Mobile providers need freedom to ‘prioritize’ own customers under new spectrum regime, SaskTel says

Industry Canada's new mandatory roaming regime should allow wireless carriers to prioritize their own customers’ traffic over other providers' customers roaming on their networks, Ron Styles, president and CEO of SaskTel, said in an interview. Styles told The Wire Report this week that the newly extended mandatory roaming policy will lead to multiple carriers’ subscribers roaming on a single network in some areas and increase network congestion. In early March, the Conservative government said it will remove the foreign investment restrictions for small wireless carriers with less than a 10 per cent share of national telecom revenues and cap the amount of spectrum licences that incumbent telcos, including SaskTel in Saskatchewan, can purchase in next year's 700 MHz auction. As part of that announcement, Industry Canada said it will extend indefinitely the five-year roaming rules it imposed on incumbent carriers in advance of the last spectrum auction held in 2008. The roaming rules require incumbent carriers to negotiate roaming rates with any other carrier that requests roaming capabilities. A departmental arbitration process is available to settle stalled negotiations. The department said in March it will extend the requirements to other carriers and shorten the timeline for the arbitration of roaming disputes. Styles said Industry Canada's auction caps and roaming policies “don’t fit” together because they require incumbents to carry the signals of other providers’ subscribers on their networks while limiting how much spectrum the incumbents can purchase to keep their networks running smoothly. “Our belief is that if you’re going to have a broader roaming policy that allows others to move onto a competitor’s network, the policy needs to be governed by some sort of prioritization of traffic,” Styles said. “Another company’s customers would have second tier priority.” Carriers are looking for ways to increase network capacity as they face rising demands for data-eating smartphones. According to Cisco Systems Inc.’s latest Cisco Visual Networking Index research carried out twice a year, mobile video consumption is rising and smartphones can now consume as much traffic as 35 basic mobile phones. Tablets can use as much traffic as 21 basic phones, Cisco said. Roberta Fox, chairman and chief innovation officer of Fox Group Technology, said in an interview Wednesday that SaskTel and other large carriers have the ability to segment traffic on their networks. She said prioritizing an incumbent’s customers could result in slower data services for roaming customers if the network does not have enough bandwidth capacity. “Currently, most of the providers have the capacity so it’s not a problem,” she said. “But it could be a problem in the future as more traffic is video, which takes a lot more bandwidth.” SaskTel's proposal could also face regulatory challenges. The CRTC has mandated roaming rules, Fox noted. "They are mandated by the CRTC to allow access to other providers of their network. So they may not want to do it, but they have to do it regulatory wise,” she said. The CRTC is also empowered to ensure telecom providers do not show an “undue preference” or competitive advantage to themselves over their competitors. Section 27(2) of the Telecom Act says no Canadian wireless carrier can “unjustly discriminate or give an undue or unreasonable preference toward any person, including itself, or subject any person to an undue or unreasonable disadvantage.” To help address network capacity issues, Styles said Industry Canada should require companies to utilize any 700 MHz spectrum frequencies they licence in rural areas. Under the department’s proposed auction rules, carriers will be required to build out networks on the 700 MHz band only in areas where they already offer HSPA coverage. Styles said SaskTel is the only carrier with HSPA coverage in rural Saskatchewan and speculated that other well-capitalized carriers will purchase spectrum throughout the province without the intention of using it. He said Industry Canada should focus on getting the widest and largest amount of network deployment possible by including a “use it or share it” requirement for rural 700 MHz licences. “They should move to a use it or share it proposal where a company that is deploying in rural Saskatchewan would be able to use some of that spectrum to reinforce their network,” he said. SaskTel previously encouraged Industry Canada to implement a “use it or lose it” rule for the purchase of 700 MHz licences in rural areas. Styles said carriers can now negotiate agreements to use each others’ spectrum. He said SaskTel currently has commercial agreements with national incumbents BCE Inc. and Telus Corp., which operate on SaskTel’s network in Saskatchewan. In a research note Monday, Scotia Capital analyst Jeff Fan wrote that the 700 MHz auction’s new combinatorial clock format, in which companies bid for packages of licences across the country, will complicate the bidding efforts of regional bidders like SaskTel, Quebecor Media Inc., MTS Allstream Inc. and Bragg Communications Inc. Industry Canada introduced rules for the 700 MHz auction that limits each carrier to one of the four blocks of “prime” spectrum available in each licence area, or market. Fan said national incumbent carriers Rogers Communications Inc., Telus, and Bell will acquire prime spectrum licences “without much difficulty” because there are four prime blocks available in each market and only three national, incumbent bidders. “But if there is a fourth bidder for a package of national (prime) licences, that fourth bidder could end up winning a package of national licences and keep the regionals from acquiring their regional blocks,” the research note said. The prime blocks, known as the B, C, C1 and C2 blocks, make up the so-called “beachfront” spectrum used on the devices of Verizon Communications Inc. and AT&T Inc. subscribers in the United States. Fan said if a national fourth bidder emerges, such as Wind Mobile or Mobilicity, it could drive up the prime spectrum’s bid price and make prime blocks out of reach from regional players. “This would cause regional bidders to bid more aggressively or form a partnership of regional bidders to ensure they pick up a national package,” he wrote. Styles said Canadian telcos are watching mobile trends and developments in the United States and have not yet determined their strategies for bidding in next year’s auction. “I think you’d probably see people lock in early in 2013,” he said. “In terms of a final decision, you take as much time as you can and get as close to the auction as you can.” Styles was interviewed Monday at The Wire Report's office in Ottawa, where he held a series of meetings. dgrenier@thewirereport.ca

Mobile providers need freedom to ‘prioritize’ own customers under new spectrum regime, SaskTel says

News | May 3, 2012

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