Tuesday 15 January 2013

Rogers Makes Offer to Purchase Shaw Spectrum

Rogers announced that it has reached an "option to purchase" agreement with Shaw for the wireless spectrum purchased by Shaw in the AWS (Advanced Wireless Services) band. The statement was part of a number of agreements announced on Monday, 14 Jan 2013 by Rogers but the only one having a direct impact on the Algoma District.

In 2008, Shaw spent close to $190 million dollars to purchase wireless spectrum in the area from SSM to Vancouver Island. Included in this amount was $1.25 million for spectrum in the SSM and Thunder Bay areas.

In the fall of 2011, Shaw decided not to proceed with plans to develop a traditional cellular network but opted instead to build a Wi-Fi based network with cellular hardware access capability fully integrated with its cable network.  This made the AWS wireless spectrum they held redundant to their needs.

Under the terms of the 2008 spectrum auction, the major incumbent network operators i.e. Bell, Rogers and Telus are prohibited from purchase spectrum from the new entrants such as Shaw until 2014. No mention was made of "options to purchase." Regardless, the Rogers/Shaw sale will need approval from the Competition Bureau and Industry Canada. The CRTC is not involved in this decision.  

Rogers paid Shaw $50 million dollars upfront for the option to purchase. Since Shaw paid $190 million originally, and is rumoured to have spent close to a billion dollars overall in the development of a wireless strategy, it is reasonable to speculate that if the regulators approve the sale, Shaw will try to recoup as much of their expenditure as possible and Rogers will end up paying many times more than the $50 million agreed to for the option.

What Rogers would do with the spectrum in the Algoma District is open to conjecture. There does not appear to be spectrum shortage per se in the District but there is a congestion issue with the existing sites. More cells need to be added to ease this congestion.  How the major vendors providing the cell and backbone infrastructure in the District - Bell, Rogers and Tbaytel - achieve this is up to them.

One of the consequences which the regulators will have to consider when making their decision is the impact it will have on the other new entrants in the marketplace. Will companies such as Mobilicity, Public or Wind be able to sell all or part of their spectrum to an incumbent if the Shaw sale is approved? These companies have spectrum in the north, but I am not aware of any plans to activate their own hardware based service in the area. 

In my estimation third parties will launch some sort of legal or regulatory appeal of the process and any preliminary decisions the regulators may arrive at.

Stay tuned; I am sure there will more to follow. 

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