The Rogers astroturf lobby campaign against a spectrum set-aside, which sneakily uses people interested in a notification on when LTE may be available in their market, foreshadows a major battle over the rules on the 2012 spectrum auction. Much like the 2007 battle over the AWS auction, the incumbents will argue that the market is already sufficiently competitive and that any set-aside will unfairly advantage new entrants. The 2007 battle included submissions from Rogers and Bell that insisted that Canada was already “extremely competitive” and that consumer prices for wireless services very low. For example, Rogers argued:

Canadian consumers are very satisfied with their choice of Canadian providers, pricing plans and technology options. Consumers are the first to object in the face of poor competition among service providers, yet surveys indicate the exact opposite sentiment.

The company added that “contrary to many statistics that are used and quoted irresponsibly, Canadian consumers fair very well when compared to other countries. Canadian carriers offer
some of the most competitive rates in the world.”

The government rightly rejected the incumbent arguments and established a set-aside that led to new entrants such as Wind Mobile and Mobilicity.

The impact of new competitors has been significant, as the Globe’s Iain Marlow recently reported:

A new report by Convergence Consulting Group Ltd. shows just how much pressure new entrant wireless companies are putting on the margins and metrics, such as the average revenue per user, at Rogers, BCE Inc. and Telus Corp. New entrant providers are offering combined voice and data plans that are 58 per cent cheaper than the incumbents, and their wholly-owned discount brands. For data plans, new entrant providers are charging as much as 83 per cent less.

Given the effects of new competition, it should come as no surprise that Rogers and the other incumbents will use every tactic in the book to prevent a repeat of the AWS auction and a set-aside for new entrants. Yet just as the AWS auction was about injecting much needed competition into the wireless market, the next spectrum auction is about fostering competition in the wireless broadband market. The 700 MHz spectrum is particularly well suited for wireless broadband and holds the promise of an effective alternative for those seeking something other than cable or DSL services. The consumer frustration with the broadband choices has been well-documented and this spectrum auction offers possibly the best hope of opening that market to new competitors.

That opportunity is precisely why the government should open the door to foreign investment and create a set-aside. Foreign investment is needed to allow for some major international players to consider entering the marketplace with the injection of foreign capital. Even with foreign investment, a set-aside is still needed since the economics for an incumbent are far different from a new entrant. Without a set-aside, it is likely Bell, Rogers, and Telus will inflate the prices of spectrum to keep new competitors out of the market since incumbents will overpay for spectrum in an effort to keep out new competitors. For the new entrant, pricing is based on the business case for the market, which is closer to the “real” value of the spectrum.  For Industry Minister Christian Paradis, that means ignoring the Rogers’ astroturf campaign and focusing on the policies that will have the most pro-competitive impact.