Consultation on a Policy and Licensing Framework for Spectrum in the 26, 28 and 38 GHz Bands

1. Through the release of this document, Innovation, Science and Economic Development Canada (ISED), on behalf of the Minister of Innovation, Science and Industry (the Minister), is initiating a consultation on a policy and licensing framework for the auction of millimetre wave (mmWave) spectrum licences in the bands 26.5-27.5 GHz (referred to as the 26 GHz band), 27.5-28.35 GHz (referred to as the 28 GHz band), and 37.6-40.0 GHz (referred to as the 38 GHz band) (collectively referred to as the mmWave bands) as announced in Canada Gazette notice SPB-001-22.

2. Subsequent to the initial consultation entitled SLPB-001-17, Consultation on Releasing Millimetre Wave Spectrum to Support 5G, released in June 2017, the addendum entitled SLPB 005-18, Addendum to the Consultation on Releasing Millimetre Wave Spectrum to Support 5G, released in June 2018, and the resulting policy decisions announced in the document SLPB-003-19, Decision on Releasing Millimetre Wave Spectrum to Support 5G, released in June 2019, ISED is now seeking comments on the policy and licensing considerations including auction format, rules and processes, as well as on conditions of licence for spectrum in the 26, 28 and 38 GHz bands.

3. The Minister, through the Department of Industry Act, the Radiocommunication Act and the Radiocommunication Regulations, with due regard to the objectives of the Telecommunications Act, is responsible for spectrum management in Canada. As such, the Minister is responsible for developing national policies for spectrum utilization and ensuring effective management of the radio frequency spectrum resource.

4. Wireless services are an important part of Canadians' lives, whether they are accessing multi-media applications, conducting business while on the move, connecting with family and friends, or managing their finances. In recent years, these services have become increasingly integrated in society, with the COVID-19 pandemic in particular accelerating the digitalization of how Canadians live and work, and how businesses operate. Now more than ever Canadians expect wireless services to be high quality, available in every region of the country, and competitively priced.

5. In this context, ISED is committed to the objective that all Canadian consumers, businesses and public institutions have access to the latest wireless telecommunications services, at competitive prices. A robust wireless telecommunications industry drives the adoption and use of digital technologies, facilitates innovation, and enhances the productivity of the Canadian economy.

6. Spectrum is a critical resource for wireless service providers. Additional spectrum for flexible use will enable providers to increase network capacity to meet increasing traffic demands and support the provision of next-generation wireless technologies. The fifth generation of technology, known as 5G, is expected to dramatically change the telecommunications landscape. 5G technology will facilitate the delivery of high-quality and innovative services to Canadian consumers and businesses. The continued development and deployment of 5G technologies is essential to Canada becoming a global centre for innovation, and will bring the country to the forefront of digital adoption, strengthening our world-class wireless infrastructure. Further, this technology presents a key opportunity to support competition and the provision of high quality, innovative, and competitively priced wireless services to Canadians.

7. Beyond improvements to mobile and fixed wireless networks, 5G is also expected to support the creation and expansion of new wireless applications in industry verticals such as agriculture, manufacturing, healthcare, public safety and transportation. With more spectrum available, Canadians will be able to embrace new applications and services in these industry verticals as they are developed. Testing and demonstrations of different use cases are already taking place domestically and internationally. Initial 5G deployments are mainly focussed on capacity expansions; however, it is unclear at this time which business cases will drive ongoing investment in 5G networks, and which services and applications will deliver the greatest benefit to Canadians.

8. The release of mmWave spectrum is an opportunity to support investment and improvement of services by service providers. Access to large blocks of mmWave spectrum will enable service providers to offer high-speed and high-capacity 5G services to consumers. Additionally, mmWave spectrum presents a key opportunity to continue to facilitate competition at the regional and national levels, resulting in a mobile wireless market that has greater choice and competitively priced offerings for consumers.

9. In addition to the mobile and fixed wireless service providers, satellites are vital to Canada's telecommunication and broadcasting services. They are currently the only means of reaching some communities in rural and remote areas, where demand for high-quality broadband continues to grow. Satellite operations are moving to higher frequencies to better accommodate these growing demands for data-intensive applications that require larger bandwidth. ISED is of the view that this trend will continue with next-generation satellite technologies, such as high throughput satellites and low Earth orbit (LEO) satellite constellations, and that the mmWave band will allow these systems to provide advanced services and broadband Internet throughout Canada, helping to bridge the digital divide between rural and urban areas. Based on these developments and international studies, ISED is of the view that sharing between satellite and commercial mobile services in the mmWave bands can be facilitated so that both 5G and advanced satellite services can be made available to Canadians.

10. The propagation characteristics of mmWave spectrum are likely to make it a viable candidate for industry verticals, enabling specialized uses such as private networks in small areas. For example, mmWave may be well suited for manufacturing sites that use automated operations and robotics, which require high levels of bandwidth and network performance. Private networks would also enable operators to manage their own connectivity and coverage, support a multitude of devices, and have the flexibility to manage their own networks to enable quality of services as they deem appropriate. Industries may be able to use private 5G networks in order to develop new business opportunities or facilitate the use of innovative technology.

11. Canadian consumers have the opportunity to benefit from these technologies and from the economies of scale that can come when manufacturers produce equipment for many markets, resulting in access to the latest devices at competitive prices for Canadians. By ensuring that the spectrum being made available reflects global trends, emerging 5G standards and the continued evolution of the equipment ecosystem, Canada will continue to benefit from the next generation of smartphones and other advanced wireless devices.

12. In developing this consultation, ISED was guided by the Spectrum Policy Framework for Canada (SPFC), which states that the objective of the spectrum program is to maximize the economic and social benefits that Canadians derive from the use of the radio frequency spectrum resource. This objective and the enabling guidelines listed in the SPFC remain relevant for guiding ISED in delivering its spectrum management mandate.

13. In May 2019, the Government of Canada released Canada's Digital Charter: Trust in a digital world (Digital Charter). The Digital Charter lists universal access as the first of ten principles that will lay the foundation for a made-in-Canada digital approach, and guide policy thinking and actions towards establishing an innovative, people-centred and inclusive digital and data economy built on trust. Universal access is the principle that all Canadians will have an equal opportunity to participate in the digital world and have the necessary tools to do so, including access, connectivity, literacy and skills.

14. The Government of Canada is also committed to connecting all Canadians to affordable, reliable, high-speed Internet and improving access to the latest mobile services. In 2019, High-Speed Access for All: Canada's Connectivity Strategy set a national connectivity target to make broadband speeds of at least 50 megabits per second (Mbps) download and 10 Mbps upload available to all Canadian homes and businesses, and to improve mobile wireless access from coast to coast to coast. To reach these objectives, ISED is considering the need to support and encourage connectivity for rural and remote communities as it develops new policies and licensing processes for the mmWave bands.

15. The proposals set out in this consultation support the objectives of the Telecommunications Act, the SPFC, the Digital Charter, Canada's Connectivity Strategy and Innovation and Skills Plan, by positioning Canada at the leading edge of the digital economy through the release of mmWave bands to support 5G technologies, introduce new applications and services for all Canadians, and bring Canada into the future. Consequently, ISED's policy objectives for the release of mmWave bands are to:

• enhance innovation by enabling Canadian companies to develop innovative use cases that put Canada at the leading edge of the digital economy
• foster investment and the evolution of wireless networks by enabling the development of high-quality 5G networks and technology
• support sustained competition in the provision of wireless services so that consumers and businesses benefit from greater choice and competitive prices
• facilitate the deployment and timely availability of services across the country to promote connectivity in rural, remote, and Northern regions

16. In the Spectrum Outlook 2018 to 2022 (the Spectrum Outlook), ISED noted that the new applications and services that are expected to be made available through 5G technologies will likely require spectrum in different frequency ranges.

17. Different frequencies possess unique propagation characteristics and can be developed to offer applications and services that make use of these different characteristics and benefits. ISED has completed the release of, or is in the process of releasing, spectrum in low-, mid- and high-frequency bands. ISED is of the view that each level will be beneficial to the deployment of 5G technologies offering higher speeds, low latency and improved capacity and coverage.

18. Low-band spectrum is ideal for covering large geographic areas and in-building penetration, making it important for both urban and rural deployments. In March 2018, ISED published SLPB-002-18, Technical, Policy and Licensing Framework for Spectrum in the 600 MHz Band to support increased network capacity and coverage, and the deployment of next-generation technologies. The auction for the 600 MHz band was completed in April 2019.

19. The characteristics of mid-band spectrum allow for a mixture of providing coverage and capacity. Taking into account the need for mid-band spectrum to complement existing low- and high-bands, in March 2020 ISED published SLPB-001-20, Policy and Licensing Framework for Spectrum in the 3500 MHz Band. The auction for the 3500 MHz band was completed in July 2021. In May 2021, ISED published SLPB-002-21, Decision on the Technical and Policy Framework for the 3650-4200 MHz Band and Changes to the Frequency Allocation of the 3500-3650 MHz Band, to make more mid-band spectrum available for 5G. In December 2021, ISED published SLPB-006-21, Consultation on a Policy and Licensing Framework for Spectrum in the 3800 MHz Band, seeking comments on the policy and licensing framework for the auction of spectrum licences in the band 3650-3900 MHz.

20. Releasing spectrum in high-bands will allow service providers to obtain large blocks of spectrum to increase the capacity and quality of their networks and will promote innovation by supporting new technologies and business models. SLPB-003-19, Decision on Releasing Millimetre Wave Spectrum to Support 5G (the 2019 Decision), released in June 2019, outlined the changes to the 26, 28 and 38 GHz band plans to accommodate flexible use in the bands, and the treatment of existing users. The 2019 Decision and this consultation are key steps in optimizing this high-band spectrum for low latency and high-bandwidth use.

21. The 2019 Decision also resulted in interim guideline GL-10, Interim Guideline for Licensing of Earth Stations in the Fixed-Satellite, Earth Exploration-Satellite and Space Research Services in the Frequency Bands 26.5-28.35 GHz and 37.5-40 GHz (GL-10), which set out service areas that would be exempt from certain provisions for licensing of satellite services. In April 2021, ISED released SAB-002-21, Moratorium on the Licensing of Earth Stations in the Frequency Bands 26.5-28.35 GHz and 37.5-40.0 GHz in Certain Areas, which placed new geographic restrictions on the location of new satellite earth stations in the mmWave bands.

22. In the Spectrum Outlook, ISED noted the significant interest internationally in releasing mmWave spectrum, particularly above 20 GHz, for commercial mobile, licence-exempt, satellite and backhaul services and applications. As a result, ISED classified mmWave spectrum as a Priority 1 in the Spectrum Outlook.

23. Taking into account these developments, ISED is hereby consulting on a policy and licensing framework for spectrum in the mmWave bands.

24. Globally, other nations are also seeking to facilitate the development and adoption of 5G technology and are in the process of making mmWave spectrum available for this purpose through various licensing approaches.

25. The United States (US) has held three auctions for mmWave spectrum. The Federal Communications Commission (FCC) auctioned spectrum licences in the 24.25-24.45 GHz and 24.75-25.25 GHz bands in November 2018, and licences in the 27.5-28.35 GHz band in March 2019. The auction for licences in the 37.6-38.6 GHz, 38.6-40.0 GHz and 47.2-48.2 GHz bands was completed in March 2020.

26. Australia has proposed a mixture of auctioned spectrum licences in urban areas and apparatus (i.e. site) licensing in rural areas in the 24.25-27.5 GHz band. In August 2020, the Australian Communications and Media Authority (ACMA) released a consultation on draft apparatus licensing arrangements for 5G applications in the 26 and 28 GHz millimetre wave bands and completed its auction of the 26 GHz band (25.1-27.1 GHz) in April 2021.

27. The United Kingdom (UK) added the 24.25-26.5 GHz band to their spectrum sharing framework decision for low power indoor use in July 2019. According to the Office of Communications (Ofcom), this decision provides access to 2.25 GHz of spectrum for new indoor 5G applications without prejudicing future 5G use of the band. Ofcom is of the view that the low risk of interference to existing services means the lower 26 GHz band can be made available rapidly in order to facilitate and expedite the possibility for innovation, application development and commercial 5G use in this part of the band. These licences are available on a first-come, first-served (FCCS) basis.

28. France issued a call for the creation of 5G trial platforms in the 26.5 to 27.5 GHz band in January 2019. The call was aimed at market players wanting to obtain 26 GHz band frequencies to create open trial platforms (using small-scale 5G networks) and to open these platforms up to third parties. It was also aimed at market players wanting to test new use cases: innovative tech and service companies, including start-ups and industry verticals (health, energy, smart cities, etc.) players. In October 2019, France announced the first 11 projects selected. Projects included a variety of telecom industry players and verticals.

29. Hong Kong assigned 400 MHz blocks of spectrum in the 24.25-27.5 GHz and 27.5-28.35 GHz bands to three wireless carriers and made 400 MHz of mmWave spectrum available on a shared basis for the provision of innovative wireless broadband services.

30. The 3rd Generation Partnership Project (3GPP) includes various organizations that work together to develop industry specifications for equipment used for commercial mobile services. In the 26 and 28 GHz bands, 3GPP specifications for three 5G New Radio bands have been defined: band n257 (26.5-29.5 GHz), band n258 (24.25-27.5 GHz) and band n261 (27.5-28.35 GHz). Equipment is available for the 26 and 28 GHz bands, however most of the equipment that is currently available can only access one of these three 3GPP bands. Recent trends show that many upcoming devices are expected to incorporate all three bands, but only the bands relevant to a specific market will be enabled. ISED is seeking comments on the development of equipment that could access more than one of these bands, and if so, whether such equipment will be available in Canada. In the 38 GHz band, a single 3GPP band, n260 (37-40 GHz), has been defined, and equipment is available.

31. In July 2020, 3GPP finalized specifications for additional advanced 5G features, such as ultra-reliable low latency communications, massive machine-to-machine communications and network slicing. These advanced 5G features will be used by not only the telecommunications industries but also industry verticals, such as manufacturing, healthcare, public safety and transport. Furthermore, devices that can access a mix of low-, mid- and high-band 5G spectrum will enable users to take full advantage of what 5G technologies have to offer. Availability of 5G equipment for these industry verticals is demand driven and will be determined in part by business cases and investment plans that are still maturing. Consequently, the timelines for the availability of equipment using these advanced 5G features are currently unknown. ISED is seeking comments on the development of an equipment ecosystem using the 5G technologies in the 26, 28 and 38 GHz bands.

32. In the 2019 Decision, ISED adopted a band plan for the 26 and 28 GHz bands consisting of 18 unpaired 100 MHz blocks throughout the 26.5-28.3 GHz range with a 50 MHz block in the 28.3-28.35 GHz range, as shown in figure 1.

Figure 1: Band plan for the 26 and 28 GHz bands

33. In the 2019 Decision, ISED also adopted a band plan consisting of 24 unpaired 100 MHz blocks for the 37.6-40.0 GHz band and deferred the development of a band plan in the 37.0-37.6 GHz band, as shown in figure 2.

Figure 2: Band plan for the 38 GHz band

34. There are a number of existing satellite and fixed users in the mmWave bands. There are fixed licences in the 38 GHz band. Currently there are satellite allocations in all three bands but satellite earth stations are only licensed in the 28 GHz band.  

8.1 Fixed service in the 38 GHz band

35. The 38 GHz band currently contains fixed Tier 3 spectrum licences and grid cell and site-specific first-come, first-served licences.

8.1.1 Fixed Tier 3 spectrum licences

36. In 1999, ISED awarded 800 MHz (38.7-39.1 GHz and 39.4-39.8 GHz) for licensing, on a Tier 3 basis, via auction. In 2014, ISED published the New Licensing Framework for the 24, 28 and 38 GHz Bands and Decision on a Licence Renewal Process for the 24 and 38 GHz Bands (the 2014 Renewal Decision). This document included decisions on the renewal process for the fixed point-to-point and point-to-multipoint broadband wireless access spectrum licences in the 38.7-39.1 GHz and 39.4-39.8 GHz bands, which were auctioned in 1999 and were set to begin expiring in 2015. It was not anticipated at that time that these bands would be considered for mobile use, and the decision was made to issue new 10-year licences to those licensees in compliance with their conditions of licence, at the end of their current term.

37. In the 2019 Decision, ISED stated that the existing fixed Tier 3 spectrum licensees in the 38 GHz band, which are in compliance with their current licence conditions, would be eligible on expiry of the current 10-year licence term or voluntary licence cancellation prior to expiry, to apply for a new flexible use licence for an equal amount of spectrum. ISED further stated that new flexible use licences available to eligible Tier 3 licensees will be based on the new band plan established in the 2019 Decision and issued using licence areas that align with the new flexible use licence areas.

38. As of January 2022 there were 27 fixed Tier 3 licences held by three licensees: TeraGo Networks (25 licences), ABC Communications (1 licence) and Xplornet (1 licence). The licences are listed in annex A. Section 9.1 contains ISED's proposed transition plan for the fixed Tier 3 spectrum licences.

8.1.2 Existing grid cell and site-specific first-come, first-served licences

39. In 1999, ISED designated 600 MHz of spectrum (38.6-38.7 GHz paired with 39.3-39.4 GHz, and 39.1-39.3 GHz paired with 39.8-40.0 GHz) for point-to-point microwave systems, licensed on a grid-cell basis through a first-come, first-served (FCFS) process. In addition, the frequency band 38.4-39.8 GHz was made available under the same FCFS approach for unpaired point-to-point and unpaired multipoint communication systems.

40. The 2014 Renewal Decision allowed for point-to-multipoint systems in the frequency ranges 38.6-38.7 GHz, 39.1-39.4 GHz, and 39.8-40.0 GHz and established a new FCFS licensing process for available spectrum in the frequency bands 38.7-39.1 GHz and 39.4-39.8 GHz with site-specific licences.

41. In the 2019 Decision, ISED stated that grid cell and site-specific FCFS licences operating in the 38.6-40.0 GHz range, issued as of the date of the decision, will be displaced, subject to a transition plan. The 2019 Decision also placed a moratorium on issuing new terrestrial licences in the 38 GHz band, effective the date of the decision.

