Industry Minister James Moore said Monday Ottawa will set aside new spectrum, or wireless airwaves, exclusively for smaller cellphone carriers in a new wireless auction that’s been fast-tracked to sometime early next year.
The move is designed to bolster competition in the $21-billion wireless market, the government said.
This is an old hat for Ottawa, which first moved to inject fresh competition into the market in 2008 when it allowed a crop of new carriers to launch and compete against Rogers, Bell and Telus.
The results have been mixed – the biggest new entrant, Wind Mobile, has struggled to win enough subscribers to make it viable, while two other carriers, Mobilicity and Public Mobile, are either operating under creditor-protection or absorbed into an incumbent.
Here are five key questions answered about today’s latest wireless announcement:
Er, what’s spectrum again?
In short, the lifeblood of a wireless carrier. Spectrum is the radio frequencies that carry signals to and from phones and cell towers. The more spectrum a carrier has, the more traffic it can support on its network and faster service it can provide. One big handicap smaller carriers face against Rogers, Bell and Telus is the limited amount of spectrum they hold compared to the Big 3.
READ MORE: Spectrum 101, what consumers need to know
What is Ottawa announcing today?
In a surprise move, Industry Canada said Monday it is speeding up plans to sell off spectrum called “AWS 3” – airwaves that can support faster and more robust wireless services across the country. More importantly, Ottawa is setting aside 30Mhz, or most of the new spectrum, for smaller carriers like Wind.
READ MORE: Government of Canada’s full statement
Rogers, Bell and Telus are prohibited from buying most of the spectrum, while it appears only “operating new entrants” or companies already with cellphone service in market will be eligible to bid on the set-aside spectrum. That means only Wind, Mobilicity or Quebec’s Videotron, or EastLink in Atlantic Canada are able to secure the new stuff.
Why is the government helping smaller wireless carriers?
It’s all about you, dear wireless consumer. “Canada’s wireless consumers have been clear that they want their government to make decisions that will lead to more choice, lower prices and better wireless service,” Industry Canada said.
By allowing smaller providers to beef up their networks – and therefore enhance the performance of phones to deliver an overall better customer experience – the new carriers will attract more subscribers and perhaps become financially viable enough to stick around long-term.
Wireless pricing has remained stubbornly high (in the opinion of Ottawa) in key markets like B.C., Alberta and Ontario, and the Conservatives are hoping a stronger competitive alternative to Rogers, Bell and Telus in those markets will pressure prices.
“Wireless competition is lacking in Canada,” said John Lawford, executive director and general counsel for Ottawa-based Public Interest Advocacy Centre, a consumer group.
“The set-aside of AWS-3 spectrum provides an on-ramp for competitors to get on the wireless data highway with smartphones” he said.
There’s also an election on the horizon next year, and the optics of the Conservatives cajoling the wireless industry into offering “more choice, lower prices” are not altogether unwelcome.
Will it mean alternatives to Rogers, Bell and Telus will be around long-term?
Good question — and depends on where you live. Subscribers in Manitoba and Saskatchewan already have entrenched alternatives to the Big 3 in the form of their former provincial phone monopolies (MTS and SaskTel).
As for other provinces, Monday’s decision unquestionably aids Wind and Mobilicity, who have a presence in most big cities. Each needs more spectrum if they are going to win additional customers. But Wind’s current backer, European giant VimpelCom, is seeking a way out of its Canadian investment (which it has been prohibited from taking full control of — thus the reason it wants out), while Mobilicity is operating under creditor-protection.
Both are still bleeding cash. Some are skeptical that this move alone is enough to reverse that – or that the market can even support additional carriers long term.
Will this lower wireless prices at Rogers, Bell or Telus?
Maybe. If the new set-aside spectrum can be quickly deployed by the new entrants – perhaps with the financial aid of a new investor who can consolidate Wind and Mobilicity into a single carrier—the government’s long-sought after goal may be achieved: A fourth player to meaningfully challenge Rogers, Bell and Telus in the big markets of B.C., Alberta and Ontario. Montreal’s Videotron is also weighing plans to go national now, and could bid on the new spectrum.
Such outcomes would put sustained, long-term pressure on average wireless prices, experts say.
But some are skeptical, noting that a similar auction structure was used in 2008 to allow Wind and the others to launch. The new carriers have badly missed their own growth estimates since.
“We have seen this story before and it has not resulted in success for the new entrants,” Canaccord Genuity analyst Dvai Ghose said.
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