Spectrum Management and TelecommunicationsAppendix
- 1. Introduction
- 2. Technical Considerations
- 3. Ministerial Authority
- 4. Licence Conditions
- 5. Licensing Process
- 6. Auction Design and Rules
- 7. Second Phase of the Auction
- Appendix A — Related Canada Gazette Notices
- Appendix B — Eligibility Points and Opening Bids for Spectrum Licences for Advanced Wireless Services and other Spectrum in the 2 GHz Range
- Appendix C — Roll-Out Targets
- Appendix D — Checklist of Forms
This document entitled Licensing Framework for the Auction for Spectrum Licences for Advanced Wireless Services and other Spectrum in the 2 GHz Range (DGRB-011-07) serves as a companion document to the Policy Framework for the Auction for Spectrum Licences for Advanced Wireless Services and other Spectrum in the 2 GHz Range (DGTP-007-07) released (AWS Policy Framework). This document elaborates auction application procedures, licensing parameters, technical considerations, bidder application and timing for next steps such as a mock auction for bidder familiarization.
In October 2003, Industry Canada released a consultation paper entitled Consultation on Spectrum Licences for Advanced Wireless Services and Review of the Mobile Spectrum Cap Policy (Gazette Notice DGTP-007-03). The paper initiated the public consultation to open new spectrum in the 1710-2200 MHz range for AWS, with high mobility service capability as a main component. There was also a proposal made to expand the existing licensed PCS band.
On February 16, 2007, the Department announced in Canada Gazette notice DGTP-002-07, the release of a paper entitled Consultation on a Framework to Auction Spectrum in the 2 GHz Range including Advanced Wireless Services. Part I outlined allocation changes to the Canadian Table of Frequency Allocations for bands in the 1710-2200 MHz range, designated spectrum for AWS, expandedthe 1900 MHz PCS licensed bands, and finalized the allocation changes for the band 1670-1675 MHz. Part II of the paper initiated consultation on policy issues and the process for the selection of licences for exclusive access to spectrum bands in service areas across Canada. In response to that consultation, 60 comments and reply comments were received from interested parties by the closing date of July 27, 2007.
On November 28, 2007, the Department released the Policy Framework for the Auction for Spectrum Licences for Advanced Wireless Services and other Spectrum in the 2 GHz Range (DGTP-007-07). Inestablishing the AWS Policy Framework, consideration was given to the comments received, the spectrum being auctioned, the current state of the Canadian wireless market and the broader telecommunications market in which wireless is an increasingly important segment. The decisions made in the AWS Policy Framework are finaland form the policy basis for the auction.
The Department released its Consultation on the Proposed Conditions of Licence to Mandate Roaming and Antenna Tower and Site Sharing and Prohibit Exclusive Site Arrangements (DGRB-010-07) which addressed specific conditions of licence for current licensees with respect to the implementation of measures from the AWS Policy Framework. The consultation proposed new wording of the conditions of licence, and provisions onthe operative conditions such as dispute resolution mechanisms and time frames relating to mandatory antenna tower and site sharing and mandated roaming. Following the close of the supplementary consultation, the final conditions of licence will be made public so that all those affected are aware of the changes prior to the deadline for auction applications.
The Department intends to move quickly to ensure there are no delays in the auction, which is expected to be held May 27, 2008. Details on the rules and procedures of the licensing process for the auction are laid out in the remainder of this document.
The Department makes no representations or warranties about the use of this spectrum for particularservices. Applicants should be aware that this auction represents an opportunity to become a licensee, subject to certain conditions and regulations. An Industry Canada auction does not constitute an endorsement by the Department of any particular service, technology or product, nor does a spectrum licence constitute a guarantee of business success. Applicants should perform their individual due diligence before proceeding as they would with any new business venture.
Departmental documents cited herein are available on Industry Canada's Spectrum Management and Telecommunications website athttp://www.ic.gc.ca/spectrum.
All enquiries should be addressed to:
Name: Howard Chatterton
Title:AWS Auction Manager
Address:Radiocommunications and Broadcasting Regulatory Branch
300 Slater Street, 15th floor
2. Technical Considerations
Details on the band plan and tiers can be found in the AWS Policy Framework, under the headings 'Frequency Blocks' and 'Geographic Tiers'. In summary, the Department will use the same basic block structure as used in the U.S. and described in Figure 1. Figure 1 also shows spectrum blocks B, C and D for the set-aside. The Department is adopting the use of Tier 2 and 3 service areas as described in Figure 2.
Figure 1: AWS Frequency Blocks and Set-aside
Description of Figure 1
This chart shows the general band plan for the AWS commercial mobile spectrum to be auctioned. Six blocks (namely, blocks A, B, C, D, E and F) in the frequency range between 1710-1755 MHz, paired with the same blocks in the frequency range between 2120-2155 MHz.
|A||1710-1720 MHz / 2110-2120 MHz||2×10 MHz||3||59|
|B||1720-1730 MHz / 2120-2130 MHz||2×10 MHz||2||14|
|C||1730-1735 MHz / 2130-2135 MHz||2×5 MHz||2||14|
|D||1735-1740 MHz / 2135-2140 MHz||2×5 MHz||3||59|
|E||1740-1745 MHz / 2140-2145 MHz||2×5 MHz||3||59|
|F||1745-1755 MHz / 2145-2155 MHz||2×10 MHz||3||59|
2.1 AWS: 1710-1755 MHz/2110-2155 MHz
2.1.1 TDD Operation in the AWS Bands
The Department will allow time division duplexing (TDD) operation in the band if proposed by operators; however, these systems will have to conform to the technical rules established for frequency division duplexing (FDD) operation — i.e. low-power transmissions in the lower sub-band, high-power transmissions in the upper sub-band, out-of-band emission limits, and power flux density limits for coordination purposes. Technical standards are currently being developed in consultation with the Radio Advisory Board of Canada (RABC) and will be published in Standard Radio System Plan 513.
2.1.2 Technical considerations in the AWS Bands
The Department is currently drafting technical standards (Standard Radio System Plan 513 and Radio Standards Specification 139 (RSS-139)) for the AWS band in consultation with the RABC. The SRSP will specify permissible e.i.r.p. (effective isotropic radiated power) limits for mobiles and base stations and the envelope of technical rules for TDD operation. With regard to domestic and international co-channel/adjacent area coordination, the Department will use the same process as it currently uses for the coordination of cellular and PCS systems. This process requires that licensees initiate and coordinate the deployment of systems. In the case of interference resulting from the operation of two AWS systems, licensees are expected to cooperate fully to resolve those conflicts through mutual arrangements. Coordination rules in place for cellular and PCS systems are well established and have been developed in consultation with the industry over the years. Adopting the same rules for the AWS bands received widespread support from respondents to the Consultation.
The Department also notes that as there are a number of systems that operate adjacent channels to the AWS bands, coordination may have to be carried out with these systems. Coordination requirements will be specified in the SRSP.
Radio Standards Specification 113 will provide standards for the certification of transmitters and receivers, including out-of-band emission limits.
2.2 PCS Extension Bands: 1910-1915 MHz/1990-1995 MHz
2.2.1 Technical Standards for the PCS Extension Band
The technical standards for the PCS band (SRSP-510) are currently being updated in consultation with the RABC to include PCS Extension bands 1910-1915 MHz and 1990-1995 MHz. SRSP-510 will provide information on permissible e.i.r.p. limits for mobiles and base stations. Also, as there are a number of systems that operate adjacent-channel to PCS bands, coordination may have to be carried out with these systems. Coordination requirements will be specified in the SRSP. Finally, the SRSP will specify requirements for the domestic and international coordination of cellular and PCS systems that use the same channels in adjacent areas. This process requires that licensees initiate and coordinate the deployment of systems. In the case of interference resulting from the operation of two PCS systems, licensees are expected to cooperate fully to resolve those conflicts through mutual arrangements.
RSS-133 provides standards for the certification of transmitters and receivers, including out-of-band emission limits.