42. There are currently 76 active grid cell licences held by 8 licensees that have collectively deployed approximately 1900 sites. Rogers, TeraGo and Freedom Mobile (Shaw) collectively hold 99% of these licences. There are 419 site-specific licences (for 838 individual sites) to 10 licensees. Freedom Mobile (Shaw) holds 75% of these licences. Data from ISED's licensing database shows that approximately 88% of all sites (including grid cell and site-specific licences) are located within the greater areas of Vancouver, Calgary, Edmonton, Toronto, Ottawa and Montréal. Section 9.2 contains ISED's proposed displacement plan for the grid cell and site-specific FCFS licences.

8.2 Existing satellite earth stations in the 26, 28 and 38 GHz bands

43. There are a number of different satellite service allocations within the 26, 28 and 38 GHz bands. These allocations include earth exploration-satellite service in the frequency band 26.5-27 GHz, fixed-satellite service (FSS) in the frequency bands 27.0-28.35 GHz and 37.5-40.0 GHz and space research service in the frequency bands 26.5-27 GHz and 37-38 GHz. The 2019 Decision established a sharing framework to allow the continued deployment of earth stations that will pose minimal constraints upon the deployment of fixed and mobile services. There are currently no licensed earth stations in the 26 and 38 GHz bands. There are currently 37 licensed earth stations in the 28 GHz band.

44. The 10 FSS earth stations identified in table B1 of annex B, were licensed prior to June 5, 2017, or had applications pending approval on June 5, 2017. The 2019 Decision states that these earth stations are permitted to operate under the technical and licence conditions attached to their current authorization for an extended period of time (a minimum of 10 years from the completion of the future competitive licensing process in the band). The minimum of 10 years from the completion of the future competitive licensing process will allow these FSS earth station licences to align with a future licensing renewal process for the flexible use licences issued through the auction process being consulted upon here. The 2019 Decision also states that prior to the renewal of flexible use licences, ISED will consult on whether to permit these earth stations to continue to operate under the same technical and licensing conditions, or be subject to new licensing and coordination rules.

45. For the 10 FSS earth stations identified in table B2 of annex B, licence applications were submitted after June 5, 2017, but prior to June 2019. As stated in the 2019 Decision, these earth stations are required to comply with the licensing and coordination rules to be established in the future. Changes to their operations and/or adoption of specific mitigation measures may be required in order to satisfy the future rules. In the 2019 Decision, ISED also stated that it would consult on the amount of time allowed for these earth stations to comply with the future rules and any other matters related to transition through the licensing framework consultation. Further, ISED also stated that it expects affected flexible use and earth station licensees operating in the same band to work collaboratively towards mutually acceptable agreements to facilitate coexistence.

46. Since the 2019 Decision, ISED has received and approved several earth station applications. These applications were submitted in accordance with either issue 1 or issue 2 of GL-10. In section 10.5, ISED discusses the treatment of earth stations licensed or for which applications were received between the 2019 Decision and the publication of this consultation.

47. The 2019 Decision noted that there are no terrestrial incumbent licences in the 26/28 GHz band. In the 38 GHz band, there are fixed Tier 3 spectrum licences as well as grid cell and site-specific first-come, first-served licences. In the 2019 Decision, ISED implemented a moratorium on new terrestrial service licences in the 26, 28, and 38 GHz bands and that moratorium is still in place. Once the new licensing framework is established for these bands, the previous licensing framework for terrestrial services will no longer apply. The proposed processes for the transition of 38 GHz fixed Tier 3 spectrum licences and the displacement of 38 GHz grid cell and site-specific first-come, first-served licences are described below.

9.1 Treatment of 38 GHz fixed Tier 3 spectrum licences

48. There are 27 fixed Tier 3 spectrum licences, held by three licensees. These licences are based on the pre-existing band plan of paired 50 MHz blocks with various transmit/receive frequency separations. The amount of spectrum held by licensees in the affected Tier 3 areas varies from 100 MHz to 600 MHz. On January 20, 2025, the 38 GHz fixed Tier 3 spectrum licences will expire. These licences are listed in annex A.

49. In the 2019 Decision, ISED decided that fixed Tier 3 spectrum licences in the 38 GHz band will be treated as follows:

• Upon expiry of the current 10-year licence term, or voluntary licence cancellation prior to expiry, licensees who are in compliance with their current licence conditions will be eligible to apply for a new flexible use licence for an equal amount of spectrum.
• The new flexible use licences available to eligible licensees will be issued using licence areas that align with the new flexible use licence areas, which will be further consulted on, and only for those areas within which the existing licensee has deployed services by the end of its current licence term or voluntary cancellation date. These areas will likely be smaller than the existing Tier 3 licence areas.
• The new flexible use licences will be issued to licensees based on the new band plan and may be assigned different frequency blocks than their existing licences.
• Licensees of new flexible use licences will not be permitted to deploy mobile systems prior to the completion of the future competitive licensing process to award new flexible use licences in the band.

50. ISED also stated in the 2019 Decision that the following details with respect to the new flexible use licences for which existing fixed Tier 3 licensees will be eligible to apply would be established through this licensing framework consultation:

• The assessment criteria used by ISED to determine the level of deployment required to be eligible to apply for a flexible use licence in a specific licence area.
• The process for assigning new frequency block(s) for the new flexible use licences.
• The new conditions of licence, including deployment requirements, for the new flexible use licences.
• The process by which current licensees can apply for and be issued these new flexible use licences, including matters related to timing.

9.1.1 Proposed licence areas and eligibility for obtaining licences through the transition process

51. In section 12, ISED is proposing to use Tier 5 service areas for the proposed mmWave auction. Tier 5 service areas nest within Tier 4 service areas, which in turn nest within Tier 3 service areas. ISED is proposing that the new flexible use licences for eligible, existing fixed Tier 3 licensees be issued on a Tier 5 basis. As per the 2019 Decision, new flexible use licences will be issued only for the Tier 5 service areas within an existing licensee's Tier 3 service area where the existing licensee has deployed its network by the end of its current licence term or the date of voluntary licence cancellation.

52. The current deployment requirements for the incumbent Tier 3 licences are to maintain ongoing deployment of eight links per one million population (rounded up to a whole number). ISED proposes applying this same deployment requirement to each of the Tier 5 service areas within each incumbent Tier 3 licence. ISED would issue a new flexible use licence for each Tier 5 service area where the deployment requirement is met. In Tier 5 service areas where the proposed deployment requirement is not met, the licensee would not be eligible for a new flexible use licence.

53. Tier 3-020 Kingston, for example, contains four Tier 5 service areas. At the Tier 3 level, two links (rounded up from 1.4 links) are required to meet the deployment requirements based on the population in the Tier 3 service area. This same deployment requirement applied to the four Tier 5 service areas results in a higher number of links (five) being required to be deployed across the four Tier 5 service areas in order to retain the whole tier 3 licence area. See table 1 for an illustration of the example and annex C for a complete list of the requirements for each affected Tier 3 and Tier 5 service area.

54. Using the existing deployment requirement and applying it to smaller service areas may subject existing licensees to increased deployment requirements compared to those for their current Tier 3 licences. However, ISED is of the view that this is consistent with the 2019 Decision, which noted that existing licensees would only be eligible for new flexible use licences in those areas within which the licensee has deployed service. ISED also believes that these higher deployment requirements are reasonable since existing licensees can apply to obtain new flexible use licences.

55. All Tier 3 licensees will be required to meet the relevant deployment requirements set out in annex C in order to be eligible for new flexible use licences. Site locations for existing Tier 3 licences can be found on ISED's mmWave licence deployment maps website. Licensees are requested to notify ISED of any discrepancies.

9.1.2 Proposed new frequencies for 38 GHz fixed Tier 3 spectrum licences

56. The 2019 Decision stated that the new flexible use licences will be issued based on the new band plan, and could be assigned different frequency blocks than the existing fixed Tier 3 spectrum licences. ISED is proposing to auction the blocks currently occupied by the fixed Tier 3 spectrum licences, and to reserve an amount of spectrum equal to the amounts held by existing licensees for the transition to flexible use licences that will be issued based on the new band plan.

57. ISED is of the view that contiguous blocks of spectrum would better enable operators to support 5G applications. Therefore, ISED is proposing that the reserved blocks for the new-flexible use licences for eligible fixed Tier 3 incumbents be contiguous. ISED is also seeking comments on where the blocks for the new flexible use licences should be located in the frequency band, including whether they should be located close to the bottom of the 38 GHz  band (i.e. in the 38.4 to 39 GHz range) or at the top of the 38 GHz band (i.e. in the 39.4 to 40.0 GHz range).

9.1.3 Proposed transition process

58. Transitioning from fixed to flexible use services may take time for licensees to plan, coordinate, and complete. In ISED's view, existing fixed Tier 3 licensees will have enough time to transition to the new band plan by the end of their current licence term in 2025. Given that the procedures for, and location of, reassignment will be known in advance of the licence end date, and in accordance with its objective of supporting sustained competition, ISED is proposing that existing fixed Tier 3 licensees will be eligible to transition to flexible use at the same time as the issuance of the auctioned licences. This would allow flexible use licensees to enter the market at the same time, creating the conditions to maximize competition to the benefit of Canadians.

59. ISED proposes that existing fixed Tier 3 licensees can apply for new flexible use licences as soon as transition procedures and conditions are finalized in the decision stemming from this consultation, if they are in compliance with their conditions of licence, and meet the deployment requirements proposed in this section. However, as stated in the 2019 Decision, existing fixed Tier 3 licensees that successfully apply for new flexible use licences, will only obtain their new flexible licence(s) at the same time as those issued through the proposed mmWave auction process. In addition, flexible use licensees must protect grid cell and site based licensees until their scheduled transition dates.

60. ISED proposes that existing fixed Tier 3 licensees may apply for flexible use licences up to November 20, 2024. This will allow ISED adequate time to process applications prior to the January 2025 expiry date of existing fixed Tier 3 licences.

61. Existing fixed Tier 3 licensees will not be permitted to operate both their existing fixed and new flexible use licences in the same geographic area, except during an overlap period during the transition. To ensure that the transition process to the new band plan and licence areas is efficient, ISED is proposing that existing fixed Tier 3 licensees be permitted a six-month overlap between their existing fixed Tier 3 licence and new flexible use licence. During this six-month period, ISED will allow fixed Tier 3 licensees to operate on both their existing fixed and new flexible use licences. At the latest, this overlap period would start six months prior to the January 20, 2025 expiry date of existing fixed Tier 3 licences.

62. Any frequency blocks reserved for the transition where no application for transition has been submitted by November 20, 2024, or for which the Tier 5 service area transition eligibility requirement is not met, will be held by ISED and included in a future licensing process.

9.1.4 Proposed licence term and conditions of licence for licences obtained through the transition process

63. ISED proposes that new flexible use licences issued to existing fixed Tier 3 licensees through the transition process would be subject to the same conditions of licence as the auctioned licences, including deployment requirements, as proposed in section 14.

64. ISED is also proposing that all new flexible use licences issued through the transition process be issued with the same licence end date, and that this date would be the same as the flexible use licences issued through the proposed mmWave auction process. In practice, this would mean that existing fixed Tier 3 licensees that wait until after the proposed mmWave auction or until the end of the current licence term before applying for a flexible use licence would have licence terms shorter than 10 years. In ISED's view, aligning the licence end dates would harmonize all the mmWave flexible use licences and simplify the licence renewal process.

9.2 Displacement plan for grid cell and site-specific first-come, first-service licences

65. The 2019 Decision stated that all grid cell and site-specific first-come, first-served 38 GHz licences will be displaced, and are subject to this consultation. ISED's mmWave licence deployment maps website contains current grid cell and site-specific licence deployments site locations for existing Tier 3 licences. Licensees are requested to notify ISED of any discrepancies.

66. Proposed displacement plan: Through the proposed displacement plan for all grid cell and site-specific first-come, first-served licences in this band, ISED is seeking to provide timely access to flexible use spectrum in order to facilitate the introduction of 5G technologies for Canadians. ISED expects 5G services using mmWave spectrum to be deployed in large urban population centres first. Until these services progressively expand outside large urban population centres, existing rural and remote usage of the band could continue to operate. As such, ISED is proposing to adopt a displacement plan that will allow for the timely deployment of 5G mmWave services in urban and metropolitan Tier 5 service areas while providing incumbent rural and remote users with more time to remain in the band.

67. ISED proposes that the displacement plan include a fixed displacement deadline in all Tier 5 service areas, as defined according to the Tier 5 categories (see annex D for categories), which would allow incumbent licensees to continue operating until the deadline. ISED is of the view that the proposed displacement deadline for urban and metropolitan areas would allow for rapid deployment of flexible use services by auction licensees. In addition, the later proposed  displacement deadline for rural and remote areas reflects the view of ISED that 5G services will be deployed in large urban population centres first.

68. Grid cell and site-specific first-come, first-served licences consist of fixed stations that are primarily used for backhaul. Licensees may choose to transition their fixed stations to any of the available backhaul bands at any time prior to the transition timeline proposed in this consultation and any stations that have not transitioned early, must abide by the deadlines established through this consultation process.

69. Existing licensees have a variety of spectrum options for their backhaul operations. Currently there is roughly 26 GHz of spectrum available in Canada for backhaul facilities. This includes the additional 1.6 GHz that ISED made available in the 32 GHz band (31.8-33.4 GHz) for backhaul use. Given that there are various bands currently available for backhaul systems, ISED encourages existing grid cell and site-specific first-come, first-served licensees to transition early to any backhaul band that suits their needs.

70. Existing grid cell and site-specific first-come, first-served licences are currently mainly located in urban areas. Currently, 99.1% of the licences are located in urban and metropolitan Tier 5 service areas. Furthermore, 88% of all these licences are located in Canada's six largest cities (Vancouver, Calgary, Edmonton, Toronto, Ottawa and Montréal). Only 34 sites (less than one percent) are located in non-urban areas. Rogers, TELUS, TeraGo and Freedom Mobile (Shaw) collectively hold 99% of grid cell and site-specific first-come, first-served licences.

71. Displacement deadline in urban and metropolitan tiers: New 5G mmWave deployments are initially expected to be concentrated in urban and metropolitan Tier 5 areas. As a result, it will be important that metropolitan and urban Tier 5 service areas be rapidly cleared to support the first phase of deployment.

72. As such, ISED is proposing to displace grid cell and site-specific first-come, first-served licences that fall within metropolitan and urban Tier 5 service areas six months after the issuance of the auctioned licences. For the six months between the issuance of new flexible use licences following the completion of the proposed auction and the displacement deadline, new flexible use licensees would be required to avoid interfering with existing grid cell and site-specific first-come, first-served stations, but could otherwise operate in their licence area. After the displacement deadline, ISED would revoke all the grid cell and site-specific first-come, first-served existing licences in the metropolitan and urban tiers.

73. Under this proposal, prior to the displacement deadline in urban and metropolitan Tier 5 service areas, grid cell and site-specific first-come, first-served licensees could continue to operate as per their technical and operational parameters that have been provided to ISED and would receive protection from new flexible use licensees. However, modifications would not be permitted to any of these stations operating on these licences.

74. Displacement deadline in rural and remote areas: In these Tier 5 service areas, ISED expects that new flexible use systems will be deployed later than in metropolitan and urban tiers, and that these deployments will be less concentrated and more likely used for fixed wireless access or backhaul applications. The directionally focused radios used for these applications will allow for simpler coexistence with other systems. As such, for licences located in rural and remote Tier 5 service areas,  ISED proposes that existing licensees would be able to continue operating for three years after the issuance of the auctioned licences.

75. ISED is proposing to include a protection period of three years, commencing after the issuance of new flexible use licences won through the proposed auction process. The proposed protection period would provide certainty to, and minimize disruptions for, existing licensees in rural and remote areas, since they would not be required to vacate the band or make changes to their existing systems before the end of this period.  Existing licensees would be permitted to modify their operating parameters during this protection period upon request and approval from ISED, as long as any changes would not interfere with new flexible use deployments. During this protection period, new flexible use licensees would be required to avoid interference with existing grid cell and site-specific first-come, first-served stations, but can otherwise operate in the licence area.

76. Should existing grid cell and site-specific first-come, first-served licensees, in any Tier 5 service area, obtain a flexible use licence through the proposed auction process in the same service area and frequency block as their current licence, they will not be required to change frequencies to alternate frequency blocks. However, they will have to register the station(s) under the new flexible licence and abide by the new conditions of licence including the new technical rules for the flexible use licence. 

77. In the 2019 Decision, ISED stated that licensing rules would be established using a population-impact based approach to enable coexistence between flexible use service and satellite earth stations in the mmWave bands. The population-impact approach for the mmWave bands is based on setting limits on earth station deployments so they would not affect a material amount of population in a given service area. These limits could differ depending on whether the service area is anticipated to be in high demand for flexible use or satellite use.

78. ISED also indicated that until the earth station licensing and coordination rules are adopted, it would consider applications for new earth stations and modifications of existing earth stations in accordance with GL-10. ISED noted that an authorization for an earth station obtained under the GL-10 could also be subject to future licensing and coordination rules. In April 2021, ISED released GL-10, issue 2 to partially address some of the limitations observed since the release of the first issue. At the same time, ISED also published a spectrum advisory bulletin (SAB-002-21) to impose a moratorium on the licensing of earth stations in the frequency bands 26.5-28.35 GHz and 37.5-40.0 GHz in certain areas. Following the decisions of this consultation, GL-10, issue 2 and SAB-002-21 will be replaced with licensing and coordination rules, and/or technical standards for satellite earth stations and flexible use services, as appropriate.

79. Since June 2019, several earth station licence applications have been submitted to ISED. As indicated in GL-10, ISED intended to gather insight from its use in order to develop future licensing and coordination rules. While evaluating the submitted applications, ISED was able to assess the population-impact based approach as a viable approach and noted certain limitations in the provisions of GL-10 that may be too restrictive in areas where the deployment of 5G was less likely, thus unnecessarily constraining the deployment of earth stations. Furthermore, recent reports and deployments in different regions of the world have been aligned with ISED's view that initial 5G mmWave deployments would be concentrated in areas with a high population density. Therefore, ISED believes it is appropriate to impose additional restrictions for earth station licensing while loosening others.

