Canadian Wireless Spectrum Bidding Tops $4.1 Billion

Despite a tough funding market, tight foreign ownership limits, a set-aside for new market entrants and the challenges of Canadian geography, two dozen groups have bid up prices on 105 MHz of advanced wireless services spectrum put on sale in May (CD May 28 p10). By mid-morning Monday, bidders had slogged through 158 rounds, posting high bids that totaled nearly C$4.2 billion, Industry Canada said. The bidding is considered to be in the final stages.

The three big wireless incumbents - Rogers, BCE’s Bell Mobility and Telus - have led the way on regional licenses, pledging nearly C$2.5 billion in high bids through the middle of round 158. Rogers led at slightly more than C$949 million in high bids for 56 licenses, followed by Telus with C$839 million in high bids for 54 licenses and Bell Mobility with C$693 million in high bids for 52 licenses.

As the Conservative government had hoped in setting aside 40 MHz for new entrants, upstarts bid assertively. Newcomers include Quebecor’s Videotron cable unit, which has bid C$565 million for 18 licenses; Globalive Wireless, which bid C$432 million for 24 licenses; and Data & Audio-Visual Enterprises (DAVE) Wireless, committing C$243 million for 10 licenses. Another sizable new bidder is Shaw Communications, which has pledged nearly C$208 million for 24 licenses.

Most industry observers don’t expect a fourth national wireless player to emerge immediately. Videotron, Globalive Wireless, DAVE Wireless and other new players have placed top bids for more than 50 markets total, none has the foundation for a new coast-to-coast service that could rival the three established carriers’ networks. “Firms are contesting a few key areas, including Southern and Eastern Ontario, Southern Quebec, Manitoba and Atlantic Canada,” Jonathan Allen, an analyst with RBC Dominion Securities, wrote in a recent note to clients.

Yet a few analysts believe that the government, seeking to increase competition and drive down wireless prices, in time could realize its goal of a fourth major carrier. They see Globalive Wireless and DAVE Wireless possibly teaming up or regional players like Shaw and Videotron stitching together their networks. In a note to clients last week, Allen said a partnership between Globalive Wireless and DAVE Wireless would make the most sense.

Regardless, the spirited auction may be producing the result government wants. In the past two weeks, market leader Rogers has slashed its wireless data rates for BlackBerrys and other smartphones. That move followed a declaration by Rogers COO Nadir Mohamed that the carrier’s wireless data pricing will “evolve” as cellphone subscribers go beyond phone calls to embrace mobile Web browsing, multimedia and other uses. “The incumbent players are going to have to change, and we're already starting to see that with some of Rogers’ new rate plans,” Carmi Levy, senior vice president of strategic consulting for AR Communications Inc., told the Toronto Star.

Rogers’ cut comes as the carrier gears up for launch of Apple’s iPhone in Canada next week. Rogers has the Canadian exclusive on the iPhone, starting July 11. Rogers said last week that it will charge C$60 to C$115 a month for a range of three-year voice and data plans with various calling and data caps. Unlike AT&T in the U.S., it doesn’t intend to offer unlimited use plans for iPhones.

With the federal treasury set to reap far more than the $1.5 billion expected, debate is on as to the windfall’s fate. The Conservatives had said the proceeds would go to pay down the national debt. But academics and other industry observers want the government to share the wealth. In a Toronto Star op-ed, for instance, University of Ottawa law Prof. Michael Geist suggested the government use some of the proceeds to implement a much-delayed anti-spam bill, a security-breach disclosure mandate and other measures. Geist, who specializes in Internet and E-commerce law, said the government also could use proceeds to back municipal wireless access plans. And he urged allocating “a large chunk of the surplus” to finance universal broadband access.