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How the 700 MHz Spectrum Auction Works

The Government of Canada will begin to auction the 700 MHz mobile broadband airwaves for telecommunication networks in January 2014. This new spectrum, which can reach remote areas easier, is being offered to service providers to bring high-speed technologies to Canadian residents.

In order to prevent the major telecommunication companies from seizing all available blocks, the government has restricted the number of blocks a provider can win in a certain region (incumbent big companies can bid on only one block, new or smaller entrants can bid on two). This post will look at the auction in some detail.

What is the spectrum auction?

Typically, spectrum auctions are used by a government (not only in Canada but in many countries across the world) to sell the rights (known as licenses) to communicate signals over specific frequencies. Along these lines, the Canadian government is offering licenses to transmit signals over the 700 MHz frequency.

Who are the bidders?

Industry Canada released the updated list of bidders that includes the major telecommunications players as expected along with a few relatively unknown companies. The list is given below:

  • Bell Mobility Inc.
  • Bragg Communications Incorporated
  • Feenix Wireless Inc.
  • Globalive Wireless Management Corp.
  • MTS Inc.
  • Novus Wireless Inc.
  • Rogers Communications Partnership
  • Saskatchewan Telecommunications (SaskTel)
  • TBayTel
  • TELUS Communications Company
  • The Catalyst Capital Group Inc.
  • Vidéotron s.e.n.c.

Why is the auction good for us (the consumer)?

The government reports that new policies have fostered competition and offered lower rates for consumers. According to this fact sheet, the average price of wireless plans has fallen by 20% in the last few years. A usual comparison that is brought up, when talking about wireless plans, is the rates in the US and how Canada fares relative to that. The answer depends on the package/plan.

Wall Communications Inc. prepared a detailed report for Canadian Radio-television and Telecommunications Commission and Industry Canada, which offers more insight (here). Also, there are options such as Republic Wireless for the cost-conscious US consumer.

As Canadian consumers, we would be remiss to not notice that the major three telecommunication companies still control >85% of the wireless airwaves and about 90% of the market share. Nonetheless, the domination has diminished to some extent considering that they held around 99% of the airwaves prior to 2008 (please see fact sheet link above).

The government’s wireless policy has helped Canadian consumers to some degree through more choice and better rates. It will be interesting to watch how the auction goes and what the winners (whether incumbent or new) will bring to the table. Nevertheless, a cost-conscious investor may choose to use VOIP to fulfill many of their calling needs and invest in the telecommunication companies. For more information about the upcoming spectrum auction, please refer to this page.

What do you think about your current plan? Do you think service plan rates will go down and/or consumers will get more options to choose from (company-wise and/or plan-wise)? Any other thoughts/insights about the auction?
About the Author: Clark works in Saskatchewan and has been working to build his (DIY) investment portfolio, structured for an early retirement. He loves reading (and using the lessons learned) about personal finance, technology and minimalism. You can read his other articles here.

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FrugalTrader About the author: FrugalTrader is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.

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