80. As discussed in section 12, ISED is proposing to use Tier 5 service areas for auctioned licences, but GL-10 was developed based on Tier 4 service areas. If this proposal is adopted, the earth station licensing rules will be developed based on Tier 5 service areas. 

81. Given the potential changes in service areas and the insight obtained from the implementation of GL-10, ISED is of the view that improvements to the interim rules would be beneficial to both flexible use and satellite earth stations operators. These improvements would minimize the impact on the deployment of 5G systems in the more densely populated areas while providing increased flexibility to earth station operators outside of these areas. Taking into account the policy objectives stated in section 3, ISED has developed proposals for the licensing of earth stations, in the following sub-sections to:

• enable flexible use licensees to have access to areas where they are expected to deploy, i.e. flexible use systems initially in densely populated areas
• ensure that earth stations have opportunities to deploy in areas where there is access to fibre and road infrastructure
• give flexible use licensees and satellite earth station operators investment certainty with respect to their ability to deploy their networks, to the extent possible
• enable flexibility between licensees to coordinate and enter into mutual sharing agreements

10.1 Definition of satellite-dependent areas

82. In the 2019 Decision, ISED recognized the important role of satellites in providing connectivity to certain rural and remote communities, such as the North. In order to facilitate the deployment of earth stations in these communities, ISED defined a preliminary list of 24 Tier 4 service areas for which no population limits were established as part of the geographic restrictions imposed on earth stations. The 24 Tier 4 services areas are listed in annex C of the Interim Guideline. In May 2021, ISED defined these same 24 Tier 4 service areas as satellite dependent for the 3800 MHz band though its Decision on the Technical and Policy Framework for the 3650-4200 MHz Band and Changes to the Frequency Allocation of the 3500-3650 MHz Band.

83. In this consultation, ISED is proposing to establish a list of satellite-dependent areas for the mmWave bands that aligns with those developed for the 3800 MHz band and GL-10. Given ISED's proposal to license flexible use based on Tier 5 service areas, ISED is proposing to identify the 86 Tier 5 service areas contained within the boundaries of the preliminary list of the 24 Tier 4 service areas as satellite-dependent areas (see annex E). These are generally service areas with low populations and remote communities where satellite communications provide an important role in providing connectivity. These Tier 5 service areas include 43 rural and 43 remote Tier 5 service areas. No metropolitan or urban Tier 5 service areas are proposed to be identified as satellite-dependent areas.

10.2 Geographical restrictions for earth stations

84. Statistics Canada's population and dwelling table categorizes the 1025 Canadian population centres under the following groups:

• large population centre (LPC), with a population greater or equal to 100,000
• medium population centre (MPC), with a population between 30,000 and 99,999
• small population centre (SPC), with a population between 1,000 and 29,999

85. Based on previous earth station applications, and using the existing rules, it may be possible for an earth station to be deployed in the centre of an LPC. This is not aligned with ISED's policy objectives, which aim at enabling flexible use operators to deliver 5G services in urban areas, particularly in densely populated areas. To provide certainty to future flexible use licensees, ISED is proposing to prohibit earth stations from being located within the boundaries of metropolitan Tier 5 service areas, LPCs and MPCs, unless mutually agreed by affected flexible use and earth station licensees. In addition, ISED is proposing to prohibit earth station contours from overlapping the boundaries of metropolitan Tier 5 service areas and LPCs, unless mutually agreed by affected flexible use and earth station licensees.

86. In anticipation of this proposal, in April 2021, ISED issued SAB-002-21, which indicated that ISED would no longer consider applications for earth stations within LPCs and MPCs or if their contours overlapped the Tier 4 service areas of 4-051 (Montréal), 4-077 (Toronto), or 4-152 (Vancouver), and/or LPCs in other tiers. It is ISED's intention that following the decision on this consultation, SAB-002-21 will no longer be needed and will therefore be rescinded.

87. Earth station contours can be either a receive contour or a transmit contour. As defined in GL-10,  the ‘receive contour' of an earth station is intended to represent a region within which there is a potential that a flexible use system may cause harmful interference to the operation of the earth station. Moreover, the ‘transmit contour' of an earth station is intended to represent a region within which flexible use systems may experience harmful interference from the emissions of the proposed earth station. These contours will be made available prior to auction to inform potential bidders of the tier areas that are encumbered and may potentially be subject to interference. These contours are expected to be used as part of the overall coordination process that would be included in relevant technical and/or licensing requirement documents such as a Client Procedure Circular (CPC) or Standard Radio System Plan as appropriate. 

88. The proposed geographic restrictions described above would be aligned with the policy objectives to preserve urban areas for 5G deployment and to simplify the coordination process for flexible use operators in areas where deployment of 5G networks is expected to be dense.

89. ISED also reviewed the provision in GL-10 that requires earth stations contours to avoid overlapping with major infrastructure within a census metropolitan area (CMA). In the Interim Guideline, ‘major infrastructure' includes, but is not limited to: major roadways, stadiums or arenas, international airports, urban mass transit routes and cruise ship ports.

90. Based on earth station applications received since the release of GL-10, ISED noted that this provision has yielded varying results. Under certain circumstances, it would unnecessarily constrain the ability of satellite operators to deploy their earth stations in locations suitably close to infrastructure. Furthermore, most major infrastructure identified falls within the metropolitan Tier 5 service areas, LPCs and MPCs identified above.

91. Therefore, ISED is proposing to not include the requirements related to major infrastructure in its earth station licensing rules.

10.3 Maximum impacted population limits per Tier 5 service area

92. As indicated above, GL-10 was developed based on Tier 4 service areas. In section 12, ISED is proposing to issue flexible use licences based on Tier 5 service areas. GL-10, issue 2 includes a maximum population limit that is based on the total population covered by the contours of all licensed earth stations in a Tier 4 service area for each flexible use frequency block.

93. When converting the maximum impacted population limits for Tier 4 service areas to Tier 5 service areas, ISED concluded that the conversion could not follow a single linear rule given that a single Tier 4 service area could encompass between 1 to 12 Tier 5 service areas. Furthermore, the populations and populations densities vary significantly in each of these Tier 5 service areas enclosed within a Tier 4 service area. Consequently, ISED is proposing, in the following sub-sections, a series of maximum impacted population limits for different types of Tier 5 service areas. These limits consist of aggregated maximum population limits from all earth stations deployed within a single Tier 5 service area. Going forward, determination of the Tier 5 service area population for earth station licensed will be based on the most up-to-date population census data made available by ISED at the time the earth station licence application is submitted.

94. In section 10.2, ISED proposed to prohibit earth stations from being located within metropolitan Tier 5 service areas, including prohibiting earth station contours from overlapping with metropolitan Tier 5 service areas. As such, ISED is not proposing to establish population limits for the 30 Tier 5 service areas covering Vancouver, Toronto and Montréal as listed as metropolitan in annex D.

10.3.1 Maximum impacted population limits per urban Tier 5 service area

95. There are 70 urban Tier 5 service areas, which enclose one or more LPCs and MPCs. As indicated previously, ISED anticipates that flexible use operators will primarily require access to urban areas while satellite operators will require flexibility to deploy earth stations in areas where fibre and road infrastructure is accessible. Per the proposed geographic restrictions described in section 10.2, the largest markets within urban Tier 5 service areas will be preserved for flexible use licensees. ISED is proposing that satellite operators have the flexibility to deploy earth stations anywhere outside the geographic restrictions proposed in section 10.2. This would be permitted as long as the impacted total population enclosed within all contours of the earth stations deployed within a single urban Tier 5 service area does not exceed the proposed maximum impacted population limits shown in table 2, unless there is a mutual agreement with flexible use licensees that have an impacted population within their licence area.

10.3.2 Maximum impacted population limits per rural non-satellite-dependent Tier 5 service area

96. In section 10.1, ISED proposed that 43 rural Tier 5 service areas be considered satellite-dependent areas. A total of 468 rural Tier 5 service areas would be considered non-satellite-dependent areas. It is noted that relaxing the maximum impacted population limits compared to those for urban Tier 5 service areas could facilitate the deployment of earth stations in non-satellite-dependent rural Tier 5 service areas while still allowing flexible use licensees to offer services in the Tier 5 area. Consequently, ISED is proposing the maximum impacted population limits per rural non-satellite-dependent Tier 5 service area shown in table 3, unless otherwise mutually agreed by impacted flexible use and earth station licensees.

10.3.3 Maximum impacted population limits per rural or remote satellite-dependent Tier-5 service area

97. Altogether, there are 43 remote Tier 5 service areas covering 10 Tier 4 service areas, all of which fall within the proposed satellite-dependent areas described in section 10.1. Additionally, there are 43 remote Tier 5 service areas that are located in satellite-dependent areas. ISED is of the view that the maximum impacted population limits per rural and remote satellite-dependent Tier 5 service area could be further relaxed to enable satellite connectivity for Canadians living in these areas. Consequently, ISED is proposing the maximum impacted population limits per rural and remote satellite-dependent Tier 5 service area shown in table 4, unless otherwise mutually agreed by impacted flexible use and earth station licensees.

10.4 Aggregate earth station contours and maximum impacted population limits

98. As noted above, ISED defined a preliminary list of 24 Tier 4 service areas for which no population limits were established as part of the geographic restrictions imposed on earth stations. The 24 Tier 4 services areas are listed in Annex C of the Interim Guideline. In GL-10, issue 1 ISED implemented two sets of limits with respect to earth stations operating in Tier 4 service areas not listed in annex C of GL-10:

• the incremental population limit per earth station(a maximum impacted population per earth station operating in a flexible use frequency block, that varied between 500 and 2,500 people depending on Tier 4 service area population)
• a maximum number of 10 earth stations per flexible use frequency block in each Tier 4 service area

99. In GL-10, issue 1, an earth station was considered as one of the 10 earth stations if its contour covered an area that was not already covered by an existing contour. A limit of 10 earth stations was chosen in order to cap the aggregate population impacted by all earth stations authorized in a Tier 4 service area. A maximum impacted population per earth station was chosen to ensure that the entire population limit is not consumed by a single earth station operator. In GL-10, issue 2 ISED relaxed the constraints on earth stations to be deployed outside urban areas by making the single earth station population limit the same in all Tier 4 service areas (except for those identified in annex C of GL-10). This change was facilitated by replacing the limit of 10 earth stations per Tier 4 service area with an aggregate population limit in order to simplify the earth station licensing process. The overall impact on earth stations in a Tier 4 service area remained unchanged since there was no modification to the maximum impacted population limits per Tier 4 service area. 

100. In its experience applying GL-10 in processing earth station licensing applications, ISED has noted several drawbacks in utilizing a population limit per earth station. Firstly, utilizing a population limit per earth station does not provide flexibility to earth station operators co-siting their earth stations (e.g. an antenna park). For example, an operator wishing to co-site multiple earth stations cannot exceed a population limit of 2,500 people for each incremental contour, regardless of whether the average exceedance per incremental contour is less than 2,500 people. Secondly, the requirement for earth station operators to produce incremental contours to meet the per earth station population limit could result in inaccurate population counts where two different earth station operators use different technical assumptions. This could be exacerbated when an applicant for a new earth station cannot obtain technical information from an operator of an existing earth station. Thirdly, this system is more administratively burdensome since it requires both the applicant and ISED to work with multiple contours to produce a population count per incremental contour.

101. In addition, some of the original considerations in establishing the limit on earth stations, including the number of earth stations, the per earth station population limits, the major infrastructure restrictions, and the size of earth station contours, have effectively been replaced with the proposed geographic restrictions outlined in section 10.2. Consequently, some of the rules in GL-10, issue 2 may no longer be applicable.

102. ISED is proposing to include the requirement to provide an aggregate earth station transmit/receive contour that takes into account the characteristics of other existing earth stations operating in the same geographic area. Due to the limitations described above, ISED is proposing to not include any incremental population limits. As a result, earth station operators would no longer need to generate an incremental contour. As described in section 10.3, ISED would maintain a total population limit for each frequency block licensed to flexible use systems in a Tier 5 service area. An earth station could be authorized if the total population within all contours residing in a Tier 5 service area is less than the population limit described in section 10.3. The earth station would also be required to comply with other requirements, including those described in section 10.2.

103. ISED is seeking comments on whether the measures mentioned above are sufficient for the coexistence of flexible use and satellite earth stations, or if additional measures such as, but not limited to, a potential limit on the number of earth station aggregate contours within a Tier 5 service area, or limits on the dimensions of aggregate earth station contours (e.g. maximum dimensions/size), are required.

10.5 Treatment of earth stations licensed before the publication of this consultation

104. Prior to June 5, 2017, ISED received applications for several earth stations listed in table B1 of annex B, which have all been subsequently approved. As previously noted in section 8.2, the 2019 Decision states that these earth stations are permitted to operate under the technical and licence conditions attached to their current authorization for an extended period of time (a minimum of 10 years from the completion of the future competitive licensing process in the band). As such, these earth stations will not be subject to any new rules proposed in this consultation, including the new geographic restrictions as proposed in section 10.2.

105. Since June 5, 2017, ISED has received and approved several earth station applications as listed in tables B2 and B3 of annex B. The 2019 Decision stated that the earth stations would be subject to future rules. Given that they were licensed prior to this consultation, ISED is proposing that the earth stations currently located within the boundaries of metropolitan Tier 5 service areas, LPCs or MPCs be exempted from the new geographic restrictions proposed in section 10.2. However, these earth stations will still be subject to all other proposed requirements described in section 10 (e.g. population limits, etc.). ISED is proposing to allow earth stations listed in tables B2 and B3 a 180 day transition period to comply with the future rules and to submit all the revised documentation to ISED once the corresponding Tier 5 areas are licensed to flexible use.

106. As discussed in section 3, ISED expects that there will be demand for different types of applications and services for flexible use licences in the mmWave bands. As indicated in the Spectrum Policy Framework for Canada, ISED has adopted a policy objective to maximize the economic and social benefits that Canadians derive from the use of the radio frequency spectrum resource. One of the enabling guidelines under this objective recognizes that market forces should be relied upon to the maximum extent feasible. As detailed in the Framework for Spectrum Auctions in Canada, with due regard to this policy and guideline, ISED will generally consider the following broad conditions in determining whether an auction process will be used as the spectrum assignment mechanism:

• whether the demand for spectrum is expected to exceed the available supply 
• whether government policy objectives can be fully met through the use of an auction

107. ISED is of the opinion that the demand for mmWave spectrum may exceed the available supply, but that ISED's policy objectives to enhance innovation and foster competition may not be fully met exclusively through the use of an auction process due to the potential new and future uses for this spectrum from smaller and non-traditional users. As such, ISED is considering licensing processes for the mmWave spectrum that could provide for different types of spectrum licences:

• ISED is proposing to use an auction process to allocate 3.2 GHz of mmWave spectrum through long-term spectrum licences which will allow for flexible use of spectrum in a service area in accordance with the conditions of licence developed through this consultation. It is anticipated that there will be a high level of demand for these licences by carriers and service providers.
• In addition to the spectrum allocated through the auction, ISED is also proposing to make up to 1.05 GHz of mmWave spectrum licences available through a separate process or processes and will conduct a separate consultation for this spectrum.

11.1 Proposed auction process for flexible use licences

108. Spectrum is a critical resource for both mobile and fixed wireless service providers. Making mmWave spectrum available for flexible use will allow service providers to increase network capacity to meet increasing traffic demands, and support the provision of next-generation wireless technologies, such as 5G. Spectrum licences with conditions that offer long term certainty establishes an incentive for wireless service providers to invest in the infrastructure required to build out their networks. The demand for these types of licences generally exceeds supply and, in these instances, an auction is generally selected. As such, ISED is proposing an auction process to assign a portion of the spectrum licences in the mmWave bands.

109. ISED is proposing that, for auction purposes, the 26 GHz and 28 GHz bands be treated as a single category of licences in each service area. Therefore, in the text that follows, the spectrum frequencies 26.5-28.35 GHz will collectively be referred to as the 26/28 GHz band.

110. ISED is proposing to make a total of 3.2 GHz of spectrum available for flexible use via an auction. Specifically, ISED is proposing to auction 1.6 GHz of spectrum in the 26/28 GHz band (namely, the 26.7-28.3 GHz range) and 1.6 GHz of spectrum in the 38 GHz band (namely, the 38.4-40.0 GHz range). This would result in up to thirty-two 100 MHz blocks available in each service area.

11.2 Future licensing of remaining mmWave spectrum

111. The full potential of mmWave spectrum for 5G and other applications is not yet clear. The global ecosystem for mmWave technology is still developing, and new applications and services that make use of this spectrum will likely emerge in the future. As part of this innovation, ISED expects to see demand from different types of users for non-traditional use cases. For example, ISED has seen that there is growing demand for private networks that could be used for industry verticals such as agriculture, manufacturing, healthcare, public safety and transportation. Private networks could also be used in locations such as universities and colleges, stadiums, shopping centres and office buildings.

112. Supporting access to spectrum is critical for wireless innovation and helps enable Canadians to leverage the benefits of new technologies and applications as they emerge. As mmWave spectrum has the potential to facilitate the development and adoption of 5G technology, ISED views non-traditional users' access to spectrum as particularly important to foster innovation among businesses, research institutions and all levels of governments. As such, in addition to the spectrum licences assigned through the proposed mmWave auction, ISED is seeking comments on authorizing the use of the remaining spectrum in the mmWave bands, through non-competitive licences, in order to support innovation and facilitate access to spectrum for verticals and non-traditional users. In ISED's view, a non-competitive licensing process would facilitate access to spectrum by providing licences to support innovation where the business case may not support participation in the auction. This process would present an opportunity to foster competition within the emerging vertical market.  As such, ISED is proposing to include 200 MHz in the 26 GHz band (26.5-26.7 GHz), 50 MHz in the 28 GHz band (28.3-28.35 GHz), and 800 MHz in the 38 GHz band (37.6-38.4 GHz) in a future non-competitive licensing process.

113. The Service areas for competitive licensing interactive map and table outlines the general service areas that are used by ISED for the purposes of issuing spectrum licences. The defined geographic areas have been categorized under “service area” tiers that are based on Statistics Canada's Census Divisions and Subdivisions.

114. As different wireless services and applications are best suited to different sizes of service areas, five tiers of service areas have been established.

