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EXPLAINER: The fight for Canada's wireless market

The debate over the upcoming wireless spectrum auction is heating up. But what exactly is the debate about, and what effect is all this going to have on your phone bill? Here's what you need to know about the biggest rift in the Canadian telecom industry today.

The premise

Canada is one of the most expensive wireless markets in the world. The Canadian wireless industry is dominated mostly by three telecommunication (telecom) giants: Bell, Rogers and Telus. They sometimes operate under different names (Virgin Mobile, Fido and Koodo are their "budget" brands, respectively), but ultimately, the "Big Three" account for about 90 per cent of wireless industry revenues, and control about 85 per cent of the Canadian wireless spectrum.

In order to operate in Canada, wireless service providers need a license from the government to operate in a specific range of the wireless spectrum. Occasionally, the government holds auctions for unallocated spectrum ranges, and a major one is coming up in January 2014 for the 700 mHz range.

Current rules state that, in order to promote competition, a certain portion of the spectrum on auction is reserved for "new entrants" — meaning the Big Three are unable to bid on those portions. This means that independent startups can get wireless spectrum access for much cheaper than if they were bidding against the Big Three, albeit in limited amounts.

The debate

In 2012, the government tweaked the rules to allow foreign companies more access to the Canadian wireless market. In June of this year, American telecom heavyweight Verizon offered to buy Wind Mobile, a non-Big Three startup that operates primarily in Ontario, Alberta and B.C., for $700 million. This means that Verizon would have access to the cheap newcomer-allocated blocks of spectrum in January's auction if the deal goes through.

The Big Three have decried this, saying that the current rules would give Verizon — a company four times the size of the Big Three combined — an unfair advantage. They claim that Canadian jobs will be threatened, and that rural infrastructure expansion will suffer if telecoms are forced to compete more fiercely in urban markets. They've launched an advertising campaign, Fair for Canada, to drive these points home, running full-page ads in newspapers and taking their message to social media.

The government, on the other hand, claims its policies promote competition, which leads to lower prices for consumers. It claims that Canadian wireless costs are down 20 per cent under its watch (though takes issue with this and several other government claims). Their own recently-launched campaign, Consumers First, makes it clear that they are unlikely to change their policy anytime soon.

The result

The pleas of the Big Three don't seem to be doing much to sway public opinion. Many on Twitter see the campaign as media spin from companies concerned solely with their own profits, and some even welcome Verizon if it means lower rates:

A parody of the video component of the Fair for Canada campaign has also made the rounds:

While the public sentiment is clearly not in the Big Three's favour, analyst opinion is more varied. The Fraser Institute says all restrictions on foreign ownership should be lifted, and that a free market will result in the best deal for Canadians. On the other hand, Ralph Nader says allowing Verizon into Canada is a bad idea, as the company is one of the United States' "most aggressive corporate tax dodgers."

Meanwhile, the mere threat of another major player in the market already seems to be affecting the market. The Big Three all rolled out new data-sharing plans and two-year contracts that analysts are chalking up to the perceived threat of increased competition.

So, will Verizon soon be open for business at a cell tower near you? The Big Three are strongly against it, the public are mostly for it, and the government seems unlikely to change its stance. We'll know soon either way — applications for bidding in the January auction are due Sept. 16.

Matt Meuse is completing a practicum at The Tyee.

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