Licensing Framework for Mobile Broadband Services (MBS) — 700 MHz Band

6. Conditions of Licence for Spectrum in the 700 MHz Band

233. The following conditions will apply to all licences issued through the auction process for spectrum in the 700 MHz band. It should be noted that the licences are subject to the relevant provisions in the Radiocommunication Act and the Radiocommunication Regulations, as amended from time to time. For example, the Minister continues to have the power to amend the terms and conditions of spectrum licences (section 5(1)(b) of the Radiocommunication Act). The Minister may do so for reasons including furtherance of the policy objectives set out in section 7 of the Telecommunications Act and the policy objectives related to this band as set out in SMSE -002-12. Such action would normally only be undertaken after consultation.

234. Licensees must be fully aware of their obligations with respect to licence terms and conditions. Industry Canada will monitor compliance and take any necessary action to ensure compliance and to enforce the provisions of the Radiocommunication Act and the Radiocommunication Regulations.

6.1 Licence Term

235. Industry Canada sought comments on its proposal to issue spectrum licences in the 700 MHz band with a 20-year licence term.

Summary of Comments

236. The majority of respondents who commented on this issue supported the proposed 20-year licence term, including Bell, MTS Allstream, Mobilicity, Quebecor, Rogers, SaskTel, Sogetel, SSI, TELUS and WIND.

237. The Eastern Ontario Regional Network (EORN), the Ontario Minister of Agriculture, Food and Rural Affairs and Drs. Taylor and Middleton from Ryerson University disagreed with the proposed term. Concerns were noted that longer licence terms would not necessarily result in adequate deployment, particularly in rural areas, and that the current rate of development in wireless technology is too fast and unpredictable to commit Canadian frequencies for such an extended period of time.

Discussion

238. The revised Framework for Spectrum Auctions in Canada, published in March 2011, states that Industry Canada is adopting a flexible approach in determining licence terms (up to 20 years) based on the specific spectrum being offered.

239. This decision was based on the recognition that licence terms in excess of 10 years would create greater incentive for financial institutions to invest in the telecommunications industry and for the industry itself to further invest in the development of network infrastructure, technologies and innovation.

240. The 700 MHz band, which has excellent propagation characteristics, is considered to be important in the deployment of next-generation mobile broadband services in rural areas and in meeting the increasing demand and network congestion in urban areas. The issue with regard to spectrum usage is better addressed through conditions of licences which consider the deployment requirements of licensees within the term of the licence.

241. The 700 MHz spectrum has already been licensed in the United States for mobile broadband services. Although changes in technology are inevitable over time, it is unlikely that any technical developments would result in a change to another use that would be incompatible with mobile broadband within the next 20 years.

Decision

242. In light of the above, auctioned spectrum licences in the 700 MHz band will have a licence term of 20 years. The condition of licence is as follows:

6.2 Spectrum Aggregation Limits

243. Competitive measures with regard to the 700 MHz band were announced in SMSE‑002‑12. Industry Canada sought comments on the proposed wording of the condition of licence related to the spectrum aggregation limits as follows:

The licensee must comply with the spectrum aggregation limits as follows:

• A limit of two paired frequency blocks in the 700 MHz band (blocks A, B, C, C1 and C2) is applicable to all licensees.
• A spectrum cap of one paired spectrum block within blocks B, C, C1 and C2 is applicable to all large wireless service providers. Large wireless service providers are defined as companies with 10% or more of the national wireless subscriber market share, or 20% or more of the wireless subscriber market share in the province of the relevant licence area.

The spectrum caps put in place for the 700 MHz auction will continue to be in place for five years following licence issuance. Therefore, no transfer of licences or issuance of new licences will be authorized that allows a licensee to exceed the spectrum caps during this period. Any change in ownership or control granting a right or interest to another licensee in this band may be considered as licence transfer for the purpose of this condition of licence whether or not the licensee name is changed as a result. The licensee must request approval by the Minister of Industry for any change that would have a material effect on its compliance with these spectrum aggregation limits. Such a request must be made in advance for any proposed transactions within its knowledge.

Summary of Comments

244. Mobilicity, Public Mobile, Quebecor, SaskTel, Sogetel, SSI and WIND agreed with the proposed wording. TELUS proposed some minor modifications to the wording in order to improve clarity, which Bell supported. Quebecor suggested that further precision be added by explicitly stating that the reference data that will be used to determine market share will rely on the 2012 CRTC Communications Monitoring Report.

Discussion

245. TELUS proposed minor edits to the text, which included changing the term “caps” to “aggregation limits” and enhancing the clarity of the wording regarding any changes to the licensee’s ownership and control structure. Industry Canada agrees that the proposed changes would provide additional clarity to the condition of licence without changing its meaning. The wording of the condition was also modified to preclude any agreements that would result in the licensee having a right or interest in spectrum in excess of the spectrum aggregation limits for as long as the limits are in place.