• Tier 1 is a single national service area
• Tier 2 consists of 14 large service areas covering all of Canada
  • eight Tier 2 service areas that have provincial/territorial boundaries
  • six Tier 2 service areas that are sub-provincial within Ontario and Quebec
• Tier 3 contains 59 smaller regional service areas
• Tier 4 consists of 172 localized service areas 
• Tier 5 contains the smallest licensing areas and includes 654 service areas, further categorized into 4 broader groups: metropolitan, urban, rural, and remote

115. In order to determine the appropriate licensing area, ISED takes into consideration the potential uses for the spectrum and the characteristics of the spectrum, including propagation characteristics and potential for interference coordination challenges. The limited range of mmWave signals lowers the potential for interference, and makes mmWave suitable for licensing using smaller tier sizes. Licensing based on smaller tier sizes, such as Tier 5, also provides additional flexibility to licensees by allowing them to concentrate on the geographic markets of most interest and/or to aggregate smaller service areas into larger regions that correspond to their business needs. In particular, Tier 5 further separates metropolitan, urban, rural, and remote areas allowing wireless providers to target their areas of interest with greater specificity. In ISED's view, Tier 5 service areas would be appropriate for the proposed mmWave auction. As such, ISED is proposing to use Tier 5 service areas for the proposed mmWave auction.

116. Demand for spectrum in rural and remote tiers: The results from the US mmWave auctions show there was excess demand over supply in urban areas and in most rural areas. As such, ISED is proposing to auction metropolitan, urban, rural, and remote Tier 5 service areas as part of the proposed mmWave auction. However, ISED recognizes that mmWave applications are still developing, and many potential use cases remain unclear. The mmWave bands may not be suitable for covering large areas, and existing fixed deployments are primarily located in large urban centres.

117. ISED expects that as new mmWave use cases emerge, they will likely be deployed in metropolitan and urban tiers first. In section 10, ISED is proposing that the rural and remote Tier 5 service areas listed in annex E be considered satellite-dependent areas. In order to facilitate the deployment of earth stations in these areas, the proposed licensing rules for earth stations are intended to more readily support their deployments compared with non-satellite-dependent areas. ISED is therefore seeking comments on the potential demand for mmWave spectrum in rural and remote areas. Specifically, ISED is seeking comments on its proposal to include all Tier 5 service areas, including all rural and remote Tier 5 service areas and satellite-dependent Tier 5 service areas in the proposed mmWave auction. Any Tier 5 services areas excluded from the proposed mmWave auction would be made available for flexible use in the future through a separate licensing process (e.g. first-come, first-served).

12.1 Encumbered blocks in the mmWave bands

118. As described in the 2019 Decision, the mmWave bands will be shared between fixed and mobile services and satellite services. The existing earth stations and fixed Tier 3 spectrum licences result in encumbrances that are explained below.

12.1.1 Tier 5 service areas containing an existing licensed earth station in the 28 GHz band

119. Section 10.3, outlines the proposals to enable coexistence between flexible use services and new earth stations in the mmWave bands based on a population impact assessment approach as per the 2019 Decision. The 2019 Decision also stated that existing earth station licences would be treated differently, depending on when they were licensed or when their applications were pending approval. These existing earth stations would have varying impact on the available geography and population for flexible use in a combination of blocks and service areas.

120. Earth stations licensed prior to June 5, 2017, or whose applications were pending approval as of June 5, 2017 and were subsequently approved are listed in table B1 of annex B. The 2019 Decision stated that these earth stations would be permitted to operate under the technical rules and licence conditions attached to their current authorization for an extended period of time (a minimum of 10 years from the completion of the future competitive licensing process for the band). The 2019 Decision also noted that ISED will consult on whether to permit these earth stations to continue to operate under the same technical and licence conditions or be subject to new licensing and coordination rules, prior to the renewal of flexible use licences.

121. There are 10 earth stations that were licensed prior to June 5, 2017 or whose application were pending approval as of June 5, 2017 located in eight Tier 5 service areas. The number of frequency blocks that are impacted by these earth stations varies from three to nine. Given that ISED is proposing not to auction block U, the number of frequency blocks that ISED is proposing to auction that are impacted by these earth stations varies from two to eight. Six of the 10 earth stations do not impact any adjacent impact licence areas. One earth station impacts two adjacent Tier 5 service areas. Two earth stations' contours each a single Tier 5 service area adjacent to the Tier 5 service area in which the earth station is located.

122. The paragraphs below describe the population impacts resulting from earth station contours that affect more than one Tier 5 service area, for the earth stations deployed or whose applications were received prior to June 5, 2017. The population impacts are assessed based on the encumbrance of a grid cell using the contour (or aggregated contours, if applicable) provided by the satellite operators. Therefore, the actual population impacted by each earth station will likely be less than the values described below given they are calculated assuming the full grid cell is encumbered. The maps depicting the encumbered grid cells can be found on ISED's mmWave licence deployment maps website.

123. In Tier 5-448 Regina, Xplornet's and Hughes' collocated earth stations operate in five auctioned frequency blocks (P, Q, R, S and T) and the contours impact approximately 45% of the population in Pilot Butte and 15% in Regina.

124. Furthermore, in Tier 5-447 Pilot Butte, Hughes' earth stations also operate in three proposed auctioned frequency blocks (L, M and N) and the contours impact approximately 44% of the population in Pilot Butte and 0.01% in Regina. 

125. In Tier 5-400 Winnipeg, the earth stations of Inmarsat and WildBlue are collocated and operate in eight proposed auctioned frequency blocks. The contours impact up to  39% of the population of the service area for frequency blocks S, T and U. The contours also impact up to 5% of the population of the adjacent Tier 5-396 Lorette and up 1% of the population in the adjacent Tier 5-397 Oakbank. For more detail about the population impacted in other proposed auctioned frequency blocks for these two earth stations, see ISED's mmWave licence deployment maps website.

126. Earth stations whose licence applications were submitted after June 5, 2017, but prior to June 2019 are listed in table B2 of annex B. These earth stations will be required to comply with the future licensing and coordination rules, with the proposed exception related to the geographic restrictions discussed in section 10.2. The number of frequency blocks that ISED is proposing to auction that are impacted by these earth stations varies from one to seven. These earth stations are located in six Tier 5 service areas. Nine of the 10 earth stations identified do not impact any adjacent licence areas. One earth station impacts one adjacent Tier 5 service area.

127. In Tier 5-451 Saskatoon, Telesat's earth station operates in seven proposed auctioned frequency blocks, and the contour impacts approximately 5% of the population.

128. In Tier 5-453 Waldheim, Telesat's earth station operates in seven proposed auctioned frequency blocks, and the contour impacts approximately 22% of the population. The contour also impacts approximately 0.3% of the population in the adjacent Tier 5-452 Martensville.

129. In addition, 17 earth stations, listed in table B3 of annex B have been licensed since the publication of the 2019 Decision.

130. ISED is of the view that where any earth station's contour encumbers a significant percentage of the population of the Tier 5 service area, the affected frequency blocks would be of lesser value in the auction. ISED also notes that including these frequency blocks in the proposed mmWave auction and accounting for their dissimilarity from other blocks would increase the complexity of the auction. In section 10.3 ISED proposed to set maximum impacted population limits on earth station deployments such that they would not prevent meaningful deployment for flexible use licensees. These limits could differ depending on whether the service area is anticipated to be in high demand for flexible use or satellite use. As such, ISED is proposing to exclude from the auction the frequency blocks where an existing earth station's contour encumbers more than the maximum population limits proposed in section 10.3. ISED is also proposing to make an exception for Edmonton (5-521), which has an encumbrance of 5% of its nearly 1.2 million population, and is proposing to include it in the auction as unencumbered as ISED is of the view that there will be demand for this Tier. ISED's proposed blocks to exclude from the auction in the 28 GHz band, can be found in table F1 of annex F. 

131. For the affected 28 GHz frequency blocks in the Tier 5 service areas listed in annex G, the population impacted by an existing earth station contour does not exceed the maximum impacted population proposed in section 10.3. In some cases, this is a result of an earth station's transmission contour impacting more than one Tier 5 service area. ISED is proposing that these frequency blocks be included in the proposed mmWave auction, and be treated as unencumbered blocks.

132. The 2019 Decision established that ISED will adopt earth station licensing and coordination rules to facilitate sharing between earth stations and flexible use systems. As a result, in the future it is expected that satellite earth stations will be deployed in several Tier 5 areas where flexible use systems will also be deployed. Satellite earth stations whose licence applications were submitted after June 5, 2017, but prior to June 2019, will be required to adhere to the future rules, as discussed in section 10, with the proposed exception discussed in section 10.5. Notwithstanding this exception, these earth stations would still have to comply with the proposed maximum impacted population limits in section 10.3. As such, the Tier 5 service areas where these earth stations are deployed will not be considered as encumbered tiers in the auction.

12.1.2 Fixed Tier 3 spectrum licences in the 38 GHz band

133. There are 27 fixed Tier 3 licences in the 38 GHz band, held by three licensees. These licences expire in 2025. The 2019 Decision determined that upon expiration, or voluntary cancellation prior to expiry, licensees who are in compliance with their current licence conditions will be eligible to apply for a new flexible use licence for an equal amount of spectrum to their existing licences. ISED also decided that the new flexible use licences available to eligible licensees will be based on the new band plan and will be issued using licence areas that align with the new flexible use licence areas and only for those areas within which the existing licensee has deployed services by the end of its current licence term, or voluntary cancellation date.

134. The fixed Tier 3 licensees hold licences in 12 Tier 3 service areas, which contain 135 Tier 5 service areas. However, licensees have generally not deployed throughout their Tier 3 areas, and current deployments are mostly limited to population centres within each Tier 3. Since the incumbent licences do not expire until 2025, the licences could delay deployments in certain frequency blocks in the 38 GHz band, unless licensees voluntarily transition earlier. The affected blocks are located in the frequency bands 38.7-39.1 GHz and 39.4-39.8 GHz.

135. Spectrum will need to be reserved (i.e. not included in the auction) for the transition of fixed Tier 3 licences. The proposals related to the transition of the fixed Tier 3 licences and the location of the reserved spectrum are discussed in section 9.1. As a result of the existing encumbrances due to the existing fixed Tier 3 spectrum licences in the 38 GHz band, and the need to reserve an additional amount of spectrum to transition these licences, the amount of unencumbered spectrum available in the auction in the affected areas would be limited.

136. ISED is proposing that the encumbrances would be treated similar to the grid-cell and site-specific licences in the 38 GHz band. ISED is proposing that there would be no encumbered category to account for grid-cell and site-specific licences, similar to previous auctions (e.g. AWS-1, AWS-3 and 600 MHz) with similar transition plans. Given that the fixed Tier 3 licences also have a known transition deadline, ISED is of the view that the blocks with existing Tier 3 licensees could also be treated as unencumbered for the purpose of the auction. Under ISED's proposal, the amount of spectrum that would be unavailable for auction in the 38 GHz band in affected Tier 5 service areas is listed in table F2 of annex F.

137. Alternatively, ISED could include both encumbered and unencumbered blocks in the auction, with encumbered blocks being offered separately for the purposes of the auction process (i.e. a Tier 5 service area could have unencumbered and encumbered categories of blocks).

138. The mmWave bands are internationally recognized as key sources of high-band spectrum that are critical for 5G wireless networks. ISED views the licensing of these bands as an opportunity to allow service providers to obtain the large blocks of spectrum necessary to improve the quality, affordability and availability of wireless services for Canadians, and to facilitate innovation across all sectors of the Canadian economy. In this context, the mmWave bands will support the ability of Canada's service providers to offer 5G services to consumers, the ability of regional service providers to compete with the national mobile service providers (NMSPs) in the provision of 5G services, and the ability of WISPs to offer 5G fixed wireless services in rural and remote areas of the country, in addition to facilitating  the emergence of new use cases in industry verticals.

139. Since the federal government began taking steps to facilitate the entry of new competitors to the mobile wireless market in 2008, additional service providers have undertaken the substantial investments required to deploy wireless networks in many markets across Canada and to provide affordable wireless services to Canadians. As a result, competition in the market has increased, providing Canadians with greater choice and more affordable services. To illustrate, the Price Comparisons of Wireline, Wireless and Internet Services in Canada and with Foreign Jurisdictions: 2020 Edition found that the average prices offered by regional mobile service providers (RMSPs) were up to 14% lower than plans provided by the three big national carriers. It also found that prices for low- to mid-size data plans declined as much as 28% since 2019.

140. There is a risk that competition in the post auction marketplace for mobile wireless services may be affected without measures to facilitate access to spectrum for service providers other than the three NMSPs. ISED is of the view that larger service providers likely have the means and incentive to prevent other bidders, particularly smaller service providers, from acquiring spectrum licences in an open auction. Furthermore, the Competition Bureau has asserted that NMSPs have market power in the provision of retail mobile wireless services, most recently in its intervention to the Canadian Radio-television and Telecommunications Commission's (CRTC) review of mobile wireless services. The intervention included a study commissioned by the Competition Bureau (the Matrix Study), which found that are 35-40% lower across all carriers in areas where wireless disruptors (strong regional competitors) have achieved a market share above 5.5%.

141. As noted in the Framework for Spectrum Auctions in Canada (FSAC), there are various measures available in an auction to promote a competitive marketplace if required, notably spectrum set-asides and spectrum aggregation limits, also known as spectrum caps. These measures can address issues of market power and support competition in the provision of wireless services. The factors that ISED may consider when deciding upon use of a competitive measure are set out in section 4 in the FSAC.

142. A spectrum set-aside reserves a certain amount of spectrum for a defined sub-set of entities. ISED has previously used set-asides in a number of auctions, including:

• 40% of the AWS-1 band in 2008
• 60% of the AWS-3 band in 2015
• 43% of the 600 MHz band in 2019
• approximately 25% of the total band and 42% of spectrum at auction of the 3500 MHz auction in 2021 (where a set-aside of 50 MHz in most areas was made available)

143. A spectrum cap limits the amount of spectrum that a single licensee is allowed to obtain, thereby regulating the distribution of spectrum across different licensees. Spectrum caps can be applied across one band (in-band) or multiple bands (cross-band). In-band spectrum caps have been used in past auctions, including the 700 MHz auction in 2014 and the 2500 MHz auction in 2015. ISED has also applied cross-band caps, notably for the introduction of Personal Communications Service (PCS) licenses in 1995, where a 40 MHz cap was used across the 2 GHz and 800 MHz bands. Additionally, in 1999, ISED reviewed the spectrum cap policy and increased the cap from 40 MHz to 55 MHz.

144. Though few spectrum regulators have auctioned mmWave bands, competition risks in the market for wireless services have been recognized by some international jurisdictions. In these cases, regulators have elected to address these risks by adopting competitive auction measures. In June 2018, South Korea auctioned 2.4 GHz of spectrum in the 28 GHz band (26.5-28.9 GHz), and applied a 1 GHz cap. In June 2020, Finland auctioned 2.4 GHz of spectrum in the 26 GHz band (25.1-27.5 GHz), and capped each bidder at one 800 MHz block. In April 2021,  the Australian Communications and Media Authority auctioned 2.4 GHz of spectrum in the 26 GHz band (25.1-27.5 GHz), and applied a cap of 1 GHz. In the US the FCC eliminated a previously set cap of 1.25 GHz in the 28 GHz, 37 GHz and 39 GHz bands, partially due to a lack of ability to predict the optimal amount of spectrum needed for 5G wireless development.

145. Given the above considerations, and in light of the policy objectives stated in section 3, ISED proposes to adopt pro-competitive measures for the mmWave licensing process.

146. Options for pro-competitive measures: ISED notes the uncertainty around the level of demand from potential bidders and different valuations between mmWave bands. As such, ISED is seeking comment on whether to use a spectrum set-aside or a cross-band spectrum cap across the 26/28 GHz and 38 GHz bands as outlined below:

• Option 1: a total of 800 MHz set-aside across the 26/28 GHz and 38 GHz bands
• Option 2: an 800 MHz cross-band cap across the 26/28 GHz and the 38 GHz bands

147. As discussed in section 15.1, ISED is proposing that, for Option 1, the proposed set-aside quantities would be conditional on sufficient aggregate demand from set-aside eligible bidders in the first clock round.

148. Placement of a set-aside: If a set-aside is applied, ISED is seeking comment on the placement of set-aside given that there are some differences between the 26/28 GHz and 38 GHz bands.  From a technical and equipment ecosystem perspective, current research suggests that there may be more immediate use cases for spectrum in the 28 GHz and 38 GHz bands compared to spectrum in the 26 GHz band. As it is possible that there may be different valuations of the mmWave frequency ranges at the time of auction, ISED views the placement of set-aside spectrum as particularly important to provide operators with the opportunity to access spectrum that can easily be deployed. Access to this spectrum will provide operators with the opportunity to more effectively compete against the well-established NMSPs in the provision of competitively priced services, benefiting Canadian consumers.

149. Furthermore, as 5G technical standards continue to develop, it is unclear how much spectrum is sufficient to support the development of high-quality next-generation networks or what is the relative value of each band. To maximize the benefits of mmWave spectrum, access to larger blocks of contiguous spectrum (e.g. up to 800 MHz) in a single band may provide operators with the opportunity to deliver ultra-fast speeds and the added capacity required to support data-intensive 5G applications, as well as economies of scale for network equipment for a single frequency range. Conversely, providing set-asides in both bands (e.g. 400 MHz set-aside in each band) would allow set-aside-eligible bidders to select their preferred band and take advantage of any differences in the equipment ecosystem for the different frequency ranges that may better serve their business or use cases. Based on the considerations above, ISED is seeking comments on an 800 MHz set-aside (Option 1), including variations of a set-aside such as a set-aside of 400 MHz in each of the two bands (i.e. 400 MHz in the 26/28 GHz band and 400 MHz in the 38 GHz band).

150. Eligibility for set-aside spectrum: If a set-aside is applied, ISED must determine which service providers will be eligible to bid on set-aside spectrum. In its effort to promote a competitive marketplace, ISED has implemented policies in various auctions that effectively reserved spectrum for certain sub-sets of entities that could acquire  access to this spectrum to compete with NMSPs. Smaller service providers, such as RMSPs and WISPs could benefit from an opportunity to acquire mmWave spectrum to support network improvements to meet the wireless traffic demands of their growing subscribership. In addition, access to mmWave spectrum that is set aside may also facilitate the emergence of new use cases. Though many use cases of 5G are still unknown, it is expected to be used in the development of innovative technologies and business cases across many sectors of the economy, such as agriculture, manufacturing, healthcare, public safety and transportation.  As such, ISED is of the view that the eligibility for the set-aside should not preclude bidders seeking spectrum to provide these new and emerging services.

