Auction rules may force Rogers into deals with competitors
Jamie Sturgeon Mar 16, 2012 9:12 AM ET
Rogers Communications Inc. may have to collaborate with a competing wireless operator to deliver mobile broadband services outside major cities or be left at a disadvantage to rivals BCE Inc. and Telus Corp., sources said Thursday. The potential scenario is the result of a decision by the federal government Wednesday to group valuable airwaves set for auction into five smaller “blocks” rather than bigger parcels.
The amount of radio spectrum per block will limit how much subscriber traffic from calls and data transmission the frequency band can support, analysts say, meaning slower speeds for customers unless blocks owned by competitors can be paired and shared.
While BCE’s Bell Mobility and Telus confront the same problem, the two operators share their current wireless network assets under an existing agreement.
A spokesman for Telus declined to comment on whether the agreement included access to radio bands owned by the other, but it has been suggested the arrangement includes spectrum.
If a similar deal is struck between the two telecom giants for the prized bands up for sale next year, the two will be able to deliver faster mobile high-speed Internet to large areas of the country compared to others that have less of the spectrum, including Rogers, the country’s biggest wireless provider.
In the long-awaited auction decision, government officials prohibited the sector’s three dominant providers from acquiring more than one “prime” block per market. Combining frequencies will allow BCE and Telus to skirt this condition but Rogers has no obvious partner to team with to deliver comparable speeds.
“[They’ll] have to come up with something,” a source close to the company said. “Whoever ends up with the other [block], will probably be looking over at [Rogers]” to do a deal. And perhaps vice versa.
The auction is for bands located in the 700Mhz frequency range, formerly used by television broadcasters. The airwaves are especially valuable for their ability to travel long distances and penetrate walls more easily than higher bands.
While Rogers (as well as Bell and Telus) is selling advanced mobile broadband services in big cities using higher frequencies it has now, the provider, like the others, is eyeing the new bands up for auction to deliver services to outlying suburban areas and smaller centres.
Technology will advance over time to allow for multiple bands to be used simultaneously to deliver large amounts of traffic, but as of now, the promise of high-speed mobile Internet relies on contiguous blocks about double the size of the five Industry Canada plans to auction off next year.
Meanwhile, Wind Mobile, the largest of four new entrants to come into the $18-billion market in recent years, is claiming it will be unable to offer a competitive wireless product to incumbent companies based on the size of the spectrum parcels.
While Industry Canada capped the number of blocks the three big operators can buy — ensuring a new entrant like Wind or Mobilicity get one in every market — the amount of spectrum allotted to each block will constrict bandwidth to speeds no faster than what’s available on today’s networks, which are hitting capacity constraints.
In order to widely deploy super fast next-generation “LTE” networks, more spectrum is required, Simon Lockie, Wind’s chief regulatory officer said. Under the current proposal, “I mean, we can have LTE [technology and equipment] but it won’t be LTE speeds