Spectrum auction aims to lower wireless costs

The federal governmenthas set a number of rules aimed at increasing competitionin Canada's wireless market when it sells another batch of spectrum at the end of November.

Ottawa announced on Thursday it will sell the next batch of wireless airwaves in an auction on November 19th. On that day, the government will start accepting bids to use the so-called 700 MHz spectrum, which will allow cellular companies to transmit largeramounts of data over their networks, faster.

Among other features, that's abranch of spectrum that will let cellphonesget stronger connectionsin elevators, tunnels, basements and other areas where current service can be spotty.

Recent figures suggest wireless traffic is increasing at a rate of five per cent per month in Canada.

Competition sought

Ottawa says the auction will be tailored to ensure that no one company can buy more than one of four blocks of available spectrum. That will have the effect of making sure there is real competition between at least four companies in every regional market.

Another rule will make it easier for wireless companies to share cellphone towers, a contentious problem that should lead to stronger signals without having to build superfluous towers.

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 better rates for consumers," Industry Minister Christian Paradis said at a press conference in Ottawa outlining the rules.

"Through better use of existing cellphone towers and by taking action to promote at least four wireless providers in every region of the country, our government is making it possible for all Canadians to have access to world-class wireless service they can afford, no matter where they live."

Industry watchers welcomed the changes, but say they are not a panacea to improve Canadians' wireless services by themselves.

Regional differences

Technology analyst Iain Grant of the Seaboard Group wondered why and how the government came up with the cut-off of four companies being ideal competition.

"In Biggar, Sask., for example, you have 'four' already with Bell, Telus, Rogers and SaskTel all offering mobile service today. Does that mean 'mission accomplished' already?" hesaid.

A consumer in Toronto can already choose between more than seven wireless companies. "Four isn't a magic number there, either," he said.

But one rule Grant thinks will have a real impact is the ability for companies to share cell towers.

"Looking at the towers and the spectrum resource associated therewith as a more of a public resource, rather than as a strategic resource for a particular competitor, is an important fundamental," he said.

"This could lead to a lessening of the footprint penalty for the new entrants, which we would support as very positive."

Windfall for government

The last time the government sold wireless spectrum, more than $4 billion was raised, far outstripping initial estimates. Minimum bid levels this time suggest Ottawa stands to earn at least $900 million this time around, although the final tally will likely be much higher.

The 2008 auctionled to new companies such as Wind, Mobilicity and Public Mobile launching cellular networks to compete with the big three established players: Bell, Rogers and Telus.

Although the big three still control about 90 per cent of Canadian cellphones, the new players have eked out market share.

On Thursday, Wind Mobile announced it added almost 80,000 new subscribers last quarter, bringing their total customer base to590,000.That's a drop in the bucket comparedwith Rogers' more than seven million customers, for example,but Wind's customer gains from a smaller baseline level eclipsed the 58,000 postpaid customers that Rogers added to its network during the period.

Theannouncement Thursdayfollows earlier steps to help smaller wireless providers enter the market by getting rid of foreign-investment restrictions.