2024 Notice of Upcoming Auction of Residual Spectrum Licences

1. Through the release of this document, Innovation, Science and Economic Development Canada (ISED), on behalf of the Minister of Innovation, Science and Industry (the Minister), announces an upcoming auction of residual spectrum licences, consistent with decisions published in Canada Gazette Notice SLPB-003-21, Decision on a Streamlined Framework for Auctioning Residual Spectrum Licences (the Streamlined Framework).

2. This document (the Notice) sets out the parameters of the licences to be auctioned. This includes information related to the band plans, pro-competitive measures and conditions of licence for the licences made available through this process. Given the decisions outlined in this Notice, ISED will not hold a consultation for this upcoming auction of residual spectrum licences.

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

4. The Framework for Spectrum Auctions in Canada (FSAC) describes the general approaches that ISED uses to auction spectrum licences. The Streamlined Framework, published in 2021, acts as a complement to the FSAC in accordance with the policy objectives of the Telecommunications Act and the Spectrum Policy Framework for Canada. In the Streamlined Framework, ISED adopted a notice-based approach to minimize elements requiring consultation and facilitate access to residual licences, while establishing a predictable and consistent format for future auctions of residual licences.

5. The most recent auction of residual spectrum licences was conducted in 2023. Since that time, ISED has completed an auction for the 3800 MHz band, which resulted in additional licences remaining unallocated.

6. The Streamlined Framework specifies that it is only applicable to auction residual spectrum licences, defined as: spectrum licences that remain unallocated at the conclusion of an auction process; licences that have not been renewed; licences that were previously assigned but have been cancelled by ISED; and licences that have been returned to ISED by a licensee prior to the end of the licence term.

7. The following 225 unallocated licences will be available in this auction:

• one (1) 600 MHz licence in Newfoundland and Labrador (Tier 2)
• two (2) 600 MHz licences in Nunavut and the Northwest Territories (Tier 4)
• three (3) 2300 MHz licences in Northern Quebec, Saskatchewan and Nunavut (Tier 4)
• eighteen (18) 3500 MHz licences in Northern Ontario, Nunavut, the Northwest Territories and Yukon (Tier 4)
• two hundred and one (201) 3800 MHz licences in Newfoundland and Labrador, Prince Edward Island, Nova Scotia, Quebec, Ontario, Manitoba, Alberta and British Columbia (Tier 4)

8. In the Streamlined Framework, ISED specified that the tier sizes used in the initial auction process will generally be maintained when auctioning residual licences. In this auction, ISED considers it appropriate to maintain the original tier sizes of each licence. An interactive map and table illustrating service areas is available on ISED’s Service areas for competitive licensing web page.

9. Further details regarding the specific blocks available in this auction, including frequencies, prices and product numbers, are provided in annex A.

4.1 600 MHz band

10. Residual licences in the 600 MHz band reflect the band plan established in the Technical, Policy and Licensing Framework for Spectrum in the 600 MHz Band (the 600 MHz Framework). Three (3) 600 MHz licences will be available in this auction.

4.2 2300 MHz band

11. Residual licences in the 2300 MHz band reflect the band plan established in Policy and Licensing Procedures for the Auction of Spectrum Licences in the 2300 MHz and 3500 MHz Bands in 2003. Three (3) 2300 MHz licences will be available in this auction.

4.3 3500 MHz and 3800 MHz bands

12. Residual licences in the 3500 MHz band reflect the band plan established in the Policy and Licensing Framework for Spectrum in the 3500 MHz Band (the 3500 MHz Framework). Eighteen (18) 3500 MHz licences will be available in this auction.

13. Licences in the 3800 MHz band were auctioned in November 2023, and reflect the band plan identified in the Policy and Licensing Framework for Spectrum in the 3800 MHz Band (the 3800 MHz Framework). Two hundred and one (201) 3800 MHz licences remained unallocated at the conclusion of the auction and will be available in this auction.

14. Note that some licences in the 3800 MHz band are encumbered by fixed satellite service (FSS) earth stations that have been permitted to continue operating in satellite-dependent areas. In areas where more than 10% of the population is affected, two categories of licences were offered: “unencumbered” (denoted by the suffix “-0” in the product number) and “encumbered” (denoted by the suffix “-1” in the product number). For details on encumbrances, refer to annex D of the 3800 MHz Framework.

15. In the Streamlined Framework, ISED indicated that it would generally not consult on competitive measures before an auction of residual licences where the relevant competitive measures are maintained from the initial auction process or in cases where ISED elects to remove competitive measures for licences that have already gone unallocated in at least one previous auction of residual licences. The competitive measures for the licences available in this auction are therefore set out below.

5.1 600 MHz band

16. The 600 MHz auction included a set-aside of 30 MHz in each service area, which was maintained during the most recent auction of residual licences in 2023. Eligibility to bid on set-aside spectrum was limited to those registered with the Canadian Radio-television and Telecommunications Commission (CRTC) as facilities-based providers that were not national incumbent service providers as defined in the 600 MHz Framework, and that were actively providing commercial telecommunications services to the general public in the relevant Tier 2 service area of interest, effective as of the application date to participate in the 600 MHz auction.

17. Given that the available licences remained set-aside and went unallocated in the 2023 residual auction and that the set-aside transfer restrictions are set to expire in 2024, ISED is lifting the set-aside eligibility requirements for these licences, making them available to all qualified bidders.

5.2 2300 MHz band

18. Residual licences in the 2300 MHz band will not be subject to any pro-competitive measures as previous pro-competitive measures have expired. The licences in this band will be available to all qualified bidders.

