Cellphone carriers already feeling the competition: Prentice
Industry minister says prices are sure to fall in wake of spectrum auction
Last Updated: Tuesday, July 22, 2008 | 12:08 PM ET
By Peter Nowak CBC News
Minister of Industry Jim Prentice declined to say how the spectrum auction proceeds will be spent. (CBC)Cellphone prices will come down now that several new carriers are poised to deliver services after the government's spectrum auction, Minister of Industry Jim Prentice said Tuesday.
Speaking at a press conference in Edmonton, Prentice said that incumbent carriers Rogers Communications Inc., Bell Canada Inc. and Telus Corp. are already feeling the competitive heat from new entrants, who likely won't start offering services for months.
"I think that we have already begun to see significant pressure on the pricing in the Canadian industry and it's something that the auction was intended to accomplish," he said. "But in anticipation of more competition, certainly, I think there will be downward pressure on prices."
Prentice also countered fear-mongering started by some incumbents and industry analysts that new entrants — including Globalive, Videotron, Shaw and Eastlink — will have to pass on the large amounts they paid for spectrum in the auction, which ended Monday, to consumers.
The licences are for 10 years, which means their costs can be amortized over a long period, Prentice said. New entrants will also have no choice but to offer their services for less than existing players if they hope to attract any customers.
"Once they have those licences in hand, I'm satisfied they will put them to full productive use," he said. "That will involve competing in a marketplace that will have significantly more competition and by definition there will be downward pressure on prices, pressure on increasing services and significantly increased choice for Canadians. That is how the marketplace is intended to work."
Prentice declined to say how the proceeds of the auction — $4.2 billion, or nearly triple the amount originally expected — will be used. Before the auction, the government had earmarked the funds for debt reduction or tax cuts, but was not expecting such a huge windfall.
A growing chorus of support, including the Liberals and NDP, has recently emerged for using the proceeds to establish a national broadband strategy, where high-speed internet access would be subsidized for rural communities.
Prentice said Prime Minister Stephen Harper and the cabinet will decide what to do with the money in the "days ahead."
