QUEBECOR SPECTRUM RIGGED? CORCORAN,

The deadline is today — Friday the 13th — for Innovation, Science and Economic Development Canada (ISED) bureaucrats to receive part of one of Ottawa's easiest and sneakiest tax grabs. Figuratively, more than a dozen telco service minivans have been up at ISED headquarters this week bearing $1.8 billion in banknotes. Big Three logos led the delivery brigade — Rogers unloaded $660 million; Bell $415 million; and Telus $390 million. Oh — look who came next: Videotron with $168 million.

The money drop, $1.8 billion from more than a dozen firms, represents the 20 per cent deposit on $8.9 billion the companies bid at an auction for vital government-controlled 3500 MHz spectrum for the coming 5G wireless revolution. The $7-billion cash balance will be paid by the companies on Oct. 4, money that Ottawa will then spend on such election promises such as daycare, housing subsidies and other electioneering gimmicks.

As he shovels the cash into the Trudeau government's fiscal furnace, no mention will be made by ISED Minister François-Philippe Champagne about where the money is really coming from, which is mainly the pockets of Canada's 30 million wireless users. Nor will he dwell on the controversies surrounding the latest auction process.

As the owner of all spectrum in Canada, Ottawa operates a spectrum extortion racket that extracts billions from spectrum-hungry telecom companies while playing political games with consumers. Since 2008, the federal government has collected about $30 billion in spectrum auction revenues, most of it ultimately paid by consumers through higher wireless bills — about $1,000 per Canadian wireless customer.

The three major firms — Bell, Rogers and Telus — have raised alarms about the government's rigged auction system. In addition to creating artificial shortages that drive up prices, the auction process sets aside 25 per cent of spectrum for bidding by smaller firms.

Instead of clearing a lower-cost path for fourth carrier alternatives to the Big Three, the policy has produced a crop of failures. One company after another — Clearnet, Microcell, Public Mobile, Mobilicity, Wind Mobile (now known as Freedom Mobile) — all failed and were later acquired by other firms.

Now ISED appears to have rigged up another auction gambit. The Videotron van that delivered $168 million to Ottawa this week is owned by Quebecor, which is controlled by Quebec media czar Pierre Karl Péladeau, who oversees powerful newspapers, television and wireless operations in the province.

In telecom, Videotron is big in Quebec but not outside the province. At the latest auction, however, Videotron loaded up on cheap spectrum offered by ISED to so-called “small and regional carriers.” In all, Videotron paid $829 million for wads of 3500 MHz spectrum, including large blocks in Alberta, British Columbia and other parts of the country. While the Big Three were forced to pay an average of $3.36 on a megahertz-per-population (MHz/pop) basis, Videotron was able to pick up cheap spectrum at 92 cents per MHz/pop.

But how was Videotron allowed to scoop up spectrum when, according to ISED's official auction policy, the company does not appear to meet the requirement for bidding in Alberta and other provinces? The policy states that “Eligibility to bid on set-aside spectrum will be limited to those registered with the CRTC as facilities-based providers that are not national mobile service providers, and that are actively providing commercial telecommunications services to the general public in the relevant Tier 2 service area of interest, effective as of the date of application to participate in the 3500 MHz auction.”

At least three telcos — Bell, Telus and Xplornet Communications — have asked ISED to explain how Videotron was able to bid on spectrum in areas where it has no commercial services. Based in New Brunswick, Xplornet specializes in providing broadband to rural communities across Canada. It bid more than $244 million for new spectrum and would be competing against this prospective Videotron expansion.

I sent a note to Quebecor asking for its comments on the claims that Videotron did not qualify for the outside-Quebec auction, but had received no reply at deadline. ISED appears to be playing dumb. Apparently Quebecor has convinced Ottawa that an obscure subsidiary called Fibre Noire qualifies Videotron's auction participation. The company's website, which promotes dark fibre and ethernet services, shows little activity outside Quebec.

But if Videotron lands the new spectrum, how will it compete? Or will it? In the past, Quebecor acquired spectrum at cheap auction prices and then sold it off for big profits estimated at more than $330 million. Is this just another Péladeau hoarding gambit on spectrum to be sold off later as the 5G revolution expands?

The alternative is that this time Péladeau is serious about competing and has big hopes that Ottawa will force Rogers and Shaw to sell off Shaw's Freedom Mobile operation to be merged with Videotron to create a fourth national carrier.

The costs and risks associated with such a mega-billion-dollar adventure are massive. Many analysts have doubts. But what if the Trudeau government is planning to rig the rest of the story so that Quebec-based Pierre Karl Péladeau can get a major financial advantage via regulation and mandates that would allow Videotron unfair competitive advantage? That seems quite possible in view of the latest auction results.

OTTAWA 5G AUCTION

SPARKS CONFLICT

OVER PÉLADEAU

PLANS.