5.3 3500 MHz band

19. The 3500 MHz auction in 2021 included a set-aside determined by the amount of spectrum available in a given service area. For tiers containing a large population centre (or large urban population centre as defined by the 2016 Census), the set-aside was equal to the lesser of 50 MHz or all blocks available in the tier. For tiers without a large population centre, 50 MHz was set-aside in service areas with at least 50 MHz available. No blocks were set-aside in tiers without a large population centre where less than 50 MHz of spectrum was available. Eligibility to bid on set-aside spectrum was limited to those registered with the CRTC as facilities-based providers that are not national mobile service providers as defined in the 3500 MHz Framework, and that are actively providing commercial telecommunications services to the general public in the relevant Tier 2 service area of interest, effective as of the date of application to participate in the 3500 MHz auction.

20. Blocks that were set-aside in the 3500 MHz auction remained set-aside in the auction of residual spectrum licences in 2023. In this auction, ISED is lifting the set-aside eligibility requirements on all set-aside licences that remain unallocated, namely nine (9) licences available in service areas 4-170, 4-171 and 4-172, and is making these licences available to all qualified bidders.

21. Nine (9) other 3500 MHz licences have been returned to ISED. They will be auctioned, including two (2) licences in 4-099 Elliot Lake, two (2) partial licences in 4-169 Dawson Creek and five (5) sub-divided licences in 4-171 Nunavut. Information on the sub-divided licences is available on ISED’s 3500 MHz Spectrum Licence Maps web page. Given that these returned licences were not set-aside in the 3500 MHz auction, these licences will be available for bidding to all qualified bidders.

5.4 Cross-band cap for the 3500 MHz and 3800 MHz bands

22. Spectrum in the 3800 MHz band was not subject to set-aside eligibility requirements. Instead, the 3800 MHz Framework established a pro-competitive measure in the form of a cross-band cap that limited the total of a licensee’s 3500 MHz and 3800 MHz spectrum holdings to 100 MHz for a period of five years starting from the initial licence issuance date of the 3800 MHz licences. The 3500 MHz and 3800 MHz licences available in this auction will remain subject to this cross-band cap.

23. In service areas where a licensee already holds 3500 MHz and/or 3800 MHz licences equal to or in excess of this cap, the licensee will not be eligible to bid for additional licences in either of the two bands unless these additional licences are in the same blocks and service areas as the licensee’s existing holdings. In other words, submitting bids for partial licences in blocks where the licensee holds the remaining portion of the block would not count for the purposes of the spectrum cap.

24. All 3500 MHz and 3800 MHz licences held by a licensee count toward the cross-band cap. This includes partial licences, licences encumbered by existing grid-cell licences and protected grid-cell licences. Note that the cross-band cap also includes all licences held by any affiliate of a licensee (see sections 10.1 and 10.2 for the definitions of affiliated and associated entities). Subordinate licences will not count towards the subordinate licensee’s cross-band spectrum cap provided the primary licensee and the subordinate licensee demonstrate to the satisfaction of ISED that they will be separately and actively providing services to customers in the applicable licence area using the licensed spectrum.

25. For the information of all licensees, ISED has published a current list of existing holdings in the 3450-3900 MHz frequency range.

26. As indicated in section 8.1 of the 3800 MHz Framework, in addition to the existing conditions for 3500 MHz licences, ISED will amend the licence condition on transferability, divisibility, and subordinate licensing of all 3500 MHz licences by adding text related to the cross-band cap at the same time the 3800 MHz licences are issued.

5.5 Moratorium on transfers of licences between 3450 MHz and 3900 MHz

27. To support the administration of the auction and provide potential applicants with clarity on the licences available in the auction, ISED is instituting a moratorium on requests to transfer licences in the range of 3450-3900 MHz, effective as of the publication of this Notice.

28. The moratorium does not apply to requests for transfers that meet the criteria for a licence exchange, as defined in section 5.3 of the 3800 MHz Transition Manual and Licence Exchange Process for Flexible Use Licensees in the 3500/3800 MHz Bands. However, during the moratorium, ISED will not be accepting requests from licensees to exchange existing licences with licences in ISED inventory.

29. The moratorium will remain in place until the application deadline indicated in the Table of Key Dates. After the list of auction applicants has been published, the moratorium will no longer apply to transfers where neither the licensee nor the proposed transferee are participating in the residual auction. In cases where either the licensee or the proposed transferee is a participant in the auction, the moratorium will remain in place until the publication of the provisional results. Note that the terms “licensee,” “proposed transferee,” and “participant” include all affiliates, agents or representatives of those entities.

30. Licences are subject to the relevant provisions in the Radiocommunication Act and the Radiocommunication Regulations. The Minister continues to have the power to amend the terms and conditions of spectrum licences pursuant to paragraph 5(1)(b) of the Radiocommunication Act, and may do so for a variety of reasons, including furtherance of the policy objectives related to the band.

31. In the Streamlined Framework, ISED specified that it will generally not consult on the applicable conditions of licences when they align with the conditions established in the initial licensing framework for those licences or when they have been amended to align with the results of another consultation process. ISED will not be consulting on the conditions of licences for this auction as all available licences will be subject to conditions that are consistent with the initial licensing frameworks or to conditions that have been recently amended.

32. For residual licences, the “initial licence issuance date” in the conditions of licence is the date residual licences are issued following this auction process. This is the date that will be used to determine timelines for all deployment requirements specified in the relevant conditions of licence for each band with the exception of the final deployment requirement, which will become an end-of-term requirement.

33. Furthermore, consistent with the decisions established in the Streamlined Framework, the expiration date of all residual licences available in this auction will be aligned with the expiration date of existing licences that have been issued for the band. Note that aligning the expiration date of licences within the same bands will require residual licensees to meet the end-of-term deployment requirement at the same time as licensees who obtained their licences through the initial auction process or in accordance with the conditions of licence established in the relevant renewal decision.

34. ISED may update the published conditions of licence to clarify the conditions of licence for residual licences issued through this auction. Any updates will not impact licences obtained outside of this auction process.

