Canada Wireless Foreign Ownership Decision Could See Rates Drop

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OTTAWA - Canadians should expect lower prices after Ottawa announces its decision on foreign ownership in the wireless sector and sets ground rules for the next sale of broadband space, Industry Minister Christian Paradis indicated Tuesday.

But, despite wide speculation that Paradis was ready to announce those rules in a speech to an industry convention, the minister said he needed more time to study the issues.

"Some of you may be looking for an early Christmas present today, but I am afraid I am going to be a bit of a Grinch," he told the conference.

"Given the importance and the serious impact this will have on the lives of Canadians for years to come, this is not a decision that I nor this government will be taking lightly."

While Paradis did not say directly which way he was leaning, he did say he expected the decisions the government makes will lead to more competition.

"We expect that globally competitive prices for consumers will flow from these fundamentals," he added.

The minister also said he wants rural customers to receive the same wireless service as those in large, urban centres.

Globalive chief executive Tony Lacavera, operator of the Wind Mobile startup established after the last spectrum auction in 2008, had scheduled a news conference in Ottawa after the minister's speech.

Lacavera speculated that the government may be divided by intense lobbying from industry players, which have different interests and do not agree on the best way to proceed.

Many analysts had expected the government to announce that smaller players — those with 10 per cent or less market share — would be freed from any restrictions on foreign investment.

They also expected they would receive an effective set-aside in the new auction of 700 megahertz of spectrum. That would make it easier for small and new entrants to bid for spectrum to operate and compete in the sector dominated by Rogers Communications(TSX:RCI.B), Bell (TSX:BCE) and Telus (TSX:T).

"If they don't have a set-aside, we're going to be forced to fold into one of the new incumbents and you'll see all the new entrants do the same thing," said Lacavera.

"We all saw what happened between 2003 and 2008, pricing in Canada rose to the highest level in the world when there wasn't competitive pricing out there."

Mobilicity head John Bitove, another new entrant, said in an interview that the government should go ahead with the auction anyway — if it hasn't made up its on foreign ownership rules — because Canada is falling behind on the desirable 700-MHz frequency, which was vacated by the conversion of television signals to digital.

"The fact is you've got four new entrants soon to be five, and we're all going to need more bandwidth," he said.

Currently, telecom operators in Canada are restricted to a maximum 46.7 per cent in direct and indirect foreign investment.

Last year, Ottawa announced it was looking at three options on ownership. Removing all restrictions, removing restrictions for small players, or upping the foreign ownership limit to 49 per cent.

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