Business

Why some say latest spectrum auction won't do much to lower your cellphone bill

The federal government says the results of this week's spectrum auction — frequencies needed for the next generation of mobile devices —  created more competition in Canada's wireless industry. But some experts and small wireless rivals disagree.

Biggest players still bought lion's share of licences, 2 cable firms get spectrum set aside for new entrants

Canadian wireless companies spent $3.5 billion in an auction for the rights to use new wireless airwaves this week. (Kiyoshi Ota/Bloomberg)

The federal government says the results of this week's spectrum auction — frequencies needed for the next generation of mobile devices —  created more competition in Canada's wireless industry.

But some experts and small wireless rivals disagree, saying the biggest players still bought the lion's share of the licences, and many of the blocks of spectrum set aside for new entrants were scooped up by two large cable companies. 

The government generated nearly $3.5 billion from auctioning 104 licences to Canada's wireless networks. At stake were the 600 MHz frequencies, which are particularly desirable because they penetrate buildings and cover long distances.

Canada's Big Three national carriers — Bell, Rogers and Telus — were only allowed to bid on 64 licences. The rest were set aside for companies with less than 10 per cent of the national market share in an effort to spark competition in the oligopolistic Canadian wireless industry.

Of the Big Three, Rogers Communications was the biggest spender, paying $1.72 billion to acquire its new licenses, which it says include all available blocks in southern and northern Ontario, northern Quebec, Atlantic Canada, Manitoba and all three territories.

The other bidders

In the set-aside portion, Vidéotron — owned by Québecor Inc. — won 10 licences at a cost of $256 million. Freedom Mobile, owned by Shaw Communications, paid $492 million for 11 licences. Together, Québecor and Shaw are worth more than $20 billion in market capitalization.

"We saw blocks in Quebec in particular — nobody was really able to get anything other than Vidéotron," said Samer Bishay, president & CEO of Iristel, a small northern-based telecom operator.

"Let's be real. If you look at the players, who's really new in this game other than Iristel? And even then we only got one block," he said.

Samer Bishay, president and CEO of Iristel, says large companies still dominated the portion of the spectrum auction set aside for new entrants. (Submitted by Samer Bishay)

SaskTel, a Saskatchewan Crown corporation; Eastlink, owned by Bragg Communications and based in the Maritimes; Xplornet, a rural provider headquartered in New Brunswick; and TBaytel, a municipally-owned telecom from Thunder Bay, Ont., also won licences.

Navdeep Bains, minister for Innovation, Science and Economic Development, told The Canadian Press the auction created more regional competition, which will ultimately result in lower wireless prices.

"I'm confident this strategy — in the short, medium and long-term — will benefit consumers," he said.

"Acquisition of this spectrum will enable Vidéotron to continue its expansion in mobile telephony markets in Quebec and the Ottawa area, and support genuine sustainable competition that benefits consumers," said Pierre Karl Péladeau, Québecor president and CEO.

Shaw also said the auction results will increase competition.

"We have made significant investments to improve the wireless experience for Canadians, becoming a true alternative to the incumbents," said Shaw Communications CEO Brad Shaw.

'It's promising'

"I think that the new competitors did nicely in this auction, and it's promising," said Ben KlassPhD student at Carleton University's School of Journalism and Communication and part of the Canadian Media Concentration Research Project, which studies media concentration in Canada.

At the same time, Klass said the spectrum auction itself is unlikely to have a significant effect on the cost of owning a cellphone in Canada.

"This is not a one-size-fits-all solution and just giving spectrum to large cable companies is not going to solve all the problems with Canada's really high wireless prices and the lack of adoption that results from that." Klass said.

Ben Klass, PhD student at Carleton University's School of Journalism and Communication and part of the Canadian Media Concentration Research Project, says Canadian wireless prices are coming down, albeit very slowly. (Submitted by Ben Klass)

"The cable companies, the new entrants, their business model is similar to the incumbents.

"So what you end up with is prices that will come down a little bit from where they were when it was just the Big Three but not to a level that will make sure everyone can have access. And certainly not the types of [price] levels we see in other countries," he said.

Klass says prices are already coming down, albeit very slowly.

"Vidéotron is sending flyers to my house that say 8 GB for $55 [per month]," he said.

"So it does move [but] at a glacial pace. It's not always immediately apparent."

About the Author

Aaron Saltzman

Senior Reporter, Consumer Affairs

Aaron Saltzman is CBC's Senior Reporter for Consumer Affairs. Tips/Story ideas always welcome. aaron.saltzman@cbc.ca twitter.com/cbcsaltzman

With files from The Canadian Press

Comments

To encourage thoughtful and respectful conversations, first and last names will appear with each submission to CBC/Radio-Canada's online communities (except in children and youth-oriented communities). Pseudonyms will no longer be permitted.

By submitting a comment, you accept that CBC has the right to reproduce and publish that comment in whole or in part, in any manner CBC chooses. Please note that CBC does not endorse the opinions expressed in comments. Comments on this story are moderated according to our Submission Guidelines. Comments are welcome while open. We reserve the right to close comments at any time.