Canada’s 700 MHz Auction to Stimulate Competition

The Canadian government said on Thursday it would start the process of auctioning 700 MHz spectrum on November 19, and announced other steps designed to stimulate competition and reduce high roaming charges.

The Canadian government aims to assure at least four competitors serve each region of the country. To accomplish that, it will limit the three dominant carriers, Bell Canada, Rogers and Telus, to three of four prime blocks in each area.

Industry Canada will use an auction to award spectrum. After the upcoming 700 MHz auction on November 19, 2013, and the 2500 MHz auction the following year, Canada will be more than two thirds of the way towards its target of allocating 750 MHz of commercial mobile spectrum by the end of 2017. The Commercial Mobile Spectrum Outlook provides an overview of the Government’s approach to spectrum.

“Our government’s priority is to provide greater wireless coverage at lower rates for consumers,” Industry Minister Christian Paradis said in a statement.

Canada’s wireless market, which has some of the highest roaming charges in the world, is dominated by Bell, Rogers and Telus, which together command a 90 percent share, reports Reuters.

The government sought to weaken their dominance in a 2008 auction of airwaves in which it set aside some spectrum for new entrants. Among the upstarts that emerged are Wind Mobile, a carrier in the process of being acquired by Amsterdam-based VimpelCom, and closely-held Mobilicity and Public Mobile.

In another measure to promote competition, Ottawa is indefinitely extending a requirement that wireless carriers provide roaming on their network to rivals, and expanding that requirement to all carriers. But Ottawa stopped short of requiring that networks provide so-called “seamless” roaming, a major win for the Big Three, according to Desjardins analyst Maher Yaghi.

The policy still allows calls to be dropped when a customer strays out of the coverage area, but gives the customer the right to reconnect on the roaming network.

Canadians have paid among the highest roaming rates in the world, according to an OECD report from May 2011, and the highest average bills, according to a September 2010 report from Bank of America Merrill Lynch.

The established providers have defended the rates they charge, countering that both voice and data usage are higher than average in Canada and that per-minute or per-megabyte comparisons paint an accurate picture.

In the United States, the 700 MHz band was auctioned off in 2008. The FCC divided most of the 700 MHz spectrum into 3 blocks of 6×6 MHz (blocks A, B & C in the lower 700 MHz band), and one block of 12×12 MHz (in the upper “C” block). Verizon bought most of the 12×12 MHz block, while AT&T bought most of the lower 700 MHz spectrum in blocks B & C, thereby creating another 12×12 block.

Consequently, both AT&T and Verizon now dominate LTE coverage in the United States. Neither carrier lets subscribers use their LTE spectrum from competing devices. Critics say that allows them to squeeze small carriers out, so they can eventually control the remaining “A” block. Carriers say it is too expensive and complicated to allow roaming between competing LTE providers on the 700 MHz band.

Both AT&T and Verizon manage to interoperate in public safety (band class 14) – which requires different power requirements then their commercial LTE service. Apparently where there’s a buck to be made, interoperability happens:

Ottawa set minimum opening bids totaling C$897 million ($870 million) for the auction, with initial applications due June 11. Analysts expect each of the three main players to pay at least C$500 million to secure more airwaves. Limited resources may stop some of the newer carriers from bidding aggressively.

In another step that could loosen the Big Three’s grip, the government may also review its policy on the transfer of spectrum licenses. That could lead Ottawa to take a more aggressive stance on proposed transfers, and it could veto Rogers’ planned purchase of airwaves owned by Shaw Communications. Shaw bought set-aside spectrum in the 2008 auction before scraping plans to build a wireless network.

Posted by Sam Churchill on .

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