246. Industry Canada also agrees with the suggestion by Quebecor to explicitly state that the reference data to be used in the determination of subscriber market share will rely on the 2012 CRTC Communications Monitoring Report.

Decision

247. Based on the considerations stated above, the wording for the condition of licence is as follows:

248. As noted in Section 5.2.3, associated entities requesting that the spectrum aggregation limits be applied individually rather than jointly, must demonstrate to the satisfaction of Industry Canada that they will be separately and actively providing services to customers in the applicable service area, for at least the duration of the spectrum aggregation limits.

249. Where licensees establish an agreement to share spectrum such that another entity has control over the use of the spectrum, a subordinate licence is required. This requirement applies to all spectrum sharing arrangements, whether the arrangement is established post-auction or was established and disclosed prior to the auction. Generally, a subordinate licence will count towards the spectrum aggregation limit in a service area; however, for the 700 MHz spectrum auctioned through this licensing process, subordinate licences may not count towards the licensee’s aggregation limit if the licensees demonstrate to the satisfaction of Industry Canada that they meet the criteria with respect to separately and actively providing services to customers in the applicable service area as discussed in Section 6.3.

6.3 Licence Transferability, Divisibility and Subordinate Licensing

250. In general, licences obtained through an auction may be transferred in whole or in part (either in geographic area or in bandwidth) to a third party, subject to Industry Canada’s approval and subject to the conditions stated on the licence and other applicable regulatory requirements.

251. In its consultation, Industry Canada proposed the following wording for the condition of licence on transferability and divisibility:

The licensee may apply, in writing, to transfer its licence in whole or in part (divisibility), in both the bandwidth and geographic dimensions in accordance with Client Procedures Circular CPC-2-1-23, Licensing Procedure for Spectrum Licences for Terrestrial Services, as amended from time to time. Licensees may apply to use a subordinate licensing process.

Industry Canada’s approval is required for each proposed subordinate licence or transfer, whether the transfer is in whole or in part. Industry Canada may define a minimum bandwidth and/or geographic dimension (such as the grid cell) for the proposed transfer. The transferor(s) must provide an attestation and other supporting documentation demonstrating that all conditions, technical or otherwise, of the licence have been met. The transferee(s) must provide an attestation and other supporting documentation demonstrating that it meets the eligibility criteria, including documentation related to associates and affiliates demonstrating that the transfer is in accordance with any spectrum aggregation limits.

Subordinate licences may not count towards the licensee’s aggregation limit if the subordinate licensee demonstrates to the satisfaction of Industry Canada that the relevant licensees meet the criteria with respect to competing in the post auction market (see condition of licence regarding Spectrum Aggregation Limits).

The transferee must satisfy all applicable conditions of licence including, rural deployment and general deployment requirements.

Summary of Comments

252. Bell, Rogers, Quebecor, SSi and Sogetel generally supported the proposed wording.

253. TELUS proposed changes to the title and text of the condition of licence to provide clarity. Bell disagreed with TELUS’ suggestion to change the title to include "and Subordinate Licensing." However, it supported TELUS’ suggested changes to the text, as did Xplornet.

254. Mobilicity requested that rules pertaining to transfer or divisibility of the 700 MHz spectrum not impede the ability of the AWS new entrants to transfer or divide any 700 MHz spectrum at the same time as they transfer their AWS spectrum should such a transfer be part of a single transaction.

255. WIND proposed amendments to ensure that rollout conditions do not form part of the evaluation of the transfer request if the target date for the rollout has not yet arrived.

256. MTS Allstream and Mobilicity argued that subordinate licence agreements within the first five years should count towards a licensee’s spectrum aggregation limits; whereas Xplornet stated that no transfer or issuance of new licences should be authorized within those five years.

257. Additional comments were received which were outside of the scope of the consultation, as they dealt with issues that extend beyond the 700 MHz band, or proposed changes to decisions already announced in SMSE-002-12.

Discussion

258. Where competitive measures have been put in place, either to limit the amount of spectrum held by a licensee (spectrum aggregation limit), or to restrict the eligibility of access to a specific spectrum band (set-aside), the ability to transfer and divide the licence in question will be similarly restricted. With respect to spectrum in the 700 MHz band, transfers are not permitted where they will result in a licensee exceeding the spectrum aggregation limit.

259. In the consultation, Industry Canada proposed changes to provide increased flexibility in the treatment of a certain subset of associated entities such that they could participate in the auction separately and have the spectrum aggregation limit apply separately, as long as this would not have an adverse impact on the integrity of the auction or the intent of the spectrum aggregation limit.

