Policy and Technical Framework
Mobile Broadband Services (MBS) — 700 MHzBand
Broadband Radio Service (BRS) — 2500 MHz Band (sf10123)

PART B — Decisions on a Policy and Technical Framework for Commercial Mobile Broadband Spectrum in the 700 MHz band

B3. Measures to Promote Competition

100. In the 700 MHz consultation, comments were sought as to the appropriate auction mechanism(s) which should be adopted in the event that Industry Canada decided that specific measures to promote competition were desirable. Comments were sought on:

  • whether a spectrum cap or set-aside should be implemented;
  • whether a potential spectrum cap should apply only to the 700 MHz band or whether it should be broader (e.g. to all mobile spectrum);
  • the attributes of a potential set-aside, including the amount of set-aside spectrum, which block(s), and the eligibility requirements for bidders in the set-aside block(s);
  • whether restrictions should be put in place to ensure that policy objectives are met (e.g. whether transfer of set-aside spectrum licences should be restricted or whether a spectrum cap should be put in place for a specific time period); and
  • whether specific bidding rules should apply to bidders and their affiliates or associates.

Summary of comments

101. The submissions of parties on these issues were widely diverging. Most large wireless service providers, including Bell, Rogers, SaskTel and TELUS, argued that there is no need for specific measures to promote competition and that any government intervention would harm the Canadian wireless industry. Bell stated that, due to the scarcity of the 700 MHz spectrum, the imposition of a spectrum set-aside or spectrum cap would have a great impact on the auction’s ability to efficiently determine who is best able to use the spectrum, and would also permanently disadvantage at least one of the three national wireless service providers.

102. Rogers also maintained that the amount of 700 MHz spectrum available for auction is insufficient to allow for a set-aside. Rogers stated that, in the event that Industry Canada decides to adopt a set-aside mechanism, entitled bidders should be restricted to bidding on the set-aside blocks only. Rogers added that, should Industry Canada decide to adopt a spectrum aggregation limit, it should adopt an “auction cap” for 700 MHz spectrum only, and not a general “spectrum cap” applicable to other spectrum holdings. Rogers further added that, if a cap were to be imposed, it should be shared by affiliates and associated entities cooperating in building their network or marketing their services.

103. TELUS was also of the view that no set-aside or spectrum cap should be implemented in the 700 MHz auction. However, TELUS added that if Industry Canada were to decide that some mechanism was appropriate, a reasonably designed spectrum cap would be preferable to a set-aside. TELUS’ support for such a spectrum cap would be contingent on TELUS being allowed to bid on at least two paired blocks of spectrum in the 700 MHz band. TELUS submitted that bidders and their legal affiliates should be required to share a spectrum cap if such a cap were imposed. However, TELUS stressed that bidders which have roaming and other network access arrangements with other bidders should not be treated as associated entities for the purpose of 700 MHz auction. Furthermore, TELUS argued that cable companies and regional ILECs22 should not qualify to bid on any set-aside spectrum.

104. SaskTel pointed out that market forces work differently in rural and urban areas, as there is significant facilities-based competition in urban areas. In rural areas, however, competition is generally limited to competition for services. For example, in areas where population densities do not support the economics of more than one network infrastructure, other companies use SaskTel’s infrastructure to provide services. In SaskTel’s view, access to spectrum by the facilities-based provider is crucial in order that all cellular service providers be able to serve their customers.

105. MTS Allstream proposed that block C in the Upper 700 MHz band be set aside for new entrants and that the new entrant definition used in the AWS auction continue to be used for the 700 MHz auction.23

106. Cogeco Cable Inc. (Cogeco) and EastLink both proposed a similar amount of spectrum for a set-aside. Cogeco proposed that an unspecified block of at least 30 MHz be set aside for AWS entrants (excluding MTS Allstream in Manitoba and SaskTel in Saskatchewan) and future new entrants. EastLink proposed that all of the spectrum in the lower portion of the 700 MHz band (36 MHz paired and 12 MHz unpaired) be set aside for service providers with less than 3% of the Cellular (800 MHz) spectrum holdings (weighted by population).