35. As indicated in the original licensing frameworks, at the end of the term, licensees will have a high expectation that a new licence will be issued for a subsequent term through a renewal process unless a breach of licence condition has occurred, a fundamental reallocation of spectrum to a new service is required, or an overriding policy need arises. ISED is of the view that the amount of time provided to meet the end-of-term deployment requirements is sufficiently distant to not disadvantage residual licensees.

6.1 600 MHz band

36. Conditions of licence for spectrum in the 600 MHz band were established in the 600 MHz Framework, and maintained in the most recent auction of residual spectrum licences in 2023. These conditions, including licence term, deployment requirements and other conditions, can also be found in P1 — 600 MHz Spectrum Licences issued via the 2019 Auction.

37. The expiration date of residual 600 MHz licences assigned through this auction will be aligned with the expiration date of the licences issued following the initial 600 MHz auction process in 2019 and the residual auction in 2023 (May 26, 2039). Note that this means residual licensees must meet the 20-year deployment requirements established in table A3 of the 600 MHz Framework by the end of the term on May 26, 2039.

6.2 2300 MHz band

38. In January 2024, ISED published its Decision on the Spectrum Licence Renewal Process for Wireless Communication Services (WCS) Licences. Given that these amendments were established through public consultation, ISED will maintain the conditions specified in this decision for the residual 2300 MHz licences available in this auction. In line with this decision, three available 2300 MHz licences will have a licence term of 10 years from the date of issuance, with the expiration date indicated on the licence.

6.3 3500 MHz band

39. Conditions of licence for spectrum in the 3500 MHz band were established in the 3500 MHz Framework in 2021, and maintained in the most recent auction of residual spectrum licences in 2023. The licence conditions, including licence term, deployment requirements and other conditions, can also be found in L10 — 3.5 GHz Spectrum Licences issued via the 2021 Auction or Transition Process.

40. The expiration date of residual 3500 MHz licences assigned through this auction will be aligned with the expiration date of the licences issued following the initial 3500 MHz auction process in 2021 and the residual auction in 2023 (December 16, 2041). Note that this means residual licensees will need to meet the 20-year general deployment requirements established in annex F of the 3500 MHz Framework by the end of the term on December 16, 2041.

41. Treatment of existing users: As set out in SLPB-001-19, Decision on Revisions to the 3500 MHz Band to Accommodate Flexible Use and Preliminary Decisions on Changes to the 3800 MHz Band (the 2019 Decision), existing licensees are permitted to continue operating in absence of a formal displacement notice given by the Minister. Once a displacement notice has been issued, the licensee must deploy their system(s) in accordance with the submission plan provided to the Minister. This displacement process is set out in ISED’s 3500 MHz Transition Manual. Except as authorized by ISED as set out in the 2019 Decision, licensees will not be permitted to operate on a flexible-use licence in areas where they hold a fixed-use licence in this band.

6.4 3800 MHz band

42. Conditions of licence for spectrum in the 3800 MHz band were established in the 3800 MHz Framework. Licences assigned as a result of that auction process will be issued following the deadline for final payments on May 29, 2024.

43. ISED will maintain the conditions established in annex C of the 3800 MHz Framework for licences issued through this residual auction process. Residual licences in the 3800 MHz band will have a licence term of 20 years. However, ISED will align the expiration date of these residual licences to the expiration date of licences issued through the initial 3800 MHz auction process. The exact date, which will be in 2044, will be determined following the issuance of licences after the final payment deadline. Note that residual licensees must meet the 20-year general deployment requirements established in annex A of the 3800 MHz Framework at the same time as licensees assigned their licences through the 3800 MHz auction.

44. Treatment of existing users: As set out in SLPB-002-21, Decision on the Technical and Policy Framework for the 3650-4200 MHz Band and Changes to the Frequency Allocation of the 3500-3650 MHz Band (the 3800 MHz Repurposing Decision), existing wireless broadband service licensees are permitted to continue to operate in the 3650-3700 MHz portion of the 3800 MHz band, subject to the transition plan and moratorium established in sections 10.1.2 and 10.1.3 of the 3800 MHz Repurposing Decision.

45. Similarly, with the exception of the consolidated gateway sites in Weir, Quebec, and Allan Park, Ontario, the Government of Canada site in North Bay, and satellite-dependent areas where authorized earth station operations may remain and are protected from interference from flexible use licensees, FSS earth stations are permitted to continue to operate in the band until their transition deadline of March 31, 2025, as established in sections 10.2 to 10.4 of the 3800 MHz Repurposing Decision.

46. Coexistence requirements between flexible use operations in the 3450-3900 MHz band and transitioning licensees in the 3650-4000 MHz band are outlined in the 3800 MHz Transition Manual and Licence Exchange Process for Flexible Use Licensees in the 3500/3800 MHz Bands.

47. Reserve prices are the minimum amounts that will be accepted for each licence. For this auction, ISED will set the reserve prices equal to the opening bid prices established in the original licensing frameworks for the licences, as shown in annex A.

48. As indicated in the Streamlined Framework, ISED will generally use a sealed-bid auction with a second-price rule for auctions of residual licences while retaining the option to allow combinatorial bidding. Combinatorial bidding allows bidders to bid on packages of licences when there are complementarities or interdependencies between the licences.

49. In a sealed-bid auction, bidders simultaneously submit sealed bids on the licence(s) they are interested in so that no bidder knows the bids of any other participant.

8.1 Licences auctioned in one stage

50. Licences in service areas in the 3500 MHz and the 3800 MHz bands where only one block is available, and all licences in the 600 MHz and 2300 MHz bands, will be auctioned individually. These licences and their reserve prices are listed in table A2 of annex A.

51. Following the bid submission deadline, ISED will process the bids, determine the provisional winners and prices that these winners will have to pay, and provide this information to bidders. The bidders who do not win any licences will also be informed that their bids were unsuccessful.

