TORONTO -- The head of one of Canada's big three telephone companies warned the sector faces a "bloodbath" unless rules that could give a U.S. giant preferential treatment in the upcoming spectrum auction are changed in the next two months.
Darren Entwistle, chief executive of Telus Corp., said Thursday the government's campaign to have at least four wireless carriers in every market will lead to overspending by the incumbents, could leave one of them behind technology-wise, and even threaten investment in services for rural communities.
The government plans to auction off wireless spectrum in the prized 700-megahertz frequency band in January but the deadline for deposits is Sept. 17 and Entwistle is conducting a campaign to convince the public as well as government officials, opposition politicians and the unions representing telecom employees the rules need to change before then.
The radio airwaves at stake, which became available after the transition to digital television, are highly prized for their ability to travel long distances and easily penetrate buildings. This type of spectrum is in short supply and wireless carriers are desperate to get their hands on it to build the networks of the future and accommodate the video-streaming and web-surfing data demands of the mobile world.
Entwistle's primary concern is if a foreign player with massive resources such as Verizon Communications Inc. takes part in the Canadian auction, it would be treated as a "new entrant" and permitted to bid on up to two out of four prime blocks of spectrum.
The Canadian incumbents would be capped at just one block, leaving Telus, BCE Inc. and Rogers Communications Inc., as well as smaller regional players such as Winnipeg-based MTS, fighting over the two remaining blocks of spectrum.
"There's going to be a bloodbath because people are not going to give up on getting that block," Entwistle said. "So it's going to be prohibitively expensive and suck a lot of money out of the industry - money that won't go to infrastructure and technology, money that won't go into rural coverage or support lower prices."
Telus executives, along with their counterparts at BCE and Rogers, have been sounding an alarm over the auction rules since reports surfaced over the past month Verizon was eyeing the Canadian market and considering buying Wind Mobile and its smaller startup carrier peer Mobilicity.
"The level of bitterness on the competitive front between Telus, Bell and Rogers makes it very difficult to collaborate unless the circumstances are extremely dire," Entwistle said.
He said the rivals are working together to advocate for what he calls a "level playing field" after investing $420 billion among the three of them since 2000.
If Verizon comes to Canada, Entwistle said, the government should consider three possible changes to the auction rules, which he said were intended to protect fledgling competitors, not foreign players more than 10 times the size of Telus.
-- Financial Post