Canadian 5G auction raises competition questions, again

Canada has announced the results of its latest 5G auction, raising C$8.9 billion (US$7.1 billion) from the sale of spectrum in the 3.5 GHz band. But while the country’s innovation minister declared the result to be a success from the point of view of market competition, it’s pretty clear who the big winners really are.

The big three Canadian mobile operators – Bell Mobility, Rogers, and Telus – together accounted for C$7.3 billion (US$5.9 billion) or over 82% of the total auction spend. But that did not deter the state from claiming a good result.

“The 3500 MHz auction is a key step in our government’s plan to promote competition in the telecom sector, improve rural connectivity, and ensure Canadians benefit from 5G technologies and services,” said Minister of Innovation, Science and Industry, François-Philippe Champagne.

“As intended, small and regional providers have gained access to significantly more spectrum, meaning that Canadians can expect better wireless services at more competitive prices, which has never been more important for working, online learning and staying connected with loved ones,” the minister added.

Admittedly, you would expect the biggest players to be the biggest spenders, and the big three weren’t the only ones to win spectrum – there were 15 winners in total out of 23 participants – so Champagne’s words are not entirely without merit. But against a backdrop of historically weak market competition, a handful of players picking up small amounts of spectrum will not radically alter the competitive landscape.

Nonetheless, it’s worth noting that Videotron, Canada’s would-be fourth mobile operator – Rogers’ planned C$26 billion (US$20.9 billion) acquisition of Shaw is still in the pipeline; Shaw did not take part in the auction – was the fourth-highest spender, picking up almost C$830 million (US$665.6 million) worth of frequencies covering a population of close to 30 million. Meanwhile, a number of other companies spent in the hundreds of millions, including SaskTel, Xplorenet and Cogeco.

Rogers spent the most, racking up a C$3.3 billion (US$2.7 billion) bill, followed by Bell Mobility at C$2.1 billion (US$1.7 billion) and Telus at C$1.9 billion (US$1.5 billion).

“This investment in 5G spectrum will build on our existing 5G assets and enable us to deliver the world-class connectivity Canada needs to increase productivity, fuel innovation, create jobs, and compete in a global economy for decades to come,” said Joe Natale, CEO of Rogers Communications, taking a leaf out of the ‘ticking all the right boxes’ playbook. Rogers is promising the types of developments we have come to expect from 5G operators, including high-speed mobile services, fixed wireless broadband, 5G-powered IoT applications, and mobile edge computing.

There were similar statements from Bell and Telus, as you might expect. The latter, however, also took the opportunity to complain about the cost of spectrum in Canada.

The auction came in at C$3.28 (US$2.63) per MHz/pop, according to Telus, which is 2.8 times the amount paid by operators in the US in the most recent FCC auction, and much more than carriers have paid in similar sales elsewhere in the world. As such, the benefit to the Canadian economy from 5G will be lower than it could otherwise have been, Telus insists.

“Canada’s position as a global leader in broadband networks is vulnerable to burdensome regulations governing access to spectrum,” said chief executive Darren Entwistle. “Going forward, if we are to truly benefit all Canadians, accelerate the government’s innovation and affordability agendas, and transition successfully into a 5G digital world, we need responsible, forward looking and predictable regulatory policy that ensures affordable, fair and expeditious access to this national asset so we can continue building our world-leading networks,” he said.

Which just goes to show, that even if you’re one of the big players in a market widely considered to be lacking in competition, there’s always something to grumble about.

Speaking of which, the government’s announcement on the outcome of the 3.5 GHz sale was followed by an update on its efforts to boost competition in the mobile market. Its headline finding is that data prices have decreased, with the cost of the majority of data plans in the 2 GB to 6 GB range having dropped by between 9% and 25% since early 2020.

“While I’m encouraged by the decreasing prices for a majority of plans across Canada, there is still progress needed to meet our goal,” Champagne said, referring to the government’s aim of reducing the price of popular plans by 25% over two years. “We will continue working with service providers to ensure all Canadians have access to more affordable wireless services,” he said.

That’s doubtless good news for consumers, but with operators once again shelling out billions for new spectrum, we will surely see some creative tariff plans as 5G goes mass market.