November 22, 2010 / 5:18 PM / 7 years ago

Canada eyes wireless auction, new ownership rules

OTTAWA (Reuters) - Canada will decide whether to allow more foreign investment in the telecommunications sector prior to its next auction of radio frequency spectrum in about two years, Industry Minister Tony Clement said on Monday.

Clement said he will launch public consultations “shortly” on the 700 megahertz spectrum, with the aim of auctioning it by late 2012. If the government opts to lift restrictions on foreign ownership in the sector, it must carry out those reforms before then, he said.

“You can’t decide that in isolation. You’ve got to look at what the capital needs are for the sector, how the auctions are going to work -- are there going to be any reserves or set-asides, those kinds of things,” Clement told reporters after delivering a speech on Ottawa’s digital strategy.

Consultations will start early next year on a second block of 2,500 megahertz frequency, he said. Both auctions will make further spectrum available for wireless communications.

Canada’s wireless sector is dominated by three companies with close to 95 percent market share: BCE Inc’s Bell Canada, Rogers Communications and Telus Corp.

Canadians still pay some of the steepest wireless rates in the world, despite the entry of new players following a 2008 auction.

The 700 MHz airwaves are being freed up as most television broadcasters are due to switch from analog to digital delivery by August 2011. The frequencies are considered valuable as they can cover long distances and more easily penetrate obstacles such as thick walls and buildings.

The 2,500 MHz frequency range allows for more speed and capacity, but less easily penetrates buildings.

The Conservative government announced in March of this year it would open the door to more foreign investment in the telecommunications industry to ensure protectionist measures do not inhibit growth.

Clement said there was no consensus within the industry on whether the current rules were an impediment to expansion.

“These consultations will continue as we proceed with our discussions on the 700 MHz spectrum,” Clement said in his speech.

“After all, how spectrum is allocated and who is eligible to compete for it -- and pay for it -- are interrelated issues. And so we will consider foreign investment rules and decisions around the 700 MHz auction together, as part of an integrated regulatory approach,” he said.

FOREIGN OWNERSHIP REVISITED

The Telecommunications Act limits foreign ownership at 20 percent of a company’s voting shares. Restrictions on direct and indirect control are 46.7 percent.

Ottawa is studying three possible reforms:

- Increase the limit for direct foreign investment in broadcasters and telecoms companies to 49 percent;

- Lift all restrictions on telecom companies that have a market share of 10 percent or less, as measured by revenue;

- Completely remove restrictions on direct foreign investment in telecoms.

In the government’s last wireless spectrum auction in 2008, in which it raised C$4.25 billion ($4.17 billion), it set aside blocks exclusively for new players in a bid to increase competition.

The government also renewed the debate over ownership rules when it overturned a decision by the federal telecoms regulator that had blocked one of those new entrants, Globalive, from offering wireless service in Canada.

The government decided that Globalive, which has financial backing from Egypt’s Orascom Telecom estimated at more than C$500 million, met Canadian ownership and control requirements.

Clement did not say whether he would again set aside spectrum for new entrants. Even so, he said that approach worked last time, opening the lucrative market to three new players: Globalive’s Wind Mobile, Public Mobile, and Mobilicity.

“The result? New entrants are offering lower-priced services and providing greater choice for consumers,” he said.

Clement also said his department was reviewing policy on tower-sharing and roaming agreements, and that he would be in a position to decide on those issues by next spring.

($1=$1.02 Canadian)

Reporting by Louise Egan; editing by Frank McGurty

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