MONTREAL - Canada's new wireless carriers need the same kind of "hand-up" the federal government gave them more than a quarter-century ago to ensure cellphone customers continue to benefit from competition, says a telecom report.
The Canadian government awarded the original wireless licences that kicked off cellphone competition in 1985, the SeaBoard Group report said Friday.
"It was a hand-out to incumbent carriers, pure and simple -- and it was definitely a hand-up," said the report, which estimates the current value of the radio spectrum at more than $20 billion.
Rogers (TSX:RCI.B), Bell (TSX:BCE) and Telus (TSX:T) are Canada's big wireless carriers with a total of more than 24 million cellphone subscribers.
New players Wind Mobile, Mobilicity, Public Mobile and Quebecor's Videotron (TSX:QBR.B) need to have radio waves -- over which cellphone networks operate -- set aside specifically for them to bid on in the next spectrum auction, said Iain Grant, managing director of the SeaBoard Group.
Otherwise, they will be outbid by Rogers, Bell and Telus and there will be less competition, Grant said.
Federal Industry Minister Christian Paradis could soon announce rules for the auction of the 700-megahertz band, known as the "beach front property" of the airwaves for its reach.
This spectrum has the ability to allow cellphone calls in elevators, deep in underground parking lots in big cities and in basements and attics in suburban areas. It also provides better and more affordable coverage in rural Canada because fewer cellphone towers are needed to provide coverage.
The report also said Canada's four new wireless carriers are starting to take away some subscribers from their bigger rivals.
Rogers, Bell and Telus had total net subscriber additions of 234,000 in the fourth-quarter of 2011, the report said.
By comparison, Wind Mobile, Public Mobile, Mobilicity and Videotron added a total of 218,000 net subscribers in the fourth quarter.
Grant said most of the big three carriers' customers are on contracts.
"So, the fact that they have managed to carve out that many new subscribers over the last quarter is significant."
Grant said the new players need to bid on radio spectrum set aside just for them to allow them to build out their networks and bring lower prices to Canadians outside big urban areas.
Bell and Rogers have argued against any measures that would favour the smaller wireless companies in the auction and Telus has proposed caps on the amount of spectrum bidders can buy.
Wind Mobile said Friday consumers will lose out if the Canadian government doesn't set aside radio spectrum for the smaller companies and ease foreign ownership restrictions.
"If the Harper government makes this mistake, they will undo every positive advance in wireless over the past three years and move us back to an era dominated by an oligopoly that produced higher prices, fewer choices and mass dissatisfaction among consumers," Wind Mobile CEO Anthony Lacavera said in a statement.
Grant said if the federal government lifts foreign ownership restrictions in the telecommunications industry, it will be easier for the smaller wireless companies to raise the capital they need.
"If we change foreign investment regulations, it won't be necessary to consolidate amongst ourselves," Grant said.
"We can become the flag bearer in Canada for somebody else's interests."
That means U.K.-based Vodaphone, France's Orange and Mexico's America Movil could invest in Canadian telecom companies, he said.
In 2008, the federal government set aside radio spectrum for newcomers opening up Canada's cellphone industry to more competition and raising more than $4 billion for federal coffers.
The auction saw Wind Mobile, Public Mobile, Mobilicity and Videotron all launch into the cellphone market.
