Does Canada need more wireless spectrum?
Why Canada is ‘dragging its feet’ on the next spectrum auction as demand soars
Canada is home to more than 30 million mobile phone subscriptions for roughly 36 million residents. Put simply, we love being constantly connected.
Quarter after quarter, national wireless carriers report higher revenue per user as customers blow past data limits and buy bigger data buckets. Year after year, the telecom regulator reports more people upgrading to data-devouring smartphones to use on increasingly fast networks that let them consume content more easily.
It may be a given that Canadians can’t get enough snapping, streaming and content sharing, but data demand is only expected to grow as 5G networks, the Internet of Things and connected cars become reality.
But how and when the federal government will auction off the next band of spectrum — the invisible asset required to power wireless communications — remains a mystery even to itself. Although it predicts more spectrum may be required by the end of 2017, by the time it gets around to putting more spectrum on the block, 5G network standards may require a different set of airwaves to function, limiting any auction’s appeal.
Nearly two years have passed since the department formerly known as Industry Canada, now called Innovation, Science and Economic Development (ISED), announced plans to follow in the United States’ footsteps and repurpose the 600-MHz band of spectrum, a particularly valuable chunk of low-band airwaves that brings signals to tricky spots such as elevators and basements, for mobile service uses instead of over-the-air television signals currently.
The U.S. wrapped up its 600MHz auction earlier this month, pulling in a total of US$19.8 billion. Canada has always indicated it would wait for the U.S. auction to conclude to avoid technical variations between markets.
Yet, even though ISED Minister Navdeep Bains in November told reporters the government was working with industry to make spectrum available as soon as possible, an auction will take at least two more years, ISED stated this week in an email responding to questions on what Canada’s auction might look like.
ISED has not yet determined a structure for the auction, and noted it must first launch a public consultation on auction policies and then issue a decision on how to run the auction.
“The entire process, which also includes developing the auction software and conducting extensive bidder training, takes approximately two years from the launch of the consultation,” the ministry stated. “No specific date has been set for the consultation or the auction, at this point in time.”
Billions of dollars could be on the table. The government pulled in nearly $5.3 billion in the last major auction of low-band spectrum, the 700-MHz band, in 2014. In 2015, it raised another $2.1 billion selling higher-frequency spectrum in the AWS-3 bands.
ISED did indicate Canada’s next auction will be structured differently than the one recently wrapped up by the U.S. Federal Communications Commission, which was set up as an incentive auction where broadcasters were encouraged to vacate their channels so wireless carriers could bid on the spectrum.
That unprecedented model is widely seen to be less effective in Canada since two communications titans — namely, BCE Inc. and Rogers Communications Inc. — own both broadcasters and wireless carriers.
“Fortunately, Canada was able to free up the same amount of spectrum while ensuring that all Canadian broadcasters would have access to the spectrum they need to continue providing services,” ISED said.
Canada may be “dragging its feet a little bit” on its 600-MHz auction, but that’s not necessarily a tactical error given the importance of the asset, said Gregory Taylor, principal investigator for Canadian Spectrum Policy Research and an assistant professor in the University of Calgary’s communications department.
“This is where the power lies right now, in this invisible stuff that’s around us all the time,” he said.
The standard school of thought for decades has been that the big companies are running out of spectrum, Taylor said. But in the latest U.S. auction, the two biggest players largely stayed out of the game.
Verizon Communications Inc. didn’t bid at all and AT&T Inc. spent less than US$1 billion. TMobile, the third-largest carrier that bills itself as the consumerfriendly industry outsider, spent US$8 billion.
The lack of interest by the big guns could be for a variety of technical reasons, Taylor said. For one thing, wireless networks and smartphones are more efficient than they were even five years ago. For another, many people offload data to Wi-Fi networks on a regular basis so they don’t need as much cellular access.
“A lot of these things are making us re-examine how much spectrum we need,” Taylor said. “This is actually one where Canada may have been wise to wait this out a little bit. We’ve sold off a lot of spectrum, the major companies have large reserves of spectrum right now, I don’t think there’s a panic. We want to make sure we’re doing this right.”
Dwayne Winseck, a communications professor at Carleton University in Ottawa, called the U.S. auction a success story in terms of competition. He believes TMobile’s big win, which will help it improve coverage, proves the FCC made the right choice to insist on four strong national wireless carriers by rejecting AT&T’s attempt to buy T-Mobile in 2011.
Ever since the FCC rejected that merger, T-Mobile has introduced a variety of consumerfriendly initiatives such as bring your own devices, international roaming and unlimited plans, Winseck said. Now it’s bulking up its network.
“T-Mobile got the message that you have to compete,” he said. “T-Mobile is seeing this as a huge opportunity to build out in areas where it’s been weak.”
Winseck is less optimistic that one of Canada’s smaller players will go all out like T-Mobile did in an attempt to be cutting edge.
But less intense competition doesn’t mean low-band spectrum, including the 600-MHz band, isn’t important north of the border.
“We view low-band ownership as important, especially for smaller players which have to broaden their wireless network coverage,” Desjardins analyst Maher Yaghi said in a note to clients. “Quebecor Inc. has already mentioned that it needs more low-band spectrum, and we believe Shaw Communications Inc. would also be a buyer of such spectrum.”
But Yaghi agreed with Taylor’s assessment that technology improvements might have made the 600-MHz auction less useful to the major U.S. players, especially given recent indications that 5G networks may require higher-frequency spectrum to work properly.
By the time Canada gets around to its own 600-MHz auction, 5G standards may have been set that will change the table stakes. In the meantime, companies continue to spend on the wireless infrastructure needed to make their networks ever faster to meet seemingly insatiable demand for data.
The major companies have large reserves of spectrum right now, I don’t think there’s a panic. We want to make sure we’re doing this right.