Law Times

Law Times • June 6, 2016 Page 11 www.lawtimesnews.com Wireless policy ready for reset BY MICHAEL MCKIERNAN For Law Times C anada's telecommuni- cations policy is ripe for a reset ahead of the next major auction of wire- less spectrum, according to an economic think-tank researcher who says Ottawa should stop in- terfering in the market. The U.S. has already begun selling off spectrum to wireless carriers in the 600-MHz band, once used for analog television signals. Just before the federal election, Industry Canada, which has since re-branded as Innovation Sci- ence and Economic Development Canada, agreed with its Ameri- can counterparts to re-purpose the same spectrum in this coun- try for mobile broadband ahead of its own auction, but it has yet to set the rules of play. "This is an ideal time for the new government to press the reset button on wireless policy," says Paul Beaudry, an associate researcher at the Montreal Eco- nomic Institute. "They should abandon the policy of preferential auctions where some players have regula- tory privileges at the expense of others, and return to the practice of free and open auctions, which is how things were traditionally done before 2008. We believe that is the best way to allocate these scarce resources." But consumer advocacy groups are pushing just as hard to get Justin Trudeau's new gov- ernment to double-down on the fourth-carrier policy championed by its predecessor, led by former prime minister Stephen Harper. At the Public Interest Advo- cacy Centre, general counsel and executive director John Law- ford says an open auction would merely confirm the dominance of Canada's Big Three telecom giants: Telus Communications, Rogers Communications Inc., and Bell Canada Enterprises, which together hold around 90 per cent of the national market. "Upstart wireless operators could work in Canada; it just depends on whether you set the conditions to give them a shot at succeeding. We'll get a look at the new government's true colours when we see if they have the guts to set aside spectrum and help smaller new entrants when we have the 600-MHz auction," Lawford says. The rules of the last two ma- jor spectrum auctions were en- gineered as part of a concerted effort to encourage competition in the wireless sector. In 2008, the federal govern- ment earmarked 45 per cent of the available spectrum exclu- sively for new entrants, draw- ing in companies such as Wind Mobile, Public Mobile, and Mo- bilicity. The next time around, in 2014, the government changed tack slightly, imposing caps to ensure at least four providers could gain access to spectrum in each region of the country. According to Beaudry, the previous government's preoccu- pation with establishing a fourth carrier only succeeded in dam- aging the market. He notes that none of the ma- jor new entrants from 2008 still operate: Telus acquired Public Mobile just five years after its first auction, Mobilicity f lirted with bankruptcy before Rogers took it over, and, most recently, Calgary-based Shaw Commu- nications purchased Wind ear- lier this year. Meanwhile, the regional caps have left swaths of spectrum unused after compa- nies like Wind and Videotron bought up licences outside their core markets. "I think the activist policy agenda of the last government has resulted in under-utilized and inefficient use of spectrum. In the short term, maybe the arrival of smaller players had a positive impact on pricing, but in the long term, I don't think the entire policy has had a posi- tive impact," Beaudry says. Despite those concerns, he says the Shaw-Wind deal could give the wireless market that long-sought-after fourth na- tional player. However, Lawford is not so sure. "We're expecting Shaw to stay close to home and not do much elsewhere," he says. "They're structured like the other Big Three, so it's likely they'll be trying to sell their broadcasting content over wireless, and pric- ing like the incumbents." The federal government has given few clues so far about its approach to the wireless sector, although Lawford says he was encouraged by ISEDC's recent decision to reject a petition from Bell to overturn a CRTC deci- sion that forced large providers to share their fibre networks with smaller players. "The decision strikes the right balance between the pri- vate sector having incentive and consumers having a competitive choice," said Navdeep Bains, the minister in charge of ISEDC, in a statement announcing the re- jection of Bell's appeal. However, everyone in the sector is looking to Manitoba for the next big signal about which direction the new government will head. ISEDC and the Com- petition Bureau will both have to clear Bell's $3.9-billion acqui- sition of Manitoba Telecom Ser- vices Inc., the province's former public utility. The proposed deal would cut the number of wireless car- riers in Manitoba to three from four in a province with some of the lowest prices in the country, putting it right at the top of Law- ford's priority list. "It's exactly the wrong mes- sage to Canada and the rest of the world," he says. "People will be pulling their hair out when their prices go up to match the rest of the country." Despite the cut in the number of players, Beaudry says Bains can still achieve his competitive aims in the province. At the moment, MTS holds about half of the Manitoba wire- less market, ahead of Rogers, which controls about one-third, while Bell and Telus hold minor stakes. However, after the deal goes through, Bell has promised to off load about one-third of its subscribers and retail outlets to Telus. "I think it could be good for Manitoban consumers, and would, in our view, be pro- competitive. Some people just look at number of competitors and think that's a negative, but I would argue that the three play- ers that emerge would be stron- ger than the four you have right now," Beaudry says. He says pricing is only part of the picture, arguing MTS has artificially held its prices low in order to hold on to customers. Bell, he noted, has promised to pump $1 billion into wireless infrastructure in Manitoba over the next five years. "The reality is that the tele- com sector is extremely capital- intensive. It's not sufficient to offer attractive pricing; you need to have the financial resources to be able to invest in the infra- structure of tomorrow," he says. According to Lawford, how- ever, the promised investment merely matches plans in place before the deal was announced. "The only thing that delivers investment is competition. They won't loosen their chequebooks unless they feel threatened. "If you look at other places where Bell have a big interest, it's not like they have blanketed Quebec and Ontario with fibre optics up to the 63 rd Parallel. They move at the rate they want to," Lawford says. LT FOCUS John Lawford says an open auction would merely confirm the dominance of Canada's Big Three telecom giants: Telus Communications, Rogers Communications Inc., and Bell Canada Enterprises. 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