The Wireless Spectrum Auction
WirelessNorth.ca’s Tom Purves offers his summary of the 2008 wireless spectrum auction, including its long-term impact on mobile competition and innovation in Canada. Thomas Purves is a Toronto-based blogger, editor of wirelessnorth.ca, technologist and innovator. By day, Thomas helps global major brands plan for their digital futures and navigate the as-yet murky waters of mobile commerce.
In the summer of 2008, the Canadian government under Industry Canada auctioned off a large block of wireless spectrum called the AWS (advanced wireless services) block for new mobile/cellular services. This auction represents a significant moment for the wireless industry in Canada. In the past decade, the Canadian mobile industry has been characterized by growing carrier consolidation – before the auction there were only 3 major mobile carriers in Canada and only one GSM carrier. These industry dynamics led to a situation where Canadians experienced among the highest pricing in the developed world for wireless services and among the lowest penetration rates of mobile phone and smart phone usage.
Why the AWS spectrum auction is so significant for the Canadians and the Canadian wireless industry is because the government did something special with this auction: they designed it specifically to bring new wireless competition to Canada. The AWS spectrum was divided into 6 blocks, with 3 blocks “set aside” only for new entrants. In addition, rules were put in place requiring the incumbent carriers to share tower space and allow roaming on their networks, while new entrants are building out their infrastructure.
Who won? Well, the jury is still out. Certainly the incumbents did well by acquiring some big new blocks of spectrum to help them continue to add network capacity. Bell and Telus may be the biggest winners as they have announced plans to move their network to the GSM-based 3G standard called HSPA to better compete with Rogers.
For new entrants, the Canadian government certainly did an ambitious and well-intentioned thing by setting aside spectrum blocks. But their approach may have worked too well. So many wellfunded new entrants (remember 2008 as the peak of the flush credit markets) rushed in that they may have overpaid. The big auction winners were Globalive coast to coast, Quebecor/Videotron in Quebec, and Eastlink down east.
I am cautiously optimistic that one or all of these new players will breathe some fresh competition into the market. But there are a few caveats. If industry giants like Bell and Telus have seen the advantages of rolling out their new HSPA networks only by pooling their resources, how easy is it going to be for these new “little” guys to each of them pull off this same trick? Especially in the now dreadful economic climate?
The other cause for worry is that the only two players to disclose their roll out strategy so far – Globalive and another small regional Ontario player Public Mobile – have announced that they are going for the low end of the market: talk and text customers.
This is the mobile equivalent of partying like it’s 1999. New competition at the low end is nothing for lots of Canadians to complain about, unless you are a mobile content creator or any business trying to do anything particularly innovative in the mobile space and hoping to find lots more Canadians sporting smart phones and capable data plans.
This is where I start to worry that the latest spectrum auction could have been a $4 billion windfall for the government but a missed opportunity for Canada to really catch up in the global wireless landscape. Our best hope may in fact be that Bell and Telus’ new network could finally bring better competition at the high-end (all the nifty high-end smartphones tend to come out on GSM/HSPA first).
While at the same time Industry Canada may one day catch up to the FCC in releasing new spectrum. Watch later this year for Industry Canada to announce new/better rules for the 700MHz block. As usual, WirelessNorth.ca will be following the story!
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