151. In the past, ISED has used specific definitions to distinguish between established service providers and newer service providers for the purpose of determining bidding eligibility. For the purpose of this consultation on mmWave bands, it is proposed that NMSPs be defined as “companies with 10% or more of national wireless subscriber market share.” The subscriber market share will be determined by the 2020 CRTC Communications Monitoring Report and related open data.

152. Given the potential for these new use cases to emerge, ISED is proposing that, if a set-aside is applied, eligibility to bid on set-aside spectrum should be open to all bidders, which are not NMSPs, or entities that are affiliates of, associates of, or under the control of, an NMSP.

153. Upon application to participate in the auction, applicants would be required to indicate in their application whether they are applying to bid as a set-aside-eligible or set-aside-ineligible bidder. In order to ensure the effectiveness of the set-aside and to deter speculation, it is proposed that any set-aside licences acquired by set-aside-eligible bidders would not be transferable to set-aside-ineligible entities for the first five years of the licence term, as set out in section 14.2.1.

154. ISED notes that changes to a licensee's ownership structure, business relationships or service offerings after it has been issued a licence may affect the licensee's set-aside eligibility. It is proposed that the conditions of licence reflect the responsibility of any set-aside licensees to maintain their set-aside eligibility for the first five years of the licence.

155. As discussed in section 11.1, ISED is proposing to auction 16 unpaired blocks of 100 MHz in the 26/28 GHz band and 16 unpaired blocks of 100 MHz in the 38 GHz band. Should a set-aside be applied, ISED is proposing that the set-aside also be auctioned as unpaired blocks of 100 MHz. Proposed contiguity rules for the aggregation of blocks within a specific licence area are discussed in section 15.

156. Encumbrances: As outlined in section 12.1.2 of this consultation, ISED is proposing that the majority of the encumbered frequency blocks in the 28 GHz band would not be included in the auction and is considering how to take into account the frequency blocks in 38 GHz that could be encumbered by fixed Tier 3 licensees. ISED recognizes that across service areas with encumbered frequency blocks, there are different levels of encumbrance that reduce the amount of spectrum available for auction. Should a set-aside be adopted for the mmWave auction, ISED recognizes that the amount of spectrum that would be open to all bidders would be further reduced. As such, ISED is seeking comment on whether to reduce the set-aside in service areas with encumbered frequency blocks. A similar approach was taken for the recent 3500 MHz auction, where ISED applied different set-asides based on the availability of unencumbered spectrum in most areas.

157. Application of a cross-band spectrum cap: If a cross-band cap is applied, ISED is proposing that the cap apply to the total of a licensee's 26/28 GHz and 38 GHz spectrum licences for a period of five years.  For fixed Tier 3 licensees in the 38 GHz band described in section 12.1.2, if  a cross-band spectrum cap is applied, in licence areas where a licensee already holds 38 GHz spectrum licences, in excess of the spectrum cap, it is proposed that:

• such licensees would not be eligible to bid for additional licences in the mmWave auction in service areas where the spectrum cap has been met or exceeded
• such licensees would not be required to divest any 38 GHz licences in order to fall within the spectrum cap

158. For this measure, licences held by any affiliate of the licensee would count as part of the cross-band cap.  It is further proposed that ISED will consider the amount of 38 GHz spectrum held by potential bidders at the time of application when considering eligibility to bid for areas in the auction given a spectrum cap.   

159. The proposed conditions of licence would apply to all flexible use licences whether issued through the auction or the transition process for the existing 38 GHz fixed Tier 3 licences. It should be noted that licences are subject to the relevant provisions in the Radiocommunication Act and the Radiocommunication Regulations. For example, the Minister continues to have the power to amend the terms and conditions of spectrum licences pursuant to paragraph 5(1)(b) of the Radiocommunication Act. The Minister may do so for a variety of reasons, including furtherance of the policy objectives related to the band. Such action would normally only be undertaken after consultation.

14.1 Licence term

160. The Framework for Spectrum Auctions in Canada states that ISED has adopted a flexible approach in determining licence terms (up to 20 years) based on the specific spectrum being offered and subject to a public consultation preceding the specific auction or renewal process.

161. ISED recognizes that the rate of wireless technology development continues to evolve, and developments such as dynamic spectrum access will provide new opportunities for increased efficiency for spectrum access. These new approaches to enable efficient spectrum access make it increasingly feasible to share spectrum between multiple services, including opportunistic access to licensed spectrum. In order to maximize the use of the spectrum resource and make spectrum available for a variety of services and applications, ISED is committed to further enabling technologies and approaches that will support the increased sharing of spectrum. As a result, it is expected that although long-term spectrum licences will continue to provide priority access to spectrum, future consultations will likely explore the possibility of providing for opportunistic access to licensed spectrum.

162. ISED has applied 20-year licence terms for its recent auctions, however there is also precedent for 10-year licences. For example, the 3500 MHz and AWS-1 licences auctioned in 2004 and 2008 respectively were issued for 10-year terms.

163. In the US, the FCC has opted for a 10-year licence term for the mmWave bands. Applying a 10-year term to licences issued through the proposed mmWave auction would allow ISED to learn from deployment and renewals in the US when deciding on renewal in Canada. As mmWave technology, deployments, and use cases are rapidly evolving, ISED would gain valuable insights from policy developments internationally. This approach would allow ISED to learn from international best practices for deployment, demand, and opportunities while promoting the potential for harmonization of ISED and international rules and procedures where appropriate.

164. Previous auctions conducted by ISED featured spectrum with clear demand and technological ecosystems. mmWave applications however are in their infancy and many potential use cases remain unclear, creating uncertainty for the long-term development of use cases within the mmWave bands. Licence terms shorter than 20 years would allow the market for mmWave to mature in the medium term and allow ISED to adjust its rules for the mmWave to take into account new technology and new use cases at the time of renewal.

165. In light of the above, ISED is proposing that flexible use spectrum licences in the 26, 28, and 38 GHz bands have a licence term of 10 years. The proposed condition of licence is as follows:

The term of this licence is 10 years from the date that licences are first issued following the auction procedure (“the initial licence issuance date”) set out in the Policy and Licensing Framework for Spectrum in the 26, 28, and 38 GHz bands (the “Framework”). Whether the licence was issued on the initial licence issuance date or issued at any later time, in accordance with transition provisions of the Framework, all licences will terminate on the same date, 10 years after the initial licence issuance date.

The process for issuing licences after this term and any issues relating to renewal, including the terms and conditions of the new licence, will be determined by the Minister of Innovation, Science and Industry (the Minister) following a public consultation.

14.2 Licence transferability and divisibility

166. In general, auctioned spectrum licences may be transferred in whole or in part (either in geographic area or in bandwidth) subject to the approval of the Minister. All spectrum licence transfer requests, including requests for subordinate licences, are subject to review under the CPC-2-1-23, Licensing Procedure for Spectrum Licences for Terrestrial Services, which may be amended from time to time.

14.2.1 Auction and Tier 3 licenses obtained through the transition process

167. ISED is proposing to treat new flexible use mmWave licences in the same way as other commercial mobile spectrum licences and may be transferred or subordinated in accordance with the provisions of section 5.6 of CPC-2-1-23 (including section 5.6.4). As part of this review, ISED will analyze concentration levels that would result from the licence transfer, and examine the ability of the licence transfer applicants and other existing and future competitors to provide services, given the post-transfer concentration of commercial mobile spectrum in the affected licence area(s). For subordinate licensing, the subordinate licence would include a subset of the primary licence conditions and its deployment would count toward meeting the deployment requirements of the primary licensee.

168. If a set-aside is applied, ISED proposes that transfers of mmWave spectrum will not be permitted where they will result in a set-aside-ineligible entity obtaining a set-aside spectrum licence for the first five years of the licence term. After the first five years, it is proposed that set-aside spectrum licences would be treated like all other commercial mobile spectrum licences and may be transferred in accordance with the provisions of section 5.6 of CPC-2-1-23. Similarly, ISED proposes that transfers between set-aside-eligible entities may take place at any time, subject to the provisions of section 5.6 of CPC-2-1-23.

169. The five-year restriction on set-aside transfers is to ensure that auction participants are not speculating on licences in order to hold them for later financial arrangements without providing service to Canadians. The initially proposed five-year deployment requirement would support the provision of services to Canadians as the primary licensee would not be able to transfer the licence unless it has met its mid-term deployment condition.

170. Despite the general restriction on subordination of set-aside licences, ISED proposes that a subordinate licence may be granted to a set-aside-ineligible entity in support of an agreement to share spectrum. In order for a subordinate licence to be granted in these cases, it is proposed that there are two conditions:

• licensees would need to demonstrate that the conditions under section 5.6.3 of CPC-2-1-23 are fully met
• licensees would be required to demonstrate to ISED's satisfaction that they intend to, and will continue to, make use of the mmWave spectrum to actively and independently provide services in the applicable licence area, based on the assessment factors set out below

171. If a spectrum cap is applied, for the first five years of the licence term, a licence is not transferable where the Transfer would be contrary to the Spectrum Aggregation Limit established in the framework with two exceptions:

1. a Subordinate Licence may be granted in support of a spectrum sharing agreement provided that the requirements in section 5.6.3 and section 5.6.4 of CPC 2123 are met and that ISED is satisfied that the relevant entities will actively and independently provide wireless services in the applicable licence areas, based on the assessment factors set out in the Framework; and
2. an exchange of equal amounts of 26, 28, and/or 38 GHz spectrum within the same licence area may be allowed, where the result of all the relevant transfers is still in accordance with the Spectrum Aggregation Limit subject to the provisions of section 5.6 of CPC-2-1-23.

172. Assessment factors: ISED will consider a range of criteria to determine whether the applicants for a transfer provide, or intend to provide, services in a given area. Assessment criteria may include, but will not be limited to:

• the companies' intent and actions to provide services in the area in which the sharing occurs, including wireless coverage, backhaul capacity, and/or other service(s)
• the level of investment, including in distribution, marketing and customer service, in order to acquire and serve customers
• the companies' demonstration of separate presences in the marketplace

173. Documentation: Applicants for a transfer will be required to provide all relevant documentation to ISED in regard to the above-noted assessment factors. These may include, but will not be limited to:

• all agreements relating to the transfer of, use of and access to the mmWave spectrum
• business plans for the area in which the agreement(s) will provide access to spectrum
• business and financial results, including investments and customer acquisition

174. ISED may request additional documentation to complete its assessment and may require that documents be certified by an officer of the company.

175. ISED's review will not extend to an overall assessment of the effects of the agreement between associated entities on competition in the marketplace.

176. Licensees must apply to ISED for the issuance of subordinate licences prior to the implementation of any spectrum sharing agreements or any agreement that provides for another party to operate the licensee's spectrum.

177. Exchange of spectrum licences: If a set-aside is applied and in recognition of the principles for promoting the efficient use of spectrum, it is proposed that ISED may also permit, after the announcement of the provisional licence winners, a transfer or "exchange" of equal amounts of mmWave spectrum within the same licence area between a set-aside-eligible entity and a set-aside-ineligible entity, subject to the provisions of section 5.6 of CPC-2-1-23.

178. For further information on these requirements, refer to CPC-2-1-23, as amended from time to time, as well as the future decision on the policy and licensing framework for the 26/28GHz and 38 GHz bands. Licence transfers may also be subject to the provisions of the Competition Act.

179. ISED is proposing the following wording for the condition of licence on transferability and divisibility:

This licence is transferable in whole or in part (divisibility), in both bandwidth and geographic dimensions, subject to ISED's approval. A Subordinate Licence may also be issued in regard to this licence. ISED's approval is required for each proposed Subordinate Licence.

The licensee must make the Transfer Request in writing to ISED. The Transfer Request will be treated as set out in Client Procedures Circular CPC-2-1-23, Licensing Procedure for Spectrum Licences for Terrestrial Services, as amended from time to time.

The licensee must apply in writing to ISED for approval prior to implementing any Deemed Transfer, which will be treated as set out in CPC-2-1-23. The implementation of a Deemed Transfer without the prior approval of ISED will be considered a breach of this condition of licence.

Should the licensee enter into any Agreement that provides for a Prospective Transfer with another holder of a Licence for commercial mobile spectrum (including any Affiliate, agent or representative of the other licence holder), the licensee must apply in writing to ISED for review of the Prospective Transfer within 15 days of entering into the Agreement, which will be treated as set out in CPC-2-1-23. Should ISED issue a decision indicating that the Prospective Transfer is not approved, it will be a breach of this condition of licence for a licensee to remain in an Agreement that provides for the Prospective Transfer for a period of more than 90 days from the date of the decision.

In all cases, the licensee must follow the procedures as outlined in CPC-2-1-23.

All capitalized terms in this section (H4) have the meaning ascribed to them in CPC-2-1-23.

If a set-aside is applied the following would also apply:

The following provision applies to set-aside licences as defined under the Framework:

For the first five years of the licence term, a set-aside licence is not transferable to a set-aside-ineligible entity (as defined in the Framework) with two exceptions:

1. a Subordinate Licence to a set-aside-ineligible entity may be granted in support of a spectrum sharing agreement provided that the requirements in section 5.6.3 and section 5.6.4 of CPC-2123 are met and that ISED is satisfied that the relevant entities will actively and independently provide wireless services in the applicable licence areas, based on the assessment factors set out in the Framework; and
2. an exchange of equal amounts of 26, 28 and/or 38 GHz spectrum within the same licence area between a set-aside-eligible entity and a set-aside-ineligible entity may be allowed, subject to the provisions of section 5.6 of CPC-2-1-23.

A set-aside spectrum licence may only be transferred to a set-aside-ineligible licensee after the five-year period set out above and once the licensee has satisfied the mid-term deployment requirement.

If a spectrum cap is applied the following would also apply to all flexible use licences:

For the first five years of the licence term, a licence is not transferable where the Transfer would be contrary to the Spectrum Aggregation Limit established in the framework with two exceptions:

1. a Subordinate Licence may be granted in support of a spectrum sharing agreement provided that the requirements in section 5.6.3 and section 5.6.4 of CPC-2123 are met and that ISED is satisfied that the relevant entities will actively and independently provide wireless services in the applicable licence areas, based on the assessment factors set out in the Framework
2. an exchange of equal amounts of 26, 28, and/or 38 GHz spectrum within the same licence area may be allowed, where the result of all the relevant transfers is still in accordance with the Spectrum Aggregation Limit subject to the provisions of section 5.6 of CPC-2-1-23

14.3 Deployment requirements

180. ISED uses deployment requirements to encourage licensees to put the spectrum to use to provide wireless service in Canada and to deter acquisition of spectrum licences by speculators and those whose intent is to prevent access to the spectrum by their competitors.

181. Deployment requirements are conditions of licence that generally require licensees to provide coverage to a percentage of the population or to a percentage of the licensees' existing mobile broadband footprint within a given time period. This encourages the delivery of service in all regions of Canada in a timely manner for the benefit of Canadians. As with previous licensing processes, ISED will consider the expected utilization of the band, as well as propagation characteristics, when determining deployment requirements.   

182. mmWave is not currently considered to be a band that will be primarily used to provide expanded network service coverage. The spectrum is expected to be primarily deployed in providing high-capacity backhaul, as well as to augment capacity of existing services in existing service areas through the deployment of small cells.

183. Traditionally, ISED has designed the deployment requirement criteria within the context of macrocell networks. However, the deployment of mmWave spectrum is expected to differ considerably from the use of those technologies. The Accenture report, Fuel for Innovation: Canada's Path in the Race to 5G has predicted a substantial increase in the number of antennas and small cells necessary to serve Canadians, and estimated that up to 273,000 small cells could be deployed across Canada over the next 5 to 7 years. In comparison, there are currently approximately 33,000 radio sites established over a period of more than 30 years.

184. It is anticipated that 5G applications using mmWave spectrum will create a new set of use cases. In the initial licence term, it is expected that deployment in the mmWave bands will be primarily concentrated in the densest urban areas, and particularly in mass gathering areas such as stadiums, factories, places of higher education, airports, and technology hubs. Advancements in technology and increasing demand for high-capacity data transmission may expand the use cases for the mmWave bands.

185. Given the uncertainty in regards to demand for spectrum in the mmWave bands, expected deployment levels, potential users and use cases, ISED is considering the following two deployment requirement options, which are further expanded on in section 14.3.1 and 14.3.2:

• Option 1 sets a baseline level of deployment while
• Option 2 requires greater station density resulting in higher deployment targets

14.3.1 Proposed approach for deployment requirements

186. Given the deployment uncertainty for the mmWave bands, coupled with the propagation characteristics of high-band spectrum that limit coverage, ISED is proposing deployment requirements based on the number of stations deployed (a “station approach”), rather than an approach based on the population covered. The proposal allows for full flexibility between various types of services expected to be deployed, consistent with the flexible use designation of the mmWave bands.

187. A station approach is a simplified methodology for both licensees and ISED, especially given the mmWave bands' propagation characteristics and expected mix of services. A station approach would involve requirements for licensees to deploy a minimum number of stations within their licence area. A station, for the purposes of the proposed mmWave deployment requirements, is any collection of radios, transmitters or receivers with identical GPS coordinates, regardless of elevation. For example, if multiple antennas exist at various heights, such as different levels of a building, but the same latitude/longitude are registered to the same licence, they would be counted as a single station for the purposes of this deployment requirement. Conversely, if antennas are in close proximity but are located at differing GPS coordinates (i.e. different location in degree/minutes/seconds), these would be counted as separate stations.

188. In order to encourage licensees that win multiple blocks of spectrum to use all the licensed blocks they hold, ISED is proposing to establish deployment requirements for each block individually. Every licence acquired would be required to meet the minimum number of stations per licence within the Tier 5 service area, as outlined in annex D. Note that annex D sets out two deployment requirement options.