260. Industry Canada also proposed in its consultation that subordinate licences may not count towards the licensee’s spectrum aggregation limit if the licensees demonstrate to the satisfaction of Industry Canada that they meet the criteria with respect to competing in the applicable service area.

261. Industry Canada considers that most of the changes proposed by TELUS would add clarity to the condition of licence. In addition, Industry Canada confirms that the deployment status would not form part of an evaluation of licence transfer if the date for the deployment requirement (rollout) has not yet arrived and a minor change has been made to clarify this point. Furthermore, the proposed rules will not impede the ability of AWS new entrants to transfer or divide any 700 MHz or AWS spectrum as part of the same transaction, unless any part of the transfer or division would be contrary to any applicable conditions of licence.

262. As noted in the consultation, where licensees establish an agreement to share spectrum such that another entity has control over the use of the spectrum, a subordinate licence is required. Generally, this applies where an entity is responsible for the operation of equipment using the spectrum. It is noted, however, that other agreements may result in an entity having decision making power with respect to network design and operations, which would result in Industry Canada determining that the entity has control over the spectrum. In such situations, Industry Canada may determine that subordinate licences are required. Companies may approach the Department for clarity at any time prior to entering into an agreement in order to determine whether subordinate licences would be required under the particular circumstances.

263. Licensees must apply to Industry Canada 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 spectrum. For further information on these requirements, refer to Client Procedures Circular CPC-2-1-23, Licensing Procedure for Spectrum Licences for Terrestrial Services, as amended from time to time.

264. Generally, a subordinate licence will count towards the spectrum aggregation limit in a service area in addition to licences held directly by the subordinate licensee and those held by its associates or affiliates. However, in the case of associated entities, the proposed subordinate licensee may apply to have its subordinate licence(s) excluded from the calculation of its holdings for the purposes of the spectrum aggregation limit, if the subordinate licensee can demonstrate as part of its application that it will separately and actively provide services to customers in the applicable service area.

Decision

265. In consideration of the above, the condition of licence on transferability and divisibility will apply as follows:

266. The criteria to be considered in determining whether the companies intend to separately and actively provide services to customers in the applicable licence area are included in Section 5.2.3 — Eligibility to have the spectrum aggregation limits apply separately, of this Framework. The ongoing requirement to compete for at least the duration of the spectrum aggregation limits will become a condition of licence specific to the licensees involved.

267. These requirements are subject to revision and amendment for reasons including furtherance of the policy objectives related to the 700 MHz band. Agreements regarding licence transfers are also subject to the provisions of the Competition Act.^{Footnote 13}

6.4 Eligibility

268. As stated in the consultation, generally, spectrum licences contain an eligibility condition of licence that reads as follows:

The licensee must comply on an ongoing basis with the eligibility criteria for a radiocommunication carrier, including compliance with subsection 10(2) of the Radiocommunication Regulations. The licensee must notify the Minister of Industry of any change which would have a material effect on its eligibility. Such notification must be made in advance for any proposed transaction within its knowledge. For further information, refer to Industry Canada’s Client Procedures Circular CPC-2-0-15, Canadian Ownership and Control, as amended from time to time.

Summary of Comments

269. Respondents who commented on this issue agreed with the proposed wording.

Discussion

270. On June 29, 2012, the Telecommunications Act was amended to lift foreign investment restrictions for telecommunications companies with annual revenues from the provision of telecommunications services in Canada that represent less than 10% of the total annual revenues from such services in Canada, as determined by the Canadian Radio-television and Telecommunications Commission (CTRC).^{Footnote 14} The total annual revenue from the provision of telecommunications services in Canada is published annually by the CRTC in its Communications Monitoring Report. Industry Canada will review Client Procedures Circular CPC-2-0-15, Canadian Ownership and Control, to clarify the effects on spectrum licence holders operating under the Radiocommunication Act and Radiocommunication Regulations.

271. Given the changes made to the Telecommunications Act and to ensure consistency, minor changes were made to the wording to remove the reference to "radiocommunication carriers."

Decision

272. In consideration of the above, and noting that the text could be further simplified with no impact on licensees, the condition of licence will be stated as follows:

6.5 Treatment of Existing Spectrum Users

273. The decision regarding the treatment of existing spectrum users was announced and published in SMSE-002-12, Policy and Technical Framework: Mobile Broadband Services (MBS) — 700 MHz Band, Broadband Radio Service (BRS) — 2500 MHz Band. Industry Canada sought comments on proposed wording for the condition of licence that basically referred to this previous decision.

Summary of Comments

274. None of the respondents who commented on this issue suggested any changes to the proposed wording of this condition of licence.

