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Quebecor defends Ottawa’s spectrum reserve amid criticism from rivals

The offices of Quebecor are seen in Montreal in this file photo.

Christinne Muschi/The Globe and Mail

Quebecor Inc. is firing back at its national wireless rivals over accusations that it stands to get an unneeded taxpayer handout in the next public auction of cellular airwaves.

The Montreal-based cable and media company launched its wireless business in 2010 after buying spectrum in a public auction that included setting aside airwaves specifically for new entrants.

Quebecor's Videotron Ltd. now has 16 per cent of wireless subscribers in the province and, after wrapping up expensive investments in building an LTE network, the business now makes a healthy contribution to the telecom division's free cash flow, which increased by almost $100-million in the first half of this year to $399.5-million.

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That success is why leaders from the three national carriers have publicly swiped at Ottawa's plan to reserve more than 40 per cent of the licences in a forthcoming auction of airwaves in the 600-megahertz frequency for bidding only by small carriers, which would include Videotron and Calgary-based cable operator Shaw Communications Inc.'s Freedom Mobile.

Rogers Communications Inc. chief executive Joe Natale on Wednesday called it "puzzling" that Ottawa would offer subsidies to "well heeled, vibrant cable operators."

But Quebecor chief financial officer Jean-François Pruneau said on Thursday he's happy the government's objective "remains favouring competition in the marketplace and competition, obviously, from new entrants."

Speaking at an investor conference hosted by Canadian Imperial bank of Commerce, he said there are advantages to owning low-frequency spectrum – the longer wavelengths can travel long distances and penetrate into buildings and basements – and that's why a set-aside in the 600-MHz auction is necessary. Quebecor presently owns "only one block" of low-band airwaves, he said, "whereas the incumbents own a lot more."

Earlier this week, Quebecor CEO Pierre Karl Péladeau made a similar point in an interview with The Globe and Mail, noting that the Big Three – Rogers, BCE Inc. and Telus Corp. – received swaths of low-band spectrum from the government at no charge when they first set up their cellular networks in the 1980s.

"You should never forget that the first pieces of spectrum they had were free," Mr. Péladeau said, adding his family-controlled company has paid for all of the airwaves it owns. "We spent a significant amount of money to acquire spectrum, and we never had spectrum for free. That was not the case for the incumbents."

Quebecor spent more than $1-billion on spectrum licences in four auctions beginning in 2008. However, it also recently sold airwaves it owned outside of its home province after deciding not to expand its wireless business beyond Quebec.

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Shaw paid $430-million while Rogers paid $184-million in two separate transactions announced in June and approved by Ottawa later this summer. That brings Quebecor's total actual outlay for airwaves from those auctions to less than $400-million.

Rogers, BCE and Telus spent more than $10-billion combined at those four public auctions. They have also paid fees to maintain the licences for spectrum they received for free.

Federal Innovation Minister Navdeep Bains has praised the investment Canada's incumbent telecom providers have made in their networks and infrastructure, but he has nonetheless said he wants to promote more competition in the industry. In an interview earlier this month, he said the proposed rules for the 600-MHz auction are one way to reach that goal.

Also Thursday, Mr. Bains and Canadian Heritage Minister Mélanie Joly jointly sent a letter to Ian Scott, the new chairman of the Canadian Radio-television and Telecommunications Commission, detailing how they believe he can "fulfill [his] mandate going forward."

On the subject of telecom, the ministers wrote "the government's objectives are to improve the quality, coverage and price of services … increased competition is an important tool for advancing these goals."

The consultation on the framework of the 600-MHz auction is open for comment until Oct. 2. The auction is not likely to be held until at least 2019.

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With a report from Susan Krashinsky Robertson

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