2.3 The Band 1670-1675 MHz
2.3.1 TDD Operation in the Band 1670-1675 MHz
The Department will allow operators to choose whether to deploy FDD or TDD systems in the band. If operators decide to deploy FDD operations, they may use this 5 MHz block paired with another block acquired via auction, and use it for either base or mobile transmissions.
2.3.2 Technical Standards in the Band 1670-1675 MHz
The technical standards for the band 1670-1675 MHz (SRSP-514 and RSS-112) are currently being drafted by the Department in consultation with the RABC. SRSP-514 will provide information on permissible e.i.r.p. limits for mobiles and base stations, as well as coordination requirements for systems in adjacent blocks. Also, the standards will specify the requirements for domestic and international coordination between systems that operate co-channel in adjacent areas.
RSS-112 will provide standards for the certification of transmitters and receivers, including out-of-band emission limits.
3. Ministerial Authority
It should be noted that spectrum licences are subject to relevant provisions in the RadiocommunicationAct and the Radiocommunication Regulations. As a result, the Minister has the power to amend theterms and conditions of the licence and to suspend or revoke a radio authorization (paragraphs 5(1) and 5(2) of the Radiocommunication Act).
With respect to terms and conditions, paragraph 5(1) of the Act states that the Minister may
"…fix the terms and conditions of any such licence, certificate or authorization including, in the case of a radio licence and a spectrum licence, terms and conditions as to the services that may be provided by the holder thereof;"
Paragraph 5(2) of the Act further states:
- (2) The Minister may suspend or revoke a radio authorization
- (b) after giving written notice to the holder and giving the holder a reasonable opportunity to make representations to the Minister with respect thereto, where the Minister is satisfied that
- (i) the holder has contravened this Act, the regulations or the terms or conditions of the radio authorization,…
- (b) after giving written notice to the holder and giving the holder a reasonable opportunity to make representations to the Minister with respect thereto, where the Minister is satisfied that
Section 40 (Assignment of Frequencies) of the Radiocommunication Regulations also applies; itstates:
"The assignment of a frequency or frequencies to a holder of a radio authorization does not confer a monopoly on the use of the frequency or frequencies, nor shall a radio authorization be construed asconferring any right of continuing tenure in respect of the frequency or frequencies."
The full text of the Radiocommunication Act andrelated regulation may be viewed on the Department of Justice Canada's website.
4. Licence Conditions
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 Radiocommunication Regulations.
The following conditions will apply to licences for the AWS, PCS Expansion and 1670-1675 MHz spectrum bands.
4.1 Licence Term
The AWS licences will be issued for a 10-year term similar to other spectrum licences. At a minimum of 2 years before the end of this term, and any subsequent terms, the licensee may apply for licence renewal for an additional licence term of up to 10 years. AWS licence renewal will be subject to a public consultation process initiated in year eight. The nature and details of this process will be developed through a separate consultation to be initiated by the Department in the context of the Framework for Spectrum Auctions in Canada. The renewal process developed through that consultation may apply to all auctioned licences, including AWS.
The renewal process, which will form the basis of the follow-up consultation, will include consideration of:
- the extent of geographic coverage across the licensed area;
- whether there is interest in the licence from other parties;
- whether licence fees should apply for a subsequent licence term; and
- whether renewal in whole or in part supports the orderly development of radiocommunication in light of the policy objectives of the Telecommunications Act given known future factors, pressures and the spectrum environment.
Beyond consideration of the above factors, other reasons for non or partial renewal may include:
- a fundamental reallocation of spectrum to a new service is required;
- an overriding policy need or spectrum management concern arises;
- national security, treaty or other international obligations or requirements;
- a breach of licence condition;
- the spectrum has not been deployed, or not sufficiently deployed over the licensed area;
- whether there is interest from others for access to the spectrum; and
- other relevant factors which might be raised in the public consultation.
4.2 Licence Transferability and Divisibility
The licensee may apply to transfer its licence(s) in whole or in part (divisibility), in both the bandwidth and geographic dimensions. The Department may define a minimum bandwidth and/or geographic dimension (such as the grid cell Footnote 1 for the proposed transfer. Systems involved in such a transfer shall conform to the technical requirements set forth in the applicable standards mentioned in Section 2, Technical Considerations. Footnote 2
Licences acquired through the set-aside may not be transferred or leased to, divided among, or exchanged with companies that do not meet the criteria of a new entrant, for a period of 5 years from the date of issuance.
Departmental approval is required for each proposed transfer of a licence, whether the transfer is in whole or in part. The licensee must apply to the Department in writing. The transferee(s) must also provide an attestation and other supporting documentation demonstrating that it meets the eligibility criteria and all other conditions, technical or otherwise, of the licence.
4.3 Eligibility Criteria
A licensee must be eligible to become a radiocommunication carrier and as such, must comply on an ongoing basis with the eligibility criteria in section 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 more information, refer to Industry Canada's Client Procedures Circular 2-0-15, Canadian Ownership and Control (CPC-2-0-15), as amended from time to time.
4.4 Displacement of Incumbents
Licensees must comply with the transition policy set out in the Consultation on a Framework to Auction Spectrum in the 2 GHz Range Including Advanced Wireless Services, Part I, Section 3. Treatment of Incumbent Licensees. Furthermore, licensees should note the following:
- Industry Canada will retain oversight of the displacement process and will assist, where appropriate, affected fixed operators in identifying new replacement frequency assignments.
- In the event the AWS and PCS operators need to defer a notified displacement date, an amendment to the date should be identified to the Department as early as possible.
- Industry Canada will monitor the effectiveness of the spectrum policy provisions related to the displacement of fixed systems. In the long term, changes to these provisions and/or licence conditions may be made to ensure that the continued availability of spectrum for AWS and PCS systems is accomplished in the most efficient manner.
4.5 Radio Station Installations
While site-specific radio licences will not be required for each radio station, licensees must ensure that each radio station is installed and operated in a manner that complies with Industry Canada's Client Procedures Circular 2-0-03, Radiocommunication and Broadcasting Antenna Systems, Issue 4, effective January 1, 2008 (CPC-2-0-03), as amended from time to time.
4.6 Provision of Technical Information
When the Department requests technical information on a particular station or network, the information must be provided by the licensee to the Department according to the definitions, criteria, frequency, and timelines specified by the Department. For more information, refer to Client Procedures Circular 2-1-23, Licensing Procedure for Spectrum Licences for Terrestrial Services (CPC-2-1-23), as amended from time to time.
4.7 Compliance with Legislation, Regulations and other Obligations
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 the application materials are all true and complete in every respect. The licensees must use the assigned spectrum in accordance with the Canadian Table of Frequency Allocations and the stated spectrum policy. Footnote 3 Licensees may also be subject to, and must abide by, applicable provisions of other statutes and the rulings of other statutory bodies, such as the Canadian Radio-television and Telecommunications Commission (CRTC) or the Competition Bureau.
4.8 International Coordination
Licensees must comply with the current and future agreements established with other countries. While frequency assignments are not subject to site licensing, licensees may be required to furnish all necessary technical data to Industry Canada for each relevant site. However, it is expected that coordination will be carried out by licensees. Licensees will be encouraged to enter into mutually acceptable sharing agreements that will facilitate the reasonable and timely development of their respective systems. These agreements provide the basis for coordination in the U.S. border area.
4.9 Lawful Interception
Licensees using spectrum for circuit-switched voice telephony systems must, from the inception of service, provide for and maintain lawful interception capabilities as authorized by law. The requirements for lawful interception capabilities are provided in the Solicitor General's Enforcement Standards for Lawful Interception of Telecommunications (Rev. Nov. 95). These standards may be amended from time to time following consultation with Public Safety Canada and licensees. Licensees 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.
Applicants should be aware that a legislative package is being developed to ensure that law enforcement and national security agencies acting with lawful authority have effective access to communications and information. The Department continues to meet with Public Safety Canada and the Department of Justice on this initiative and will provide licensees with appropriate guidance until such time as any new legislation is enacted.