107. Mobilicity, Public Mobile and WIND proposed that the entire 700 MHz band be set aside for eligible AWS entrants (excluding MTS Allstream in Manitoba and SaskTel in Saskatchewan) and service providers with no Cellular spectrum holdings in their respective home market. In the reply comments, WIND submitted the view that enhanced competition in the sector following the AWS auction has resulted in Canadians enjoying “substantially more affordable wireless service as well as new and innovative product offerings and terms of service,” and restated that AWS entrants and future new entrants should be given access to all, or substantially all, of the newly available spectrum. Should a complete 700 MHz set-aside not be implemented, WIND submitted the view that a spectrum cap of 105 MHz should be imposed on the total spectrum holdings24 of wireless service providers. In addition, WIND proposed a further cap of 25 MHz of spectrum below 1 GHz in any licensed territory; a limit of two 700 MHz paired blocks for any bidder; and a single paired block for incumbents, in any given area. Mobilicity suggested that, in the event a complete set-aside is not adopted, a spectrum cap should be implemented in which affiliated and/or associated parties are treated as one entity based on their holdings in the frequencies below 1 GHz. Mobilicity reiterated that such a cap should remain in place indefinitely, subject to review from time to time. Public Mobile proposed a complete set-aside of 700 MHz spectrum for service providers which do not currently hold spectrum below 1 GHz in the same region. As well, Public Mobile argued that service providers with more than 20 MHz of unused spectrum in any band should not be allowed to participate in the auction. In addition, Public Mobile proposed an “in auction” cap which would prevent any auction participant from holding more than 25 MHz of spectrum below 1 GHz in any licensed territory. Public Mobile also suggested that bidders and their associates share the spectrum cap.

108. Shaw and QMI both favoured the imposition of spectrum caps. Both proposed that, in any licence area, no participant in the 700 MHz auction be able to acquire more than two paired blocks of 700 MHz spectrum, and that any participant already holding spectrum below 1 GHz be able to acquire only one paired block of 700 MHz spectrum. This two-fold proposal was also supported by SSi in its reply comments. In addition, Shaw requested that Bell and TELUS be considered as one bidder for the 700 MHz auction.

109. Service providers with a focus on rural areas, including Axia NetMedia (Axia), Xplornet, the Canadian Cable Systems Alliance (CCSA), Ontario Telecommunications Association (OTA) and Tbaytel, advocated for some form of set-aside. Axia proposed that, in rural areas, up to 100% of the available spectrum be set aside for bidders that commit to reach the highest portion of rural users. CCSA recommended a set-aside of 50% of the 700 MHz spectrum for AWS entrants and future new entrants, whereas Tbaytel and the OTA recommended a set-aside of an unspecified amount for small ILECs. Axia and Xplornet proposed that bidders, affiliates and associates share the spectrum caps.

110. In addition, Xplornet suggested a specific “rural set-aside” which would be based on licensing the spectrum using Tier 4 areas; the borders of Tier 4 areas would be redefined such that rural areas in proximity of urban areas would be “unbundled” and attached to the surrounding rural Tier 4 licence areas. In Xplornet’s proposal, entities with spectrum holdings of 50 MHz or more would be excluded from bidding on the rural portions of the unbundled Tier 4 blocks. In its reply comments, Xplornet further proposed that the above provisions be applied to the unpaired blocks D and E, which are “well suited to deliver fixed wireless services based on TDD,” and to the D block in the Upper 700 MHz band (see Section B2) on an interim basis until the spectrum utilization for this block is determined.

111. The Province of British Columbia and the Yukon Government proposed a set-aside of modestly priced licensed spectrum which would cover small geographic areas (excluding urban and metropolitan areas). On the other hand, a significant number of municipal and regional governments from rural and remote areas have submitted views supporting an open auction with no preferential treatment for any service provider.

