May 27, 2008 / 2:24 PM / 10 years ago

Canada auction aims to reshape wireless market

OTTAWA (Reuters) - Canada’s government launched an auction of wireless spectrum on Tuesday that it hopes will bolster competition and lower prices by allowing new players to break into the cellular phone market.

<p>A pedestrian walks past a Bell World Store in Toronto May 19, 2008. REUTERS/Peter Jones</p>

In a process that Industry Minister Jim Prentice estimates could take up to a month to complete, 24 companies can bid electronically on 292 licenses for chunks of wireless airwaves in different geographical regions across the country.

Of the 105 megahertz (MHz) of spectrum to be auctioned, 40 MHz will be set aside for new players.

That provision is a source of worry for the three big players -- Rogers Communications Inc, Telus Corp and BCE Inc -- which control about 95 percent of the wireless market in terms of revenue.

Canadian cellphone users pay higher prices than their U.S. or European counterparts, Prentice said, largely because there are so few mobile service providers.

A list of qualified bidders, released in April, included newcomers Quebecor Inc, Manitoba Telecom Services (MTS) and Shaw Communications Inc.

But analysts have said they doubt any of the new players have enough money to launch a very aggressive network-building campaign to become serious rivals to the incumbents on a national scale.

<p>A Telus retail store is seen in downtown Montreal, June 21, 2007. REUTERS/Shaun Best</p>

Quebecor, for example, is expected to initially target its home province of Quebec. Shaw, a cable and satellite TV company, has cautioned that its participation in the auction doesn’t necessarily mean it will build a network at all.

MTS suffered a setback last week when the consortium it had formed to participate in the auction dissolved. The company said it was still qualified to bid but analysts doubt it can expand its network beyond the province of Manitoba.

Prentice, however, said there was no doubt the auction would result in increased competition, and he was hopeful that would pressure prices downward.

“Early indications are that they (the bidders) represent a broad range of capacity from across Canada and ... either individually or collectively they would have the capacity to increase competition and increase choice and lower prices for consumers in Canada,” he said at a news conference.

The first two rounds of bidding, managed by Industry Canada, will kick off on Tuesday, based on opening bids provided by the government. There will be several more rounds throughout this week and the winners will likely be announced in late June.

In the first stage of the auction, officials raise the price on each license that received bids by 15 percent after each round. As the auction progresses and bids slow down, the price increase is smaller between rounds.

The results of each round will be published on Industry Canada's website: here

Reporting by Louise Egan; editing by Rob Wilson

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