189. A station could operate over multiple blocks of spectrum and as such, that station would count towards the requirement for each of the blocks in use. If a licensee chooses not to deploy all of their spectrum at each station, they would be required to deploy more stations to meet their overall station deployment requirement. It is ISED's view that this approach will maximize the amount of spectrum deployed. Licensees will still be required to update information on individual radios, transmitters and receivers in the ISED site database as per usual practice.

190. ISED's proposal for the number of stations required varies by Tier 5 licence area. Both approaches recognize that network deployment over the proposed licence term is likely to be primarily correlated to population density, with lower deployment expected in rural and remote areas.

191. In order to encourage increased coverage within the licence service area and discourage hyper dense deployment in only small regions of the licence area, ISED is proposing that a maximum of 30 stations per grid cell be permitted to count towards any deployment requirement per block within the licence area.

14.3.2 Proposed deployment requirements

192. ISED's proposed deployment model was designed through the analysis of estimated station deployment densities and areas of the country where deployment is reasonably expected within a 10-year licence period. The proposed deployment requirements have been designed based on the projection that mmWave networks will be deployed in higher-density areas first.

193. ISED proposes to use the Tier 5 service area categories, to further classify tiers based on their population density and expected demand and to take into account that mmWave deployment will be largely correlated to population density. As population density can vary greatly across Tier 5 areas, population-density-based deployment requirements enable a more targeted and consistent nationwide approach.

194. The proposed hierarchy of Tier 5 service areas for use in mmWave deployment requirements is listed below:

• Top 3: tiers containing the downtown areas of Canada's three largest cities – City of Toronto (5-282), the Island of Montréal (5-187), and the City of Vancouver (5-577)
• High population: urban tiers that contain large population centres, and remaining metropolitan tiers
• Medium population: urban tiers that contain medium population centres
• Rural: rural tiers
• Remote: remote tiers

195. ISED is proposing that licensees be required to meet the deployment requirements at the year 5 milestone and six months before the end of the 10-year licence term, or 9.5 years, as set out in annex D.

196. ISED proposes that the most densely populated Tier 5 service areas would have the most stringent deployment requirements, and that deployment requirements would decrease for each lower category in the aforementioned hierarchy, with all non-remote tiers having a baseline station requirement.

197. For rural and remote tiers, given the low population density and uncertainty regarding their deployment timelines and use cases ISED is proposing a standardized minimum deployment requirement that increases over the licence term.

198. ISED is proposing two options (see proposed deployment requirements in annex D):

• Option 1 has deployment requirements with a lower number of stations to take into account the uncertainty of the business models for the mmWave bands
• Option 2 has higher deployment requirements between three to five times the number of stations of Option 1 to encourage greater use of the spectrum.

199. Option 1 would facilitate mmWave deployment along historical trends of first deployments in other mobile/flexible use bands in Canada. This includes the focus on core urban centres, large venues, transportation hubs, and enterprise settings. Carriers would likely be co-locating their radios on their existing towers or readily accessible infrastructure. Option 2 would also facilitate deployments to similar targets as in Option 1, but would also promote aggressive expansion into small cells and Internet of Things as well as enhanced massive mobile networks. This would involve heavier reliance on deployments on non-traditional infrastructure. Option 2 would also better align deployment requirements with projected forecasts, such as in the Accenture report.        

200. ISED recognizes that the two proposed options may not fit for all Tier 5 service areas and that an alternative option, or a hybrid solution may be warranted and is seeking comments on the matter.

14.3.3 Proposed deployment requirement condition of licence

201. ISED proposes to incorporate the above station approach for deployment requirements into mmWave conditions of licence, subject to additional condition of licence considerations outlined below.

202. ISED proposes that deployment by a subordinate licensee will count towards the requirements of the primary licensee. ISED also proposes that backhaul, fixed service and mobile coverage using 26, 28, and 38 GHz spectrum will count towards meeting the deployment requirements.

203. ISED encourages subordination especially in cases where the licensee does not plan to deploy services to a particular area or with particular spectrum, in order to maximize the benefits that Canadians derive from the use of the spectrum.

204. Where a licence is transferred, the deployment requirements for the new licence will remain unchanged, and will continue to be based on the initial licence issuance date.

205. In consideration of the above, ISED proposes the following wording for this condition of licence, which will apply to all flexible use licences, also included in annex H:

Licensees will be required to demonstrate to the Minister of Innovation, Science and Industry that this spectrum has been put to use to actively deliver or support delivery of service with the number of stations in each Tier 5 service area as specified in annex D, at 5 and 9.5 years following the initial licence issuance date. A maximum of 30 stations in any single grid cell may be counted towards the deployment requirement of any given licence.

In the case of stations operating over multiple blocks of spectrum, the licensee may count that station towards the deployment requirements of the associated licence for each block in use.

The licensee is required to meet these conditions at all relevant times during the licence term and to continuously offer services throughout the term of the licence in accordance with these requirements.

Where a licence is transferred, the deployment requirements for the new licence will remain unchanged, and will continue to be based on the initial licence issuance date.

ISED will review licensees' compliance with their deployment requirements within the timeframes of their deployment obligations. Where, at any point in the licence term, the licensee is not meeting its deployment requirements, ISED may invoke various compliance and enforcement measures.

14.4 Other conditions of licence

206. ISED is seeking comments on additional conditions of licence outlined in annex H that would apply to licences issued through the proposed auction process for spectrum in the 26, 28 and 38 GHz bands. The proposed conditions of licence are based on existing policies and procedures.

207. In section 20, ISED is consulting on implementing a fee regime for flexible use and commercial mobile spectrum licences in the 10-95 GHz range. The proposed fee would apply in situations such as transitioned spectrum licences, or licence renewal after the initial auction licence term is completed.

208. The auction format should be simple, fair and transparent for bidders and it should lead to an efficient assignment of spectrum. In selecting the auction format and related rules, consideration is given to the characteristics of the spectrum being auctioned, for example, the quantity and size of the blocks, their geographic characteristics, as well as the similarities and complementarities that may exist among the blocks.

209. ISED considers that given the expected demand for licences in the mmWave bands, reducing uncertainty concerning the value of the spectrum being offered would be of significant benefit to potential bidders. As such, ISED is proposing an auction format that allows for price discovery with multi-round simultaneous bidding.

210. The number of licences that will be available for the proposed mmWave auction will significantly exceed the number of licences available in previous Canadian auctions. The clock auction format is a unique practical option that would permit price discovery and would allow the allocation of mmWave licences in a reasonable time. Therefore, ISED proposes to use a clock auction format for the proposed mmWave auction.

211. Specifically, ISED is proposing the clock auction format with generic licences and intra-round bidding, as described below with further details provided  in annexes I and J. The multi-round clock stage of this auction format would allow for price discovery. It would also provide an opportunity for participants to address exposure risk, as compared to other computationally feasible alternatives. The use of generic licences and intra-round bidding would support a shorter auction process. The assignment stage of this auction format would facilitate the assignment of contiguous spectrum.

15.1 Generic licences

212. Generic licences are blocks of spectrum that are sufficiently similar and comparable in value to one another that they can be offered as a single category in each service area. In determining whether licences should be regarded as generic, ISED considered the frequency location in the band, the block size, the encumbrance, and possible technology and interference constraints. The use of generic licences simplifies the bidding process, as it enables bidders to indicate quantities of licences desired in each area instead of identifying specific licences, and also reduces the number of possible combinations that bidders have to consider in placing their bids. It also maximises the possibilities to award contiguous spectrum in the assignment stage.

213. ISED is proposing that the mmWave bands be auctioned in unpaired 100 MHz blocks in 654 Tier 5 service areas across Canada. Since the propagation characteristics and potential technology ecosystems are sufficiently different between the 26/28 GHz band and the 38 GHz band, ISED is proposing that the mmWave licences will be offered in two distinct categories: the 26/28 GHz category and the 38 GHz category, and that blocks that belong to the same category will be offered as generic licences in each of the 654 Tier 5 service areas.

214. In the majority of Tier 5 service areas, ISED is proposing that the supply of blocks available in the auction in each band is 16. However, as discussed in section 12.1.1, in some Tier 5 service areas in the 26/28 GHz band there may be fewer blocks available for the auction because some blocks in some service areas may be excluded due to satellite earth station installations operating within these bands. In the 38 GHz band some frequency blocks in some service areas may be reserved for the transition of existing fixed Tier 3 licensees, as discussed in sections 9.1.2 and 12.1.2. These excluded frequency blocks will reduce the amount of spectrum available in the auction. As a result, the supply in a band may be less than 16 blocks in some Tier 5 service areas. In all cases, ISED is proposing that the blocks available in the auction for a given band be contiguous in every service area. For additional information on the availability of spectrum in service areas, see tables F1 and F2 in annex F.

215. If a set-aside is applied: As described in section 13, if a set-aside is applied, ISED is proposing that all applicants must indicate in their application whether they are applying to bid as a set-aside-eligible or set-aside-ineligible bidder. This eligibility will be applied to all Tier 5 service areas.

216. ISED considers that the demand for mmWave spectrum from set-aside-eligible bidders is uncertain, in particular in rural and remote service areas. In order to encourage the use of this spectrum and improve the potential for deployment, ISED is proposing to set ‘conditional' set-aside quantities and then to allow for the adjustment of the set-aside quantities based on the aggregate demand expressed by set-aside-eligible bidders in the first clock round, as described below and in annex I.

217. If a set-aside is applied, ISED is proposing to set a conditional set-aside quantity for each band and service area combination at the beginning of the auction. This set-aside quantity is conditional in the sense that the set-aside quantity will be reduced if there is not sufficient demand by set-aside-eligible bidders in the first clock round (Round 1). As discussed in section 13, ISED is seeking comment on whether to set a lower conditional set-aside quantity in service areas with encumbered frequency blocks. Then, for a given band and service area combination, the conditional set-aside quantity may depend on the supply. That is, the conditional set-aside quantity may be smaller for a band and service area combination where fewer than 16 blocks are available in the auction.  

218. In Round 1, each bidder will indicate the number of blocks it demands for each band and service area combination at the opening bid prices. If, for a given band and service area combination, the aggregate demand of set-aside-eligible bidders is at least equal to the conditional set-aside quantity, then the set-aside quantity will equal the conditional set-aside quantity. Otherwise, the set-aside quantity will equal the aggregate demand of set-aside-eligible bidders in Round 1. In other words, the set-aside quantity is reduced if set-aside-eligible bidders collectively demand less than the conditional set-aside quantity in Round 1.

219. After Round 1, the triple of a service area, a band, and a set-aside status (open or set-aside) is referred to as a “product.” A given band and service area combination may either have two products (open and set-aside) or a single product (open or set-aside).

220. In the case of a band and service area combination with two products (set-aside and open), an initial supply and a maximum supply is defined for each of the two products, and the actual supply of each product will be determined from the auction. The initial supply of the set-aside product is equal to the set-aside quantity as determined after Round 1 and the initial supply of the open product is equal to the entire supply of blocks minus the set-aside quantity. The maximum supply of a product indicates the maximum number of blocks that can be won by bidders bidding for that product. The maximum supply of the open product equals its initial supply. That is, set-aside-ineligible bidders can collectively win up to the initial supply of the open product. The maximum supply of the set-aside product equals the supply of blocks in that band and service area combination. That is, set-aside-eligible bidders can collectively win up to the entire supply of blocks in the band and service area combination.

221. Starting in Round 2, set-aside-eligible bidders can bid on set-aside products and, for a band and service area combination for which there is no set-aside product, set-aside-eligible bidders can bid on the open product. Set-aside-ineligible bidders can bid only on open products. Thus, for a band and service area combination with two products, a set-aside-eligible bidder's bid for a set-aside product could be any quantity up to the entire supply of blocks for that band and service area combination, while a set-aside-ineligible bidder's bid for the open product could be for any quantity up to the entire supply of blocks for that band and service area combination minus the set-aside quantity.

222. Given that set-aside-eligible bidders can bid on all available blocks in a service area, there is a possibility that set-aside-eligible bidders — individually or collectively — would be able to bid on and win more than the set-aside quantity in a given band and service area. In that case, ISED is proposing that all blocks won by set-aside-eligible bidders be considered set-aside blocks, and effectively be subject to the same conditions of licence set out in section 14.2. Although this rule would restrict the transferability of these licences for the first five years, it is noted that set-aside spectrum serves to provide a significant advantage to set-aside-eligible bidders by effectively protecting them from competition by NMSPs.

15.2 Anonymous bidding

223. As has been the case in recent spectrum auctions, ISED is proposing to use anonymous bidding during the proposed mmWave auction. Following every clock round, bidders will be provided with information on their own bidding activity from previous rounds and their eligibility for the next round. In addition, each bidder will be informed of the aggregate demand for each set-aside product and the aggregate demand for each open product in both the 26/28 GHz and the 38 GHz bands from the previous round and the price of each product for the next round. Bidders will not be informed about the individual bids submitted by other bidders or about the remaining eligibility of other bidders.

224. This level of information disclosure would provide bidders with enough information to permit price discovery, allowing bidders to make informed decisions regarding their bidding strategies. Anonymous bidding would help bidders focus on their valuations for the licences, the level of aggregate demand, and the prices, rather than on the bidding behaviour of competing bidders. Anonymous bidding is therefore anticipated to reduce the potential for anti-competitive behaviour, while simplifying the bidding process.

15.3 Clock auction format

225. ISED is proposing to use a clock auction format for the mmWave spectrum auction as described in annex I. This is a two-stage auction format that provides a simultaneous multiple-round clock stage for generic blocks to determine the quantity of blocks won in each product, followed by an assignment stage to determine the specific frequency assignment of each licence.

15.4 Structure of the clock stage

226. The clock stage is a simultaneous multiple-round auction process with generic blocks, where all licences are offered at the same time. Before the auction begins, ISED will specify, for each band and service area combination, the supply of blocks and the opening bid price (reserve price). An activity rule is used to improve price discovery and maintain auction progress.

227. Typically, the clock stage consists of a number of rounds in which the bidders identify the number of blocks demanded of each product, at the price specified by ISED for that round (the clock price). As the clock stage progresses, the clock prices of products with excess demand increase. 

228. In Round 1, each bidder indicates the number of blocks it demands for each band and service area at the opening bid price. If a conditional set-aside is applied, the set-aside quantity for a given band and service area combination is set after Round 1 based on the aggregate demand by set-aside-eligible bidders and the conditional set-aside quantity as proposed in section 13.

229. The products for the auction are then determined based on the set-aside quantities, as determined after Round 1. A band and service area combination has two products (set-aside and open) if the set-aside quantity is strictly between 0 and the entire supply. Otherwise, the band and service area combination has only an open product (if the set-aside quantity equals 0) or only a set-aside product (if the set-aside quantity equals the entire supply).

230. For the proposed mmWave auction, ISED is proposing the use of “intra-round bidding” in the clock stage. With intra-round bidding, all rounds that take place after Round 1 have a range of prices associated with them. The start-of-round price is the lowest price in this range, whereas the round's clock price is the highest price in this range. A bidder can either maintain its demand for a product at the round's clock price or request to change its demand at a price that is between the start-of-round price and the clock price, inclusive. The ability to express demand at any price between the start-of-round price and the clock price (rather than simply at the clock price) is referred to as intra-round bidding. This has several advantages:

• bidders can better express their demands
• ties in which multiple bidders change demand at the same price are less likely
• a larger bid increment can be used without causing inefficiencies, reducing the duration of the auction

231. At the end of each round, bids are processed to determine the number of blocks held by each bidder for each product after the round (the processed demand).  A bid to maintain demand from the previous round for a product is always applied during bid processing. A bid to increase demand for a product is applied only if the increase will not cause the bidder's submitted activity (i.e. the activity associated with the bidder's processed demands) to exceed the bidder's eligibility for the round and if the increase will not cause the bidder to exceed the spectrum cap (if adopted). The general principle is that a bid to decrease demand for a product is applied only if the reduction will not cause aggregate demand to fall below supply for that product (or to fall further below supply, if it is already below supply). This guarantees that once a product has aggregate demand greater than or equal to supply, there will never be any unsold blocks for the product. For a detailed description, see section I8 of annex I.

232. A bidder can submit a bid that expresses its demand for a product at any price between the start-of-round price and the clock price including both end points. In a simultaneous auction with intra-round bidding, a bidder's ability to increase its demand for one product may depend on whether it can reduce its demand for another product. In order to treat bids for different products in a consistent manner, the price intervals between the start-of-round price and the clock price are expressed in relative (percentage) terms. Bids for a change in demand are processed in ascending order of “price point.” The price point is generally defined by how much the intra-round bid exceeds the start-of-round price in percentage terms relative to the distance between the start-of-round price and the clock price for the product.

233. Once processed demands have been determined, the auction system will generally calculate the posted price of every product for the round as follows. A product's posted price would be equal to the clock price of the same round if aggregate demand exceeds supply at the clock price. If aggregate demand for a product is equal to supply due to an intra-round bid for a reduction in demand that was applied, the posted price would be the price of that intra-round bid. Therefore, the price for the round would not need to increase to the level of the clock price if the demand and supply are balanced at some price that is below the clock price, as expressed using intra-round bidding. If aggregate demand for a product is less than or equal to supply and no bid for a reduction in demand was applied, the posted price would be equal to the start-of-round price. The round's posted price becomes the start-of-round price for the next round. For a detailed description, see section I10 of annex I.

15.5 Price increments in the clock rounds

234. Prices for the first clock round will be set according to the opening bid prices as published in the future licensing framework. ISED is consulting on the opening bid amounts for each of the licences being auctioned, as described in section 17.2. For each subsequent round, the start-of-round price would be equal to the posted price of the previous round, and the round's clock price would be higher.

235. For the mmWave spectrum auction, ISED is proposing that a round's clock price be in the range of 1%-20% higher than the start-of-round price (or equivalently, the previous round's posted price), rounded up. Prices below $1,000 will be rounded up to the nearest $10; prices between $1,000 and $10,000 will be rounded up to the nearest $100; and prices above $10,000 will be rounded up to the nearest $1,000. During the auction, ISED reserves the right to adjust the amount of roundtoround price increases within this range to facilitate the progress of an efficient and timely auction.