52. Bids submitted for the licences in the 3500 MHz and 3800 MHz bands must satisfy the cross-band cap for the 3450-3900 MHz range. If a bid submitted by a bidder in a service area exceeds the cap, this bid will be ignored.

53. The bid amount for each licence must be a non-negative integer and cannot exceed $999,999,000. A bid for a licence must also be equal to or greater than the reserve price of the licence. To mitigate the possibility of a tie, bidders are encouraged not to bid in round figures. In a tie, the provisional winner will be determined by a pseudo-random number assigned to each submitted bid by ISED.

54. The licences auctioned on an individual basis will be awarded to the highest bidder for each licence. A provisional winning bidder will be required to pay the second-highest bid on each licence it won or the reserve price in the absence of other bids.

8.2 Licences auctioned in two stages

55. In this residual auction, there are 41 Tier 4 service areas in the 3500 MHz and the 3800 MHz spectrum bands where more than one block, or licence, is available. There is a high degree of similarity between blocks across these two bands within the same service area and the same level of encumbrance. There are also benefits in allowing bidders to submit bids on packages that include several blocks to explore potential complementarities of obtaining a larger amount of spectrum. As such, these blocks will be offered as generic licences and combinatorial bidding will be used to facilitate the efficient allocation of these blocks.

56. Generic licences are blocks of spectrum that are sufficiently similar and comparable in value to one another so that they can be offered as a single category in each service area. The use of generic licences simplifies the bidding process by enabling bidders to indicate the quantities of licences desired in each area instead of identifying specific licences. This greatly reduces the number of possible combinations of licences that bidders have to consider in placing their bids. Furthermore, using generic licences facilitates the assignment of contiguous blocks of spectrum to the extent possible.

57. The licences being auctioned in a combinatorial format and their reserve prices are listed in table A1 of annex A. Given the use of generic licences, they will be auctioned in two stages: an allocation stage and an assignment stage. In essence, this format will mimic the structure of the original 3500 MHz and 3800 MHz auctions, except that all stages will follow a sealed-bid format.

58. During the allocation stage, bidders will bid on a quantity of spectrum (number of generic 10 MHz blocks with the same encumbrance level) available within a unique service area and subject to the cross-band spectrum cap. Combinatorial bidding across different service areas will not be permitted. During the assignment stage, bidders who won generic blocks in the allocation stage will also have the option to bid on specific frequencies.

8.3 The allocation stage

59. In the allocation stage, bidders will submit sealed bids on packages of licences available within each Tier 4 service area subject to block availability and the cross-band spectrum cap. These are referred to as allocation bids. A package consists of a specific quantity of generic 10 MHz blocks in a product that a bidder desires to win. A product is defined as a combination of the service area and encumbrance level across the 3500 MHz and 3800 MHz bands. The information on boundaries and population associated with encumbrances can be found on ISED’s 3500 MHz Spectrum Licence Maps and 3800 MHz Spectrum Licence Maps web pages.

60. The bid amount for a package indicates the maximum amount a bidder is willing to pay to obtain the package. The amount a winning bidder will be required to pay for a package will be determined by the second-price rule, as described in section 8.4.

61. The bid amount for each package must be a non-negative integer and cannot exceed $999,999,000. A bid for a package must be equal to or greater than the sum of the reserve price for blocks in the package. Bidders are encouraged not to bid in round figures to mitigate the possibility of a tie. If more than one combination of valid bids has the same highest value, the tie will first be resolved by minimizing the quantity of unsold licences. If there is still a tied outcome, the tie will be broken by a pseudo-random number generator built into the allocation stage solver for the winner and price determination used by ISED for this auction.

62. Following the allocation stage bid submission deadline, ISED will process the bids, determine winners and prices that these winners will have to pay in the allocation stage and provide this information to bidders. The bidders who did not win any licences in the allocation stage will also be informed that their bids were unsuccessful.

63. For example, suppose there are four 10 MHz unencumbered blocks in a service area A in the 3500 MHz and the 3800 MHz bands, and Bidder 1 does not have any licences in these bands in this service area. Bidder 1 can submit bids for packages of one, two, three and four blocks in this service area. Suppose that another bidder, Bidder 2, already has eight 10 MHz blocks across the 3500 MHz and 3800 MHz bands in service area A. This bidder can submit bids for packages of one and two blocks in this service area.

64. Bidders do not need to submit bids for all packages available to them. In the example above, if Bidder 1 wants to obtain only two or four blocks in service area A and is not interested in one or three blocks, it has to submit two bids: one for two blocks and another for four blocks.

65. There are two service areas, 4-169 Dawson Creek and 4-171 Nunavut, where two products will be available for combinatorial bidding. In Dawson Creek, there will be encumbered product 4-169-1 in the 3800 MHz band (15 blocks) and a partial product 4-169-2 in the 3500 MHz band (2 blocks). In Nunavut, there will be a whole tier unencumbered product 4-171-0 (3 blocks) and a sub-divided product 4-171-3 (5 blocks). A combined maximum number of blocks in bids submitted by bidders with holdings in the 3500 MHz and the 3800 MHz bands in these two service areas will not be allowed to exceed the maximum number of blocks these bidders can obtain under the cap. Please refer to section 5.4 of this Notice for details of the cross-band cap application.

66. For example, suppose that Bidder 1 already has eight blocks of spectrum in Nunavut across the 3500 MHz and the 3800 MHz bands. This bidder can submit bids for one block in encumbered and unencumbered products or two blocks on either of these products. Bidder 1 will not be allowed to submit bids that may exceed the cap, for example, a bid for two blocks on an encumbered product plus a bid for two blocks on an unencumbered product. Bidders will be responsible for ensuring that their bids do not exceed the cap.

