Canada's government will again tailor the next auction of wireless spectrum to make it even easier for new entrants to get a head start on competing with the big three incumbents.

Industry Minister James Moore made the announcement at an event in Toronto on Monday morning.

Moore gave details on an upcoming auction of wireless spectrum, known as the AWS-3 band. Wireless spectrum is the network over which cellular signals travel and transmit information. The government controls access to the spectrum and auctions it off to companies that wish to use it.

Previous auctions, with the exception of one in 2008 that gave birth to new companies such as Mobilicity, Public Mobile and Wind Mobile, have been dominated by three major players — Rogers, Bell and Telus — which together control 95 per cent of the wireless business in Canada today. 

'We have seen this story before and it has not resulted in success for the new entrants'- Telecom analyst Dvai Ghose

Ottawa has a stated policy of trying to spur new investment in the sector and would prefer to see a fourth truly national wireless player, but so far no such company has emerged. The government's hoping to change that with the next auction of so-called AWS-3 spectrum, currently slated for some time in early 2015.

Smartphone Kill Switch

Industry Minister James Moore moved to skew the rules for the next wireless spectrum auction in favour of new players on Monday. (Ben Margot/Associated Press)

There's also another auction of spectrum coming up, with the 2,500-MHz block of wireless airwaves slated to be sold off next April. The AWS-3 auction will happen before that, Moore confirmed Monday. The AWS band up for grabs is of a higher frequency than most of what's currently being used, which means it's able to transmit more data if you can get a signal, but it's less able to penetrate thick walls such as parking garages and subways. It's also less useful in remote areas, because you need more cellular towers closer together in order to get a signal.

"It would be irresponsible of the government to deploy spectrum into the marketplace and not do so with a deliberate policy objective of increasing competition in the wireless market," Moore said.

Specifically, Ottawa is going to tailor the auction in favour of new entrants in three ways:

  • More than half (30 megahertz out of 50 megahertz total) will be set aside for new entrants
  • There will be strict provisions on the transfer of spectrum between companies after the auction
  • The auction process will be simpler, shorter and more streamlined, so that new entrants have a much more visible sense of how to make a go of it.

The new spectrum will be "ideal for delivering fast reliable service on the latest devices," Moore said.

One of the companies poised to benefit from the new rules, Wind Mobile, welcomed the announcement Monday.

"Today is a great day for Canadian consumers," the company said in a statement. "Canadians are paying too much for wireless services … and only increased competition will improve that. Competitive alternatives like Wind Mobile need additional spectrum to grow and flourish."

In an interview with CBC's The Lang & O'Leary Exchange, Wind CEO Tony Lacavera said the new rules should make it easier for him to woo investors. Wind dropped out of the last spectrum auction because it could not raise enough money.

"We’re going to turn our full attention to figuring how we can best finance this new spectrum which is available to us and I think the government did a very good thing by ensuring that spectrum is going to be put in the hands of parties that are going to compete," he said.

It's worth noting, however, that the government has made similar promises before. Past spectrum auctions have also had bans on the transfer of spectrum owned by new entrants to the incumbents, as well as set-aside provisions where a certain percentage of the total is saved for new players, to ensure the incumbents can't buy it all up and keep anyone else out.

New wireless players

Moore insisted Monday that the rules set up for the AWS-3 spectrum auction will spur competition like never before, but others aren't so sure.

"We have seen this story before and it has not resulted in success for the new entrants," Canaccord telecom analyst Dvai Ghose said after Ottawa announced the new rules. "We wonder why the government believes that following the same strategy that has failed to date would have a different outcome this time around."

Ghose says despite being given every advantage in previous auctions, "new entrants in Canada are not in good shape," noting that Public Mobile has already been bought out by Telus, Mobilicity is in creditor protection, and Wind Mobile's Russian owner, Vimplecom, is eager to get out of the wireless business in Canada.

Montreal-based Quebecor Inc. currently offers wireless service to the province of Quebec and has the basic building blocks of rolling out national service after buying up $233-million worth of spectrum in last year's 700-MHz auction, but so far hasn't taken any steps to do so.

Small firms may merge

Tailoring yet another round of spectrum in favour of new entrants might give them enough of an advantage for a new player — either Quebecor or somebody else entirely — to buy them up individually and merge them into a cohesive national player.

But while the new rules unveiled Monday "may well benefit new entrants," Ghose said, "we do not expect a change in status quo in the near term."

John Lawford, executive director of the Public Interest Advocacy Centre, warns it will be a while before a fourth carrier emerges in the Canadian market but he believes these rules are a good first step.

“It will take a couple of years before these guys start to use the spectrum, but we have to start now,” he told CBC.

He expects prices to drop and roaming charges to become more reasonable as a result of competition.