112. Niagara Networks argued for a set-aside of 80% of the 700 MHz spectrum and that, if a spectrum cap is imposed, it should be shared by bidders and their associates. MobilExchange was of the view that 20 MHz should be set aside for a “Secure Wireless Health Network.” The Public Interest Advocacy Centre(PIAC) stated that a minimum of 25% of the available 700 MHz spectrum should be set aside for AWS new entrants and smaller service providers. PIAC also proposed that a minimum of 25 MHz be set aside for non-emergency public uses (e.g. libraries), with a further 10 MHz set aside for innovation and research and development purposes. The British Columbia Broadband Association (BCBA) proposed a set-aside for rural service providers in the 165 least populated Tier 4 service areas. CACTUS and the Canadian Media Guild (CMG) also advocated a set-aside mechanism. Two individual respondents, Messrs. Brendan Howley and Steven May, proposed that 25% of the spectrum to be auctioned be the set-aside for smaller service providers and new entrants in 5 MHz blocks. Drs. Gregory Taylor and Catherine Middleton of Ryerson University argued for the need for both a set-aside and spectrum caps.

113. With respect to any timing restrictions for secondary market trading, Rogers suggested that if any cap is imposed, it should remain in effect for as short a time as possible so that there are no long-term consequences to this fast-changing industry. TELUS also was of the view that if Industry Canada decides to implement measures to support competition, a short licence transfer lockout period of two years at the most should be implemented in order for the market to function freely through an active secondary market.

114. Cogeco and Niagara Networks proposed that any restrictions on the resale of set-aside spectrum be limited to five years, similar to that in the AWS spectrum auction. MTS Allstream proposed to restrict the secondary market transfer of any set-aside spectrum for a period of 10 years. EastLink also suggested that a 10-year period apply to any spectrum cap. Shaw proposed that the spectrum caps remain in effect for an initial period of five years and that, prior to the expiry of such a cap, another consultation be carried out to determine whether the restriction period should be extended. QMI proposed that any spectrum cap remain in place as long as predetermined by Industry Canada.

115. Respondents other than wireless service providers stated that secondary market trading restrictions should be permanent. Axia proposed that a spectrum cap remain in effect for the duration of the licence. PIAC, CACTUS and CMG also suggested that restrictions be imposed so that successful bidders on the set-aside spectrum would not be allowed to lease, transfer, exchange or share this spectrum with an incumbent service provider during the term of its licences.

Discussion

116. Spectrum supply for the 700 MHz auction. Based on a consensus view from the industry, the U.S. band plan will be adopted for the 700 MHz band. Excluding the frequency blocks under consultation for public safety, the following spectrum blocks will be available for auction in each service area:

  • Paired blocks (6+6 MHz each): A, B and C;
  • Paired blocks (5+5 MHz each): C1 and C2;
  • Unpaired blocks (6 MHz each): D25 and E.

117. Currently available equipment for the 700 MHz band, such as Long-Term Evolution (LTE) equipment, operates on 5 and 10 MHz channel bandwidths.26

118. Equipment constraints and spectrum quality. Wireless equipment, especially consumer terminal equipment, is highly complex and is manufactured in mass quantities. New products require long development cycles and large investments. As a result, manufacturers tend to develop new products based on the demand of the service providers which can place the largest orders. As the Canadian wireless industry is not comparatively large, the Canadian service providers typically rely on the availability of equipment developed for their larger U.S. counterparts.27 As mentioned in Section B1, one reason for the selection of the U.S. band plan for the 700 MHz band is to take advantage of the scale of the U.S. wireless industry in order to gain access to a wide range of equipment at competitive prices.

119. Two non-interoperable equipment ecosystems have emerged in the United States, which correspond to the specific 700 MHz spectrum holdings of AT&T (blocks B and C) and Verizon (blocks C1 and C2). In the short to medium term, it is expected that most28 of the available equipment will operate either on blocks B and C and be compatible with AT&T equipment ecosystem, or on blocks C1, C2 and be compatible with the Verizon equipment ecosystem.

120. There are no current deployments in block A in the United States due to poor availability of equipment and the potential of interference from TV channel 51. The equipment ecosystem for block A will likely improve over time, as the interference from TV is eliminated and as interest by smaller U.S. licensees develops.

121. There is no available information on current deployments in the United States in the unpaired spectrum blocks D and E. 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 (also known as “carrier aggregation technology”). The associated equipment may not be available by the time of the auction. Wireless bidirectional technology (which is time division duplexing based) is less likely to be developed for this unpaired spectrum, as there is strong potential for interference between adjacent service areas and/or adjacent frequency blocks.