67. If any bids submitted by a bidder in a service area with one product exceed the cap, these bids will be ignored but bids in compliance with the cap will be accepted. If any combination of bids submitted by a bidder in a service area with two products exceeds the cap, all of this bidder’s bids in this service area will be ignored.

8.4 Winner and price determination in the allocation stage

68. The allocation prices will be determined from the set of allocation bids for the product. The allocation price is attributable to the total quantity of blocks allocated to a given bidder in a given product and not to individual blocks that comprise the package. Given the pricing rules, the allocation price will be equal to or less than the corresponding bid amount but cannot be less than the sum of the reserve price of blocks in the package.

69. The winning bids for each product will be calculated by determining the combination of bids that generates the highest sum for this product, with the bids in this combination being the winning bids. A bidder could win, at most, one of the bids it placed in each product. That is, a bidder can win only one package in a product.

70. As outlined in the Streamlined Framework, ISED will use a second-price rule to determine the prices that provisional winning bidders will be required to pay in the upcoming auction of residual licences. This results in each provisional winning bidder paying an amount that is sufficient to ensure that no other bidder in the auction was willing to pay more for the licence(s) they won.

71. More specifically, ISED will apply bidder-optimal core prices and use the adjusted Vickrey approach, referred to as “nearest Vickrey” (see annex B). This approach to determining second prices was used in previous combinatorial auctions conducted by ISED.

72. A reserve bid at the reserve price will be included in determining provisional winning bidders and the prices to be paid for each winning package in the allocation stage. In this process, it is as if ISED is a bidder in the auction, placing a bid on all licences at the reserve price. In a combinatorial auction, including a reserve bid for all licences ensures that the incremental value that a bidder would be prepared to pay for an additional licence is at least the reserve price of that licence. The reserve bids will not be treated as a package but as having been placed by different bidders. Therefore, in all instances where no other bidder in the auction was willing to pay for the same licences, the reserve prices noted in section 7 will be considered the second-highest bid (see annex C for bidding examples).

73. Bidders must consider the implications of the reserve bidder approach described above while submitting bids for multiple packages in the same product. Specifically, a bid for a package with a larger number of blocks must exceed a bid for a package with fewer blocks by the amount of the reserve prices associated with extra blocks in a large package.

74. For example, suppose there are two unencumbered blocks in a service area A in the 3500 MHz and 3800 MHz bands. The reserve price of one block in this product is $20,000. Bidder 1 submits two bids for this product: a bid for one block of $40,000 and a bid for two blocks of $50,000. There are no other bids for this product. Both bids submitted by Bidder 1 are valid as they exceed reserve prices for blocks associated with them ($40,000 > 1 × $20,000 and $50,000 > 2 × $20,000). However, a bid for two blocks cannot be a winning bid. This is because a bid for one block and a reserve bid will exceed a bid for two blocks ($40,000 + $20,000 = $60,000 > $50,000). Given that Bidder 1 submitted a bid for one block worth $40,000, its bid for two blocks must be equal to at least $60,000 to be a winning bid.

8.5 The assignment stage

75. After the conclusion of the allocation stage and ISED informing the bidders of their provisional results, winners will be invited to submit their bids for the assignment stage. These bids will determine the assignment of specific blocks.

76. All allocated blocks will be assigned in the same sealed bid assignment round. In each product, each winning bidder will be presented with a set of bidding options where the bidder has winnings from the allocation stage. There will be no assignment bids if a bidder wins all blocks in a product.

77. Provisional winning bidders do not have to place bids in the assignment stage if they do not have an assignment preference, as they are guaranteed the number of generic blocks they have won in the allocation stage. Each bidder has both a right and an obligation to obtain one of the frequency range options presented to it for each product where the bidder has winnings.

78. Recognizing that contiguous spectrum is generally more efficient, as a general rule, winners of multiple blocks in a given product will receive contiguous licences. For a given product, a bidder will be presented with all contiguous bidding options consistent with the number of blocks the bidder has won, regardless of the number of blocks won by other bidders. For example, a bidder that has won two blocks in a product with four blocks available, blocks W, X, Y and Z, will be presented with three bidding options: W.X, X.Y and Y.Z. The bidder might not be able to win some of its bidding options if they would preclude other bidders from a contiguous assignment in that product.

79. There will be an exception from the general rule outlined in the previous paragraph in four products where the available spectrum is not contiguous. These products are: 4-099-0 Elliot Lake, 4-109-1 Fort Frances, 4-160-0 Kamloops and 4-169-2 Dawson Creek. The bidders will be presented with assignment options in the products corresponding to these service areas, assuming no gap between available blocks. For example, in service area 4-160 Kamloops, available blocks are AR, AT, AU, AV and AW, while block AS is unavailable. A bidder that won three blocks in this product will have three assignment options: AR.AT.AU, AT.AU.AV and AU.AV.AW.

80. A bidder may specify a bid amount for each option for a given product. The bid amount must be a non-negative integer and cannot exceed $999,999,000. The auction system will treat the bid value as zero for any bidding option for which a bidder submits no bid. To mitigate the possibility of a tie, bidders are encouraged not to bid in round figures. Any ties will be broken by a pseudo-random number generator built into the assignment stage solver for the winner and price determination used by ISED for this auction in a two-stage process described in the next section.

8.6 Winner and price determination in the assignment stage

81. The assignment prices will be determined from the set of assignment bids for the product. The assignment price is attributable to the entire collection of blocks assigned to a given bidder in a given product and not to individual blocks that comprise the package. Given the pricing rules, the assignment price will be equal to or less than the corresponding bid amount and could even be zero.

82. For each product in each assignment area in a given assignment round, ISED will use a solver to identify the combination of specific assignments of licences that result in the highest bid amount while ensuring that each bidder is assigned one of the available options.

