In search of a fourth wireless force

The federal government is saving a seat for a fourth mobile carrier at next year’s wireless spectrum auction, but it’s unclear whether anyone’s actually interested — or who would benefit.

Continuing its quest for more competition in an industry Canadian consumers love to grouse about, Industry Minister James Moore announced Monday the government will hold an auction of high-quality AWS-3 spectrum early next year and set aside about 60 per cent of the available capacity for the companies that have emerged since 2008.

“This set-aside represents over half of the AWS-3 spectrum being made available and is the largest single block ever reserved for new entrants in Canada,” Moore said.

The announcement may encourage Quebecor Inc. to take the opportunity to expand nationally, inspire an outsider to step into the market or spur an investor to consolidate smaller players such as Wind and Mobilicity into a fourth major player to take on the Big Three — BCE Inc., Rogers Communications Inc. and Telus Corp.

Then again, it may not. Shaw Communications Inc. and Verizon Communications have recently taken a look at the Canadian wire- less market and said no thanks, so it remains to be seen whether the spectrum set-aside will be enough to give anyone the confidence to take the plunge.

David Heger, a telecom analyst with Edward Jones, said the government’s repeated efforts to stimulate competition create uncertainty and stock volatility for the Big Three. As for whether the Canadian market can accommodate a Big Four, he’s a skeptic.

“I just continue to question whether a fourth competitor can really be viable in a market the size of Canada,” Heger said.

Canada’s telecom industry is heavily regulated and has tight restrictions on foreign investment. Those in favour of the Conservatives’ efforts to open the market to more competition argue the big players are restricting choice and keeping prices artificially high.

A 2013 report by the Organization for Economic Co-operation and Development appears to support that argument. It found Canada has some of the highest prices for wireless services in the world, ranking in the bottom quarter in most categories studied for mobile phone calls and data.

Michael Geist, University of Ottawa law professor and technology expert, said he thinks the government is moving in the right direction with its policies aimed at

This set-aside represents over half of the AWS-3 spectrum being made available and is the largest single block ever reserved for new entrants in Canada.’ I NDUSTRY MINISTER JAMES MOORE

competition. “The government is rightly focused on promoting market-based solutions and using a public resource — spectrum allocation — to help make it happen,” he said in an email.

The last time the government tried this, it didn’t quite go as planned, however. Kyle Hyndman, an assistant professor of managerial economics at the University of Texas at Dallas, co-authored an economic analysis of Canada’s 2008 wireless spectrum auction and found setting aside a portion of the spectrum led to a 10-per-cent profit loss for the industry.

Whether consumers came out ahead is less clear. “There might be some evidence that prices came down, but really, if you look closely at the data, it’s part of a worldwide trend,” Hyndman said. “There is a bit more choice, but it’s a very specific type of customer that’s getting this more choice.”

Mobilicity and Wind left the 2008 auction with 10 to 20 megahertz of the Advanced Wireless Services spectrum, which meant they couldn’t compete for premium customers looking for the fastest data speeds and best voice options, Hyndman said. He said the 30-megahertz block on offer this time could give a new entrant a more realistic chance of competing with the Big Three.