One of the smaller players in Canada's telecom industry has slammed Ottawa's attempts to increase competition in the sector.
“The reality is that consumers will face higher prices, fewer choices and a return to the era of incumbent dominated wireless," Globalive Wireless Management Corp. said in a release.
Globalive is the parent of Wind Mobile.
"The announcement creates the illusion that the government has gone all-in to create a competitive wireless landscape, when they've only done half the job," said Wind Mobile CEO Anthony Lacavera.
Industry Minister Christian Paradis on Wednesday announced the government would be placing limits on the coming wireless spectrum auction of radio waves in the 700 and 2,500 MHz frequency bands for large players and the lifting of foreign investment limits for small telecom firms.
Paradis said Ottawa will lift restrictions on foreign investment in firms with less than 10 per cent of market share by revenue.
Smaller players had said they couldn’t compete with the financial weight of the big firms — Bell, Rogers and Telus — without access to capital from foreign investors.
Paradis also announced Ottawa will limit how much spectrum the largest players can buy through the auction.
It will set aside one of four blocks of the new spectrum for new entrants and regional providers.
The changes to the auction rules will let at least four companies obtain spectrum in each of Canada's 14 licence areas.
But Lacavera said it will mean companies won't get the airwaves they need to compete.
"The government is prepared to take credit for creating a level playing field in the upcoming auction, when all they've really done is stack the deck in favour of the incumbents" — a reference to Bell, Rogers and Telus.
"To build out an LTE network, 10 MHz of spectrum is necessary. This decision only allows new entrants access to half that amount and will prevent any carriers, other than the incumbents, from building faster networks and keeping up with the increased consumer demand for the best available smartphone technology," said Lacavera.
LTE refers to long-term evolution networks, which can handle faster and more advanced technology, and accommodate the latest smartphones.
"Delivering on foreign ownership is only half of the equation. We've spent countless months telling the government that caps will destroy our ability to compete with the incumbents in the next auction, thereby crippling wireless competition in Canada," he said.
But Wind rival Mobilicity, another new entrant, was more positive.
Mobilicity, which had called for the new 700 MHz airwaves to be set aside exclusively for bidding by smaller telecoms, said the changes will “help sustain competition and lower wireless pricing for consumers.”
“While we recognize a compromise has been made,” CEO Stewart Lyons said in a statement, “we are confident that competition will continue for the betterment of Canadian consumers."
Speaking on CBC's The Lang & O'Leary Exchange, Lyons said Mobilicity will be an aggressive bidder in the upcoming spectrum auction.
"We'll be a force to be reckoned with in that auction," he said, adding that his company has already received funding support offers.
Manitoba Telecom shares rise
The announcement had an immediate payoff for shareholders of Manitoba Telecom Services.
Its shares closed with a gain of 78 cents, or 2.33 per cent, at $34.26 on the Toronto Stock Exchange Thursday.
Several analysts have suggested it could be a takeover target. The likelihood of that will increase with the lifting of foreign ownership restrictions.
“This announcement means greater access to capital and the potential to open up valuable new opportunities,” CEO Pierre Blouin said in a release.
"This announcement means more investment, better prices and more choice for Canadians,” he said.
Telus called the initiatives “thoughtful and balanced,” and said they meet Ottawa’s goals of “promoting consumer choice, supporting sustainable competition through investment in technology and further expanding broadband services in rural markets.”
The Public Interest Advocacy Centre, which helped design the spectrum auction process in 2008 and contributed to the planning for yesterday’s changes, had a wait-and-see reaction.
PIAC, which says its focus is ensuring access, affordable prices, and consumer choices, also criticized the choice not to set aside the 700 MHz spectrum for new entrants, while applauding the partial lifting of ownership controls.
“Spectrum auctions are meant to provide outcomes that best meet the public interest”, said executive director Michael Janigan.
“That is not always synonymous with getting the most money," he added.
PIAC, he said, isn’t sure the changes do enough to ensure strong rivalry against the three dominant companies.
‘We’ll see how the financial backers of new entrants view this package fairly soon,” Janigan said.
Liberal industry critic Geoff Regan called the rule changes “half-measures.”
"If you are an outside investor, are you going to want to invest money in one of these small players so that it can grow, when you don’t know if it can later on grow beyond 10 per cent or it might be capped there and, therefore, unable to really compete with the big players later?" he asked on CBC's Power & Politics.
Regan said it’s clear they “will not lead to cheaper cellphone bills or better rural service for Canadian families,” but will “only maintain the status quo, supporting a market dominated by the Big Three,” a reference to Bell, Rogers and Telus.
“Without a competitive telecom market, Canadians will continue to pay some of the highest prices for voice and data in the developed world. After waiting two years for this announcement, the results are very disappointing,” Regan said.
NDP critic Guy Caron said the government's new rules could eventually create a situation in which two companies of similar size are competing under different sets of rules.
OpenMedia.ca, a lobby that describes itself as a grassroots organization that aims to promote an open and affordable internet, was also disappointed with the decision not to set aside the 700 MHz band exclusively for new entrants.
That, it said, would have gone the furthest “in improving what many Canadians now feel is a broken telecom market.” It said the government could have done more.
“Big telecom companies are still basically the ones regulating our phones and internet services and this decision is a clear missed opportunity to bring more telecom choice and affordability to Canadians,” it said.
“Canadians were looking for a bold step in the right direction and they didn't get it. This decision could have been worse, but if prices do not begin to come down, Canadians will know who to blame.”
OpenMedia.ca, however, was pleased that there will be a use-it-or-lose it clause, “which means that wireless carriers cannot simply hoard spectrum without using it to bring service to Canadians.”
Ottawa's announcement included a requirement that companies that hold more than one block of spectrum will have to provide wireless services to 90 per cent of their coverage areas within five years and to 97 per cent of their coverage areas within seven years.
The government said it will apply measures during the auction, which will be held in the first half of 2013, to ensure rural Canadians get the same service as people who live in bigger towns and cities.
Antenna tower sharing and roaming policies will also be changed.
A portion of the spectrum will also be set aside for public-safety services such as firefighting and police.
The new spectrum has greater reach than available spectrum, allowing calls in elevators and deep underground parkades. It will also mean better and more affordable coverage in rural areas because fewer cell phone towers are needed.
The frequencies are available because of the switch to digital television signals.
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