NextWave spectrum could revert to government after blocked sale

Industry Minister James Moore blocked a spectrum-transfer request on Thursday between NextWave Wireless Inc. and a joint venture between two of Canada’s incumbent carriers, a decision that could see ownership of the spectrum revert back to the government. Inukshuk Wireless Partnership is a wireless Internet provider in Canada’s North and rural areas that is owned by BCE Inc., and Rogers Communications Inc. It had asked Industry Canada to approve the transfer of 83 spectrum licences on the WCS band that, according to the government, cover more than half of the Canadian population. Industry Canada said in a Thursday press release that allowing the two incumbent carriers to take over NextWave’s WCS spectrum “would impact the ability of existing and future competitors to access additional spectrum and to provide services in the affected licence areas.” NextWave Wireless is a San Diego-based company that was bought by AT&T in January 2013, according to NextWave’s website. The 2300 MHz WCS spectrum licences, auctioned off between 2004 and 2009, will begin to expire next month. NextWave’s licences will begin to expire in November 2014, according to a research note from BMO Capital Markets analyst Tim Casey. “We view this announcement as a notional, but not surprising, negative for the incumbents,” Casey said in the note. In November, Industry Canada said companies that have not used this spectrum as directed by the government would lose the rights to renew those licences. Casey said it “seems unlikely” NextWave will meet government requirement on this spectrum before its licences expire. Without a purchase by Telus Corp., which holds relatively little WCS spectrum, or a piecemeal sale to regional carriers, the spectrum will be reclaimed by the government and auctioned again at a future date, Casey said. The Globe and Mail reported in November that Inukshuk has been accused of hoarding spectrum as the company has not used large parts of the spectrum it owns to expand its wireless Internet service. In a joint filing from Bell and Rogers to Industry Canada in January 2013, the carriers denied they were hoarding and said customers would be better served by the use of the spectrum for expansion of the incumbents’ current cellular networks, as opposed to wireless Internet for rural areas, which the government has promoted use of this spectrum for. “Canadians will be more effectively served by the implementation of the most innovative and advanced technologies such as LTE, “ the company said. If approved, Industry Canada said, Rogers and Bell would, through Inukshuk, increase their WCS holdings from 29 per cent to 77 per cent of the available spectrum. “Industry Canada has determined that this licence transfer would lead to unacceptable levels of concentration of spectrum in the hands of incumbent carriers that negatively affects competition in our wireless sector,” Moore said in a press release Thursday. Bell spokeswoman Jacqueline Michelis said in an email that the company “planned to use the NextWave spectrum as part of our long-range LTE rollout in rural and remote areas. We’ll adjust and foresee no impact on Bell’s overall LTE expansion program.” Rogers spokeswoman Patricia Trott said in an email: “Rogers wanted to acquire this spectrum as we know Canadians’ use of data is increasing exponentially and we wanted to put this unused spectrum to use to meet the needs of our customers. The decision doesn’t affect our plans to roll out 4G LTE to more customers in more areas across the country.” In announcing results of the 700 MHz auction last week, Moore said the government would prevent further consolidation of spectrum within the existing Canadian market. He reiterated the government’s position in the press release on Thursday. “We will not approve any spectrum transfer request that results in excessive spectrum concentration for Canada's largest wireless companies, which negatively affects competition in the telecommunications sector,” Moore said. The NextWave decision announced Thursday, for at least one analyst, was proof the government is not poised to soften its stance on spectrum transfers to incumbents, even as Mobilicity, which is in bankruptcy protection, seeks a buyer. “One had thought that had extinguished any hope that the spectrum rules would be relaxed, but I guess that hope springs eternal,” SeaBoard Group analyst Iain Grant said in an email. “It ain't going to happen while this government is in power. The minister has the full support of . And one does not hear the opposition — either of them — talking about the poor incumbents either.” The federal government previously blocked incumbent carrier Telus's $380-million offer to acquire Mobilicity in June 2013, citing Industry Canada rules that prevent incumbent carriers from acquiring Mobilicity’s spectrum licences, which it acquired as a new entrant carrier during a 2008 spectrum auction. The five-year moratorium on Mobilicity’s licences expired this month, though the industry minister still reserves the right to approve or deny spectrum transfers. The transfer of NextWave’s WCS spectrum did not face regulatory hurdles in the United States. AT&T announced in August 2012 that it would buy NextWave, and in December 2012 received approval from the Federal Communications Commission (FCC) to take over the smaller carrier’s spectrum with an eye to extending capacity on its LTE network, according to media reports at the time. AT&T also received approval to purchase WCS spectrum from Comcast Corp., Horizon Wi-Com and San Diego Gas & Electric Co., giving it WCS coverage for 70 per cent of the U.S. population, according to those media reports. — With reporting by Peter Henderson at phenderson@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

NextWave spectrum could revert to government after blocked sale

News | February 27, 2014

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NextWave spectrum could revert to government after blocked sale

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