Industry Minister Christian Paradis moved Wednesday to increase competition in Canada's wireless sector, placing limits on the coming wireless spectrum auction and lifting foreign-investment limits on small telecom firms.
Paradis made the announcement at the same time as he said the next auction of radio waves in the 700 and 2,500 MHz frequency bands will be held in the first half of 2013.
Wireless firms need access to the additional spectrum to expand their networks.
"The measures I am outlining today will ensure the timely availability of world-class wireless services at low prices for Canadian families, including those in rural areas," Paradis said in a statement.
Paradis said Ottawa will lift restrictions on foreign investment in firms with less than 10 per cent of market share by revenue.
The exemption will stay in place for companies that increase their share of the market beyond 10 per cent if they do that without merging with a rival, he said
Limits set on big firms' share
Paradis also announced Ottawa will limit how much spectrum the largest players — Bell, Rogers and Telus — can buy through the auction.
Ottawa will set aside one of four blocks of the new spectrum for new entrants and regional providers.
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.
Smaller players in the wireless sector, such as Wind Mobile and Mobilicity, had threatened to boycott the auction if Ottawa didn’t adopt rules to set aside a portion of the spectrum for bidding only by new entrants.
They asserted their bids couldn’t compete with the financial weight of the big players without access to capital from foreign investors.
Anthony Lacavera, CEO of Wind Mobile, said Wednesday he was pleased by the decision to lift the foreign ownership limits.
"It is a clear win for Canadians, it is a clear win for Canadian consumers and I'm very proud that we've been fighting that battle as long as we have," he said.
"Finally, we've gotten it across the goal line."
Lacavera said Wind Mobile would have preferred the federal government to set aside a portion of the 700 MHz spectrum for smaller companies but the company was studying the cap system put in place.
Mobilicity president and chief operating officer Stewart Lyons believes the move ensures that "fairer wireless pricing and greater proliferation of technologies and services will be available to more Canadian consumers for a long time."
Speaking on CBC's The Lang and 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.
The combined market share of all the new entrants is about four per cent, according to Industry Canada officials.
Paradis said the new measures will allow new wireless carriers into the market and foster greater competition in the telecom industry.
Liberal industry critic Geoff Regan said the question is how to ensure there will be growth for the new market entrants.
"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.
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.
The government also said Wednesday it will apply measures in the spectrum auction to ensure rural Canadians get the same service as people who live in bigger towns and cities.
"The importance of these technologies [is] undeniable," Paradis said. "It is essential that these be offered at affordable prices in every region of our country."
The changes to the auction rules will let at least four companies obtain spectrum in each of Canada's 14 licence areas.
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.
Frequencies needed for LTE networks
Amit Kaminer, an analyst at the SeaBoard Group, a telecommunications and technology consulting firm, said Industry Canada tried to balance the interests of all sides.
"Relaxing the foreign ownership rules of smaller firms is an important step in the right direction but without set-asides the incentive for the new entrants to bid in the auction in the first place is greatly reduced," he said.
"That said, the caps structure does leave small but important opportunity for the new entrant to access a limited amount of spectrum."
The industry needs the new frequencies to build networks to handle faster, more advanced Long-Term Evolution (LTE) technology and to accommodate the latest smartphones.
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 cellphone towers are needed.
The frequencies are available because of the switch to digital television signals.
An auction of wireless spectrum in 2008 raised $4.25 billion for the government.