Christian Paradis, Canada’s Industry Minister, officially announced his plans for the upcoming 700MHz frequency spectrum, plus communicated changes to how Canada’s telecom foreign ownership rules will operate. Paradis stated during his speech that, “the measures I am outlining today will ensure the timely availability of world-class wireless services at low prices for Canadian families, including those in rural areas.”
The 700MHz spectrum auction will start during the first half of 2013 and will see it divided into four blocks, each representing 25% of the bandwidth. Rogers, Bell and TELUS can bid on three of these blocks, but the fourth if reserved for Canada’s smaller carriers. We reached out to various carriers yesterday and they stated the following:
Rogers: “We’ve always said a fair and open auction is the best way to ensure Canadians have access to the best and latest technology. This is an important announcement and we’re taking the time to review the decision and what it will mean for Canadians.”
WIND Mobile: “We want to be the 4th national carrier and we cannot get enough spectrum to do it. This is a catalyst for new entrant consolidation. I believe that WIND is positioned to lead that consolidation, but we will be at a structural disadvantage with respect to our LTE offering, there is not enough spectrums set aside for new entrants to roll out LTE.” – Anthony Lacavera, CEO of WIND
Mobilicity: “It’s a victory for all Canadians. This ensures that wireless competition will stay alive and stay healthy and that means consumers will get lower wireless prices, better services, and more technology faster. We will be in the auction 100% and we will bid aggressively.” – Stewart Lyons, CEO of Mobilicity
Bell: “We’re still studying the decision and don’t have comment for now.
Today, analysts and press releases have been coming out in a flurry. First, a well thought out write up by telecom consultant Mark Goldberg, he states that the announcement by Industry Canada “is a great compromise in theory, except it virtually guarantees that Canadians will not have access to the fastest mobile speeds. While LTE can operate on 10MHz of spectrum, it can operate that much better on 20MHz. In other words, Solomon went ahead and cut the baby. Another complication comes up in the middle of the country where there will be four incumbents bidding: SaskTel and MTS have been recognized to be incumbents. Long time readers will recall that this was a problem in the last auction. So, there is a high probability that new entrants will be shut out of acquiring a national network since there will be a large hole in the midwest portion of the country.”
This was followed by a report by Jeff Fan, analyst from Scotia Capital Markets, who said “the small cap on the incumbents makes it possible for the new entrants to acquire at least one prime spectrum block (10 MHz-12 MHz). This could be more likely if BCE/TELUS and RCI/MBT are considered associated, as discussed above. We believe the limited amount of prime licences available to new entrants will likely encourage Wind, Mobilicity and Public Mobile to consolidate. This will likely occur if one of them encounters financial difficulties.”
WIND Mobile CEO Tony Lacavera was quoted in several publications that they would boycott the spectrum and not bid. In a press release this morning Lacavera stated that “The announcement creates the illusion that the government has gone all-in to create a competitive wireless landscape, when they’ve only done half the job. Delivering on foreign ownership is only half of the equation. We’ve spent countless months telling the government that caps will destroy our ability to compete with the incumbents in the next auction, thereby crippling wireless competition in Canada. It’s a simple formula, without the ability to acquire 10 MHz, NO new entrant can build out LTE, which means NO new entrant can viably compete in the long term. This is a smoke and mirrors announcement designed to distract from the fact that they’ve sided with the incumbents at the expense of Canadians.”
TELUS has finally come forward with their official statement, Darren Entwistle, TELUS president and CEO, noted that “The rules established by Minister Paradis will allow all competitors to have fair and reasonable access to the critical 700 MHz spectrum in the upcoming auction. Ultimately, the wireless services built upon this spectrum will provide businesses, educators, students, health professionals and families with the tools they need to build strong, healthy and sustainable communities.”
Mobilicity has now chimed in and their press release says “Mobilicity calls spectrum auction rules a compromise for carriers and a win for consumers” and President and CEO Stewart Lyons said “The government has declared the Canadian consumer as the clear winner of this ongoing battle between new entrant and incumbent carriers. Our position has always called for full set-asides of the 700 MHz spectrum for the new entrants; and while we recognize a compromise has been made, we are confident that competition will continue for the betterment of Canadian consumers. We will definitely bid on the 700 MHz spectrum. After completing an explosive Q4 with more net new customers than all of the other new entrants and two incumbent carriers, we are now the fastest-growing carrier and need more spectrum to expand beyond our 10MHz of spectrum and introduce new platforms, like LTE which can be launched with as little as 6MHz of spectrum (3MHz x 3MHz).”
Surely we’ll see Rogers, Bell, SaskTel, Videotron and MTS all release statements today. The spectrum is estimated to bring in over $3.5 billion for the government next year.