Decision

275. In consideration of the above, the condition of licence will be stated as follows:

6.6 Radio Station Installations

276. Industry Canada sought comments on the proposed wording for the condition of licence related to radio station installations.

Summary of Comments

277. All respondents who commented on this issue agreed with the proposed wording for the condition of licence.

Decision

278. In accordance with the above, the condition of licence will be stated as follows:

6.7 Provision of Technical Information

279. Industry Canada sought comments on the proposed wording for the condition of licence related to the provision of technical information.

Summary of Comments

280. All respondents who commented on this issue agreed with the proposed wording for the condition of licence.

Decision

281. In consideration of the above, the condition of licence will be stated as follows:

6.8 Compliance with Legislation, Regulation and Other Obligations

282. Industry Canada sought comments on the proposed wording for the condition of licence related to the compliance with legislation, regulation and other obligations.

283. The proposed wording was as follows:

The licensee is subject to, and must comply with, the Radiocommunication Act, the Radiocommunication Regulations and the International Telecommunication Union’s Radio Regulations pertaining to its licensed radio frequency bands. The licence is issued on condition that the certifications made in relation to this licence are all true and complete in every respect. The licensee must use the assigned spectrum in accordance with the Canadian Table of Frequency Allocations and the spectrum policies applicable to these bands, as amended from time to time.

Summary of Comments

284. All respondents who commented on this issue agreed with the proposed wording.

Discussion

285. Licensees are required to abide by the requirements set out for use of the radio frequency spectrum in general and for the specific frequency band being licensed. These requirements are fundamental, and in some cases, they are legislative requirements.

286. Upon further review of this condition of licence, Industry Canada is of the view that the removal of the reference to the International Telecommunication Union’s (ITU) Radio Regulations from the proposed wording would be clearer. Although conformity with respect to the ITU’s Radio Regulations and related international agreements continues to apply to Canada, the relevant requirements for licensees are included in the Canadian Table of Frequency Allocations, the Radiocommunication Regulations, policies and conditions of licence. The Canadian Table and the associated general information will, need to be revised from time to time. Such revisions occur when changes to the ITU’s Table are made as a result of World Radiocommunication Conferences or particular Canadian radio service requirements. The Canadian Table of Frequency Allocations reflects international changes while taking into account Canadian requirements to ensure that government, commercial and private users have full flexibility to develop new radio applications.

Decision

287. In consideration of the above, the condition of licence will be stated as follows:

6.9 Technical Considerations, and International and Domestic Coordination

288. Industry Canada sought comments on the proposed wording for the condition of licence related to the technical considerations and international and domestic coordination.

Summary of Comments

289. All respondents who commented on this issue agreed with the proposed wording for the condition of licence.

Decision

290. In consideration of the above, the condition of licence will be stated as follows:

6.10 Lawful Intercept

291. Industry Canada sought comments on the proposed wording of the condition of licence related to lawful intercept requirements. The proposed condition included changes to bring the wording in line with current technologies, namely by updating references to "circuit-switched voice telephony" technology.

292. The proposed wording was as follows:

A licensee operating as a service provider using an interconnected radio-based transmission facility for compensation must provide for and maintain lawful interception capabilities as authorized by law and in accordance with the Solicitor General’s Enforcement Standards for Lawful Interception of Telecommunications, as amended from time to time.

The licensee may request the Minister of Industry to forbear from enforcing certain assistance capability requirements for a limited period. The Minister, following consultation with Public Safety Canada, may exercise the power to forbear from enforcing a requirement or requirements where, in the opinion of the Minister, the requirement is not reasonably achievable. Requests for forbearance must include specific details and dates indicating when compliance to the requirement can be expected.

Summary of Comments

293. Most respondents who commented on this issue disagreed with the proposed changes. Many respondents referred to, and agreed with, comments submitted by the CWTA , which noted that replacing "circuit-switched telephony systems" with "interconnected radio-based transmission facility for compensation" would open up additional services such as Internet, cable and broadcasting to interception requirements. The CWTA also noted that such changes would be more appropriately made through federal legislation or pending revisions to the Solicitor General’s standards as proposed by Public Safety Canada.

Discussion

294. The condition of licence on lawful intercept was first introduced in 1996 for Personal Communications Services (PCS) spectrum licences. Since then, this condition has been applied to most spectrum licences where the licensee was a radiocommunication carrier, as this is the only class of licensee that carries public traffic to and from the public networks (telephone and Internet).

295. The rationale for removing the reference to a specific technology was to ensure that the requirement would remain meaningful in a Long Term Evolution (LTE) network environment, which uses packet-switched based technology instead of circuit-switched technology. The intent was not to expand the requirement to additional services.

