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Ottawa to ease way for small wireless carriers with auction of AWS-3 spectrum

TORONTO - The federal government offered a new source of hope for Canada's small wireless companies, giving them a shot at high-quality wireless spectrum earlier than expected and limiting how much can be purchased by the country's largest players.

Industry Minister James Moore said Monday that the government will hold an auction of high-quality AWS-3 spectrum early next year and set aside about 60 per cent of the available capacity for the companies that have emerged since 2008.

"This set-aside represents over half of the AWS-3 spectrum being made available and is the largest single block every reserved for new entrants in Canada," Industry Minister James Moore said Monday at a Toronto news conference.

Industry Canada will set aside 30 megahertz of the 50 MHz of available spectrum for the newer companies. The spectrum up for sale can carry high-speed Internet video over the airwaves and penetrate buildings, much like the 700 MHz frequencies that were auctioned off earlier this year for about $5.27 billion.

Details of the ground rules for the AWS-3 auction, which will be in addition to a previously announced auction of less desirable 2500 MHz spectrum in April, will be worked out over the coming weeks, Moore said.

"The rules for this auction, consistent with the ones for the 700 MHz and 2500 MHz auctions, will encourage more competition in the wireless market while ensuring the interest of consumers first," the minister told a news conference.

The government's has sought to increase competition in the wireless sector which is dominated by Rogers (TSX;RCI.B), Telus (TSX:T) and BCE's Bell (TSX:BCE).

However, so far, none of the smaller rivals to the big three has amassed even a million subscribers — compared with between about 7.8 million and 9.4 million at each of the Big Three.

The head of Toronto-based Wind Mobile, which has 735,000 subscribers in three provinces, said Monday that the government is on the right track, but it'll take more time to see how investors react.

"This spectrum is prime, prime, prime spectrum in terms of meeting the demand for mobile video, for example," Lacavera said. "It's very good, very efficient for the mobile Internet and now the mobile video Internet."

Lacavera said he hasn't had time to discuss the news with investors, "but I would expect the economics of this whole discussion is going to become clearer in the next several weeks."

Wind Mobile was unable to bid in this year's auction of prime 700 MHz spectrum because it couldn't secure funding for the bidding.

Instead, Rogers acquired the bulk of the licences for $3.29 billion. Telus also paid $1.14 billion in the 700 MHz auction and Bell paid $565.7 million.

Lacavera has said that it would make sense for the smaller players, such as Wind, to co-operate with each other so they can concentrate their resources on winning market share from the big three companies and says there are always discussions among the various industry players.

"I don't know if this announcement today is a catalyst for any of those discussions, frankly," Lacavera said.

"I think this is just another step in the government's six- or seven-year policy on competition in wireless. And they've made a variety of moves, particularly in the last 12 months."

Among other things, the federal government passed a bill that temporarily caps how much the larger network operators can charge on a wholesale basis for smaller carriers.

Ottawa has also moved to ensure that the smaller companies have access to shared cellphone towers, which are used to position their transmission equipment, and has blocked Telus from buying Mobilicity.

In 2008, Ottawa set aside a portion of the spectrum up for auction for new companies and saw several launch.

One of the small bidders in the 2008 auction, operating as Mobilicity, is currently operating under court protection from creditors and another, Public Mobile, has been purchased by Telus, but other carriers have carved out small portions of the market.

Quebecor's Videotron (TSX:QBR.B) has indicated it wants to expand beyond Quebec if the conditions are right. Other regional players include EastLink, primarily in Atlantic Canada, as well as Manitoba Telecom (TSX:MTB) and SaskTel.

The Canadian Press

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