4.10 Research and Development (R&D)
All licensees must invest, as a minimum, 2% of their adjusted gross revenues resulting from their operations in this spectrum averaged over 5 years for the duration of the licence, in eligible research and development activities related to telecommunications. Eligible research and development activities are those which meet the definition of scientific research and experimental development adopted in the Income Tax Act. Adjusted gross revenues are defined as total service revenues, less inter-carrier payments, bad debts, third-party commissions, and provincial and goods and services taxes collected. As was the case in the 2.3/3.5 GHz auction processes, businesses with less than $5 million in annual gross operating revenues are exempt from R&D expenditure requirements.
To facilitate compliance with this condition of licence, the licensee should consult the Department's Guidelines for Compliance with the Radio Authorization Condition of Licence Relating to Research and Development, which is available on the Spectrum Management and Telecommunications website.
4.11 Implementation of Spectrum Usage
The Department will take into account the roll-out targets listed in Appendix C, both in considering eventual renewal of AWS licences as discussed in Section 4.1, Licence Term, and in considering any application from a national new entrant for extension of in-territory roaming beyond the initial 5 years as discussed in the AWS Policy Framework.
4.12 Annual Reporting
Licensees must submit an annual report for each year of the licence term indicating continued compliance with all licence conditions and including the following information:
- an update on the implementation of Advanced Wireless Services, Personal Communications Services and/or services in the band 1670-1675 MHz, including the number of hub and subscriber sites installed, type of service delivered (high-speed Internet, voice, etc.), level of service (data rate), number of subscribers, as well as the population covered;
- existing audited financial statements with an accompanying Auditor's Report;
- audited Statement of Research and Development Expenditures with an accompanying Auditor's Report (where licensees are claiming an exemption based on an adjusted gross revenue of less than $5 million, supporting financial statements must be provided); and
- a copy of any existing corporate annual report for the licensee's fiscal year with respect to the authorization.
The reports are to be submitted, in writing, to Industry Canada at the address below within 120 days of the licensee's fiscal year-end. Where a licensee holds multiple licences, the reports should be broken down by service area. Confidential information provided will be treated in accordance with section 20(1) of the Access to Information Act.
Manager, Wireless Networks
Radiocommunications and Broadcasting Regulatory Branch
300 Slater Street, 15th floor
4.13 Mandatory Roaming and Antenna Tower and Site Sharing and Prohibition of Exclusive Site Arrangements
On November 28, 2007, the Department released Canada Gazette notice DGTP-010-07. That notice sought input regarding the proposed conditions to implement the policies of mandatory roaming and mandatory antenna tower and site sharing, including the prohibition of exclusive site arrangements. Early in 2008 the final conditions of licence for mandated roaming and antenna tower and site sharing will be posted on the Spectrum Management and Telecommunications website.
5. Licensing Process
This licensing process is conducted in accordance with the Framework for SpectrumAuctions in Canada (October 2001). Licensees should also familiarize themselves with Client Procedures Circular 2-1-23.
The comments received in the consultation process indicated a general agreement with the Department's proposedsteps for licensing spectrum in the 2 GHz range including Advanced Wireless Services, Personal Communications Services and 1670-1675 MHz, in accordance with the general rules outlined in the Framework for Spectrum Auctions in Canada. Theprocess by which interested parties may apply to participate in the auction is outlined below.
5.1 Application Form
The application forms for participation in the auction can be obtained electronically from the Spectrum Management and Telecommunications website.
Please note that additional corporate documentation may be required as attachments to the applicationforms—refer to Appendix D (Checklist of Forms).
A summary of key dates associated with this licensing process is provided on page ii of this document, and on the Spectrum Management and Telecommunications website athttp://www.ic.gc.ca/eic/site/smt-gst.nsf/eng/sf08840.html. Interested parties are advised to check the website for updates to the schedule of events.
The policies, rules and definitions associated with this licensing process are set out in:
- this document;
- Policy Framework for the Auction for Spectrum Licences for Advanced Wireless Services and other Spectrum in the 2 GHz Range;
- Canada Gazette notice DGTP-002-07, Consultation on a Framework to Auction Spectrum in the 2 GHz Range Including Advanced Wireless Services, Part I;
- Canada Gazette notice DGRB-010-07, Consultation on Proposed Conditions of Licence to Mandate Roaming and Antenna Tower and Site Sharing and to Prohibit Exclusive Site Arrangements and resulting decisions; and
- any written amendment or supplement that may be issued by the Department.
5.2 Prohibition of Collusion
Applicants are prohibited from co-operating, collaborating, discussing or negotiating settlement agreementswith competitors, relating to the licences being auctioned or relating to the post-auction market structure, until the deadline for the final payment on high bids.
Prospective bidders will note that the auction application form contains a declaration that the applicant willbe required to sign certifying that the applicant has not entered into and will not enter into any agreementsor arrangements of any kind with any competitor regarding the amount to be bid, bidding strategies or theparticular licence(s) on which the applicant or competitors will or will not bid. For the purposes of this certification the word competitor means any entity, other than the applicant, its Affiliates or Associated Entities, which could potentially be a bidder in this auction based on its qualifications,abilities or experience.
Prospective bidders should note that "affiliate" for the purposes of this licensing process (defined byreference to "control in fact") differs from "affiliate" for the purposes of the Competition Act. As such, in order to avoid contravening section 47 of the Competition Act, a bidder who enters into such an agreement or arrangement with any one or more of its Affiliates may have to make the agreement orarrangement known to the Department at or before the time when any subsequent agreement or arrangement is made.
5.3 Participation in the Auction—Affiliates and Associated Entities
All bids must be from unrelated competitors in order to preserve the integrity of competitive bidding.Therefore only one member of an Affiliate relationship or Associated Entity will be permitted to become aqualified bidder. This is based on the principle that only competitors should be permitted to participate inthe auction. Affiliated and Associated Entities must, therefore, decide prior to the application deadlinewhich entity will apply to participate in the auction.
All affiliations or associations must be disclosed at the time of the application. Please note however thatany discussions or negotiations after the application deadline which create an association with competitors(i.e. any explicit or implicit agreement relating to the acquisition of the licences being auctioned or to thepost-auction market structure) during the auction process are prohibited and will be considered to be collusion. Any applicant who has formed such an Association will be disqualified from participating in the auction and may be subject to revocation of existing licences. Therefore all such contact with competitors must be suspended until the final deadline for payment on high bids.
An affiliate is defined as:
A person who controls the entity, or who is controlled by the entity or by any person who controls the entity. "Control" means control in any manner that results in control in fact, whether directly through the ownership of securities or indirectly through a trust, agreement or arrangement, the ownership of a bodycorporate or otherwise. Control in fact is the ongoing power or ability, whether exercised or not, todetermine or decide the strategic decision-making activities of an enterprise, or to manage or run theday-to-day operations of an enterprise.
"Affiliate", defined by reference to control in fact, differs from "affiliate" for the purposes of the Competition Act. Consequently in order to avoid contravening section 47 of the Competition Act, a bidder who enters into such an agreement or arrangement with any one or more of its Affiliates may have to make the agreement or arrangement known to the Department at or before the time when any subsequentagreement or arrangement is made.
5.3.2 Associated Entities
An associated entity is defined as:
Any entities who enter into any partnerships, joint ventures, agreements (including agreements in principle) to merge, consortia or any arrangements, agreements or understandings of any kind, eitherexplicit or implicit, relating to the acquisition of the licences being auctioned or relating to thepost-auction market structure, will be treated as Associated Entities. The existence of such agreements, arrangements or understandings must be disclosed in writing to the Department at the time of application and this information will be disclosed to other bidders and to the public. Changes made after theapplication deadline which create an Association with another applicant are not permitted, and anyapplicant who has formed such an Association will be disqualified from participating in the auction.