296. Given the above, Industry Canada notes that removing the reference to "circuit-switched" while maintaining the reference to "voice telephony systems" would serve the original intent while effectively maintaining the scope of the condition, similar to that of other services, namely the requirement to intercept voice communications.

297. Furthermore, the term "radiocommunication carrier" is being replaced with "telecommunication common carrier" to ensure consistency with the Telecommunications Act and related regulations, noting that both terms have similar definitions.

Decision

298. In consideration of the above, the condition of licence will be stated as follows:

6.11 Research and Development

299. Industry Canada sought comments on the proposed wording of the condition of licence related to research and development (R&D).

Summary of Comments

300. The CWTA submitted that the condition of licence is no longer appropriate or required. It added that the industry has demonstrated continuous investment in coverage and capacity of networks and suggested that the R&D condition constrains a significant amount of capital in pursuit of goals that are already being met in the marketplace. Bell, MTS Allstream, Public Mobile, Quebecor, Rogers, SaskTel, Shaw, Tbaytel, TELUS and WIND do not support the condition of licence, either of their own accord or by supporting the CWTA’s position.

301. Sogetel initially recommended that the exemption threshold be increased from $5 million to $100 million. However, in its reply comments, Sogetel supported the CWTA’s position.

Discussion

302. The decision with regard to the condition of licence on research and development which applies to spectrum licences in various bands will be announced through a separate decision paper. Therefore, until such a time as a decision is released, the R&D condition of licence will apply to spectrum licences in the 700 MHz band, as proposed in the consultation, but may be amended during the licence term.

Decision

303. In consideration of the above, the condition of licence will be stated as follows:

6.12 Rural Deployment Requirements

304. In SMSE‑002‑12, Industry Canada stated its intent to facilitate the deployment of next generation mobile services to rural communities within a reasonable time frame and announced its policy decision to implement a rural deployment requirement for spectrum in the 700 MHz band.

305. In the consultation, Industry Canada proposed the following wording to reflect its decision regarding the condition of licence for rural deployment requirements:

Where a licensee holds a licence for two or more paired blocks of 700 MHz spectrum in a licence area, or has access to two or more paired blocks of 700 MHz spectrum in a licence area either directly or indirectly, that licensee must deploy 700 MHz spectrum:

1. to cover 90% of the population of its high-speed packet access (HSPA) network footprint as of March 2012, within five years of the issuance of the initial 700 MHz licence; and
2. to cover 97% of the population of its high-speed packet access (HSPA) network footprint as of March 2012, within seven years of the issuance of the initial 700 MHz licence.

306. It also proposed that, in interpreting the above-noted condition, "access to two or more paired blocks of spectrum" would include scenarios where a 700 MHz licensee has an agreement with another licensee in the same licence area that provides for the latter to operate some or all of the spectrum licensed to the primary licensee (e.g. where the licensees are associated and Industry Canada has determined that the spectrum aggregation limits will apply individually). In addition, agreements where licensees are associated through an agreement that provides the ability to influence the use of the spectrum would count as indirect access.

307. The consultation also proposed that tower and site sharing not be considered as agreements that provide "access" for this condition of licence and, furthermore, that typical roaming agreements^{Footnote 15} not be considered as providing "access to two or more paired blocks of spectrum" for the purpose of this condition of licence.

308. Industry Canada sought comments on the application of the proposed wording of the condition of licence and, specifically, on the assessment of "access to two or more paired blocks of spectrum" for the purposes of this condition of licence.

Summary of Comments

309. None of the respondents who commented on this issue suggested changes to the proposed wording; however, some asked for further clarity.

310. Most of the comments received on this issue were in relation to the policy decision and the design of the condition of licence itself, and not necessarily with regard to its application. Respondents who supported the proposed wording and application included BCBA , Public Mobile and Sogetel. Mobilicity noted that the rural deployment condition was a sensible way to ensure licence build-out in rural areas without putting undue economic burdens on licensees. TELUS noted that it would only support the proposed wording and interpretation subject to Industry Canada adopting TELUS’ recommended changes to the general deployment requirements.

311. Some respondents expressed concerns about the application of the condition itself, whereas others commented on the potential impact and effectiveness of the requirement. These comments were not within the scope of the current consultation.

312. Rogers noted that roaming, tower sharing, backhaul and equipment purchasing agreements should not result in any obligations and added that "ability to influence" the use of spectrum is vague and should also not result in any obligations to deploy.

Discussion

313. Industry Canada announced its policy decision on the implementation and details of rural deployment requirements in the 700 MHz auction in March 2012 through SMSE-002-12. This decision followed a public consultation process (SMSE-018-10)^{Footnote 16} in which stakeholder views were heard and considered in relation to any measures necessary to ensure further deployment in rural and remote areas. As additional comments on this issue were not within the scope of the current consultation, they were not considered in the final wording for the condition of licence.

