telus-tower-19-08-2011

Canadian Government Threatens to Keep TELUS Out of Spectrum Auction if They Pursue Mobilicity

April 25, 2014 - Written By Cory McNutt

It is amazing to me the political strongholds that the Government in Canada has over private industries, especially when it comes to the wireless industry.  I understand that there must be rules, regulations and certain guidelines in place for the greater good, but Industry Minister James Moore seems to be ruling with an iron fist to such a degree that rather than foster competitiveness – he is completely dismantling it.  Prices have done nothing but gone up in recent months at all of the major carriers – Rogers, Bell, and TELUS.  Now, the latest word is that he is threatening to keep TELUS out of the upcoming 2,500 MHz auction if they persist on trying to buy Mobilicity – some would call that blackmail.

In what would be TELUS’ third attempt to purchase Mobilicity – a company that is currently operating under bankruptcy guidelines – a senior government source said:  “If Telus doesn’t drop efforts to acquire spectrum set aside for new entrants, the Harper government is prepared to change the rules of the upcoming wireless auction that could effectively bar Telus or any incumbent from acquiring that spectrum.”

TELUS seemingly has the law of its side to defend its actions – after all, the Government set up a five-year waiting period that started in 2008 and has already passed, yet they continue to deny the buyout that would certainly help the creditors and banks of Mobilicity.  Mobilicity still has about 165,000 active customers and because they and TELUS are both using the HSPA network, they should be able to easily absorb their users.  William Aziz, Mobilicity’s Chief Restructuring Officer, stated, “I am confident the Transaction will serve the best interests of Mobilicity’s customers and employees.”  TELUS claims that Mobilicity accounts for less than 1-percent of Canada’s 27 million mobile subscribers and argues that there are already plenty of choices for Canadian subscribers.  Really, if TELUS acquires an additional 1-percent of Canadian subscribers and helps out a company that may soon have to close its doors – will that really hurt competition?

Analyst expected TELUS to benefit the most from the 2,500 MHz auction, scheduled in 2005, because Rogers and Bell already own significant amounts of that spectrum and because the government places caps on just how much spectrum companies can own in each region, both Rogers and Bell are already at or near their caps…leaving TELUS as the only incumbent to really acquire large amounts of 2,500 MHz spectrum.

The Government clearly wants to foster new competitors in the wireless market, but is this really the way to do it?  The Government does not seem to realize that one – it is very hard to break into an existing market with three large companies already there, trying to compete, and secondly – exactly how many large, incumbents can the market really handle?  In order to have competitive pricing there also has to be economies of scale with enough wireless customers to make it possible to offer lower pricing.  But, it will be an uphill struggle for TELUS as one government source said: “If companies like Telus think the government will allow them to stockpile spectrum that was set aside for a fourth player, and access new spectrum in future spectrum auctions, they are kidding themselves.”

Another source scolded them like a child: “The rules of the 2,500 MHz auction were designed under the assumption that AWS spectrum for new entrants would remain in the hands of new entrants.  If that changes, we’ll need to go back to the drawing board of the 2,500 MHz auction rules.  Telus should reflect on that.”

So while TELUS “reflects” and the Government keeps changing the rules to suit their mission, we will sit back and wait to see how this story ends…hopefully Mobilicity, TELUS, and most of all, the consumers will benefit.

James Moore