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    Waiting for Prentice  
    Financial Post  

Paul Vieira

    September 04, 2007  

OTTAWA - All eyes in the country's telecommunications sector are on Jim Prentice, the newly minted federal Industry Minister, to see whether he will provide a signal as to what will happen to the much-anticipated auction of wireless spectrum.
His predecessor, Maxime Bernier, had said rules governing that auction would be released in the early fall and the sale would take place in January or February. But some industry players -- notably the upstart cable and telephone players looking to enter the profitable $13-billion sector -- say the timing of the sale process is now up in the air, and they fear it could be delayed by as much as six months. As a result, new entrants into the $13-billion domestic market may not emerge until 2010 at the earliest.
Quebecor Inc. and MTS Allstream Inc. are the two companies pushing aggressively for auction rules that set aside spectrum, or radio frequency required to operate a cellphone network, for new competitors. The incumbent players, meanwhile, want few if any rules and believe available spectrum should go to the highest bidder. Moreover, they believe new entrants should not be given any breaks.

People close to the would-be wireless providers say Industry Canada officials have informed them guidelines may not be available until December at the earliest, followed by the sale in June of 2008.
This scenario, it is argued, provides an advantage to the incumbents -- Rogers Communications Inc., Telus Corp. and Bell Canada Inc. This is because it maintains the status quo and allows the three giants to record robust revenue without concern of a competitive threat. As a result, they will be able to fatten their war chests in the event new rivals come to market.
"As long as the status quo can be perpetuated, the Cheshire cat-like smiles among the incumbents will continue," said Iain Grant, Montreal-based managing director of telecom consultancy SeaBoard Group. "The new aspirants are likely anxious and chomping at the bit -- and somewhat frustrated by the fact that a change of minister means a potential change of priorities.
"And if nothing else," he added, "a change of minister means the new guy has to read every file on his desk and then prioritize. That is a pretty Herculean task in itself."
Mr. Prentice has yet to speak publicly since being sworn in as Industry Minister on Aug. 14. A spokeswoman for Mr. Prentice said there is "no fixed date" for the auction to take place, and none will be set until the department completes its review of the myriad submissions from stakeholders received as of the end of June.
"This is not a matter of delays, but there is a process that has to take place," said Deirdra McCracken, a Prentice spokeswoman.
Last February, Industry Canada kicked off a process by which it wanted to know from industry players how best to run the pending auction of wireless spectrum. Initial filings were due in May, and a second tranche, in which industry players were allowed to critique other submissions, in late June.

Mr. Grant said any new wireless player would likely need roughly 18 months to build a network, at an estimated cost of about $1-billion. In a scenario where the auction does not happen until mid-2008, that means there will be no fourth national carrier until 2010 at the earliest.
In addition, Mr. Grant said, further auction delays will only exacerbate Canada's weak standing against industrialized peers in terms of wireless use. At about 58% of the population, Canada has the second-worst cellphone uptake among OECD countries. Also, Canadian cellphone rates are said to be much higher, up to 56% higher, compared with U.S. fees, according to research conducted by SeaBoard.
But Chris Peirce, MTS Allstream's chief regulatory officer, said he's hopeful Mr. Prentice won't hold up the auction. He said Mr. Prentice showed an ability to handle controversial files when he was at Indian and Northern Affairs.

"He got things done -- especially things that were not necessarily popular with all stakeholders," Mr. Peirce said, adding Mr. Prentice is trusted by the Prime Minister.
Moreover, introducing competition to wireless would likely be well received by Canadians, and provide the new Minister with some political capital. "So when it comes to bringing new services to Canada, why wait to have this happen?" Mr. Peirce said.


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