Last week was an ironic one in the North American wireless market. Here in Canada, the bell started to toll a little more loudly for small wireless carriers with the Globe and Mail breaking the news that one of them – Mobilicity – is in buyout talks with Telus. South of the border, the ironic flipside of that was taking place as the Justice Department recommended special dispensations for smaller wireless companies in order to boost competition.
As the Globe reports, number two Canadian carrier Telus is officially talking to Mobilicity about acquiring the smaller company in a deal that some sources value at up to $400 million. If the sale does go through, the federal government would be up a certain smelly creek, since Mobilicity and fellow small carriers Wind and Public Mobile are effectively its own creations. With Ottawa having set aside spectrum for these companies back in 2008, it’s somewhat responsible for ensuring these companies get on their feet.
Instead, Industry Minister Christian Paradis decided to dish out some tough love in the upcoming 700 megahertz spectrum, which will take place in November. Rather than again giving new carriers set-asides in what is ultimately going to be very good and valuable spectrum, the government is instead going with caps that will prevent any one player from hoarding licenses. This, Paradis says, will “ensure” that at least four carriers can acquire spectrum in every market.
The only problem is, there may not be four players come November. Not having a set-side at this point is sort of like casting your children out of the house while they’re still breast-feeding. They’re virtually assured to come to a bad end.
Among the best-case scenarios at this point is that the smaller players merge with each and indeed create that fourth player the government seems to want. At least one private equity investor, money manager Newton Glassman, is looking to do just that, again according to the Globe.
Either way, the fate of these companies is likely to be known by June 11, which is the deadline to register for participating in the auction. If Wind, Mobilicity or Public don’t apply, that’ll be a pretty big sign that they’re closing up shop.
Down in the United States, meanwhile, it’s the Department of Justice that’s beating the competitive drum. The anti-trust watchdog says that without some sort of protections in the country’s own upcoming spectrum auction, the competitive positions of smaller players Sprint and T-Mobile will be lessened. The DOJ is somewhat vague in its suggestions to the Federal Communications Commission, suggesting only “different rules, weights or caps,” but its participation in the process stands in stark contrast to its Canadian counterpart.
Here in Canada, where oh where is the Competition Bureau on the spectrum issue? While the organization is supposed to be Canada’s ant-trust watchdog, it has been invisible in the run-up to the auction, with zero comments registered in the entire year-long process so far. A spokesperson I checked with could not comment on why the Competition Bureau has been silent on the issue.
The difference in approach is striking. In the United States, the anti-trust authority is pro-actively trying to ensure a more competitive landscape. When it comes to wireless in Canada, the same body has only managed to pipe up to tell everyone what they already know – that three-year contracts are bad. Is it any wonder that bills are lower down south?*
(*Sixteen per cent lower, for anyone keeping track.)