5.3.3 Presumption of Affiliate and Associated Entity Status
If a person owns, directly or indirectly, at least 20% of the entity's voting shares where the entity is abody corporate or where the entity is not a body corporate, at least 20% of the beneficial ownership in suchentity, this will result in a refutable presumption that the person controls the entity. A person may attemptto refute the presumption of an affiliate relationship by submitting an affidavit or declaration, signed by anofficer or other appropriate official, which sets out the specific ownership holdings of any person with a 20%or greater holding in the entity, affirms that the person does not control the entity, and sets out thereasons as to why the person does not control the entity. A copy of this affidavit will be made public. Suchan affidavit or declaration must also be accompanied by supporting documentation and copies of allarrangements, agreements, or understandings between the subject entities. Such materials should be filed aspart of the application materials, and in any event, no later than five business days after the publication ofthe qualified bidders. The Department reserves the right to request further information and to make its owndetermination regarding this matter.
In those cases where materials have been filed to refute a presumption of affiliate status, Industry Canadawill apply a "control in fact" test to determine whether or not the entity has satisfactorily demonstratedthat it is not affiliated with the other entity. Such determinations are done on a case-by-case basis. Inmaking its determination, Industry Canada will generally request and review the type of information listed inAttachment E of the Application Form, Declaration of Ownership andControl by Provisional Winners of Spectrum Licences in the 2 GHz Range Including AWS, PCS and the Band 1670-1675 MHz. The Department reserves the right to request additional information. For example, the Department will require the entity to submit the following types of documentation for itself and any related holding company: the incorporation documents; bylaws; details of shareholdings; shareholder agreements; details related to the election of directors and appointment of officers of the company; complete details on the financial structure of the company, information regarding relationships between the parties; and copies ofany agreements or arrangements which could affect whether the company or any related holding company are, orare not, controlled by another entity.
Any entity wishing to demonstrate why it should not be treated as an Associated Entity in the presence of theagreements, arrangements or understandings as outlined in Section 5.3.2 of thisdocument, must, as part of its submission, include evidence and set out the reasons as to why an associationdoes not exist. Such a submission must include a narrative, which will be made public, outlining the argumentsas to why an association does not exist. Supporting documentation, as well as copies of all arrangements,agreements, or understandings between the subject entities must also be provided to the Department. The Department reserves the right to request additional information in order to make its determination.
Should the entities fail to provide all the relevant information in a timely fashion to allow the Departmentto complete its determination, or if the Department is not satisfied five business days prior to the date setfor the mock auction that an association does not exist, then only one of those Associated Entities will bepermitted to become a qualified bidder in the same service area.
It should be noted that during the Department's review of the materials filed to rebut the presumptionof affiliate status, or to dispute the existence of an Associated Entity, the entities will be considered tobe competitors and will be subject to the prohibition of collusion rules outlined above.
To participate in the auction, all applicants must submit a completed application form 4 and financial deposit. In the interest of providing both the Department and other bidders with adequate information on the identity of all bidders, applicants are required to fully disclose the beneficial ownership for every entity that owns, directly or indirectly, 10% or more of the applicant's voting shares, non-voting shares, partnership interests, or any other beneficial interests, as the case may be. The Department will make this information available to the public prior to the auction, so that all bidders have knowledge of the real identity of the other bidders. This information will be used, along with other documentation submitted by applicants, to determine the type of relationship, if any, that may exist between entities.
5.4.1 Financial Deposit
In order to enhance the integrity of the auction, the Department requires that all bidders submit apre-auction financial deposit with their application to participate in the auction. The financial deposit is to be in the form of an irrevocable standby letter-of-credit. The elements required in a letter of credit and a sample letter-of-credit acceptable to the Department are provided in Attachment D of the Application Form.
The Department has established the pre-auction financial deposits based on the licences on which the applicant wishes to be eligible to bid. Each of the licences has been assigned a specific number of eligibility points ("points") that are proportionate to the population covered by the licence. One eligibility point is approximately equal to 100 000 in population per 5 MHz of spectrum. Refer to Appendix B, which provides the eligibility points and opening bids for each of the licences. The calculation of eligibility points is further described in Section 6.2.
The Department believes that it is appropriate to require bidders to submit a deposit to ensure that theintegrity of the auction is maintained. At the same time, however, the Department does not want todisadvantage those applicants who may only be interested in obtaining spectrum in a few areas. Therefore, theDepartment has decided that the financial deposit will be: $40 000 per eligibility point for the first300 points, and $140 000 per eligibility point requested thereafter.
The Department reserves the right to request additional financial deposits during the auction. This will bedetermined by considering such factors as the standing high bids on a licence and the bidding activity. Theadditional financial deposit will be based on a percentage, not exceeding 50%, of the standing high bids for alicence for a specified round. Requests for additional financial deposits will be announced to bidders aheadof their implementation. Bidders will be provided two full business days to submit their additional financialdeposits to the AWS Auction Manager (address provided in Section 1.2).
Financial deposit(s) will be returned to: any applicant not found to be a qualified bidder; any applicant that provides written notification to the Department of its withdrawal from the process prior to the auction's commencement; and any bidder whose eligibility is reduced to zero during the auction and that is notpotentially liable for any withdrawal penalties.
5.4.2 How to Submit the Application and Financial Deposit
The application form, the associated documents that may be required (as per the instructions provided on thevarious forms), and the financial deposit are to be physically delivered by 5:00 p.m., Eastern StandardTime (EST), , to the AWS Auction Manager (address provided in Section 1.2). The Department reserves the right, under exceptional circumstances, to accept applications and associated documentation after this deadline, but prior to publication of the list of applicants.
Upon receipt of the application and the associated documentation, the Department will send notification to theapplicant that the application materials have been received and confirming the amount of the deposit that hasbeen submitted. This notice does in no way mean that the application materials or the deposit have been approved.
If, prior to the application deadline, an applicant wishes for any reason to amend any of the forms it hassubmitted and/or submit a new irrevocable standby letter of credit, it may submit one or more amended formsand/or a new irrevocable standby letter of credit with an accompanying letter explaining that the enclosedform(s) and/or letter of credit are to replace the one(s) previously submitted. Any such amendments are to bephysically delivered to the AWS Auction Manager by 5:00 p.m. Eastern Standard Time (EST), .
Upon receipt of an amended form(s) and/or replacement irrevocable standby letter of credit, the Departmentwill send notification to the applicant that the amended form(s) and/or letter of credit have been received.The notification will state the amount of the new letter of credit that has been submitted. The initialirrevocable standby letter of credit will also be returned to the applicant. This notice will in no way meanthat the amended form(s) or the additional deposit have been approved.
Multiple letters of credit from one or more financial institutions will be permitted within reason. The Department will treat the financial deposit for an applicant as being the sum of the amounts of eachaccepted letter of credit. Each letter of credit must comply with the conditions laid out herein concerningletters of credit. No letter of credit shall have any conditions requiring the Department to draw on theletters in any particular order of priority, or requiring any letter to be drawn upon completely beforedrawing upon any other letter.
A list of all applicants will be made public via Industry Canada's Spectrum Management and Telecommunications website on . The publication of this list does in no way mean that these applicants have been approved as qualified bidders.
5.5 Bidder Qualification
The Department will begin to review the application forms (and any associated documents) and the accompanyingirrevocable standby letters of credit after the closing date for the submission of applications. In thisinitial review, the Department will identify any errors in the application forms or the letters of credit. Itwill also determine any additional information related to any Affiliate or Associated Entity of the applicant,if required.
Following the initial review period, the Department will provide applicants with an opportunity to correct anyerrors or inconsistencies in their application or letter of credit that have been identified by theDepartment, and will request the required additional information related to the Affiliates or AssociatedEntities, where applicable. The original applications may be returned to the applicant with a brief statementoutlining any discrepancy(ies) and/or omission(s), or requesting additional information. The applicant will be invited to resubmit the corrected form and/or the additional information and to physically deliver this to the Manager, Wireless Networks at the address provided in Section 4.12, by the date specified in the statement.
