Canadian government firing up another wireless spectrum auction

AWS-3 licenses could aid smaller carriers if Industry Minister opts for a “beauty contest” system instead of a straight-up sale.

Industry Minister James Moore.

UPDATE: The government has gone with a set-aside, brushing aside the need for a lengthy consultation on how Canada’s next spectrum auction should be run. For the likely outcomes, click here.

The Canadian government is set to announce a new auction of wireless airwaves on Monday with an aim to spurring more competition between cellphone providers, according to a source close to the situation.

The airwaves in question will be in the AWS-3 bands, which are similar to and interoperable with the AWS-1 bands.

Upstart cellphone companies – including Videotron, Wind, Mobilicity and Eastlink – bought AWS-1 licenses in a 2008 spectrum auction and used them to launch networks that compete with Bell, Rogers and Telus. The Big Three also use AWS-1 bands to supplement their other spectrum holdings.

Industry Minister James Moore will on Monday morning announce the beginning of the process to award the new licenses, the source said, speaking on condition of anonymity. The announcement will “support more consumer choice and better service in the wireless market,” according to a press release sent out by Industry Canada on Friday.

As with previous spectrum auctions, a public consultation on how the licenses should be awarded will follow. The consultation could begin by the fall.

The auction itself could take place as soon as April, to coincide with another previously scheduled auction of licenses in the 2,500 MHz range. The U.S. Federal Communications Commission is auctioning off its AWS-3 licenses in November of this year.

Industry Canada could not be reached for confirmation on Sunday.

If another auction is indeed in the cards, the shape it will take will be hotly contested over the next few months. The government, keen to spur more competitors to the Big Three, is likely to lean toward setting rules that favour new carriers. Among the possibilities would be a set-aside, similar to the AWS-1 auction in 2008, where a portion of licenses could be reserved for smaller or new service providers.

The government could also opt for a “beauty contest” where bidders would be judged on a set of criteria. Such a system would allow the Industry Minister to choose how to apportion spectrum in order to achieve the government’s goals, which in this case is more competition. Winners would then have to pay annual licensing fees.

Such a system would likely be disputed by Bell, Rogers and Telus, despite incumbent carriers gaining considerable spectrum holdings years ago under similar rules before the government moved to an auction format.

The AWS-3 spectrum, meanwhile, is considered valuable spectrum because of its interoperability with AWS-1.

U.S. carriers such as AT&T, Verizon and T-Mobile are expected to start using it within the next two to three years. Canadian carriers will therefore need similar spectrum if they want access to the most up-to-date smartphones and devices.

Both Videotron, through its parent Quebecor, and Eastlink purchased licenses in the most recent auction, which ended in February. That spectrum, in the 700 MHz, is seen as especially valuable for its long range and ability to penetrate walls. Wind and Mobilicity sat the auction out because of financing problems, with the latter actively seeking a buyer.

Quebecor’s chief executive Pierre Dion recently said the company is “ready, willing and able” to expand into Ontario, Alberta and British Columbia after purchasing 700 MHz spectrum in those provinces. The company wants rules limiting how much it would have to pay Bell, Rogers and Telus for its customers to connect to their networks before expanding.

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