Wireless D-Day has come and gone and… yawn… sorry, what was I saying? Oh yeah. Industry Canada on Monday announced the list of bidders in the uber-important spectrum auction, scheduled for January, and there’s nothing notable about it. The big incumbents will of course be there, as will Wind and a few private equity firms, but no major foreign players appear to have registered.
That’s bad news for Canadians because it likely means one thing: the status quo will continue. In the words of Bay Street analyst Dvai Ghose, “The summer war between the incumbents and the government has resulted in a victory for the incumbent carriers.” That’s a pretty creepy statement of affairs in what is supposedly a democratic country.
Contrary to what some industry boosters are saying, big foreign interests such as Verizon weren’t scared away by supposedly robust existing competition or the government’s actions – in particular, its announcement back in June that it would review all spectrum transfers and bar those that would lessen competition. That suggestion actually borders on absurd – nobody starts a business with the intention of failure, which is why no wireless company would expand into another country with an exit strategy at the top of mind.
It’s far more likely that foreign companies were frightened off by the incredibly long list of disadvantages they’d face if they indeed took the plunge into Canada. I wrote about those at length last month, but in a nutshell, Bell, Rogers and Telus would still have tons more quality spectrum, towers and infrastructure, nation-wide coverage, cash flow, service bundles, media offerings, customers tied into existing contracts, brand awareness and lobbying power. As I wrote in that post, anyone willing to take all this on might be considered certifiably insane.
So what now? Consumers’ best hope is for a happy ending to the Wind-Mobilicity drama. The best possible outcome is that the two somehow merge and end up with decently resourced ownership that is committed to growing and strengthening a combined company. It would still have all those disadvantages above to overcome, but with better-quality spectrum in hand it could still make things interesting, especially if such an entity were to explore further partnerships with the likes of business services provider Allstream (soon to be owned by one of Wind’s original backers) and independent internet provider Teksavvy.
There is also the outside hope that Verizon or another foreign player could swoop in after the January auction and acquire Wind and/or Mobilicity, if those companies are still up for sale, but that’s a remote possibility at this point.
Beyond that, the government – fresh from apparently losing the war – must surely be thinking about Plan B. I outlined several possible options last month and some of them are looking increasingly likely now. More regulation seems likeliest, perhaps with the government beginning a process that will force a wholesale scheme onto incumbents. Similar to what exists for home broadband, such a system would give indie providers access to the networks of Bell, Rogers and Telus at mandated prices. Those third parties could then sell their own services at prices that would likely be considerably below the incumbents’.
If Moore and company are particularly irate about their wireless setback – and there’s evidence that they are, as an Industry Canada website that debunks what it calls industry “fictions” attests to – they could go even further by looking at splitting the incumbents from their networks. This split, which is often referred to as operational, structural or functional separation, would be a step further than a simple wholesale regime and a very bold move for the government.
Whether or not these options are on the agenda is unknown, but the government has in fact already hinted that it is looking at Plan B. In a statement on Monday, Moore said that “in addition to this auction, our government will continue to aggressively pursue policies that ensure consumer interests are at the core of all government decisions.”
Will such policies be small and trivial, or will they be big and brash? If the summer experience taught the government anything, it’s that boldness will indeed be needed for the next phase of its war with this particular industry.