Canada's government will implement spectrum caps on leading mobile operators in the next wireless license auction, but Wind Mobile is pledging to boycott the auction because it claims the rules will not guarantee smaller players enough spectrum to launch LTE.
Christian Paradis, minister of Industry Canada, announced Wednesday that Canada will auction licenses for the 700 MHz digital-dividend spectrum in early 2013. That will be followed by a subsequent auction of 2.5 GHz spectrum within a year.
Unlike the AWS auction in 2008, Industry Canada will not set aside spectrum for new entrants this time. Instead, it will cap the amount of "prime" spectrum that the country's leading operators--BCE's Bell, Rogers Communications and Telus--will be allowed to acquire at the 700MHz auction by limiting each major incumbent to one block of spectrum out of four preferred blocks to be offered in the 14 bidding regions that will be created. That will effectively reserve one block, or 25 percent of the prime spectrum, in each bidding area for new entrants and regional providers such as MTS Allstream and SaskTel. Canada will set aside 10 MHz of the 700 MHz band for use by public-safety services as well.
The big three operators control upwards of 90 percent of Canada's wireless market, and smaller players such as Wind Mobile and Mobilicity had threatened to boycott the auction if the larger players were allowed to bid on all the spectrum that will be up for grabs.
Seven total frequency blocks will be available for the 700 MHz auction, with the largest paired couplings being the A, B and C blocks, which will each include 6+6 MHz. The C1 and C2 blocks will each offer 5+5 MHz of paired spectrum, while the D and E blocks will each offer 6 MHz of unpaired spectrum. Blocks B, C, C1 and C2 are considered prime blocks by Industry Canada. The new spectrum "will allow telecom companies to bring the latest 4G LTE mobile networks to Canadian consumers and businesses, including those in rural areas," said Industry Canada.
However, having heard the proposed auction rules, Wind is now promising a boycott. "As I understand that cap system, we will not bid," Wind Mobile CEO Anthony Lacavera told Reuters, indicating that the government's proposal would be insufficient for Wind to build an LTE network. The company claims Canada's spectrum cap decision only allows new entrants access to half of the 10 MHz of spectrum Wind claims is needed to roll out LTE .
"I don't know how we're going to be able to successfully raise the financing. We're going to make our best efforts, but I don't know how we're going to raise the financing when there's technically no way for us to roll out LTE," he said in the Reuters interview. "This is a classically Canadian solution, which on the surface looks like they gave all market players an opportunity, but at the end of the day what they've actually done is hurt the Canadian wireless industry and therefore hurt Canadian consumers," Lacavera said.
However, rival Mobilicity told Reuters that it will bid aggressively in the auction.
As part of its new auction rules, Canada will implement a strict roll out schedule for new services, dictating that companies holding more than one block of 700 MHz spectrum must provide wireless services to 90 percent of their existing broadband mobile coverage areas within five years and to 97 percent within seven years.
To ensure adequate coverage in rural areas, Industry Canada noted it will allow at least four companies to obtain spectrum in each of Canada's 14 license areas and said will alter rules regarding roaming and antenna-tower sharing "to facilitate agreements between companies to slow the proliferation of new cell phone towers."
Despite its complaints about the auction plans, Wind Mobile scored a big win on Wednesday because Industry Canada also said it will lift all foreign-investment limits on small telecom firms that possess less than 10 percent market share by revenue. The exemption will remain even if companies organically expand their market share beyond 10 percent, meaning they must do so without merging with a rival.
Total foreign ownership in Canadian telecom companies was previously capped at 46.7 percent. Wind was nearly not allowed to launch its mobile network after winning spectrum in the 2008 AWS auction because it received substantial financial backing from Egypt's Orascom Telecom, which has since sold assets including Wind to Russia's VimpelCom.
Canada's AWS auction in 2008 raised some $4.25 billion for the government.
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