updated 06:30 pm EDT, Wed March 14, 2012
Allows foreign ownership, sets auction rules
The Canadian government has issued several long awaited decisions that will alter that country's telecommunications landscape. It has announced that it will open up greater ownership of Canadian telecom providers by foreign investors. It will also set aside 25 percent of an upcoming auction of prime spectrum for smaller carriers.
In its first policy decision announced today, the Conservative government's Industry Minister, Christian Paradis, indicated that regulators would allow more than a 46.7 percent in a wireless, Internet or landline provider. The investments however, would be restricted to greater ownership in a company which held a market share of 10 percent or less. This effectively opens up the door to investment in smaller providers such as Wind Mobile, Mobilicity, Public Mobile, and Videotron. It preemptively precludes investment in the major carriers Bell, Rogers, and Telus.
In its second policy-making action, the government announced details of its anticipated auctioned for four blocks of 700MHz frequency spectrum. Each piece represents 25 percent of the bandwidth. While the three incumbents could bid on three of these parcels, the fourth would be made available exclusively to the smaller startups. The auction is scheduled for the spring of next year.
The spectrum was freed up when television broadcasts migrated from analog to digital frequencies. Auctioning is expected to yield about $4 billion Canadian ($4.04 billion USD). The bandwidth is extremely sought after because of its long range and ability to penetrate through walls and buildings. American carriers AT&T and Verizon already use 700MHz for their LTE networks, while Canadians have to use 1,700MHz and 2,100MHz.
Both actions are seen as setbacks for the incumbents. Greater participation by foreign investors potentially gives the new entrants stronger financial backing to compete with the three big carriers. While Bell, Rogers, and Telus have been trying to convince the government and subscribers that removing this limit would create a "fair" auction, critics have noted that lifting the restriction would conveniently quash competition. The 25 percent spectrum set-aside prevents the big three from outbidding the weaker competitors for all the bandwidth and squeezing the smaller players out of the market for new services, including 4G. [via Financial Post]