Here's everything you need to know about today's wireless spectrum auction and why you should care
12 telcos will get in on the action, but don't expect an industry shakeup
What's happening?
Starting at 10 a.m. on Tuesday, Ottawa is auctioning off wireless spectrum in the 600 megahertzrange to a dozen companies that will bid on the rights to use airwaves for the next 20 years. The bidders are major wireless firms like Bell, Rogers and Telus, along with nine other smaller companies, all of which arelisted on Industry Canada's website.
One name noticeably absent from the list is Montreal-based Cogeco Inc., which says it won't be in the running but maintains it is still interested in expanding itswireless service.
What isspectrum?
Spectrum is the term used to describe electromagnetic waves that travel within a certain wavelength. Spectrum is the invisible signal that allowswireless service providers to transmit data across long distances tocellphones and other internet-connected devices. AM and FM radio travels over a certain part of the wireless spectrum. So do television signals. The band up for grabs on Tuesday is in the 600 megahertz range.
Check out this explainer video for more about what spectrum is and how it works:
Why are companies bidding on it?
A quality wireless network runs on a number of different bands, so your device can always get a signal if one of the spectrum bands is temporarily unavailable where you are in a remote rural area, or several metres below the ground in a downtown parking garage, for example.
A reliablenetwork has a good mix of low and high megahertz, because, broadly speaking, the lower the number, the better it is at travelling over long distances and into hard-to-reach places. The higher the number, the better it is at moving large amounts of data. Relatively low-frequency spectrum in the 600 megahertzband is useful for filling in existing network gaps.With more and more internet-connected devices, networks need more and more spectrumto keep that data flowing, no matter where you are.
How does the auction work?
Starting at 10 a.m. on Tuesday, companies involved in the auction will bid for the rights to use seven blocks of spectrum, in 16 different areas across the country 112 different blocksin total. Bidswill be anonymous, and work on what's called a"combinatorial clock" format. You can read more about the complicated rules herebut the gist isthat it makes sure winning bidders pay more than the second-place bidders would have paid, but nothing beyond that. It alsomakes sure companies get multiple blocks of spectrum to ensure they have a big enough network.
Similar to previous ones, the auction has been set up, as best as possible, to ensure that incumbents don't gobble up all the spectrum. In this case, three out of the seven spectrum blocks up for grabs in each market havebeen set aside for new players meaning Bell, Rogers and Telus can't buy them. That's done to encourage other companies to offer services to compete with them. The rules also stipulate that those newcomers can't turn around and sell their spectrum to the Big Three, at least for the first five years.
There are minimum bids in every block up for grabs, too. The minimum bid for a block to service Nunavut and Yukon, for example, is $48,000. But a block of that same spectrum in southern Ontario will cost at least $85,302,000 because a winning bidder could use that spectrum to sell services to so many more people, thus recouping their investment.
When will we know who won?
Probably not for a while. To avoid gaming the system having companies put in bids theydon't want, just to drive up the price for a rival Ottawa is going to stay completely silentabout how the process is going until five days after the bidding has ended.
Analyst VinceValentini at TD Bank said in a research note last month he expects the process could take a month or two.
In keeping with the slow pace, he also doesn't expect feverish bidding, as some of the big companies will likely be saving theirmoney for higher-band spectrum that's coming down the line.
So, why should I care?
Well, your wireless service is likely to improve, once bidders start deploying their newfangledspectrum. That means if you're already a wireless customer, you should expect fewer coverage dead zones and dropped calls, even as companies roll out even faster 5G networks. And theoretically, it could give you more options of companies to choose from. A similar auction in 2008 led to the birth of companies like Wind, Public Mobile and Mobilicity.
But don't expect your cellphone bill to come down at least in the short term.
Analysts say telecom companies are likely to spend at least$2 billion on this auction, and an outlaylike that isn't generally what prompts them to turn around and cut their prices.
"It takes a while for this spectrum to be used," says Laura Tribe, executive director of consumer-focused telecom watchdog OpenMedia,but says prices will likelygo up before long.
Tribe cites recent storiesofincumbent players raisingtheir prices on big-data plans, which they launched in late 2017. Companies justified those moves when they were reported because they said they were investing inand updating their infrastructureto give customers better service.
"This is a really clear example of what that looks like," Tribe says.
She says the auctioncould be good news for consumers if it manages to get the spectrum in the hands of new companies that can truly shake up the industry.
But TD's VinceValentinisays he doesn't expect any new names to step up in a big way.
A 2014 auctionin which companies spent an average of $2.32 per megahertz pop an industry metric referring to the amount of bandwidth passing one person in the coverage area in a spectrum licence raised more than $5 billion. The next year, in 2015, an auction of so-called AWS-3spectrum, in whichRogers didn't even buy,raised $2.1 billion, or an average of $1.49 per megahertz pop.
Valentini doesn't expect the per person price tag for this batch to go up. "Wewould be shocked and disappointed if anyone coveted this 600 spectrum to the point of paying $3or more per megahertz pop," he said. "And we see very low odds of new entrants trying to disrupt the bidding outside of their current wireless footprints."
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