236. If a set-aside is applied, as is explained in annex I, when the price range for the set-aside product overlaps with the price range for the open product, the price increment for the set-aside product will be adjusted so that the clock price of the set-aside product equals the clock price of the open product. Together with other pricing rules, this will ensure that the price of the set-aside product never exceeds the price of the corresponding open product, while limiting the ability of set-aside-eligible bidders to raise the price of the open product without affecting the price of the set-aside product.

15.6 Activity rules in the clock rounds

237. Each of the blocks available in the auction has been assigned a specific number of eligibility points ("points") that are approximately proportionate to the opening bid price of the licence. One eligibility point has been assigned for each $100 of opening bid prices. Refer to annex K for a listing of the points for each licence and the population of each service area.

238. Each applicant must indicate in its application form the total number of "points' worth" of blocks on which it wishes to be able to bid. This number defines the bidder's initial eligibility and is also used to determine the financial deposit that must be submitted with the application. A bidder's eligibility may not be increased once the auction has started.

239. In any round, a bidder will not be allowed to submit bids if the eligibility points associated with the bids exceed the bidder's eligibility for the round. The term “submitted activity” for a round means the eligibility points associated with the bidder's demands if all of its bids submitted for the round are applied during bid processing. The term “processed activity” means the eligibility points associated with the bidder's actual processed demands.

240. In order to maintain its eligibility from the previous round, the bidder's processed activity must correspond to a certain percentage of its eligibility for that round. This percentage is called the "activity requirement." ISED will set the activity requirement between 90% and 100% in all clock rounds, and will retain the discretion to change the activity requirement within that range as the auction progresses. The precise figure for the initial activity requirement will be communicated to all qualified bidders before the auction begins. Mathematical formulas for the calculation of eligibility are set out below.

241. In Round 1, a bidder's eligibility is determined by the number of points acquired with its financial deposit. In Round 2, a bidder's eligibility is determined by its submitted activity in Round 1 divided by the activity requirement (e.g. divided by 0.95, if the activity requirement is 95%) and rounded down. Further, the bidder's eligibility for Round 2 is not allowed to exceed the bidder's eligibility for Round 1.

Mathematically, a bidder's eligibility for Round 2 is defined as the minimum of:

1. the bidder's eligibility for Round 1; and
2. SA(1) / AR(1), rounded down to a whole number;

where SA(1) denotes the bidder's submitted activity for Round 1, and AR(1) denotes the activity requirement for Round 1.

242. In subsequent rounds, a bidder's eligibility in the next round is determined by the maximum of its: processed activity in the current round; and the minimum of its processed activity in the previous round and its submitted activity in the current round. This maximum is divided by the activity requirement and rounded down. Further, the bidder's eligibility for the next round is not allowed to exceed the bidder's eligibility for the current round.

Mathematically, a bidder's eligibility for Round t+1, where t+1>2, is defined as the minimum of:

1. the bidder's eligibility for Round t; and
2. max{PA(t), min[PA(t-1), SA(t)]} / AR(t), rounded down to a whole number;

where PA(t) denotes the bidder's processed activity for Round t, SA(t) denotes the bidder's submitted activity for Round t and AR(t) denotes the activity requirement for Round t.

Some examples illustrating the application of this activity rule are provided in section I13 of annex I.

243. This calculation method has the advantage that a bidder's eligibility is not inadvertently reduced because some of its submitted bids are not applied. It allows for the processed activity to drop for one round without affecting the eligibility for the next round. However, if the processed activity does not increase sufficiently after the next round, the eligibility will be permanently reduced.

244. Bidders are required to indicate their demand in every round, even if their demand at the new round's prices are unchanged from the previous round, so as to affirmatively indicate their interest in products at the new prices. Missing bids are treated by the auction system as requests to reduce to a quantity of zero blocks at the start-of-round price for the product. If these requests are applied, or applied partially, a bidder's processed activity, and hence its eligibility for the next round, will be reduced accordingly.

15.7 Conclusion of the clock stage

245. If a set-aside is applied, the clock stage will conclude for all products in all service areas after the first round in which, after the bids have been processed, the aggregate demand for each open product is less than or equal to its initial supply (as defined in section 15.1), and there is no excess demand for any band and service area combination. If no set-aside is applied, the clock stage will conclude when there is no excess demand for any product in any service area.

246. Bidders that hold processed demand for a product in a service area after the final clock round become winning bidders of the demanded quantity of the product. The price to be paid for one generic block of a product will be the product's posted price for the final clock round. Winners will be assigned frequency-specific blocks in the assignment stage. 

15.8 Structure of the assignment stage

247. Whenever generic blocks are used, the auction format must include an assignment stage to determine the assignment of specific blocks. Recognizing that using contiguous spectrum is generally more efficient and thus preferable to fragmented spectrum, ISED is proposing that, within each Tier 5 service area, winners of multiple blocks in a specific band will be assigned contiguous spectrum.

248. All clock stage winners would have an opportunity to express their preferences for specific blocks at the same time. If a set-aside is applied, there would be no specific blocks reserved for open or set-aside products.

249. The geographic unit for bidding in the assignment stage will be the “assignment area.” An assignment area may comprise a single Tier 5 service area or a combination of two or more Tier 5 service areas. In order to simplify the assignment stage and to facilitate the assignment of contiguous spectrum across regions, ISED is proposing that two or more Tier 5 service areas located in the same Tier 3 service area be combined into an assignment area if, for each of these service areas, the same frequencies are available in the auction in each of the bands and the same bidders won the same number of blocks in each band.

250. ISED is proposing to conduct a separate assignment round for each of the eight most populated assignment areas sequentially, in descending order of population. Once the eight most populated assignment areas have been assigned, ISED is proposing to conduct the bidding for the remaining assignment areas in parallel. That is, bidding for assignments in multiple assignment areas would take place during the same assignment round. This would reduce the length of the assignment stage.

251. After the assignment of the eight most populated assignment areas, all remaining assignment areas would be ranked by population from highest to lowest and divided into 10 sessions per assignment round. Each assignment round would not include more than one assignment area from within the same Tier 3 service area, to make it less likely that licences from service areas in close geographic proximity are assigned in different sessions of the same round. This would provide each bidder with the additional knowledge of its assignments in the most populated assignment areas, before moving on to the next round in which it could adjust its preference for a specific assignment, based on the result obtained in the previous assignment round. This is to better assure that bidders can obtain the same frequencies across service areas that are in close geographic proximity.

252. Options for assigning the 26/28 GHz and 38 GHz bands: Considering that there are two separate bands in the proposed mmWave spectrum auction — the 26/28 GHz band and the 38 GHz band — it is possible to assign specific frequencies for both bands at the same time or to assign one band after another. ISED is seeking comment on two options for how to assign the two bands:

• Option 1: for each assignment area, assign both bands in the same round
• Option 2: assign the bands sequentially

253. Under Option 1, for each assignment area, the spectrum in the 26/28 GHz band and the spectrum in the 38 GHz band would be assigned in the same round. In particular, under the proposed structure for the assignment stage, the spectrum in both bands in the most populated assignment area would be assigned in the first assignment round, the spectrum in both bands in the second most populated assignment area would be assigned in the second assignment round, and so on. To be clear, bidders would be presented with a set of bidding options for 26/28 GHz and a set of bidding options for 38 GHz and they would submit their bids simultaneously, but the assignments and the assignment prices for the two bands would be calculated independently. ISED anticipates that Option 1 will reduce the length of the assignment stage, without making bidding challenging for bidders. It is expected that even if both bands in 10 assignment areas are being assigned in the same round, most bidders will be involved in significantly fewer than 20 separate assignments and bidding would be manageable for each of those bidders.

254. Under Option 2, ISED would complete the assignment of the 26/28 GHz band followed by the assignment of the 38 GHz band. First, all spectrum in the 26/28 GHz band would be assigned starting from the most populated assignment area and finishing with the least populated assignment area. Then the 38 GHz band would be assigned starting from the most populated assignment area and finishing with the least populated assignment area. With Option 2, the conditions for combining Tier 5 service areas into an assignment area would be relaxed as described in annex J. As a result, ISED expects that there could be more merging into assignment areas under Option 2. However, the expected reduction in the number of assignment rounds because of this additional merging would not come close to offsetting the reduction from assigning both bands in the same round.

255. Assignment determination and assignment prices: Winning bidders do not have to place bids in the assignment stage if they do not have an assignment preference, as they are guaranteed the number of generic licences that they have already won in the clock stage. Each winning bidder has both a right and an obligation to purchase one of the frequency range options presented to it in the assignment round.

256. The assignment bid is a package bid for the specific frequency locations of all blocks for a bidder in a given frequency range in an assignment area.

257. After each assignment round, the assignments will be determined by solving a separate optimization problem for each band and assignment area assigned in the round. The optimization will determine the combination of specific assignments of licences that result in the highest bid amount while ensuring that each bidder is assigned contiguous spectrum.

258. The assignment prices will be determined by the set of assignment bids for the frequency range in the assignment area. The assignment price is attributable to the entire collection of blocks assigned to a given bidder in a given frequency range in an assignment area and not to individual blocks that comprise the package.

259. ISED is proposing to use a second-price rule to determine the prices to be paid by winning bidders in the assignment stage. More specifically, ISED is proposing to apply bidder optimal core prices and to use the “nearest Vickrey” approach in determining the assignment prices. Given the pricing rules, the assignment price of each winning assignment stage package will be equal to or less than the corresponding winning bid amount, and could even be zero. The final price paid by a winning bidder would be the sum of the clock stage price(s) and the assignment stage price(s).

260. The structure of the assignment stage and the proposed determination of assignments and assignment prices are described in detail in annex J.

15.9 Opening bids

261. Opening bids are the prices for the spectrum licences at the start of the auction, and the minimum that will be accepted for each licence. The proposed opening bid prices can be found in table K1 of annex K. As discussed in section 12.1, ISED's proposals would not lead to the auction having encumbered spectrum.  However, if the proposed auction of the mmWave bands includes encumbered spectrum as a separate category, the opening bid prices for those encumbered blocks would be established at corresponding levels. 

262. ISED considered the opening bids used by the FCC in the US in Auction 101 for establishing the proposed opening bids for the Canadian mmWave auction. In Auction 101, spectrum from 27.5 GHz to 28.35 GHz was auctioned on the US county basis. In this auction, FCC adopted opening bid amounts for available licences using a formula based on bandwidth and county population. The FCC used a tiered approach, under which opening bid amounts in terms of $/MHz/pop varied by Partial Economic Areas (PEAs), which are ranked by population from largest to smallest. For the county-based licences that fell within PEAs 1-50, opening bid amounts were based on US$0.002 per MHz/pop; for those in PEAs 51-100, opening bid amounts were based on US$0.0004 per MHz/pop; and for all others, opening bid amounts were based on US$0.0002 per MHz/pop.

263. ISED has adopted this methodology and applied it to the Canadian context by establishing proposed opening bids that vary on $/MHz/pop basis depending on whether the corresponding Tier 5 classified as metro, urban, rural, or remote. Specifically, the proposed opening bid amounts in terms of $/MHz/pop for the mmWave bands auction are the following:

• Metro Tier 5 service areas:  $0.002/MHz/pop
• Urban Tier 5 service areas: $0.001/MHz/pop
• Rural Tier 5 service areas: $0.0002/MHz/pop
• Remote Tier 5 service areas: $0.0001/MHz/pop

264. For each service area, the proposed opening bids were determined by multiplying the proposed prices in $/MHz/pop as outlined above by the population of the service area and 100 MHz. The results of these calculations were subject to a minimum of $100 and a rounding procedure:

• results above $10,000 were rounded to the nearest $1,000
• results below $10,000 but above $1,000 were rounded to the nearest $100
• results below $1,000 were rounded to the nearest $10

265. In order to simplify the bidding and to facilitate the substitution between bands, ISED proposes to establish the same opening bids for the proposed 26/28 GHz and 38 GHz blocks. The proposed opening bids for unencumbered products are shown in table K1 of annex K.

266. Bids at or above the proposed opening bid prices will ensure that Canadians obtain a fair return for the use of this spectrum. The total amount of opening bids for one block of unencumbered 100 MHz nationwide would be approximately $4.2 million.

15.10 Proposed eligibility points for the mmWave auction

267. The proposed eligibility points associated with the licences being made available in the proposed mmWave auction are based on opening bids.

268. Proposed eligibility points per service area are listed in annex K. One eligibility point has been assigned for each $100 of the opening bid prices. In service areas with opening bid prices below $1,000, the number of eligibility points was rounded to the nearest point. The equivalent of a national licence, comprised of one 100 MHz block of spectrum in the 654 service areas covering the country, would be associated with 42,458 eligibility points.

269. In order to maintain auction integrity, as in past auctions, ISED proposes that there be rules relating to the participation of affiliated and associated entities in order to ensure that each bidder is an independent bidder. As was the case in previous auctions, it is proposed that affiliated entities not be allowed to participate separately in the auction. It is also proposed that associated entities only be allowed to participate separately if, following a review of their application, ISED is satisfied that their participation would not have an adverse impact on auction integrity. As in previous auctions, applicants will be required to disclose information about their company(ies), including affiliations and associations.

16.1 Affiliated entities

270. Proposed definition of affiliated entities: It is proposed that the definition of affiliated entities remain as it was for previous auctions, as follows:

Any entity will be deemed to be affiliated with a bidder if it controls the bidder, is controlled by the bidder, or is controlled by any other entity that controls the bidder. “Control” means the ongoing power or ability, whether exercised or not, to determine or decide the strategic decision-making activities of an entity, or to manage or run its day-to-day operations.

271. Presumption of affiliate status: If a person owns, directly or indirectly, at least 20% of the entity's voting shares (or where the entity is not a corporation, at least 20% of the beneficial ownership in such entity), ISED will generally presume that the person can exercise a degree of control over the entity to establish a relation of affiliation. The ability to exercise control may also be demonstrated by other evidence. Under this rule, ISED may, at any time, ask a prospective bidder for information in order to satisfy any question of affiliation.

272. Applicants may provide information to ISED to rebut the presumption of affiliate status. Applicants must notify ISED in writing if they are rebutting the presumption and must file material that will enable ISED to review the question and make that determination. It is the responsibility of the applicant to file the appropriate material. Such material may include:

• copies of the relevant corporate documentation relating to both entities
• a description of their relationship
• copies of any agreements and arrangements between the entities and affidavits or declarations, signed by officers from the two entities, dealing with the control as outlined in the definition of “affiliate” above

273. Upon receipt of this material, ISED will either make a ruling based on the materials submitted or ask the applicant for further information (and provide a timeline within which to do so).

274. Should the applicants fail to provide the relevant information in a timely fashion in order to allow ISED to complete its determination, ISED may make a ruling on eligibility that the applicants in question are affiliated.

275. Eligibility to participate in the auction: It is proposed that only one member of an affiliate relationship be permitted to become a qualified bidder in the auction or the affiliated entities may apply to participate jointly as a single bidder. Affiliated entities must decide prior to the application deadline which entity will apply to participate in the auction. All affiliations must be disclosed at the time of the application.

16.2 Associated entities

276. Proposed definition of associated entities: As a basis for participating in the proposed mmWave auction, ISED proposes that associated entities be defined as follows:

Any entities that enter into any partnerships, joint ventures, agreements to merge, consortia or any arrangements, agreements or understandings of any kind, either explicit or implicit, relating to the acquisition or use of any of the spectrum licences being auctioned in this process will be treated as associated entities. Typical roaming and tower sharing agreements would not cause entities to be deemed associated.

277. As in past auctions, the proposed rules would allow carriers to form a bidding consortium and to participate in the auction as a single bidder if they wish to coordinate their bids through a single bidder. In such a case, the eligibility rules would apply jointly in each licence area. In cases where any of the entities participating jointly would not qualify as a set-aside-eligible bidder, the bidding consortium would not be eligible to bid on set-aside spectrum.

278. The spectrum and network efficiencies that can be achieved through various forms of associations and arrangements may help to address the high demand for capacity by customers and the high cost of network deployment. In support of the policy objectives stated in section 3 and the spectrum and network efficiencies that can be achieved through such arrangements, ISED recognizes the need to provide increased flexibility in the treatment of a certain subset of associated entities, as long as this would not have an adverse impact on the integrity of the auction.

279. Depending on the nature of the association, it may not preclude the ability of the entities to participate separately in the auction. It should be noted that under the proposed definition, entities are only deemed to be associated with respect to arrangements that relate to the acquisition or use of spectrum licences being auctioned in this process. For example, significant joint equipment purchase agreements and joint backhaul networks would not be captured under the definition unless they relate to the licences in question.

280. Eligibility to participate separately in the auction: ISED proposes that associated entities may apply to participate separately in the proposed mmWave auction. ISED is of the view that allowing associated entities, which are competitors in the market, to bid separately would not have an adverse impact on the integrity of the auction provided that auction participants comply with the information disclosure and anti-collusion rules as proposed below (see section 16.4 and section 16.5).

281. To obtain approval to participate separately in the auction, associated entities will be required to demonstrate to ISED's satisfaction that they intend to separately and actively provide services in the applicable licence area. Associated entities wishing to participate in the auction separately would be required to submit their application at least two weeks in advance of the final application deadline. This requirement would provide ISED with the additional time necessary to assess the nature of the association between the entities. Should the request be denied, only one of the associated entities will be eligible to apply to participate in the auction. 

282. Bidders are reminded that the provisions of the Competition Act apply independently of, and in addition to, the proposed policy.

283. Please note that all entities participating in the auction will be subject to the same prohibition of collusion rules, as stated in section 16.4.

284. ISED's review would not extend to an overall assessment of the effects of the agreement between associated entities on competition in the marketplace.

285. Assessment factors: ISED would consider a broad range of criteria so as to determine the associated entities' intent and actions to actively and independently provide wireless services. Assessment criteria may include, but would not be limited to:

• the companies' intent and actions to provide services (coverage) in the area in which the sharing occurs
• the level of investment, including in distribution, marketing and customer service, in order to acquire and serve customers
• the companies' demonstration of separate presences in the marketplace

286. Documentation: Associated entities would be invited to provide all relevant documentation to ISED in regard to the above-noted assessment factors. These may include, but would not be limited to:

• all agreements relating to the transfer of, use of and access to the mmWave  spectrum
• business plans for the area in which the agreement(s) will provide access to spectrum
• business and financial results, including investments and customer acquisition

287. ISED may request additional documentation to complete its assessment and may require that documents be certified by an officer of the company.

