Bragg Communications, better known as Eastlink, has been a leader in introducing competitive services in Atlantic Canada. They pushed hard in launching voice services over cable, not waiting for VoIP. In doing so, Eastlink quickly grabbed a third of the Halifax telephone market.
Bragg Communications has been competing hard against Bell Aliant and many would say they have been winning.
According to its 
recent submission to the AWS consultation,
EastLink believes that its presence as a competitor in these markets has not only increased choice for Maritime residents and businesses, but it has also played a significant role in increasing quality of services and products to consumers. EastLink was the first company to offer bundled services, which provides special pricing opportunities for consumers.
Eastlink has accomplished all this without any handouts or subsidies. That is why it was particularly surprising to see Eastlink call for special new entrant incentives, such as a spectrum set-aside. The language in the Eastlink submission is couched in places, saying “measures should be implemented to enable new entrants to access spectrum.”
No one, or at least no reasonable person, would dispute that request.
Industry Canada should definitely enable new entrants to access spectrum. Any arguments? Is anyone really suggesting that the spectrum – or even any portion of the spectrum – should be set aside solely for incumbents?
Apparently, Economics and Technology Inc., in its appendix to one of the submissions, think so. ETI says that the TELUS / Bell / Rogers group have been arguing that “the creation of one or more new carriers with national market footprints is both unnecessary and inefficient.”
I think that is an incorrect statement of the national incumbents’ position.
In any case, the real question is whether the Department should intervene in the marketplace to constrain economic forces from an open bidding process. There is a difference between allowing the creation of a new carrier and artificially and uneconomically stimulating such market entry.
According to Eastlink, we shouldn’t worry about the resultant possibility of uneconomic entry:
The benefit to be gained by providing new entrants with the opportunity to access spectrum far outweighs the risks of potential uneconomic entry. Furthermore, uneconomic entry will eventually be corrected through market forces.
At least Eastlink recognizes the “potential” for uneconomic entry. But what does it mean that the impact will eventually be corrected? Eventually? After how many millions, tens of millions or billions of real shareholder dollars are lost?
Let’s move out of economics class here and look at the real world of investors. The potential for the government to stimulate uneconomic entry means financial houses face special risks in providing funding to Canadian carriers. Individual shareholders of corporations are people like me, my neighbours, pensioners. Mutual funds and institutional investors will look to other countries for growth opportunities. Individuals are just bound to get burned. The memories of the tech bubble are still too fresh to be happy about “eventual” corrections to uneconomic entry.
That set-aside also means that the federal government raises less than full value from the spectrum auction. I’m not sure that I’m willing to fund some new entrant or speculator with my tax dollars.
Eastlink was right when it said that new entrants should be able to access spectrum. The rules should ensure the auction allows for an open, competitive bidding process. Full stop.