Wireless spectrum auction to bring consumers more cellphone choice

Luann Lasalle, THE CANADIAN PRESS
MONTREAL - Consumers are expected to be the winners in the coming year with more choice and better prices after Canada's cellphone market gets a shot of competition.

New players and networks will enter the market as a result of the federal government's wireless spectrum auction, which starts on Tuesday.

"Ultimately, you will get more choice," said analyst Troy Crandall.

"That means more competitive prices for everyone as well," said Crandall of MacDougall, MacDougall and MacTier in Montreal.

The multimillion-dollar auction has 26 players, many of them new entrants, bidding for licensing rights for the airwaves that wireless networks need to operate over.

A 105-megahertz band of spectrum is being auctioned off and Ottawa has said proceeds from the auction will be used to pay down the national debt.

About 40 per cent of the available spectrum is being specifically reserved for new entrants into Canada's cellphone market.

That means new entrants won't have to outbid Rogers Communications Inc. (TSX:RCI.B), BCE Inc. (TSX:BCE) and Telus Corp. (TSX:T) for that section of the spectrum because the three wireless heavyweights will be bidding on the remaining spectrum access that's open to all participants.

The auction is expected to last for three to five weeks and participants will bid via the Internet. Industry Canada has said that the results of each round will be made available to bidders and the public.

The availability of new spectrum will also allow carriers - either the new or established players - to provide consumers with more bandwidth-heavy services like video streaming on cellphones.

"Possibly next summer you could start to see the beginnings of these companies coming out with offerings, maybe even May or June of next year," Crandall said.

But Crandall said consumers shouldn't expect discount prices.

Rather than "aggressive pricing," new companies will come out with "more innovative" pricing plans that aren't already being offered, he said.

At least one new entrant is looking to reshape Canada's multibillion-dollar cellphone market.

Toronto-based Globalive Communications Corp., best known for its Yak long-distance calling service, wants to build a new network and offer competitive prices.

Globalive CEO Anthony Lacavera has said there's plenty of room for other players.

"We don't necessarily think it has to be a price war," Lacavera said recently.

He also said Canada is behind in market growth in cellphones.

"Canada is lagging developing and developed countries, so we think there's a great opportunity to participate in the growth of the market and introduce new features and technologies."

Wireless subscribers in Canada now number 20.1 million, which is about 62 per cent of all Canadians, said Marc Choma of the Canadian Wireless Telecommunications Association.

It is somewhat lower than some other countries, but Choma said Europe and the United States adopted the use of cellphones several years before Canada. Canadians also are "spoiled" by top-quality land lines at affordable rates, he added.

Strict federal regulations prevent foreign telecom companies from simply breaking into Canada with their own platforms and they can only invest a minority stake in a Canadian company.

The federal government recently released the list of bidders, which also includes the media subsidiary of Quebecor Inc. (TSX:QBR.B), Shaw Communications Inc. (TSX:SJR.B) and Manitoba Telecom Services (TSX:MBT).

Analyst Iain Grant said there also will be better prices from current providers.

Grant cited Koodo Mobile, which promotes talking and text messaging plans and no system-access fee.

"Koodoo is a direct shot across the bows of new entrants," said Grant of telecom consultancy SeaBoard Group.

Telus registered the name Koodo Mobile last year in various provinces, along with the Web domain name koodomobile.ca.

"The real innovations will start next year and that could be as soon as the first quarter of next year, but mostly likely next summer," he said. "That's when we'll see the new players coming in."

Law professor Michael Geist said the auction is only a first step to better prices.

"We have a wireless crisis in Canada right now," said Geist, who teaches at the University of Ottawa where he holds the Canada Research Chair in Internet and E-commerce Law.

"It's widely recognized that mobile is where so much of the growth and opportunities lie and we find ourselves woefully behind the rest of the world," he said.

Canada needs to open up its market to greater foreign competition to have a really competitive environment, he said.

© The Canadian Press, 2008