16.3 Auction integrity and transparency (Information disclosure pre-auction)

288. In order to ensure auction integrity and transparency, all entities wishing to participate in the auction process will be required to disclose in writing, as part of their application, the names of affiliated and associated entities. It is proposed that a narrative also be submitted, describing all key elements and the nature of the affiliation or association in relation to the acquisition of the spectrum licences being auctioned and the post-auction relationships of said entities. It is proposed that this narrative include arrangements with other potential bidders that relate in any way to the future use of the licences being auctioned directly or indirectly.

289. Some examples of arrangements that would require disclosure include, but are not limited to, agreements to establish a joint network using spectrum licences acquired by each of the entities and agreements regarding a joint backhaul network if they relate to the use of the licences being auctioned. It is also proposed that agreements, such as significant joint equipment purchases, be disclosed. Typical roaming and tower sharing agreements and other agreements, such as the purchase of backhaul capacity, would not cause entities to be deemed associated entities and hence need not be disclosed.

290. The submitted narrative would be made available to other bidders and to the public on ISED's website prior to the auction in order to ensure transparency of the licensing process.

16.4 Prohibition of collusion and other communication rules

291. As in previous auctions, in order to ensure the integrity of the bidding process, all applicants will be prohibited from cooperating, collaborating, discussing or negotiating agreements with other bidders regarding the licences being auctioned or the post-auction market structure. Any such discussions occurring at any time prior to the public announcement of provisional licence winners by ISED are prohibited.

292. In order to maintain the integrity of the auction, bidders are prohibited from signaling, either publicly or privately, their bidding intentions or post-auction market structure related to spectrum in the mmWave bands. This would include comments or any communication with or via the media. An example of prohibited communications would be making a public announcement regarding which licences the company intends to bid on or its rollout intentions.

293. Given that ISED is proposing to allow the participation of some associated entities as separate bidders in this auction process, the proposed prohibition of collusion rules are as follows:

All applicants, including affiliated and associated entities, are prohibited from cooperating, collaborating, discussing or negotiating agreements with competitors, relating to the licences being auctioned or relating to the post-auction market structure, including frequency selection, bidding strategy and post-auction market strategy, until after the public announcement of provisional licence winners by ISED.

Prospective bidders will note that the auction application forms contain a declaration that the applicant will be required to sign certifying that the applicant has not entered into and will not enter into any agreements or arrangements of any kind with any competitor regarding the amount to be bid, bidding strategies or the particular licence(s) on which the applicant or competitors will or will not bid. For the purposes of this certification, “competitor” means any entity, other than the applicant or its affiliates, which could potentially be a bidder in this auction based on its qualifications, abilities or experience.

Prospective bidders should note that the definition of “affiliate” for the purposes of this licensing process (defined by reference to “control in fact”) differs from “affiliate” for the purposes of the Competition Act. The provisions of the Competition Act apply independent of, and in addition to, the policies contained in this framework.

16.4.1 Communication during the auction process

294. In order to preserve the integrity of the auction process, any communications from an applicant, its affiliates, associates or beneficial owners or their representatives that disclose or comment on bidding strategies, including but not limited to, the intent of bidding and post-auction market structures, shall be considered contrary to the licensing framework, which will be published as a result of the current consultation and may result in disqualification and/or forfeiture penalties. Statements that indicate national or particular licence areas of interest will generally be found to be in contravention of the rules on prohibition of collusion. This will include communications with or via the media. This prohibition of communication applies until the public announcement of provisional licence winners by ISED.

295. Prior to the auction, an applicant who wishes to participate separately in the licensing process may approach another potential bidder to discuss a joint infrastructure build, a joint equipment purchasing agreement or a potential spectrum sharing agreement under the circumstances outlined in the following two paragraphs.

296. Once a consortium has been established and if the entities within that consortium have had communications that contravene the anti-collusion rules, these entities would no longer be eligible to participate separately in the auction. The same entities would therefore no longer be deemed competitors for the purpose of the auction, and discussions regarding issues such as bidding strategies could then take place. Should the consortium be dissolved prior to the auction, only one of the entities would be eligible to participate in the auction, and all parties would continue to be subject to the prohibition of collusion rules. The same restrictions apply to entities that have had unsuccessful discussions regarding the formation of a consortium to bid as a single bidder.

297. Where communications that fall within the definition of associated entities have taken place, the nature of the association must be disclosed. Entities applying to participate separately are required to make a declaration that they have not entered into and will not enter into any agreements or arrangements of any kind with any competitor regarding the amount to be bid, bidding strategies or the particular licence(s) on which the applicant or competitor will or will not bid. In the case where discussions that contravene the prohibition of collusion rules have occurred, the entities would only be permitted to participate in the auction as one single bidder, or only one of the entities could participate.

16.4.2 Discussion regarding beneficial ownership

298. Information regarding the beneficial ownership of each applicant will be made publicly available so that all bidders have knowledge of the identity of other bidders. Any discussions involving two bidders or any of their affiliates or associates regarding an addition or a significant change of beneficial ownership of a bidder, including matters such as mergers and acquisitions, from the receipt deadline for applications until the public announcement of provisional licence winners by ISED, would fall into the area of prohibited discussions and would be considered contrary to the auction rules.

299. However, an applicant may discuss changes in beneficial ownership with parties who are completely unrelated to other applicants, as long as:

• any change to the beneficial ownership of the applicant that provides a new party with a beneficial interest or which significantly alters the beneficial ownership structure is effected at least 10 days before the commencement of bidding
• the applicant informs the Minister immediately in writing of any change in beneficial ownership, which will be reflected in its published qualified bidder information on ISED's Spectrum Management and Telecommunications website

300. Bidders must cease all such negotiations at least 10 days before the commencement of bidding until the public announcement of provisional licence winners by ISED.

16.4.3 Other communication rules

301. Discussions on tower sharing: The prohibition of communication includes discussions about tower and site sharing regarding the licences that are the subject of this auction until after the public announcement of provisional licence winners by ISED. Discussions concerning new arrangements or the expansion of existing sharing arrangements that relate to spectrum outside of licences being offered in this auction process are not prohibited.

302. Communication with local exchange carriers: The prohibition of communication includes discussions regarding interconnection services with a local exchange carrier (LEC) that is a qualified bidder (or one of its affiliates/associates) in this auction, where the services relate to spectrum in the bands offered in this auction process.

303. Consulting services, legal and regulatory advice: Separate bidders may not receive consulting advice from the same auction consulting company. Separate bidders may receive legal and regulatory advice from the same law firm provided that the law firm complies with the conflict of interest and confidential information requirements of the applicable law society and that the applicants otherwise comply with the provisions set forth in the licensing framework.

304. The following section outlines the proposed general process for submitting an application to participate in the proposed mmWave auction, as well as the general requirements and rules that would apply prior to, during and after the auction.

17.1 Application to participate

305. To participate in the auction, all applicants must submit a completed application form, along with a financial deposit, details of the applicant's beneficial ownership, information on any affiliations and associations as discussed in section 14 of this document, and other corporate documentation as required. ISED will publish the list of applicants on its website soon thereafter.

17.2 Pre-auction deposits

306. In order to enhance the integrity of the auction, ISED requires that all bidders submit a pre-auction financial deposit with their auction application. The financial deposit must be in the form of a certified cheque, bank draft, money order, wire transfer, or an irrevocable standby letter of credit, payable to the Receiver General for Canada, drawn on a financial institution that is a member of the Canadian Payments Association.

307. Similar to previous auctions, ISED proposes to determine the value of the pre-auction financial deposit based on the licences on which the applicant wishes to be eligible to bid. Each licence has been assigned a specific number of eligibility points that are approximately proportionate to the opening bid prices, as demonstrated in annex K. For spectrum licences to be auctioned in the mmWave band, it is proposed that the financial deposit be equal to $100 per eligibility point.

308. An individual bidder requesting to be eligible to bid on the equivalent of one national 100 MHz block would have to submit a deposit covering 42,458 points, which would equate to $4,245,800 (i.e. $100 x 42,458). Financial deposit(s) will be returned to any applicant that is found not to be a qualified bidder and to any applicant that provides written notification to ISED of its withdrawal from the process prior to the auction's commencement. Financial deposits will be returned to unsuccessful bidders once the auction has closed.

17.3 Final payment and forfeiture penalties

309. Within 10 business days following the publication of provisional licence winners, each provisional licence winner will be required to submit 20% of its final payment. The remaining portion of 80% will be due within 45 business days following the announcement of provisional licence winners. These payments will be non-refundable.

310. Following the conclusion of the auction, winning bidders that fail to comply with the specified payment schedule or fail to come into compliance with the eligibility requirements of the Radiocommunication Regulations, will be considered disqualified and will forfeit their ability to obtain licences through this process. Furthermore, noncompliant bidders will be subject to a forfeiture penalty in the amount of the difference between the forfeited bid and the ultimate price of the licence(s) — to be determined by a subsequent licensing process.

311. In addition to the forfeiture penalties set out above, the applicant and/or its representatives may be subject to prosecution, administrative monetary penalties, or other enforcement procedures under the Radiocommunication Act if the auction rules are breached.

17.4 Bidder training and support

312. Qualified bidders will receive the necessary information to participate in the auction several weeks prior to the start of the auction. Information may include, but will not be limited to, an information session, a user manual for the auction system, instructions and passwords to access the secure auction system, along with the schedule for training, mock auctions, and the start of the bidding process.

313. A mock auction will be held, likely during the weeks prior to the start of the auction, in order to allow qualified bidders to better familiarize themselves with the auction system.

314. ISED will consider making unassigned licences from the proposed auction available for licensing through an alternative process, which could include a subsequent auction at a later date following the close of the initial auction. The timing and form of such a process will depend on the demand for the available licences. ISED has streamlined the process for auctioning residual licences to expedite the availability of unallocated and returned licences in Decision on a Streamlined Framework for Auctioning Residual Spectrum Licences. If necessary, ISED may conduct an additional public consultation.

315. Following the end of the initial licence term, licensees will have a high expectation that a new licence will be issued for a subsequent term through a renewal process unless a breach of licence condition has occurred, a fundamental reallocation of the spectrum to a new service is required, or an overriding policy need arises.

316. As part of the licence renewal process, the Minister retains the power to fix and amend the terms and conditions of spectrum licences during the term of the licence and at the end of the term in accordance with subsection 5(1) of the Radiocommunication Act. As noted in the FSAC, licence fees that reflect some measure of market value will apply to licences issued through a renewal process. Accordingly, the renewal process will serve to determine whether new licences will be issued, and the terms and conditions that will apply to the new licences.

317. Generally, approximately two years prior to the end of the licence term, ISED will review whether there is a need for a fundamental reallocation of the spectrum to a new service, or whether an overriding policy need has arisen. A review of the licensee's continued compliance with the conditions of licence will also begin. ISED will launch a public consultation to discuss whether or not, in light of the above-noted issues, new licences should be issued for a subsequent term. The consultation paper will also propose, and invite comments on, licence conditions that would apply during the subsequent licence term.

318. It is proposed that the renewal process includes a public consultation that would commence approximately two years prior to the end of the licence term.

319. Spectrum licence fees are part of the overall spectrum management regulatory scheme that supports the efficient use of spectrum by licensees. The Minister is provided the general powers for spectrum management in Canada pursuant to section 5 of the Radiocommunication Act. Section 19 of the Department of Industry Act, gives the Minister the authority to issue authorizations and fix the fees with respect to the privilege of using spectrum. The Minister has used this power in the past to establish various fees related to the use of spectrum under spectrum licences.

320. Currently, the only fee orders in place for commercial mobile spectrum licences are:

• DGRB-005-03, Radio Authorization Fees for Wireless Telecommunication Systems that Operate in the Radio Frequency Bands 824.040 MHz to 848.970 MHz , 869.040 MHz to 893.970 MHz or 1850 MHz to 1990 MHz, which contains the fee schedule for spectrum licences in the Cellular and Personal Communication Services bands and
• DGRB-013-99, Radio Authorization Fees for Multipoint Communications Systems (MCS) that Operate in the 2500 MHz Range and on Other Related Frequencies and Multipoint Distribution Systems (MDS) that Operate in the 2600 MHz Range that Provide Non-Broadcasting Services, which contains the fee schedule for certain spectrum licences in the 2500 MHz band

321. Through this consultation, ISED is proposing to establish spectrum licence fees that would apply to future licensing process for flexible use or commercial mobile licences in the high-band frequency range of 10-95 GHz. The proposed fee would apply to non-auctioned spectrum licences as described in section 11.2, future licensing of remaining mmWave spectrum, that have similar characteristics and conditions to licences issued through competitive processes, such as an auction. These conditions could include long licence terms (e.g. 10-20 years), licence areas based on ISED service areas, and eligibility for licence transfers and subordination. The proposed fee would apply in situations such as transitioned spectrum licences, like the 38 GHz fixed Tier 3 spectrum licences, or licence renewal after the initial auction licence term is completed.

322. ISED is of the view that the proposed fees would provide stakeholders with regulatory certainty and promote the efficient use of spectrum. This will be done by introducing measures that support spectrum efficiency by associating fees with the amount of spectrum consumed and avoiding situations where spectrum is effectively consumed at no cost and denied to others.

323. ISED proposes to implement licence fees for flexible use licences using a fee structure similar to the one currently in place for the cellular and PCS bands. The proposed fee structure is based on the amount of spectrum assigned (number of MHz) and the total population of the licensed service area, multiplied by a fee base rate. The formula is shown below:

Annual licence fee = base rate ($/MHz/pop) x spectrum assigned (MHz) x population (from Census 2016)

324. ISED performed an international survey of mmWave licence fees and spectrum valuations in other jurisdictions, including the United States and Australia. In ISED's view, the proposed fee is in-line with other comparable jurisdictions.

325. In determining the base rate for the proposed fee, ISED considered applying the existing fee base rate for low-band cellular and mid-band PCS licences of $0.03512361 per MHz per population. However, in ISED's view this would not be an appropriate fee for high-band spectrum. Cellular and PCS licences are for smaller blocks of spectrum, paired blocks of 25 MHz for cellular licences and paired blocks of 10-30 MHz for PCS blocks A-F. The band plan for mmWave consists of 100 MHz blocks, and applying the existing cellular and PCS base rate would result in higher fees for mmWave spectrum. The physical characteristics of high-band spectrum, including the reduced propagation compared to low- and mid-band spectrum, require denser deployments and can create challenges in deploying networks in less-densely populated areas of Canada. As such, the proposed licence fee base rate is reduced compared to the existing fee base rate for cellular and PCS spectrum.

326. ISED proposes to establish an annual fee base rate of $0.00032573 per MHz per population. ISED is also proposing a minimum licence fee of $160.00 annually. As prescribed in section 17(1) of the Service Fees Act, the proposed licence fee base rate and annual minimum fee will be adjusted yearly in accordance with the Consumer Price Index. ISED proposes to apply this licence fee to future licensing processes for flexible use and commercial mobile licences issued in the 10-95 GHz frequency range. ISED will consult on implementing the proposed fee for specific bands as part of future licensing framework consultations.

20.1 Implementing the proposed fee for transitioned 38 GHz licences

327. ISED proposes to implement the new fee regime by first applying the proposed fee to the 38 GHz spectrum licences that will be issued through the transition process outlined in section 9.1. The existing 38 GHz fixed Tier 3 spectrum licences have not been subject to fees since the licences were renewed in 2014 following the initial auction term.

328. ISED proposes applying the new annual fee to licences issued through the 38 GHz transition process would as soon as the fee is fixed through an Ministerial Fee Order. ISED expects to implement the new fee April 1, 2025. Annual renewal fees would be payable each year by March 31, and once paid licences would be valid until March 31 of the following year.

20.2 Licence renewal fees for the 26, 28 and 38 GHz licences

329. ISED also proposes to apply the proposed fee to 26, 28 and 38 GHz licences that are renewed following the end of the initial auction term. As noted in the FSAC, for licences issued through a renewal process, licence fees that reflect some measure of market value will apply. In section 14.1, ISED is proposing a 10-year licence term for licences awarded through the proposed auction process. The proposed annual fee would apply to auctioned licences renewed after the end of the proposed 10-year licence term.

20.3 Service standards and remissions

330. In accordance with the Service Fees Act and related policy directives, ISED has set service standards for each fee (see Spectrum and Telecommunications Service Standards). ISED is proposing a service standard of 84 days for licences issued through the 38 GHz transition process where fees are collected. Licence applications would be subject to remissions as per ISED's Service Fees Remission Policy and the Spectrum and Telecommunications Sector Program Annex.

331. As in previous auctions, following a decision based on the questions raised in this consultation paper, ISED will accept (within the deadline) written questions soliciting clarification of the rules and policies set out in the decision paper. This deadline will be specified in the future licensing framework. Written questions, submitted by the deadline, and ISED's responses will be made public on ISED's Spectrum Management and Telecommunications website.

332. Respondents are requested to provide their comments in electronic format (Microsoft Word or Adobe PDF) by email to spectrumauctions-encheresduspectre@ised-isde.gc.ca

333. All submissions should cite the Canada Gazette, Part I, the publication date, the title and the notice reference number (SPB-001-22). Respondents should submit their comments no later than September 6, 2022, to ensure consideration. Soon after the close of the comment period, all comments received will be posted on ISED's Spectrum Management and Telecommunications website.

334. ISED will also provide interested parties with the opportunity to reply to comments from other parties. Reply comments will be accepted until November 8, 2022.

335. Following the initial comment period, ISED may, at its discretion, request additional information if needed to clarify significant positions or new proposals. In such a case, the reply comment deadline may be extended.

336. All ISED publications related to spectrum management and telecommunication are available on the Spectrum Management and Telecommunications website.

337. For further information concerning the process outlined in this document or related matters, contact: 

Innovation Science and Economic Development Canada
Spectrum Regulatory Policy
Senior Director
6th Floor, East Tower
235 Queen St
Ottawa ON K1A OH5

Telephone: 613-219-5436
TTY: 1-866-694-8389
Email: spectrumauctions-encheresduspectre@ised-isde.gc.ca