Applicants who do not comply with this request will have their application to participate in the auctionrejected. Applications that are rejected, including those for which an opportunity has been provided tocorrect errors or inconsistencies identified by the Department, but are still found to be deficient, will bereturned to the applicant with a letter indicating they have been rejected. The letter will outline thedeficiencies and will include the applicant's irrevocable standby letter of credit.
Those applicants who have submitted acceptable application materials, including the accompanying financialdeposit, will receive a Qualified Bidder Certificate and the necessary software, instructions, and codes toallow them to use the Department's automated bidding system. This includes encryption software that allows bids to be submitted securely over the Internet. Qualified bidders will also receive information on mockauctions and an online webcast presentation in the weeks following the application deadline, which will allowbidders to better familiarize themselves with the auction system. The date of the opening day of bidding isincluded in the Table of Key Dates.
A list of all qualified bidders, the licences for which they are eligible to bid, and their initial level ofeligibility points will be made public via Industry Canada's Spectrum Management and Telecommunicationswebsite, on the date noted in the Table of Key Dates.
5.6 Withdrawal of Application Forms
Applicants wishing to withdraw their application materials and have their irrevocable standby letters ofcredit returned may do so, without prejudice, by sending a written request to the AWS Auction Manager at the address provided in Section 1.2. This request is to be physically delivered to the AWS Auction Manager prior to 5:00 p.m. (EST) on the business day preceding the opening of the auction.
5.7 Change of Information
Only the Authorized Representative of the bidding company may notify the AWS Auction Manager of any material changes in the information submitted in application documents. Written notification must be sent by the Authorized Representative to the address provided in Section 1.2, within five business days of such change.
Should a qualified bidder wish to change his or her contact information, or the name of one or more of thedesignated bidders, the Authorized Representative may notify the AWS Auction Manager on his or her behalf.
A request to change a designated bidder should be made prior to the activation of the digital signature andencryption keys
5.8 Amendments and Supplements
Industry Canada may respond to questions clarifying the AWS Policy Framework.
The Department may also amend or supplement the auction rules and procedures contained in this document. Anysuch amendment or supplement will be published on Industry Canada's Spectrum Management and Telecommunicationswebsite and will be sent to all qualified bidders.
Written questions asking for clarification of rules or policies will be accepted until . Questions received by the deadline, along with the Department's written answers, will be made public by . These answers will be considered as clarification of the policies set out in the AWS Policy Framework, and as amendments or supplements to the rules set out in this document.
From time to time, the Department will also update the list of "frequently asked questions" (FAQ) on the website, however these questions and their responses are for information purposes only and will not form part of the official procedures.
5.9 Software Requirements
The Department's automated auction system features a user-friendly web browser interface. The auction will be run over the Internet and bids will be encrypted and digitally signed to ensure security and authenticity. Each entity that is qualified to participate in the auction may designate up to three individuals to submit bids on its behalf.
The results of each round will be accessible to bidders through the auction system. These results will also beposted on Industry Canada's Spectrum Management andTelecommunications website so that anyone who is interested may monitor the auction's progress. At theclose of a bidding round, the Auction Management System (AMS) automatically tabulates the bids for that round and within a few minutes posts the results for designated bidders to examine. General public availability of these results takes only a few minutes longer as results are transferred to Industry Canada's Spectrum Management and Telecommunications website. A bid tracking tool that can be used to analyze round results will be made available to the public. It is important to note, however, that the Department will not be providing any form of user support for the bid tracking tool.
To access and run the Department's auction software with maximum performance, the following platforms arerecommended.
(1) Use of one of the following web browsers and JVMs (Java Virtual Machine):
- Microsoft Internet Explorer 5.5-6.0 SP1/SP2 with Sun JVM 1.4.2/1.5, Microsoft JVM
- Netscape Navigator 7.0 with Sun JVM 1.4.2
- Mozilla FireFox 1.0 with Sun JVM 1.4.2
- Mozilla 1.7.2 with Sun JVM 1.4.2
(2) Run your choice of the preceding on one of the following Operating Systems:
- Microsoft Windows NT 4 SP4 and higher
- Microsoft Windows 2000 Professional Edition
- Microsoft Windows XP Professional edition SP1/SP2
(3) Access the Internet through a reliable connection to the Canadian Internet backbone via high-speed Internet connection.
6. Auction Design and Rules
6.1 Key Features of the Simultaneous Multiple-Round Ascending Auction (SMRA) Design
The auction will be run electronically over the Internet, and bidders will be able to participate remotely from their premises using a secure Internet connection. The key features of the SMRA auction that will be used are listed below.
- A related set of licences will be offered at the same time. Bidding is organized into a series of rounds. (The identities of all bidders, the licences on which they are qualified to bid, and their initial levels of eligibility points will be made public prior to the commencement of bidding.) Information on the bids placed by all bidders will be made available after each round.
- Opening bids are set by Industry Canada as outlined in Appendix B. The Department will state the exact level of an acceptable new bid. The new bid will typically be determined by raising the standing high bid by a pre-established bid increment. Bidders will only be able to choose whether or not to submit the new bid. This format allows rounds to be shorter and more frequent, because the mechanics of entering and checking bids are simpler, and because the prices never "jump" by unexpected amounts, thus making them more predictable. This also reduces the need for frequent executive oversight during the bidding, which saves overall costs.
- When two or more bids are submitted on the same licence in the same round, a tie occurs and the standing high bidder in the next round will be determined by a random selection process built into the auction software.
- A minimum pace of bidding in the auction is established by the "activity rule", which penalizes bidders who are inactive by reducing their "bidder eligibility points".
- The rounds continue until there is a round in the final stage in which no new bids, withdrawals, or proactive waivers are submitted (cessation of bidding). The standing high bidders on each licence on cessation of bidding will be deemed the provisional winners of those licences.
All the details of the auction format are discussed more fully below.
6.2 Bidder Eligibility Points
Each of the 292 licences has been assigned a specific number of eligibility points ("points") that are proportionate to the population covered by the licence. One eligibility point is approximately equal to 100,000 in population per 5 MHz of spectrum. Refer to Appendix B for a listing of the points for each licence and the population of each service area.
In their application each applicant must indicate the total number of "points worth" of licences on which they wish to bid in any round. This number defines a bidder's initial level of eligibility points and is also used to determine the financial deposit that must be submitted with the application. Bidder eligibility points may not be increased once the auction has started.
The Department will assign the same eligibility points for a 10 MHz licence in the AWS band as it will for a 10 MHz block in the PCS band, whereas eligibility points for a 5 MHz licence in the band 1670-1675 MHz will be half of those assigned for the AWS and PCS bands. Points have been established to provide bidders with maximum flexibility to transfer them among the available licences.
The financial deposit will be $40 000 per eligibility point for the first 300 points and $140 000 per eligibility point requested thereafter. Refer to Section 5.4.1 for further information on calculating financial deposits.
In the event that an applicant's requested level of points does not correspond with the amount of the deposit submitted, then that applicant's points will be determined by the value of the deposit submitted.
Bidder X wants to apply for the 10 MHz "C" licence, nation-wide. By consulting Appendix B, Tier 2, 'Eligibility Points' and 'Opening Bid' for 10 MHz-Block C and PCS-Block G, Bidder X determines she needs to acquire 620 eligibility points for the fourteen Tier 2 service areas. The financial deposit required is equal to $40 000 per eligibility point for the first three hundred (300) points, and $140 000 per eligibility point thereafter. Bidder X therefore prepares a financial deposit in the amount of $56 800 000 (300 × $40 000 + 320 × $140 000).
6.3 Auction Stages
There will be three stages in this part of the auction, each containing an unspecified number of bidding rounds (refer to Section 7, Second Phase of the Auction, for details). The auction will begin and continue in Stage One until bidding activity declines to a low level typified by three consecutive rounds in which new bids placed on licences represent ten (10) percent or less of the total points associated with all available licences. At that time, the Department will have the discretion to move to Stage Two. Bidders will be notified in advance of this decision, through the message function of the AMS. A similar decision will be made later in the auction to move to Stage Three.
