Bell-Rogers plan for Inukshuk stalled because of spectrum cap considerations

Bell Canada’s and Rogers Communications Inc.’s plan to combine their 2300 MHz and 3500 MHz spectrum holdings under the banner of broadband wireless operator Inukshuk Internet Inc. is on hold for the time being, Report on Wireless has learned. The news comes after Industry Canada informed both parties that Inukshuk had exceeded the 100 MHz spectrum aggregation limit in 27 serving areas following spectrum auctions in 2004 and 2005 (see table list of 27 spectrum licences). The department notes in a letter to Bell and Rogers that the 2300/3500 MHz spectrum policy requires licensees that exceed the spectrum aggregation limit "to divest sufficient spectrum holdings in order to come into compliance. This divestiture may be a transfer to non-associated, non-affiliated entity or a return of the spectrum to the department." Under the policy, the spectrum cap will remain in place for two years after the auction, which is Jan. 27, 2007. However, Bell and Rogers appear dead set on keeping firm control of the spectrum they purchased in the two auctions. The companies combined to win the rights to 316 licences worth nearly $47 million. Inukshuk also holds 12 multipoint communications services (MCS) spectrum covering all parts of Canada except for Saskatchewan, where SaskTel holds this spectrum, and in Manitoba, where this bandwidth was licensed in 1999 for instructional television services. "We obviously won’t do anything to put ourselves in jeopardy before ," Ken Engelhart, VP of regulatory affairs at Rogers, tells Report on Wireless. "We’re looking at all our options, but we’re not going to transfer the spectrum into Inukshuk. So, there’s going to be a change in the original plan."He adds it’s like a corporate reorganization that will ensure compliance with auction rules. "For as long as the spectrum cap is in place, we will comply with it," he says of the companies’ decision not to put the 2300 MHz and 3500 MHz spectrum in Inukshuk. Bell and Rogers have until December 15 to advise the department what actions they are taking to ensure they comply with the conditions of licence. The two companies announced on September 16 that they were joining forces to deploy broadband wireless across the entire country by pooling their spectrum resources in Inukshuk Internet. They indicated at the time that they would invest $100 million each over the next three years to roll out a network to 50 rural areas and 40 cities (RoW, Sept. 23/05). This marks yet another roadblock in the successful evolution of Inukshuk from mere idea to national service provider since it was first licensed more than five years ago (RoW, April 3/00). After suffering technological and then financial setbacks while under the control of Microcell, the company was acquired by Rogers as part of the Microcell purchase (RoW, Sept. 22/04) and a more solid future appeared in the cards. But it was short lived. About six months after Rogers acquired Canada’s perennial fourth wireless operator, Bell Canada entered the fray through an investment in NR Communications – a one-time partner in Inukshuk – a company controlled by wireless communications pioneer Craig McCaw (RoW, March 23/05). There was speculation in March that Inukshuk’s ownership questions would find resolution only in the courts. Even Rogers Communications CEO Ted Rogers noted during the company’s first-quarter financial results conference call that he expected the Inukshuk ownership issue to end up in front of a judge and drag on for some time. That didn’t happen as both companies set aside their differences. Trevor Anderson, a senior VP at Bell Canada, told Report on Wireless in September that there were two driving factors behind pooling spectrum under Inukshuk. "One is it makes absolute sense from an economic perspective to have a joint venture whereby we jointly construct the infrastructure and then compete at the retail level. It also makes a lot of sense for Canada in that you’ll get broadband Internet capability in areas much sooner than you otherwise would because if you’re building just one infrastructure and competing at the retail level it certainly improves your ability to drive the rollout particularly beyond the urban centres," he explained.

Bell-Rogers plan for Inukshuk stalled because of spectrum cap considerations

Broadcast | September 26, 2002

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