The federal government's decision to open more spectrum to the marketplace will change the face of Canada's wireless telecommunications industry, experts say.
"New entrants mean more choice for Canadians - and it means a challenge for the existing players," says Bernard Courtois, president and CEO of the Ottawa-based Information Technology Association of Canada (ITAC).
Both large and small operators are among a list of 30 companies that have bid to become new or expanded players in Canada's $13-billion cellphone market.
The feds have set aside 40 megahertz (MHz) for new players and 65 MHz for existing wireless operators, limiting their growth capacity.
"The effect that the auction will have is, really, enhanced competition for the cellular guys," says Dorian Banks, president of Vancouver-based MetroBridge Networks Corp. "It's going to end up forcing Rogers and Bell and Telus to come off their ... pricing, especially on the data front - much like has happened in the United States, where they have $99 all-you-can-talk and all-you-can-use data plans now that are popular."
This marks the first time since 1995 that the federal government has made new spectrum available. Spectrum refers to wavelengths that transport voice and other wireless data, and this auction - which begins May 27 - is the first of its kind.
"There's always been a question of the viability of wireless networks in Canada," says ITAC's Courtois. "We've had companies disappear or get swallowed up over the years, so it's going to be interesting to see how that plays out.
"It's expected that at least some of the entrants will have substantial existing operations to back them up - so they should be sustainable."
On March 31, Ottawa finished qualifying the bidders for future consideration. Wireless operators and industry analysts are waiting to see whether the Canadian Radio-television and Telecommunications Commission (CRTC) will provide enough spectrum to a fourth national wireless carrier, which could rival the so-called big three of Toronto-based BCE Inc. (Bell Mobility), Rogers Communications Inc. and Burnaby, B.C.-based Telus Corp.
Ottawa may also decide to allow more local and regional players to acquire spectrum.
"With the way the spectrum is set up, there's a lot of room there that, if someone wanted to just pick up some spectrum in a particular region - or regions - someone could become a regional player," says Mark Choma, spokesman for the Ottawa-based Canadian Wireless Telecommunications Association (CWTA). "There's also room for someone to become a national player as well."
Bell, Telus and Rogers are vying for more spectrum to enhance their existing, extensive networks across the country. But some cable TV companies, including Calgary-based Shaw, and newspaper operator and printer Quebecor Media Inc. are hoping to enter the wireless world.
Winnipeg-based MTS Allstream Inc., which already offers wireless phone service, is also looking to expand its business base.
Newcomers include Toronto-based Niagara Networks Inc., which has made the largest deposit - $881 million - among hopefuls, and SSI Micro Ltd., which has pledged $80,000 for a Nunavut-based service.
After more spectrum was made available in 1995, both Clearnet and Microcell emerged as new national players, but they were later acquired by Telus and Rogers, respectively.
"I'm expecting a diversity of companies to be bidding," says ITAC's Courtois. "There's quite a degree of uncertainty as to whether people will get national licences, or regional licences or local licences. All kinds of spectrum is being auctioned off in all these various formats."
But one thing appears certain: Ottawa will not permit many more cellphone towers to be built, because of concerns about unsightly apparatus in communities.
That means newcomers will likely have to piggyback their services on existing towers operated primarily by the big three firms.
New players will be able to roam on other networks, but they will need established networks of their own to start with.
"I don't think the technology is a problem," says Courtois. "The investment is significant, and you need to invest not only in a physical network, but you need to invest in a network of stores and that kind of thing. Some people have an advantage if they're already in operation and already have retail stores. But building up a client base, building up retail outlets and building up a network in and of itself, those are significant investment challenges."
Clearnet and Microcell affected the entire industry financially by introducing drastic price reductions, but they couldn't survive on their own. CWTA's Choma says the auction will add another layer of competition to the industry, but increased competition is nothing new to the sector.
"The wireless industry has never been price-regulated, so it's always been driven by competition - fierce competition, for the most part," says Choma, whose group represents service providers and hardware sellers.
Local and regional players won't be new either, he adds. Customers already have a choice of two dozen carriers, ranging from the big three national firms to regional operators MTS Allstream in Manitoba and SaskTel in Saskatchewan, and local firms such as Thunder Bay Tel and Kenora Municipal Telephone System in Ontario.
But the spectrum auction won't result in the launch of a new firm right away.
"Really, acquiring the spectrum is just the first step," says Choma. "It's a very capital-intensive industry."
Even a regional network will cost several million dollars. Since cellphones first came to Canada in 1985, he says, wireless carriers have invested $22 billion in infrastructure.
As a result, he does not expect the spectrum auction to widen the reach of wireless networks.
Approximately 98 per cent of Canadians, he says, already have wireless access.
"It's going to be especially good for the Ontario market, where Rogers really has quite a stranglehold on the cable-modem side and the cellular side," says MetroBridge's Banks.
MetroBridge, a fixed wireless service provided to offices and other buildings, is not bidding because the spectrum does not fit its business model, which is based on transmissions that require considerable bandwidth.
Kirk Glaze, a Kitchener-based telecom consultant, does not expect the auction to produce drastically lower rates, because he says most newcomers will have to piggyback on other firms' networks.
"I don't think there's going to be a lot of room for them to really lower their rates," says Glaze.
"They're going to be, basically, buying their rates wholesale off the other towers that they're roaming off of and reselling them at that point."
Bell, Telus and Rogers are, essentially, charging the same amounts, although they might package their rates differently.
"I don't expect (the increased spectrum) to change the industry overnight," says Glaze.
(Monte Stewart can be reached at monte@businessedge.ca)