Bidders are advised to check their required activity levels after a stage change has occurred.
6.4 Activity Rule
Bidders are defined as active on a particular licence in a given round if they either have the standing high bid from the previous round (and have not withdrawn that bid), or submit a new bid in that round. Bidders begin any round with "bidder eligibility points" that determine their maximum activity level for that round.
In Round 1, bidders' eligibility to bid is determined by the number of points acquired with their financial deposit (see Section 5.4.1). In subsequent rounds, bidders' eligibility to bid is determined by their activity level in the previous round. Therefore, if bidders wish to maintain their eligibility from the previous round, their activity level must correspond to a certain percentage of their eligibility points in each round. This percentage is called the "activity requirement", which will increase as the auction progresses, as follows.
- in Stage One, the Department expects the figure to be in the range of 70% to 80%;
- in Stage Two, the Department expects the figure will be increased to between 80% to 90%; and
- in Stage Three, the figure will be increased to 100%.
The precise figure for the initial activity level will be communicated to all qualified bidders well before the auction begins. A bidder may also use an "activity rule waiver" (described in Section 6.6), to maintain eligibility for a round.
If bidders fall short of the required activity level in any round, their eligibility point level will shrink proportionately, so that the total "points worth" of licences on which they may bid in the next round will be equal to their actual activity level in the current round, multiplied by the reciprocal of the required activity level (e.g. 1/0.7 in Stage One). It is important to note that where this calculation results in a required activity level that is not a whole number, the AMS will round this number up to the next highest integer to determine the minimum activity level required to remain eligible to bid on the same "points worth" of licences in the next round. Similarly, when determining the level of points for the next round, if the product of the actual activity level and the reciprocal of the activity level is not a whole number, then this number is rounded down.
It is also important to note that bidders will not add to their activity level by topping their own standing high bid on a licence, because they are already considered to be active on that licence by being the standing high bidder.
- Bidder X is seeking a national footprint and has 620 eligibility points. The auction is in Stage One, and the required activity level is 70%; which means Bidder X must bid on 434 points worth of licences to maintain full eligibility. Bidder X is already the standing high bidder on 450 points worth of licences, and therefore exceeds the required activity level without entering any new bids, and will maintain full eligibility (620 points) for the next round.
- Bidder Y has 2 400 eligibility points. The auction is in Stage Two, and the required activity level is 90%. To maintain this level of eligibility, Bidder Y must be active on 2 160 points worth of licences (2 400 points times 90%) in the current round. If Bidder Y is active on only 1 700 points worth of licences, then his/her eligibility in the next round will be 1 888 points (1 700 multiplied by the reciprocal of the required activity level and rounded down—i.e. 1 700 × 1/0.9).
- Bidder Z has 620 eligibility points. The auction is in Stage Three, and the required activity level is 100%. Bidder Z is active on 620 points worth of licences. In the next round, Bidder Z must bid on 620 points worth of licences (620 × 1/1.0).
6.5 Bid Increments
Bid increments, like activity rules, are used to hasten the auction's progress. To be acceptable, a new bid must be larger than the current standing high bid by the bid increment. Bid increments will be calculated both as a percentage of the standing high bid and in absolute terms of dollars per point and the larger of the two increments will be added to the standing high bid to determine the acceptable bid price for that round. The new bid price for that licence will be rounded up to the nearest three significant digits from the left.
Bid increments will vary with the auction stages. In Stage One, the percentage increment will be set at the higher of 15% of the standing high bid or the absolute increment which will be set at $2 000/eligibility point. In the later stages of the auction, the bid increment will diminish to allow bidders greater precision in their bids and to keep the auction moving forward at an acceptable pace. Contemplated changes to the bid increment levels will be announced to bidders well ahead of their implementation.
6.6 Activity Rule Waivers
Activity rule waivers (waivers) are designed to prevent bidders from losing eligibility points when, for example, they suffer from technical or communication problems, or some other internal issue that prevents them from satisfying the activity requirements in a given bidding round.
During the auction, if a bidder does not meet the required activity level, a warning message will appear, advising of this situation and notifying that the bidder may either submit more bids or a waiver to maintain full eligibility in the next round, or not submit bids or a waiver and accept a reduction in their eligibility to bid in further rounds.
The use of a waiver is also the default setting in the automated auction system. Thus, if technical problems prevent a bidder from accessing the auction system, a waiver will automatically be submitted on the bidder's behalf, and no reduction in eligibility will occur. If a bidder has used all available waivers, then the "use a waiver" option will not appear, and an automatic waiver will not be submitted on that bidder's behalf.
Each bidder will be given five waivers at the beginning of the auction. As the auction progresses, and the number of rounds per day increases, the Department may, at its discretion, award additional waivers to each bidder.
6.7 Proactive Waivers
Bidders will be able to submit "proactive" waivers to prevent the cessation of bidding. In Stage Three of the auction, when a round ends without any bids or withdrawals being submitted (see Section 6.12), bidders will be advised via the AMS that bidding will cease unless a proactive waiver is submitted. Bidders will be given the opportunity to submit a proactive waiver by calling an assigned telephone number within a specified time period.
All bidders who call within the specified time period to submit proactive waivers will have one of their waivers deducted, and the auction will continue with the next scheduled round. If no proactive waivers are submitted within the specified time period, no further bidding will take place.
6.8 Opening Bids
Opening bids have been established for all licences based on service area population, current licence fees for cellular and PCS licences, and the 2001 PCS auction results. Opening bids are listed in the tables provided in Appendix B.
The Department maintains the option of reducing opening bids for licences at any time to encourage bidding activity. Given that the second phase of the auction will deal with unassigned licences, the likelihood of reducing opening bids will be low. However, in the event such action is taken, the following procedure will be followed.
For set-aside spectrum, the opening bid values may be reduced only if bidding activity reveals a need to reduce opening bid values for non set-aside spectrum. Should the Department elect to reduce opening bid values, change to the opening bid values will be announced via the message feature of AMS, in the round in which licences are offered at the reduced opening bid value.
6.9 Withdrawal of Bids and Related Penalties
Bidders may withdraw their standing high bids but, to encourage meaningful bids and to ensure that no loss of revenue occurs as a result of such withdrawals, a bid withdrawal penalty corresponding to the potential loss of auction revenue caused by this withdrawal will be imposed.
If a bid is withdrawn from a licence that ultimately sells for less than the withdrawn bid, the withdrawal penalty will equal the difference between the withdrawn bid and the ultimate selling price.
In the case of multiple bid withdrawals on a single licence, at auction or in a subsequent licensing process, the withdrawal penalty will be calculated based on the sequence of the withdrawals and bids.
No withdrawal penalty will be assessed for a withdrawn bid if either the subsequent winning bid or any of the intervening subsequent withdrawn bids in the auction equals or exceeds the initial withdrawn bid. Thus a bidder who withdraws a bid will not be subject to a withdrawal penalty if there is a subsequent higher bid in this auction. If a higher bid is not submitted until a subsequent licensing process, the withdrawal penalty levied in this auction will be returned at that time.
To reduce the overall time of the auction, while not compromising efficiency, the Department will allow bidders to place new bids (and/or withdraw previously submitted bids) at the same time during a round, rather than having two distinct phases—one for bid submission and one for bid withdrawal— during each round. Note that if a bidder withdraws a bid on a licence in a round, the bidder is not considered to be active on that licence for that round and, therefore, unless bids are submitted on other licences, the bidder's eligibility to bid in subsequent rounds will decline.
When a standing high bid is withdrawn, and assuming that no new bids are submitted on that licence in that round, the status of standing high bidder on that licence will revert to Industry Canada, and the acceptable bid for the next round will be equal to the value of the withdrawn bid. If there is no bidding activity on that licence, then the Department reserves the right to reduce the required bid amount in a later round. The level of reduction will be determined by considering factors such as the stage of the auction and past bidding on that licence and similar licences.