314. Access to two blocks: In the consultation, comments were also sought on the assessment of "access to two or more paired blocks of spectrum" for the purposes of this condition of licence. The majority of respondents did not object to the application of the proposed wording or to the interpretation of "access to two or more paired blocks of spectrum."

315. This condition is intended to be applied to those companies best positioned to deliver services to rural areas (i.e. those with sufficient spectrum and infrastructure to deploy at the lowest cost). As a result, the condition of licence will only apply to licensees that had an HSPA network as of March 2012, and either directly (through the purchase of spectrum licences) or indirectly (through associations with others) have access to two blocks of 700 MHz spectrum.

316. In order to maximize the benefit of this condition of licence and to clarify its interpretation, note that any associations between licensees related to carrying subscriber traffic involving the 700 MHz spectrum (other than typical roaming agreements as defined in Section 5.2.1), will be considered to have provided access to both licensees in the particular licence area. Where carriers consider that this should not apply given extenuating circumstances, they may provide Industry Canada with an explanation of the particulars for consideration.

317. Industry Canada will not consider tower and site sharing as agreements that provide "access" for this condition of licence.

318. Furthermore, typical roaming agreements (as defined in Section 5.2.1) will not be considered as providing "access to two or more paired blocks of spectrum" for the purpose of this condition of licence.

319. Where a licence is transferred during the initial seven years, the requirement for the new licensee to deploy to a percentage of its HSPA footprint will continue to be based on the initial licence issuance date.

Decision

320. In consideration of the above, the condition of licence will be stated as follows:

6.13 General Deployment Requirement

321. In SMSE-002-12, Industry Canada announced that a general deployment requirement will apply to licensees in the 700 MHz band. Through the current consultation, comments were sought on the details of this requirement, including the proposed population coverage of between 20% and 50%, depending on the specific licence area and the proposed 10‑year time frame by which the requirement must be met.

Summary of Comments

322. Requests for increased requirements and shorter time frames: TELUS commented that the proposed requirements were not ambitious enough and that they could result in inadequate deployment requirements and a lack of balance between the build/roam incentives. It suggested more ambitious rollout at years 5 and 7 of the licence term for all licensees that have access to prime blocks of spectrum (B, C, C1 or C2). In its reply comments, Bell supported TELUS’ proposal.

323. Eastlink, MTS Allstream and SaskTel noted that the proposed deployment requirements would not have a positive impact on rural areas. They offered various proposals to address this issue, including deployment to 50% of the population at a Tier 4 level, deployment to 90% of the population for blocks B and C, and increased levels to 95% of the population for all licensees.

324. Agreement with proposed levels: Cogeco, Rogers, Sogetel and WIND all agreed with the proposed condition; however, Cogeco added that the 10‑year time frame is excessive and proposed that Industry Canada consult on implementing a "use it or lose it" policy. TELUS suggested that the proposed requirement levels should only apply to the lower A, D and E blocks given the ecosystem challenges associated with these blocks.

325. Lower deployment requirements: Xplornet and Tbaytel commented that the proposed targets were too high, and that they should be lowered to recognize the lower population densities and higher cost of service in rural and remote areas.

326. Compliance measures: SaskTel suggested modifications to the proposed condition text: (a) a "use it or lose it" clause where the spectrum is not put to use, and (b) a "use it or share it" clause in cases where the licensee has deployed in parts of the licensed area, but not in other parts thereby allowing others to gain access to unserved areas. TELUS also suggested two additional clauses in the instance of failure to meet the requirement: (a) that any licensee seeking in‑territory roaming should be required to subordinate its 700 MHz licence, and (b) that any licensee failing to meet the requirements, including marketing the service, should be forced to sell the spectrum on the secondary market or return it to Industry Canada.

Discussion

327. Objective: The objective of this general rollout requirement is to ensure that the 700 MHz spectrum, a highly valued and limited public resource, is deployed in a timely manner.

328. Similar conditions of licence have been applied to previously auctioned spectrum licences in order to encourage the deployment of systems and to dissuade speculative spectrum acquisition. Prior to the AWS auction, the deployment requirement was to 50% of the population in the licence area or to a level acceptable to Industry Canada. In the AWS auction, different levels were set for each licence area based on the population of the major urban centres for that particular licence area. In its consultation, Industry Canada proposed that the AWS levels be used as deployment requirements for the 700 MHz licences and that licensees be required to reach these levels within 10 years of the licence issuance. This would allow market forces to determine the best pace of deployment while providing an opportunity to intervene if the spectrum were left unused for an extended period of time.

