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Verizon’s Big Canadian Political Problem $VZ $T $BCE $RCI $TU

Verizon (NYSE:VZ) has walked into a Canadian political buzz saw. Scheduled for Sep is a large spectrum auction which will decide wireless dominance into the foreseeable future. The regulators had a weird rule designed to help new small upstarts allowing them to bid on more than one spectrum range.

Verizon is using the  poor wording of the rule and declaring itself to be a new entrant. Verizon has huge capital and will be able to buy the spectrum and disrupt existing players. The rules are also perverse because to help small newcomers the existing players are supposed to allow them access to the existing networks which were built with someone else’s capital expenditures.

George Cope CEO of BCE INC (NYSE:BCE)  has compared this to a foreign player entering New York City with several new spectrum licenses and then being allowed to use AT&T (NYSE:T) and Verizon’s existing networks. You know that’s not going to happen.

Verizon used to operate in Canada but withdrew several years ago. They are four times larger than the entire Canadian wireless market. No one contemplated their use of special rules which were designed to aid small players get a foothold.

The Canadian players have started a very public media campaign to wake up voters and politicians. The federal cabinet has just been reshuffled. The short-term political solution will be to defer the auction which is just weeks away. The deferral will start a separate controversy.

Canada and Japan are the only two jurisdictions which came out with LTE standard which LTE enable tablets and smart phones were first released. There is a huge technological superiority to the networks in Canada.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter @financialskepti Follow his evil twin who writes Wall Street Murder Thrillers on twitter  @georgegutowski