In order to deter the potential misuse of withdrawals as a signalling mechanism, or a means of unduly delaying the cessation of bidding, the Department will impose an additional penalty on a bidder if that bidder withdraws standing high bids in more than five rounds of the auction. For the sixth and every additional withdrawn standing high bid, this penalty will be equal to the greater of: (a) 2% of the value of the withdrawn standing high bid; or, (b) $10 000, and will be in addition to the withdrawal penalty described above. This penalty will be assessed regardless of whether the ultimate selling price of the licence is above or below the withdrawn bid.
Standard Withdrawal Penalty:
Bidder X has made no withdrawals in the first seven rounds of the auction. In round 8, Bidder X withdraws a bid of $100 000 on Licence 2, which eventually receives a winning bid of $80 000. Since the ultimate winning bid for the licence is below the withdrawn bid, Bidder X owes a withdrawal penalty of $20 000.
Additional Withdrawal Penalty for Withdrawals in More Than Five Rounds:
Bidder Y withdraws five standing high bids over a series of rounds. The associated withdrawal penalties are calculated as the difference between the withdrawn bids and the subsequent winning bid for these licences, assuming the former is greater than the latter. Any subsequent withdrawals made by Bidder Y are then subject to an additional withdrawal penalty, equal to the maximum of 2% of the withdrawn bid or $10 000.
For example, if Bidder Y withdraws bids on licences worth $100 000 and $2 000 000, the additional withdrawal penalties would be $10 000 and $40 000 respectively. These penalties would be assessed regardless of the ultimate winning bids for these licences.
Multiple Withdrawal Penalty:
Bidder X bids $100 000 on a licence then withdraws the bid. Bidder Y subsequently bids $95 000 on the same licence then withdraws the bid. Upon cessation of bidding, Bidder Z is the high bidder with a bid of $85 000. In this case, Bidder X owes $5 000 ($100 000-$95 000) in withdrawal penalties, and Bidder Y owes $10 000 ($95 000-$85 000).
Bidder X bids $50 000 on a licence then withdraws the bid. Bidder Y subsequently bids $40 000 on this same licence, and later withdraws the bid. The licence receives further bids, whereby Bidder Z eventually bids $45 000, and subsequently withdraws the bid. Upon cessation of bidding, Bidder A is the high bidder, with a bid of $35 000. In this case, Bidder X owes $5 000 ($50 000-$45 000), and Bidder Z owes $10 000. No penalty is imposed on Bidder Y, because after his/her bid, Bidder Z promised to pay more than Bidder Y, thus freeing Bidder Y from owing withdrawal penalties.
6.10 Back-up Procedures
Bidders are strongly advised to prepare contingency plans and back-up facilities and locations, including multiple means of accessing the Internet, in the event of technical difficulties at their primary bidding locations. As discussed above, all bidders will also receive a number of activity rule waivers, which will protect their eligibility point level for several rounds in case they are unable to access the auction system.
In the Designated Bidders Form (Attachment F of the Application Form), applicants are requested to designate up to three individuals who will have authority to place bids on their behalf. Each designated bidder will receive individual codes to participate in the auction. Having more than one individual designated as a bidder will strengthen back-up contingency plans for applicants in case of unforeseen problems. It is strongly advised that the designated bidders be identified in advance of the auction as the Department cannot guarantee that accounts will be set up in time if changes or additions are requested at the last minute.
As a last resort, bidders can call the Auction Centre to have departmental staff submit bids on their behalf. This is a limited back-up facility for bidders who experience technical difficulties which prevent them from accessing the auction system. Only the individuals listed as designated bidders will be able to use this option. The telephone number for the Auction Centre will be provided to the qualified bidders prior to the start of the auction.
Departmental resources available for this task will be limited, and hence, it is possible that bidders may have to wait to have their bids submitted. It is the responsibility of bidders wishing to use this option to call early enough in the round to ensure there is sufficient time for their bids to be submitted. Rounds will not be extended to accommodate these bidders. While the Department will make its best effort to submit bids on behalf of bidders, the Department assumes no responsibility if such bids are not submitted.
The departmental representative taking such calls will use a prepared script and bidders must adhere to this script in giving the required information to the departmental representative. All telephone transactions will be recorded.
The Department will prepare lists of one-time transaction code keys, which will be used to authenticate the bids transmitted by telephone. Each bidder will be issued a list of transaction code keys, each of which will be made up of eight randomly generated numbers. No two lists will be the same. Bidders will be bound by any bid made with their transaction code keys as agreed to in the Deed of Acknowledgement (refer to Attachment B of the Application Form).
6.11 Withdrawal from the Auction
A bidder may have its irrevocable standby letter of credit returned upon presentation of a written request to the AWS Auction Manager (address provided in Section 1.2) if:
- the bidder's points are reduced to zero during the auction;
- the bidder is not potentially liable for any penalties; and,
- the bidder is not the standing high bidder on any licence.
Upon receipt of such a request, the Department will confirm that the conditions outlined above have been met and will then return the irrevocable standby letter of credit to the bidder.
6.12 Cessation of Bidding
Under normal circumstances, bidding will cease in Stage Three of the auction, when a round concludes with:
(a) no bids or withdrawals being submitted; and,
(b) no proactive waivers having been submitted.
Entering and removing the same bid within a single round will not prevent the cessation of bidding.
In exceptional circumstances, and after all participants have been notified in advance, any round can be declared as the final round. Similarly, exceptional circumstances such as a natural disaster, may result in the auction being delayed, suspended or cancelled.
The standing high bidder on each licence upon cessation of bidding will be declared the provisional winner of those licences.
Licences that remain unsold upon cessation of bidding may be made available upon continuation of the auction in a second phase.
7. Second Phase of the Auction
If required, this auction process will continue in a second phase which will commence within one yearfollowing the cessation of bidding in the first phase. A Canada Gazette notice will be issued, marking the commencement of the second phase of the auction and inviting interested parties to submit applications for unassigned licences. The second phase of the auction will use the existing tiers, opening bid amounts, and eligibility points, but may vary in terms of the process and eligibility to participate.
7.1 Bid Payment
Within ten business days of the cessation of bidding, each provisional licence winner will be required to submit an initial payment with a value equal to twenty percent (20%) of the sum of its standing high bids plus one-hundred percent (100%) of the sum of any penalties that it has incurred. This payment will be non-refundable. If the provisional licence winner fails to make this initial payment within the specified period, then the provisional licence winner's irrevocable standby letter of credit will be drawn upon.
If the value of the provisional licence winner's irrevocable standby letter of credit, combined with any partial payment, is less than the required amount, then the provisional licence winner will forfeit its rightto have the licence(s) issued to it and the provisional licence winner will be subject to the applicable forfeiture penalties.
A payment for the remaining eighty percent (80%) of the total of the high bids will be due withinthirty business days of the cessation of bidding. If the provisional licence winner fails to make this final payment within the specified period, then the provisional licence winner's irrevocable standby letter of credit will be drawn upon. If the value of the provisional licence winner's irrevocable standby letter of credit, combined with any partial payment, is less than the required amount, then the provisional licence winner will forfeit its right to have the licence(s) issued to it and again, the provisional licence winner will be subject to the applicable forfeiture penalties.
A provisional licence winner who is in default of payment may not selectively forfeit on a subset of the licences on which it placed the high bid. If all required payments are not received, then the provisional licence winner will forfeit its right to have any AWS, PCS or 1670-1675 licence issued to it.
All payments must be made by certified cheque, bank draft, or wire transfer, payable to the Receiver General for Canada, drawn on a financial institution that is a member of the Canadian Payments Association.
It is important to note that these bid payments for the initial 10-year term are in lieu of any fees fixed for the radio authorization under the Radiocommunication Act or any other Act 5.