83. If the product has two or more unsold blocks, ties will be broken in two steps. First, the solver will determine whether the highest bid amount remains the same when all unsold blocks are assigned contiguously. If this is the case, the solver will select an assignment that achieves the maximum value where each bidder receives a contiguous assignment and all unsold blocks are assigned contiguously. Otherwise, the solver will select an assignment that achieves the maximum value where each bidder receives a contiguous assignment (but the unsold spectrum is not contiguous). All remaining ties will be broken by a pseudo-random number generator.

84. ISED will use a second-price rule to determine the prices to be paid by winning bidders in the assignment stage. More specifically, ISED will apply bidder-optimal core prices and use the “nearest Vickrey” approach to determine the assignment prices (similar to the approach described in annex B for the allocation stage). A separate assignment price will be determined for each product where the bidder has winnings.

85. The final price paid by a provisional winning bidder will be the sum of the price(s) in the allocation stage for all packages the bidder won, plus any associated assignment price(s).

86. This section sets out the general process for submitting an application to participate in the upcoming residual auction, the general requirements, and the rules that apply prior to, during and after the auction.

9.1 Auction timing

87. The schedule for the auction process, referred to as the Table of Key Dates, is available on ISED’s Spectrum management and telecommunications website. Items and time frames included in the schedule may be updated from time to time. Interested parties are advised to check the website regularly for any updates to the schedule of events.

9.2 Application to participate

88. To participate in an auction, all applicants must submit a completed application form, along with a financial deposit, details of the applicant’s beneficial ownership, information on any affiliations and associations as discussed in section 10 of this Notice, and other corporate documentation as required. ISED will publish the list of applicants on its website soon after the application deadline.

89. The application forms for participating in the auction will be available on request by email to spectrumauctions-encheresduspectre@ised-isde.gc.ca. Additional documentation may be required in support of the application forms.

9.3 Pre-auction financial deposits

90. In order to enhance the integrity of the auction, ISED will require that all bidders submit a pre-auction financial deposit with their application to participate in the auction.

91. The financial deposit must be equal to or greater than the reserve prices of licences on which bids are submitted. For products available through combinatorial bidding, the bids with the maximum quantity in each product will be counted to determine eligibility in terms of the submitted financial deposit. If the total amount of reserve prices of licences on which bids are submitted exceeds the financial deposit, all bids submitted will be rejected.

92. Financial deposit(s) will be returned to any applicant not found to be a qualified bidder, any applicant that provides written notification to ISED of its withdrawal from the process prior to the auction’s commencement, and any bidder that fails to win a licence during the auction.

9.4 Submissions

93. In the interest of providing ISED and other bidders with adequate information on the identity of all bidders, each applicant is required to fully disclose the beneficial ownership for every entity of which it 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. Applicants are required to disclose any explicit or implicit arrangements or agreements where financing, security or guarantees have been, or may be, provided to the applicant or any of its affiliates, by another likely applicant or its affiliates, relating to the acquisition or use of any spectrum licences being auctioned in processes. Associated entities wishing to participate separately in this auction are required to disclose the names of their associated entities within their application, and to provide narratives describing all key elements and the nature of the association regarding the acquisition of the spectrum licences being auctioned and the post‑auction relationships of said entities. A list of applicants, their beneficial ownership information and the narrative on any associated entity relationships will be made available on ISED’s Spectrum management and telecommunications website, prior to the auction, so that all bidders have knowledge of the identity of the other bidders. All other application material and other material requested by ISED will be kept confidential. Applicants are not permitted to change their beneficial ownership during the period beginning 10 days prior to the sealed bid deadline and ending once the provisional results have been announced by ISED.

94. Entities are encouraged to approach ISED at least two weeks prior to the application date if seeking guidance or a predetermination as to whether their arrangement or proposed arrangement would be considered to give rise to a finding of association. Any guidance or predetermination will not constitute a binding decision; however, potential applicants may benefit from an early opportunity to approach ISED with their proposed arrangements.

95. Applicants must also provide a certificate of incorporation or other applicable documentation to demonstrate that they are eligible to hold a licence under section 9 of the Radiocommunication Regulations. For example, corporate applicants must provide a copy of their certificate of incorporation or similar documentation, partnerships must provide an up-to-date partnership agreement, and individuals must provide a copy of their passport or other applicable documentation as described in section 9 of the Radiocommunication Regulations.

9.5 Process to submit applications and financial deposit

96. The application forms, the associated documents (as per the instructions provided on the application forms), and the total pre-auction financial deposit are to be delivered to the Manager, Auction Operations (address provided in the residual auction application form), by the date specified in the Table of Key Dates. ISED reserves the right, under exceptional circumstances, to accept additional documentation after the deadline, but prior to the publication of the list of applicants. Applications that are received without the total financial pre-auction deposit by the date specified will be rejected.

97. Microsoft Teams (MS Teams) must be used for the electronic submission of application forms and associated documents, sealed bid submission forms and to send confidential messages to ISED during the auction process. Private auction MS Teams will be set up for each auction applicant by the Manager, Auction Operations, in advance of the application deadline.

98. Upon receipt of the application and the associated documentation, ISED will send a notification to the applicant, advising that the application materials have been received. This notice will in no way mean that the application materials or the deposit have been approved.

99. The financial deposit must be in the form of a physical certified cheque, bank draft, or money order; electronic wire transfer; or a physical irrevocable standby letter of credit, payable to the Receiver General for Canada, drawn on a financial institution that is a member of the Canadian Payments Association. The elements required in a letter of credit, as well as a sample letter of credit acceptable to ISED, will be provided as part of the application forms. Multiple letters of credit (or other forms of payment) from one or more financial institutions will be permitted within reason. ISED will treat the financial deposit for an applicant as being the sum of the amounts of each accepted letter of credit, certified cheque, bank draft, money order or wire transfer. Each letter of credit must comply with the conditions laid out herein concerning letters of credit. No letter of credit shall have any conditions requiring ISED to draw on the letters in any particular order of priority, or requiring any letter to be drawn upon completely before drawing upon any other letter. If a qualified bidder does not become a provisional licence winner, the financial deposits submitted in the form of a letter of credit will be returned. Refunds of deposits submitted in the form of a certified cheque, bank draft, money order or wire transfer will likely take longer (perhaps several weeks longer) than a refund submitted by way of a letter of credit, as a cheque from the Receiver General for Canada will need to be processed.