122. As a result, the value of the various 700 MHz spectrum blocks to Canadian service providers will vary depending on which of the two equipment ecosystems each service provider will use. Furthermore, it is likely that the utility of block A will be lower than the other paired frequency blocks (B, C, C1 and C2) in the short to medium term. Consequently, it is reasonable to refer to the paired blocks B, C, C1 and C2 as “prime” 700 MHz spectrum. The quality of the spectrum block(s) acquired by bidders at the 700 MHz auction will play a significant role in their capability to deploy advanced services and compete effectively in the marketplace.

123. Spectrum demand. Due to its propagation characteristics, the 700 MHz spectrum is very well suited for providing service to wide coverage areas in suburban and rural markets, as well as high capacity applications in high density urban areas, especially for broadband deployments based on 10+10 MHz channels. All consultation submissions indicate a very strong interest in the 700 MHz spectrum. All service providers expressed the need for 700 MHz spectrum stating that, without access to it, their future ability to offer advanced wireless services and compete effectively would be negatively affected. In addition, many respondents pointed out that providing state-of-the-art services, especially to rural areas, would require two contiguous or adjacent paired blocks, i.e. 10+10 MHz of spectrum. In light of the submissions received, it is apparent that the total amount of spectrum available in the 700 MHz band is far from sufficient to satisfy all stakeholders’ needs.

124. Objectives. As stated in Part A, one of the specific objectives is to foster sufficient competition in the wireless telecommunications services market so that consumers and businesses benefit from competitive pricing and choice in service offerings. Taking into account that competition offered by AWS entrants is still emerging, at least one service provider in each licence area, other than the large national service providers, should have the opportunity to obtain 700 MHz spectrum. The government is seeking to achieve this through measures that will introduce the least amount of market distortion. Access to the 700 MHz spectrum by service providers other than the large national service providers would help to support competition, offering consumers additional choices for competitive MBS in both the metropolitan and smaller markets.

125. In many areas of Canada, consumers have access to extensive wireless coverage based on services provided by two or three large service providers. In order to allow these large national and regional service providers to offer new advanced mobile services to their customer base, they should also have the opportunity to obtain 700 MHz spectrum, which is not a substitute for Cellular spectrum. In the short to medium term, there are differences in the equipment ecosystems for the 700 MHz and the Cellular bands. In the longer term, the 700 MHz band will be needed in addition to the Cellular band for capacity reasons. The rapid growth in mobile data use is expected to increase the capacity requirements for the existing mobile infrastructure in all areas of the country. Due to its favourable propagation characteristics, the spectrum in the 700 MHz band will be needed in addition to the Cellular spectrum to address these capacity requirements. The large national and regional service providers provide the majority of Canadian users, including in many rural and remote areas, with advanced state-of-the-art wireless services and are responsible for the largest proportion of investment and innovation taking place in the Canadian wireless industry. It is important that these service providers continue to increase the capacity of their networks and deploy the most advanced wireless services at both national and regional levels.

126. Many of the respondents who advocated specific mechanisms to sustain and promote competition maintained that, in general, the large service providers have the means and the incentive to bid for spectrum at price levels that could ensure the preservation of their market share. Even if not necessarily subscribing to the above view, a prudent assumption for the auction design is that large service providers would likely win the bidding for most of the spectrum in an open auction. Therefore, an appropriately dimensioned set-aside or cap could ensure that other companies have an opportunity to acquire spectrum licences.

127. Types of interventions. Among the many comments received, possible measures suggested for implementation in the 700 MHz auction are discussed below.

128. Large set-aside. Setting aside a large amount of spectrum could negatively affect the ability of the large national and regional service providers to provide advanced services to their customer base. Deployments of the most advanced services to smaller markets, including rural and remote areas, may be delayed, counter to Industry Canada’s objective that spectrum benefits be made available on a timely basis to these Canadians.

