Groups fear less competition in cellphone market if Rogers buys Shaw's spectrum

Consumers will face a less competitive cellphone market if wireless giant Rogers Communications is allowed to buy unused network spectrum from Shaw Communications Inc., say consumer and public advocacy groups.

The groups said Tuesday that they want federal Industry Minister Christian Paradis to prevent the deal from going ahead.

It’s the first step down the road to having only Rogers, Bell and Telus as Canada’s wireless carriers, warned John Lawford of the Public Interest Adovacy Centre.

“The really short answer is: Then there were only three,” said Lawford, the group’s executive director and general counsel.

“More players actually have an effect on lowering prices and giving people a choice and better plans,” he said from Ottawa.

Rogers (TSX:RCI.B) announced the $700-million deal last week to buy Shaw’s unused network spectrum and its Ontario-based Mountain Cablevision Ltd.

New carriers Wind Mobile, Mobilicity, Public Mobile and Quebecor’s (TSX:QBR.B) Videotron all launched in the last three years after Industry Canada set aside spectrum — radio waves over which cellphone signals are carried — that was bid on by these new players.

Calgary-based Shaw (TSX:SJR.B) was also a bidder and spent $190 million in the federal AWS spectrum auction in 2008, but eventually dropped its plans to launch a wireless business.

The purchase of Shaw’s wireless spectrum will need approval by Industry Canada and the Federal Competition Bureau, which Rogers has said it expects in late 2014.

But Lawford said that under Industry Canada’s rules he doesn’t believe that Rogers will be allowed to buy Shaw’s spectrum, which was set aside for new players for five years.

“It still requires ministerial approval outside those rules,” Lawford said, adding that such deals can’t be made during the five-year period.

If the government has a “backbone,” this deal won’t be allowed to go ahead, Lawford said.

Rogers has said Shaw’s wireless spectrum goes from British Columbia to Northern Ontario and will meet data usage demands by its smartphone, computer and tablet customers.

CEO Nadi Mohamed has said Shaw’s unused spectrum will be used to expand Rogers’ next generation Long-Term Evolution (LTE) network. LTE networks are suited to data use and provide very fast downloads, for example.

When the deal was announced, Mohamed wouldn’t say if the acquisition of Shaw’s spectrum would change Rogers’ strategy to bid on 700 megahertz spectrum, up grabs in the next spectrum auction expected later this year. This spectrum is considered ideal to deploy LTE in high-density urban areas and in rural Canada.

Industry Canada has said the rules for the next spectrum auction will let at least four companies obtain spectrum in each of Canada’s 14 licence areas, effectively making one block available for one of the smaller players.

However, Lawford said the smaller wireless players won’t be able to have winning bids on enough of the 700 megahertz spectrum to compete on an equal basis with Bell (TSX:BCE), Telus (TSX:T) and Rogers across the country.

In addition to the Public Interest Advocacy Centre, other groups opposed to the sale include the Consumers’ Association of Canada,, the Samuelson-Glushko Canadian Internet Policy and Public Interest Clinic and the Council of Senior Citizens Organizations of British Columbia.

Meanwhile, small wireless player Wind Mobile announced on Friday that it has signed a deal to be owned by a global telecom company.

Wind Mobile said it will be fully owned and controlled by VimpelCom subsidiary Orascom, which already has a 65.1 per cent stake in the company and was major financial backer.