100. If, prior to the application deadline, an applicant wishes for any reason to amend any of the forms that it has submitted and/or its financial deposit, it may submit one or more amended forms and/or financial deposit with an accompanying letter explaining that the enclosed form(s) and/or financial deposit are to replace the one(s) previously submitted. Any such amendments are to be received by the Manager, Auction Operations, by the receipt deadline for applications to participate in the auction.

101. Upon receipt of an amended form(s) and/or financial deposit, ISED will send a notification to the applicant that the amended form(s) and/or deposit have been received. The notification will state the amount of the new deposit that has been submitted. Where the financial deposit is in the form of an irrevocable standby letter of credit, the initial irrevocable standby letter of credit will also be returned to the applicant where applicable. Where the financial deposit is in a form other than an irrevocable standby letter of credit, any partial reimbursement of the financial deposit may take several weeks.

102. A list of all applications will be made public on the Auctions section of ISED’s Spectrum management and telecommunications website. The publication of this list in no way means that the applicants have been approved as qualified bidders.

9.6 Bidder qualification

103. ISED will review the application forms (and any associated documents) and the accompanying financial deposit after the closing date for the submission of applications. In this initial review, ISED will identify any errors in the application forms or financial deposit. Applications that are received without the appropriate deposit by the application deadline will be rejected.

104. Following the initial review period, ISED will provide applicants with an opportunity to correct any errors or inconsistencies in their application, and will request any additional information related to affiliated or associated entities if required. A copy of the original applications may be returned to the applicant with a brief statement outlining any discrepancies and/or omissions, or requesting additional information. The applicant will be invited, in writing, to resubmit the corrected form and/or the additional information and to electronically deliver this to the Manager, Auction Operations, via MS Teams, by the date specified in the written statement.

105. Applicants that do not comply with this request will have their application to participate in the auction rejected. Applications that are rejected, including those for which an opportunity has been provided to correct errors or inconsistencies identified by ISED but are still found to be deficient, may be returned to the applicant outlining the deficiencies, along with the applicant’s deposit.

106. Those applicants that have submitted acceptable application materials, including the accompanying financial deposit, will receive a confirmation letter confirming that they are considered a qualified bidder.

107. A list of all qualified bidders, along with information related to their beneficial ownership, affiliates and associated entities will be made public via ISED’s website, in accordance with the timelines stated in the Table of Key Dates. The financial deposit amounts will not be published prior to the auction as the information could provide an indication of bidding intentions. Sharing this information is strictly prohibited in accordance with the anti-collusion rules outlined in section 10.4. Qualified bidders will be sent all information and instructions required to submit their bids, including auction bid forms.

9.7 Withdrawal of application forms

108. Applicants wishing to withdraw their application materials and have their financial deposits returned may do so, without prejudice, by sending a written request to the Manager, Auction Operations, before 12:00 p.m. noon (EDT) on the business day preceding the receipt deadline for sealed bids for the allocation stage.

9.8 Change of information

109. The Auction Authorized Representative is the individual that is nominated by the applicant in its application to receive all documentation pertaining to this licensing process.

110. Only the Auction Authorized Representative of the applicant may notify the Manager, Auction Operations, of any material changes in the information submitted in the application documents. Written notification must be sent by the Auction Authorized Representative within five business days of such changes.

9.9 Submission of auction bids

111. Completed bid form(s), which include the bid amount for each licence for which the bidder is placing a bid(s), must be received by the Manager, Auction Operations, by the receipt deadline for each of the allocation and assignment stages of the auction. The amount of each bid must reflect the amount that the bidder is willing to pay for the associated licence(s) and frequency(ies). All bids must be in dollars only, not cents. No bids will be accepted after 12:00 p.m., EDT, on the receipt deadline for sealed bids for the allocation and assignment stages. Following the auction, ISED will publish a list of all bids received on its website.

9.10 Determination of provisional licence winners

112. Bids will be examined by ISED officials following the receipt deadlines for the allocation and assignment stages. To be considered valid for the allocation stage, a bid must be at least equal to the reserve price; the previously submitted deposit must be at least equal to the sum of the reserve prices of each licence being bid upon; the bid form(s) must be completed correctly; and the bid must be submitted by a qualified bidder. Where a bid is placed on a licence on which the bidder is not eligible to bid, that bid will be ignored. To be considered valid for the assignment stage, the bid form(s) must be completed correctly; and must be submitted by a qualified bidder.

113. The auction will be considered closed upon the publication of provisional winning bidder(s).

114. The following information will be made publicly available on ISED’s website following the conclusion of the auction process:

• the list of winning bidders, licences won, and the prices to be paid
• the list of all bids received in the auction, and the licence(s), if any, that were not assigned

9.11 Final payment

115. Each provisional licence winner will be required to submit 20% of its final payment within 10 business days following the publication of provisional licence winners. The remaining portion, 80% of the final payment, will be due within 30 business days of the announcement of the provisional licence winners. Failure by the winning bidder to make these final payments in a timely fashion will result in the licence not being issued, and the bidder will be subject to the applicable forfeiture penalty (see section 9.12). Final payments will be non-refundable. If the licence winner fails to make these payments within the specified period, then the provisional winner’s irrevocable standby letter of credit will be drawn upon.

116. 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.