129. Overall spectrum cap. Placing a cap on total spectrum holdings (or for spectrum holdings under 1 GHz) could completely eliminate one or more regional or large national service providers from the 700 MHz auction, hindering their ability to continue providing advanced services. The fast-paced growth in mobile broadband use by consumers will lead to an unprecedented increase in the overall traffic demand. The large service providers have the largest subscriber bases (more than 23 million subscribers). The 700 MHz band will be needed to address this significant increase in required capacity for their wireless networks. Furthermore, an overall cap would unfairly disadvantage service providers holding spectrum in higher frequency bands, as the spectrum in these bands is available and used in larger bandwidths. Given the rapid growth in the demand for data services, an overall spectrum cap would be a continued barrier to service providers’ ability to acquire the spectrum necessary to expand their operations and deploy the latest technology in a timely fashion.

130. Based on the above considerations, the possible solutions for the auction design are either a set-aside of one or two 5+5 MHz paired frequency blocks, or a cap that prevents one or more large service providers from obtaining all of the 700 MHz spectrum licences.

131. Set-aside of one or two paired spectrum blocks for small service providers. In the context of the 700 MHz auction, the choice of a set-aside has limitations related to the non-homogenous properties of the 700 MHz spectrum blocks, as described earlier. This solution would represent a set-aside of between 20% and 40% of available paired spectrum. However, given that the band is not homogenous, it could consist of a much larger proportion of the spectrum for a particular equipment ecosystem. A set-aside of a specific block or blocks could potentially lock eligible service providers into an undesired equipment ecosystem or out of a desired one. This would affect their ability to deploy new systems that are compatible with their existing infrastructure and to implement domestic and international roaming. The choice of the set-aside frequency block is difficult given the dynamic pace of wireless technology and market evolution. Furthermore, based on available information, there is no single 700 MHz block which would fit the current technology and equipment ecosystems for all service providers. Due to the non-homogenous characteristics of the 700 MHz band, any specific block choice by government may disadvantage one or more service providers relative to others.

132. 700 MHz spectrum cap of two paired spectrum blocks. A spectrum cap for the 700 MHz band is a more flexible option, enabling service providers to bid for the block(s) they want, but limiting the total amount of spectrum that a single service provider/bidder may acquire. This would provide additional bidders with the opportunity to obtain spectrum. A cap of two paired blocks in the 700 MHz band would also respond to comments that indicated that 10+10 MHz (which can be achieved by aggregating two contiguous paired blocks) of spectrum is needed for the deployment of more advanced MBS. Moreover, several AWS entrants proposed a cap of two paired spectrum blocks and some of the large service providers were also open to such a provision. A cap of two paired blocks applicable to all bidders may lead to auction outcomes where, in each area, most or all of the spectrum licences would be won by only three companies, most likely the large service providers. To address this issue, an additional auction condition, applicable only to large service providers, is required.

133. Spectrum cap of one prime paired block for large service providers. Limiting bids from each of the large service providers to one of the prime paired spectrum blocks (block B, C, C1 or C2) ensures that one or more smaller service providers can obtain prime spectrum.

134. A “dual cap” combining the spectrum cap of two paired blocks in the 700 MHz band and the spectrum cap for prime blocks described above can considerably strengthen AWS or future new entrant(s) in most markets by enabling them to acquire at least one of the prime 700 MHz spectrum blocks (block B, C, C1, or C2). The large service providers (as described in the following paragraph) would be able to bid on one prime paired block of spectrum in each licence area, including MTS Allstream and SaskTel in their respective provinces. If more than one block of spectrum is desired, any large service provider may bid on the paired block A or the unpaired blocks D and E As well, service providers may explore possibilities of joint network builds. Deployment of advanced services requiring at least two contiguous paired blocks would be dependent on the service providers’ ability either to acquire two blocks (A+B blocks for large service providers or any blocks for other companies) or to create network arrangements with other service providers. Refer to paragraph 138, Affiliated and associated entities rules.

135. Definition of large wireless service providers. The dual cap solution requires that the term “large service providers” be defined. The definition of “new entrant” in the 2008 AWS auction29 was based on the national wireless market share of revenues. Firms which had less than 10% of the national wireless market share of revenues could bid on the set-aside spectrum. Regional ILEC operators MTS Allstream and SaskTel, which combined had less than 6% of national wireless revenues in 2008, were eligible to bid for the set-aside spectrum in the AWS auction. However, these companies have the largest share in their home markets, with 57% and 78% wireless subscriber market share in Manitoba and Saskatchewan respectively in 2010.