329. Impact of increased levels: The general deployment condition will apply to all 700 MHz licensees regardless of the number of blocks that they hold, and its intent is to deter speculation and ensure the use of the spectrum. In comparison, the rationale for the rural deployment requirement to reach 90% and 97% of the population within a specified time frame was based on the increased network efficiencies that would be realized by those with access to two or more blocks of paired spectrum. Industry Canada therefore considers that increasing the general deployment requirements is unnecessary and that an increase could impose a significant burden on licensees with only one block of spectrum.

330. Impact of shorter time frames: Industry Canada notes that reducing the timeline to meet the requirement is not expected to have any impact on incumbent licensees, as they likely have infrastructure in place and the financial capacity to meet a general deployment requirement. However, for AWS licensees, a deployment at five years would align with the requirement to complete the AWS general deployment requirements by the end of that licence term. This would be particularly burdensome for those that are required to deploy new tower and backhaul infrastructure to meet their AWS requirements. Reducing the timeline would likely have an even greater impact on any new carriers acquiring 700 MHz spectrum, as they may not have any infrastructure in place.

331. Different deployment levels for specific blocks: Industry Canada has considered arguments that there is uncertainty with regard to the future availability of equipment for blocks A, D and E in the 700 MHz band. However, recent 4G LTE service deployments using block A in the United States indicate that some equipment is available and deployed in this block (Band 12).

332. For the unpaired spectrum blocks D and E, however, there is more uncertainty with regard to the future availability of equipment. According to published plans, research and development are currently under way regarding unidirectional wireless systems, which will make use of this spectrum in conjunction with spectrum in the AWS band. Although the availability of devices for specific blocks of spectrum may affect the ability of licensees to comply with deployment requirements, it is estimated that the 10‑year time frame to reach the levels required is long enough to allow for the development of related systems to make use of these blocks.

333. Impact of lower deployment levels: As noted by Xplornet and Tbaytel, rural and remote service areas have lower population densities and a higher cost of service, making a business case more difficult.

334. Overall, the 700 MHz band has excellent propagation characteristics and is considered to be important in the deployment of next‑generation mobile broadband services in rural areas and in meeting the increasing demand and network congestion in urban areas. Industry Canada does not consider that reducing the deployment requirements to a level lower than those reflecting the more populated centres within a tier is in alignment with the intent of the condition.

335. Compliance measures: In response to the proposed compliance measures such as a "use it or share it" condition of licence, Industry Canada notes that such a condition is premature at this time and will instead first provide an opportunity for deployment in accordance with the rest of the conditions. In SMSE‑002‑12, Policy and Technical Framework Mobile Broadband Services (MBS) — 700 MHz Band and Broadband Radio Service (BRS) — 2500 MHz Bands, Industry Canada noted that the Policy for the Provision of Cellular Services by New Parties ( RP ‑019) will be reviewed. RP‑019 allows third parties to apply to use spectrum in certain geographic areas where services are not currently being offered by the current licensee. However, it only applies to certain frequency bands and was adopted many years after the initial licences were issued in those bands. Should any changes be considered, a public consultation would be undertaken. However, it is not expected that any expansion of RP‑019 would be applied to any bands within 10 years of initial licensing. Therefore, an expanded RP-019 is not expected to apply to the 700 MHz band for at least the next 10 years.

336. Upon further review of the condition of licence, and in consideration of the policy objectives stated in SMSE‑002‑12, Industry Canada has further clarified that the objectives are to help to ensure that spectrum is deployed in a timely manner for the benefit of Canadians living in each service area. The following sentence will therefore be added to the proposed condition of licence: "When the spectrum is put to use, it shall be used to provide services predominantly to Canadians within the service area."

Decision

337. In consideration of the above, the condition of licence will be stated as follows:

6.14 Mandatory Antenna Tower and Site Sharing

338. Industry Canada sought input from stakeholders on the implementation of changes proposed to the mandatory antenna tower and site sharing conditions of licence through a separate process announced through Canada Gazette notice DGSO-001-12.^{Footnote 17} Stakeholders that were interested in the 700 MHz licensing process were encouraged to participate in that consultation process, as changes will affect the 700 MHz licensees.

339. In anticipation that the above-noted process could result in modifications to Client Procedures Circular CPC‑2‑0‑17, Conditions of Licence for Mandatory Roaming and Antenna Tower and Site Sharing and to Prohibit Exclusive Site Arrangements, Industry Canada sought comments on the proposed wording of the condition of licence related to mandatory antenna tower and site sharing.

Summary of Comments

340. None of the respondents who commented on this issue proposed any changes to the wording of this condition of licence.