7.2 Payment of Penalties
Upon cessation of bidding, the sum of the standing high bids and the sum of any withdrawal penalties and other penalties incurred will be calculated for all bidders. If the final value of withdrawal penalties cannot be calculated at that time because one or more licences remain unsold, the full value of the withdrawn bid will be used as an interim proxy for the value of the withdrawal penalty.
Suppose that a bid of $1 000 000 was forfeited on licence X after the auction. The ultimate selling price of licence X will not be known until a subsequent licensing process and hence the value of the forfeiture penalty cannot be calculated until that time. The full value of the forfeited bid plus 3% ($1 030 000 in this example) would be used as the interim proxy forfeiture penalty until a subsequent licensing process. Bidders should note that a subsequent licensing process will not take place for at least a year.
For each bidder, one of the scenarios laid out below will apply.
- If the sum of a bidder's standing high bids equals zero and the sum of its penalties equals zero, then that bidder's irrevocable standby letter of credit will be returned.
- If the sum of a bidder's standing high bids equals zero and the sum of its penalties is greater than zero, then that bidder will be required to submit a payment for the full amount of the penalties within ten business days.
If payment for the full amount of the penalties is not received by the Department within ten business days, then the bidder's irrevocable standby letter of credit will be drawn upon for the amount in question. If the full amount of the irrevocable standby letter of credit, combined with any partial payment, is less than the required amount, then the difference will be owing and payable to the Receiver General for Canada 6.
If the sum of a bidder's standing high bids is greater than zero and the sum of its penalties is equal to zero, then that bidder will be required to: (1) submit payment with a value equal to twenty percent (20%) of the sum of the standing high bids within ten business days; and (2) submit a second payment with a value equal to eighty percent (80%) of the sum of the standing high bids within thirty business days.
If either of the required payments is not received by the Department within the specified time-frames, then the bidder's irrevocable standby letter of credit will be drawn upon for the amount in question. If the value of the irrevocable standby letter of credit, combined with any partial payment, is less than the required amount, then the bidder will forfeit its right to have the licence issued to it and will be subject to the forfeiture penalties discussed in Section 7.3.
If the sum of a bidder's standing high bids is greater than zero and the sum of its penalties is greater than zero, then that bidder will be required to: (1) submit payment with a value equal to twenty percent (20%) of the sum of the standing high bids plus one-hundred percent (100%) of the sum of the penalties within ten business days; and (2) submit a second payment with a value equal to eighty percent of the sum of the standing high bids within thirty business days.
If either of the required payments are not received by the Department within the specified time-frames, then the bidder's irrevocable standby letter of credit will be drawn upon for the amount in question. If the value of the irrevocable standby letter of credit, combined with any partial payment, is less than the required amount, then the bidder will forfeit the right to have the licence issued and will be subject to the forfeiture penalties discussed in Section 7.3.
Bidder X withdraws a bid of $150 000 on Licence 1, which is eventually won by Bidder Y for $130 000. Bidder X withdraws a bid of $120 000 on Licence 2, which remains unsold upon cessation of bidding. Upon cessation of bidding, Bidder X is the standing high bidder on Licence 3 for $250 000 and Licence 4 for $300 000. In a subsequent licensing process following the cessation of bidding, Licence 2 is sold for $90 000.
Upon cessation of bidding, the sum of Bidder X's standing high bids is $550 000 and the sum of Bidder X's penalties is $140 000 (withdrawn bid of $150 000 less final selling price of $130 000 equals penalty of $20 000 for Licence 1 and withdrawn bid of $120 000 equals interim proxy penalty of $120 000 for Licence 2).
Within ten business days, Bidder X must submit a payment for $250 000 (20% of the value of the standing high bids equals $110 000 and 100% of the value of the penalties equals $140 000). Within thirty business days of the cessation of bidding, a payment for an additional $440 000 is required.
After the subsequent licensing process for Licence 2 is held, the correct penalty for Bidder X can be calculated as $30 000. Bidder X is then refunded $90 000.
7.3 Bid Forfeiture and Related Penalties
Following cessation of bidding, bidders who have submitted the high bid on a licence but fail to comply with the specified payment schedule or, as outlined in Section 4.3, fail to come into compliance with the eligibility requirements of the Radiocommunication Regulations, will forfeit their right to the licence. Furthermore, those bidders will be required to pay a penalty in the amount of the difference between the forfeited bid and the eventual selling price of the licence (determined by a subsequent licensing process), if the eventual selling price is lower than the forfeited bid 7. If the licence is not sold in a subsequent licensing process, then the selling price will be deemed to be zero and the penalty will be calculated accordingly. An additional amount of the greater of (a) 3% of the original forfeited bid; or (b) $10 000 for each forfeited bid will be charged, regardless of the eventual selling price.
In the event of licence forfeiture, the bidder's irrevocable standby letter of credit will be drawn upon for the full amount of the interim proxy forfeiture penalty. If the interim proxy forfeiture penalty is greater than the full amount of the bidder's irrevocable standby letter of credit combined with any partial payment, or if the letter of credit has been returned before the forfeiture, then the difference will be owing and payable to the Receiver General for Canada 8.
Neither a bidder who forfeits on a licence, nor any of that bidder's Affiliates and Associated Entities, will be eligible to bid on it in any subsequent licensing process.
7.4 Eligibility Documentation
Bidders who are provisional licence winners will be required to submit documentation related to their compliance with the condition of licence, Eligibility Criteria—Ownership and Control discussed in Section 4.3 of this document. Provisional licence winners must submit The Declaration of Ownership and Control for Provisional Winners of Spectrum Licences in the 2 GHz Range, Including AWS, PCS, and the Band 1670-1675 MHz (see Attachment E of the Application Form), and all documents listed therein, within ten business days of the cessation of bidding.
The Department will review these documents expeditiously. The Department will then notify each provisional winner regarding compliance with the Canadian ownership and control requirements. In the event that a provisional licence winner does not, in the opinion of the Department, comply with the Canadian ownership and control requirements, the Department will require that the provisional licence winner make changes in order to become compliant. If the provisional winner fails to comply with the Canadian ownership and control requirements within sixty days after being notified by the Department of the required changes, then the provisional licence winner will forfeit the right to have issued any licences offered in this auction and will be subject to the penalties outlined in Section 7.3.
7.5 Issuance of Licences
Provisional winners of spectrum licences will have those licences issued to them on completion of the following: (1) payment of the sum of their standing high bids and the sum of their penalties, if any; and (2) a determination by the Department that the Canadian ownership and control requirements have been met. Depending on the complexity of the provisional winners' ownership and control structures and the responsiveness of the winners in providing any required additional documentation, this determination may take several months to complete.
1 Spectrum grid cells are defined in Service Areas for Competitive Licensing. (Return to content)
2 Note that this licence condition also allows for subordinate licensing as described in Client Procedures Circular 2-1-23, Licensing Procedure for Spectrum Licences for Terrestrial Services (CPC-2-1-23). (Return to content)
3The Canadian Table of Frequency Allocations.
The changes to the Canadian Table related to AWS can be found in the Consultation on a Framework to Auction Spectrum in the 2 GHz Range including Advanced Wireless Services. (Return to content)
4 The application form is available on the Spectrum Management and Telecommunications website. (Return to content)
5 As per subsection 5(1.3) of the Radiocommunication Act. (Return to content)
6 If a subsequent licensing process results in the calculated values of final withdrawal penalties being different from the interim proxy values, then the difference will be refunded to the bidders in question. (Return to content)
7 Suppose that a bid of $1 000 000 was forfeited on Licence X after the auction. The ultimate selling price of Licence X will not be known until a subsequent licensing process and hence the value of the forfeiture penalty cannot be calculated until that time. The full value of the forfeited bid plus 3% ($1 030 000 in this example) would be used as the interim proxy forfeiture penalty until a subsequent licensing process. (Return to content)
8 If a subsequent licensing process results in the calculated values of final forfeiture penalties being different from the interim proxy values, then the difference will be refunded to the bidders in question. (Return to content)