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Federal government to hold auction for wireless spectrum in November

By: Steve Rennie, The Canadian Press

Posted: 03/7/2013 7:25 AM | Comments: 0 | Last Modified: 03/7/2013 4:52 PM

A reporters takes a picture on a cell phone prior to sending it to social media of Industry Minister Christian Paradis during a press conference in Ottawa on Thursday March 7, 2013., regarding Canada's wireless telecommunications sector. THE CANADIAN PRESS/Sean Kilpatrick

OTTAWA - Ottawa is putting highly sought-after spectrum for wireless devices on the auction block later this year in the hopes of fetching at least $900 million — but likely much more.

The Conservative government is aiming to have at least four wireless players in every region of the country in a bid to help upstarts grab a piece of a market that has been dominated by big companies such as Rogers (TSX:RCI.B), Bell (TSX:BCE) and Telus (TSX:T).

"Today, our government is implementing four distinct measures to ensure that Canadian consumers continue to benefit from more choice in the wireless (sector)," Industry Minister Christian Paradis said Thursday as he announced the Nov. 19 start date for the auction.

The 700-megahertz wireless spectrum, which is up for auction, is considered ideal for use by new high-speed networks in high-density urban areas and in rural Canada.

It has the ability to allow cellphone calls in elevators, deep in underground parking lots and in tunnels in big cities, and in basements and attics in suburban areas. It also provides better and more affordable coverage in rural Canada because fewer cellphone towers are needed to provide coverage.

At minimum, Ottawa wants to raise $897,294,000 from the auction. But the wireless spectrum is widely expected to fetch potentially billions of dollars.

The government raised nearly $4.3 billion in its last spectrum auction in 2008.

"We'd be surprised if it's a lot more than a $2-billion valuation, $2.5 billion," analyst Dvai Ghose of investment firm Canaccord Genuity said of the November sale.

"Now two things to remember, which are contradictory: on the one hand, there's much more spectrum that was released last time around ... so there's much less spectrum (now).

"But the other issue is, it's much better spectrum."

All the licenses will be auctioned at the same time over multiple rounds. Companies will have to bid on the entire package of licenses they want rather than on a collection of individual licenses. Applications are due June 11.

There will also be requirements for carriers with access to two blocks of paired spectrum to deploy their services to rural areas.

"Our government's priority is to provide greater wireless coverage at lower rates — at better rates — for consumers," Paradis said.

"Wireless services are changing our families, our work and our economy — be it the tools that help families stay connected regardless of where they live, access to high-definition video and video conferencing that connects businesses around the world, or greater access to e-health, intelligent transport systems and other advanced applications that will revolutionize rural living."

The announcement follows the federal government's earlier steps to help smaller wireless providers enter the market by getting rid of foreign-investment restrictions.

Ottawa has also previously announced measures for cell-tower sharing, and requirements that companies provide wireless roaming to their competitors.

The government will also review its policy on transfer requests for spectrum licenses ahead of November's auction. Starting now and ending in early May, companies and other key players in the wireless industry will be asked for their input on a range of issues.

"The intent is to make sure that spectrum is not hogged by a few players and to keep competition alive in the sector," analyst Maher Yaghi of Desjardins wrote in a note to investors.

"No limits are set on how much each entity can hold of each spectrum at this stage, but the ministry is considering a possible limit. We will wait to see what limit — if any — will be implemented. A low limit could prevent incumbents from buying new entrant spectrum in the future, a potential negative in the long term."

The government says at least 1,000 megahertz of mobile broadband spectrum will be needed by the start of the next decade, as more people use wireless devices.

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