Government announces AWS-3 spectrum auction for early next year, sets aside 30Mhz for existing new entrants

At a brief press conference in Toronto this morning, Industry Minister James Moore reiterated his government’s plan to foster a sustainable wireless market, with four competitive companies operating in each region, across Canada.

To that end, he announced the streamlining of a new spectrum auction, dubbed AWS-3, with 50Mhz of paired spectrum that sits next to, and functions identically to, the airwaves that were auctioned in 2008.

While the government recently held an auction for all-important 700Mhz spectrum, which travels further and penetrates thick walls better than what we consider “higher” spectrum — including AWS — none of the current new entrants except for Videotron’s parent company managed to find the necessary capital to bid on it.

In this auction, the government is setting aside 60% of the spectrum, 30 of the 50Mhz, for operating new entrants such as WIND Mobile, Mobilicity and Videotron. Specifically, operators with less than 10% national and 20% provincial market share will have bidding priority.

The auction has been designed to make it easy for these existing new entrants to obtain at least 10Mhz of paired spectrum, which would be enough for companies like WIND to launch LTE service in the areas they currently operate. This is the major stipulation: the set-aside spectrum is available only to companies operating in specific areas, so WIND wouldn’t have access to it in Saskatchewan, even if it owns non-deployed spectrum there already.

Another spectrum auction so soon after the 700Mhz is likely an indicator that the government did not get the results it wanted to foster wireless competition across Canada. WIND’s parent company pulled out of the auction at the last minute due to ownership disputes with the GoC, and Mobilicity was nowhere near financially capable of bidding. This auction is meant to catalyze the consolidation of WIND and Mobilicity, perhaps by Quebecor, which would then have prime spectrum in both AWS and 700Mhz to more readily compete with Rogers, Bell and Telus.

During the Canadian Telecom Summit in June, Videotron announced a campaign called Wireless for Less, a lobby play for an auction very much like this. If Quebecor were to purchase WIND and Mobilicity — and it appears to be the only Canadian company with both the capital and incentive to do so — it would have roughly a million subscribers across three of Canada’s most populace provinces, in addition to its Quebec-based Videotron business, as well as a huge amount of set-side AWS-3 spectrum to launch a nation-wide LTE network. It would, of course, need to own both new entrants before the start of the auction, since the provider needs to be operating in the regions if it wants access to the set-aside.

AWS-3 is adjacent spectrum to what was auctioned in 2008, though it’s unclear at this point whether current AWS-compatible smartphones will work.

The government will hold a public consultation this summer to hammer down the finer details of the AWS-3 auction.

Update: As the current band plan for AWS-3 is not yet known, we cannot say for certain whether current devices will work, though it’s likely that the airwaves will be consolidated into the Band IV plan.

[source]Industry Canada[/source]