341. Some respondents also took the opportunity to reference their comments submitted through DGSO‑001‑12. These comments were outside the scope of this consultation.

Discussion

342. The related decisions, including the applicability of the mandatory antenna tower and site sharing condition to the 700 MHz band, will be announced separately.

Decision

343. In consideration of the above, the condition of licence will be stated as follows:

6.15 Mandatory Roaming

344. Industry Canada sought comments from stakeholders on the implementation of changes proposed to the mandatory roaming condition of licence through a separate process announced through Canada Gazette notice DGSO‑001‑12.^{Footnote 18} Stakeholders that were interested in the 700 MHz licensing process were encouraged to participate in that consultation process, as changes may affect the 700 MHz licensees.

Summary of Comments

345. None of the respondents who commented on this issue proposed any changes to the wording of this condition of licence.

346. Some respondents also took the opportunity to reference their comments submitted through DGSO-001-12. These comments were outside the scope of this consultation.

Discussion

347. The related decisions, including the applicability of the mandatory roaming condition to the 700 MHz band, will be announced separately.

Decision

348. In consideration of the above, the condition of licence will be stated as follows:

6.16 Annual Report

349. Currently, spectrum licences include a requirement to submit an annual report to Industry Canada to provide some basic information on spectrum use and existing company reports. This provides valuable information without requiring extensive report generation by the licensees.

350. Industry Canada sought comments of the proposed wording of the condition of licence as follows:

The licensee must submit an annual report for each year of the licence term, which includes the following information:

• a statement indicating continued compliance with all conditions of licence;
• an update on the implementation and spectrum usage within the area covered by the licence;
• existing audited financial statements with an accompanying auditor’s report;
• a report of the research and development expenditures for licensees operating as radiocommunication carriers as set out in these conditions of licence. Industry Canada reserves the right to request an audited statement of research and development expenditures with an accompanying auditor’s report;
• supporting financial statements where licensees are claiming an exemption based on an annual gross revenue of less than $5 million; and
• a copy of any existing corporate annual report for the licensee’s fiscal year with respect to the authorization.

Summary of Comments

351. Rogers WIND, Sogetel and SSi agreed with the proposed wording. However, SSi added that reports need not be audited due to the expense involved. MTS Allstream also supported the wording with the exception of the R&D requirement.

352. Bell argued that the annual report should be streamlined to reduce the administrative burden on licensees and the Department. It also raised concerns regarding the 120‑day limit for filing the annual report and requested that the company be allowed to continue its long‑standing practice of filing within 180 days of its fiscal year‑end. TELUS supported Bell’s proposal that the condition of licence allow for annual reports to be filed within 180 days of the licensee’s fiscal year‑end.

353. Bell and TELUS disagreed with the requirement to break down their deployment reports by licence. Bell recommended that licensees be able to address the licensee’s total operating area, whereas TELUS recommended that the deployment level for "each licence area" be changed to "the most rolled up tier level that an operator holds," with Industry Canada reserving right to ask for more detail. TELUS noted that overall usage across a larger geographical area demonstrates a more complete picture of how the spectrum is being used.

Discussion

354. The purpose of the annual report is to provide basic information on spectrum use and existing company reports. This provides valuable information without requiring extensive report generation by licensees.

355. To date, the 120-day time limit after the licensee’s fiscal year-end to submit its annual report has been sufficient for the majority of licensees reporting in other bands. Therefore, Industry Canada does not consider that an extension to 180 days is necessary. Where a licensee is unable to submit its annual report within this time frame, it may request an approval for an extension.

356. Industry Canada also reiterates the importance of reporting on deployment at an individual licence level in the assessment of compliance with any deployment requirements associated with the licences in various bands. This level of detail has been the standard to which all auction licences have been held in the past.

357. The condition states that audited reports must be submitted where they exist and, therefore, should not result in additional costs.

Decision

358. Given the above considerations, the condition of licence on annual reporting requirement will apply as proposed. Requirements may change over the course of the 20‑year licence term. Accordingly, reporting requirements in relation to this condition of licence may be amended from time to time following the issuance of a notice to all licensees in advance of the relevant fiscal year-end.

359. Where a licensee holds multiple licences, spectrum implementation reports should be broken down by licence area. This information, including the extent of implementation and spectrum usage, is important for reasons such as the analysis of each licensee’s individual performance against its conditions of licence, monitoring the effectiveness of these conditions in meeting the policy objectives of the band, and Industry Canada’s intention that the spectrum be deployed in a timely manner for the benefit of Canadians.

6.17 Amendments

360. The following condition of licence will also apply, consistent with spectrum licences in other bands:

361. The Minister of Industry retains the discretion to amend these terms and conditions of licence at any time.