136. Some of the comments received suggested linking the eligibility to bid in the 700 MHz auction with a bidder’s existing commercial mobile spectrum holdings. One view was that entities holding Cellular spectrum could be limited to bidding on a maximum of one paired block in the auction. However, such a linkage would overlook the key factors of market share and market size, which are important when considering competition. For example, a large service provider may lack Cellular spectrum in a certain region, but it may have significant market share in that region. Conversely, a smaller service provider may hold Cellular spectrum in a certain region, but it may not have significant market share in that region. Therefore, linking eligibility to bid in the 700 MHz auction with a bidder’s existing commercial mobile spectrum holdings may not be appropriate.

137. A definition of a large service provider should take into account the regional nature of the wireless services market. This can be achieved by linking the definition to both the national and provincial wireless market share. The national market share threshold of 10% could be adopted. The threshold for the provincial market share should be higher, however, to reflect a situation in which an entity could have a large provincial market share (thus the entity should be considered as a large service provider in that province) but have a small national market share. Based on the above considerations, the definition for large wireless service providers will be based on a subscriber market share of 10% at the national level or 20% at the provincial level. The reference data for the evaluations will rely on the 2012 CRTC Communications Monitoring Report.

138. Affiliated and associated entities rules. Past auctions have featured rules that associated and affiliated entities30 were required to bid as one entity to ensure the integrity and transparency of the auction. There were also limits on the ability to communicate with other bidders starting from the date of application to participate in the auction up to the final payment deadline for licences provisionally won in the auction process. In addition, rules restricting post-auction licence transfers also included transfers to affiliated or associated entities so as not to defeat the purpose of those restrictions. There will be similar auction rules and conditions regarding transfer of licence in effect as part of the licensing framework in the 700 MHz auction. That being said, Industry Canada recognizes that changes to the rules should be considered due to the scarcity of spectrum in the 700 MHz band, the high demand for capacity by customers (driven by the use of smart phones and tablets), the high cost of network deployment, particularly in rural areas, and the spectrum and network efficiencies that can be realized through the use of more than one block of spectrum through spectrum sharing.

139. A number of Canadian service providers have entered into different forms of network and spectrum sharing arrangements, driven by the investment and spectrum efficiencies such arrangements can bring. As consumer demand for wireless data grows rapidly, interest in these arrangements among carriers in Canada and other countries is expected to increase. Changes to the rules surrounding spectrum sharing are being considered in order to encourage more rapid deployment of next generation services to rural Canadians. These changes may also support investment and service innovation as next generation technologies require large amounts of spectrum. We will be seeking input from stakeholders on this issue in the next consultation process.

140. For example, if licensees are competitors and intend to remain so, and have an existing or enter into a new joint network or spectrum sharing agreement such that they are associated, they may still be eligible to participate in the auction as separate entities and continue to be treated as separate entities for the purposes of the spectrum cap if certain conditions are met. On the other hand, if two or more entities are affiliated through ownership structure or if they enter into agreements which have the effect of undermining the integrity of the auction or defeating the purpose of the spectrum cap(s), those entities would be required to bid as one and the cap would be applied to them jointly. Standard roaming agreements would not result in the companies being deemed associated. Entities would be able to request a ruling as to whether an agreement would have the effect of making them associated or affiliated for the purposes of the auction. Changes to the specific auction rules and the conditions of licence relating to associates will be discussed in the upcoming consultation on the licensing and auction framework.

141. Unpaired blocks D and E. As described earlier, the technology planned for blocks D and E in the Lower 700 MHz is not currently available and, hence, untested in the marketplace. Furthermore, the planned use of these blocks would likely involve joint use with other spectrum bands. Open bidding will allow the bidders who value this spectrum the most to acquire these blocks.

