Spectrum auction inches closer to $4 billion

Total revenue raised by a sale of new spectrum, which will likely result in new cellphone carriers next year, hit $3.96 billion on Friday, greatly exceeding the $1.5 billion many within the industry expected.

The government's auction of cellphone airwaves, closing out its fourth week on Friday, inched closer to raking in $4 billion.

Total revenue raised by the sale, which will likely result in new cellphone carriers next year, hit $3.96 billion on Friday after 105 rounds of bidding. The amount raised so far greatly exceeds the $1.5 billion many within the industry expected.

The federal government has not announced what it plans to do with auction proceeds.

The success of the auction, which continues on Monday and could last another few weeks, had some participants taunting existing cellphone carriers Rogers Communications Inc., Bell Canada Inc. and Telus Corp.

In November, the three companies lobbied the federal government to keep the auction open to all comers. The government, however, decided it wanted more industry competition to lower prices, so it reserved 40 per cent of the spectrum for new entrants. The incumbents argued that would result in the auction bringing in less money.

Earlier this week at the Canadian Telecom Summit, new entrants couldn't resist the opportunity to make the incumbents eat crow.

Robert Dépatie, chief executive of Vidéotron — whose parent company Quebecor Inc. held high bids on 19 of the 292 licences as of Friday — said new entrants alone had exceeded the original estimates with $1.7 billion in bids.

"Eating words has never given us indigestion," Dépatie said, quoting Winston Churchill, adding that the incumbents' argument was "codswallop."

Ken Engelhart, Rogers' head of regulatory affairs, at the summit said the high bidding is in line with recent auctions in the United States.

The Canadian auction is raising about the same, per capita, as the recent U.S. sale of 700-megahertz airwaves.

The current Canadian auction is for advanced wireless services spectrum, which is on a different frequency — one seen as less valuable than the 700-megahertz band. The U.S. auction of AWS spectrum in 2006 raised $13.9 billion US, or about half the projected per-capita revenue of the current Canadian sale.

Janet Yale, head of regulatory affairs for Telus, warned summit attendees that new entrants may have to pass on their big spectrum-acquisition costs to customers in the form of higher prices when they eventually launch services.

Attention turns to proceeds

With the auction slowing down — only 51 new high bids were placed in the last round on Friday — attention is starting to turn to what the government should do with the proceeds.

Mark Goldberg, a telecommunications analyst and organizer of the summit, told attendees that some of the proceeds should be used to subsidize broadband internet access for low-income families.

Montreal-based Quebecor ended the week holding top bids on licences mostly in Quebec, as well as in Toronto. In previous rounds, the company had been actively bidding on licences along the Highway 401 corridor.

Toronto-based Globalive Communications Inc., which sells internet and phone services around the country under the Yak brand, led new entrants with its quest to become a national cellphone carrier. The company ended Friday with 30 high bids for licences around the country.

Halifax-based Bragg Communications Inc., which operates cable provider Eastlink, ended the week with high bids on 27 licences, mostly in the Maritimes but also some in Ontario.

Calgary-based Shaw Communications Inc. had 18 high bids, all in Western Canada.

Toronto-based Data & Audio-Visual Enterprises, run by entrepreneur John Bitove, ended Friday with high bids on 10 licences, mostly in Ontario but also in large western cities.

Rogers, Telus and Bell — who are free to bid on 60 per cent of the spectrum — ended Friday with high bids on 54, 48 and 46 licences respectively, spread across the country.