142. Rollout obligation. In several past licensing processes, Industry Canada has made use of general rollout obligations intended to encourage licensees to put the spectrum to use and to deter acquisition of spectrum licences by speculators and those whose intent is to preclude access to the spectrum by their competitors. Several respondents noted the importance of this requirement, particularly given the high demand for the 700 MHz band in comparison to its availability. A condition of licence similar to those previously used will apply to all licences issued subsequent to the 700 MHz auction. This condition of licence will be in addition to any applicable rural rollout conditions. Comments will be sought on the details of the general deployment requirement that will apply to the 700 MHz licences (e.g. population coverage required and time frame) in the upcoming consultation on the licensing and auction framework.

Decisions on mechanisms to promote competition in the 700 MHz auction

143. Given the above considerations, the following measures will be adopted for the 700 MHz auction:

B3-1: A spectrum cap of two paired frequency blocks in the 700 MHz band (blocks A, B, C, C1 and C2) is applicable to all licensees.

B3-2: A spectrum cap of one paired spectrum block from 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 national wireless subscriber market share, or 20% or more wireless subscriber market share in the province of the relevant licence area.31, 32

B3-3: Unpaired blocks D and E in the Lower 700 MHz band are not subject to a spectrum cap.

B3-4: Industry Canada will consult with a view to revising the rules on associated entities.

B3-5: A general rollout obligation will apply to all 700 MHz commercial licences. Industry Canada will consult on the details of the general deployment requirements (e.g. population coverage and time frame).

144. Limiting transfers to maintain spectrum cap. In the past, Industry Canada has implemented competitive measures, such as spectrum caps and set-asides, and maintained them post-auction in order to ensure that the measure is effective. In the 2008 AWS auction, licences acquired in the spectrum set aside specifically for them could not be transferred or leased to companies that did not, at the time of the auction, meet the criteria of a new entrant (which included MTS Allstream and SaskTel), for a period of five years from the date of issuance of the licence. Spectrum caps have also been employed in previous auctions, such as in the auctions of the 2.3 GHz and 3.5 GHz bands and remained in effect for various time frames following the close of the auctions to deter speculation.

145. As a “dual” spectrum cap will be implemented in the 700 MHz band, restrictions on secondary market transactions, including transferability of licences, should be imposed for specific time frames post-auction in order to limit the opportunities for a company to purchase another company’s licence in order to circumvent the cap.

146. Retaining the spectrum caps for five years from the date of issuance of the licence would reduce the attractiveness of the licences to speculators yet would permit market adjustments within a reasonable period of time.

Decision regarding limitations on licence transfers in the 700 MHz band

147. The following decision has been made with respect to the 700 MHz auction:

B3-6: 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 if it allows a licensee to exceed the spectrum cap during this period.

Footnotes

  1. 22 Incumbent LocalExchange Carriers — for example, MTS Allstream and SaskTel.
  2. 23 The definition of a“new entrant” in the AWS auction is available at http://www.ic.gc.ca/eic/site/smt-gst.nsf/eng/sf08833.html.
  3. 24 Including holdingsin the 2500 MHz (BRS) and 806-824/ 851-869 MHz (iDEN/ESMR) bands.
  4. 25 This is the unpairedblock D in the Lower 700 MHz band. Not to be confused with the paired D blockin the Upper 700 MHz band, which is subject to the discussions related topublic safety.
  5. 26 The LTEspecifications also include provisions for 1.4 MHz and 3 MHz channelbandwidths; however, equipment using these narrower channels is less spectrallyand operationally efficient, and has not been developed for the 700 MHzband.
  6. 27 The customer base ofthe largest wireless service provider in the United States is more than three timesthe size of the population of Canada.
  7. 28 Equipment operating inblocks A, B and C (3GPP band 12) is also expected to become available beforethe 700 MHz auction.
  8. 29 The new-entrantsdefinition for the AWS auction is available at http://www.ic.gc.ca/eic/site/smt-gst.nsf/eng/sf08833.html.
  9. 30 Affiliated andassociated entity definition for the AWS auction is available at http://www.ic.gc.ca/eic/site/smt-gst.nsf/eng/sf08833.html.
  10. 31 The subscribermarket share for Ontario will apply for the licence area 2-06, Eastern Ontario and Outaouais.
  11. 32 For the Tier 2-14licence area (Yukon, Northwest Territories and Nunavut), only the nationalmarket share criteria will apply.
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