117. These bid payments for the initial licence terms are in lieu of any fees fixed for radio authorization under the Radiocommunication Act or any other act.

9.12 Forfeiture penalties

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

119. 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, which will be the full amount bid for the licence(s) forfeited. 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 or has expired, then the difference will be owing and payable to the Receiver General for Canada.

120. A winning bidder that forfeits on a licence (or any of that bidder’s affiliated and associated entities) will not be eligible to bid on any subsequent licensing process for the related band.

121. In addition to forfeiture penalties, the applicant and/or its representatives may be subject to administrative monetary penalties under the Radiocommunication Act if auction rules set out in this Notice are breached.

9.13 Enforcement of auction rules

122. Applicants and/or their representatives who fail to comply with the requirements or rules set out in any section of this Notice or applicable Licensing Frameworks may be subject to one or more of the following depending on the circumstances:

1. the applicant may be disqualified from bidding or continuing to bid
2. the applicant’s bids may be deemed invalid
3. any and all licences issued to the applicant as a result of this auction may be revoked
4. the applicant may be subject to the appropriate forfeiture penalties as outlined in section 9.12
5. the applicant may be subject to administrative monetary penalties or prosecution under the Radiocommunication Act

123. This section describes the general rules relating to participation of affiliated and associated entities in order to ensure that each bidder is an independent bidder.

124. Affiliated entities will not be allowed to participate separately in the auction. Associated entities will only be allowed to participate separately if, following a review of their application, ISED is satisfied that their participation would not have an adverse impact on auction integrity. Applicants will be required to publicly disclose information about their beneficial ownership, affiliations and associations.

10.1 Affiliated entities

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

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

127. Applicants may provide information to ISED to rebut the presumption of affiliate status. Applicants must notify ISED in writing if they are rebutting the presumption and must file material that will enable ISED to review the question and make that determination. It is the responsibility of the applicant to file the appropriate material. Such material may include: copies of the relevant corporate documentation relating to both entities; a description of their relationship; copies of any agreements and arrangements between the entities and affidavits or declarations, signed by officers from the two entities, dealing with the control as outlined in the definition of “affiliate” above.

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

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

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

10.2 Associated entities

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

132. As in past auctions, the rules will allow prospective bidders to form a bidding consortium and to participate in the auction as a single bidder if they wish to coordinate their bids through a single bidder. In such a case, the eligibility rules will apply jointly in each licence area. Rules regarding communication between prospective bidders who are seeking to form a consortium are discussed further in section 10.6 below.

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

134. Eligibility to participate separately in the auction: Associated entities may apply to participate separately. Allowing associated entities which demonstrate that they are competitors in the market to bid separately would likely not have an adverse impact on the integrity of the auction provided that auction participants comply with the information disclosure and anti-collusion rules (see sections 10.3 and 10.4).

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

136. Bidders are reminded that the provisions of the Competition Act apply independently of, and in addition to, the Notice.

137. All entities participating in the auction will be subject to the same prohibition of collusion rules, as stated in this Notice.

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

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

1. associated entities’ intent and actions to provide services (coverage) in the area in which the sharing occurs
2. the level of investment, including in distribution, marketing and customer service, in order to acquire and serve customers
3. associated entities’ demonstration of separate presences in the marketplace

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

1. all agreements relating to the transfer of, use of and access to the bands available in this auction
2. business plans for the area in which the agreement(s) will provide access to spectrum
3. business and financial results, including investments and customer acquisition

141. ISED may request additional documentation to complete its assessment and may require that documents be certified by an officer of the company. Where associated entities are competing, each associated entity may provide its documentation separately on a confidential basis. The material related to the request, except for the narrative described in section 10.3 below, will remain confidential.

10.3 Auction integrity and transparency

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

143. Some examples of arrangements that would require disclosure include, but are not limited to, agreements to establish a joint network using spectrum licences in this auction that may be acquired by each of the entities, and agreements with respect to a joint backhaul network if they relate to the use of the licences being auctioned. Typical roaming and tower sharing agreements and other agreements, such as the purchase of backhaul capacity, would not cause entities to be deemed associated entities and hence need not be disclosed. Where a prospective bidder has previously attempted to form or has dissolved a consortium, that bidder must disclose this fact and indicate the other entities that were part of the consortium or negotiations thereto.

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

10.4 Prohibition of collusion and other communications rules

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

146. In order to maintain the integrity of the auction, bidders are prohibited from signalling, either publicly or privately, their bidding intentions or planned post-auction market structure related to the spectrum licences being auctioned. This includes, for example, comments or any communication with or via the media, other government departments, or government officials that do not have a mandated or delegated authority related to the auction process, including at the municipal, provincial, territorial and federal levels. An example would be making a public announcement regarding which licences the company intends to bid on or its rollout intentions.

147. Given that ISED is allowing the participation of some associated entities as separate bidders in this auction process, the prohibition of collusion rules are as follows:

1. All applicants, including affiliated and associated entities, are prohibited from cooperating, collaborating, discussing or negotiating agreements with competitors, relating to the licences being auctioned or relating to the post‑auction market structure, including frequency selection, bidding strategy and post‑auction market strategy, until after the public announcement of provisional licence winners by ISED.
2. Prospective bidders will note that the auction application forms contain a declaration that the applicant will be required to sign certifying that the applicant has not entered into and will not enter into any agreements or arrangements of any kind with any competitor regarding the amount to be bid, bidding strategies or the particular licence(s) on which the applicant or competitors will or will not bid. For the purposes of this certification, “competitor” means any entity, other than the applicant or its affiliates, which could potentially be a bidder in this auction based on its qualifications, abilities or experience.
3. Prospective bidders should note that the definition of “affiliate” for the purposes of this licensing process (defined by reference to “control in fact”) differs from “affiliate” for the purposes of the Competition Act. The provisions of the Competition Act apply independently of, and in addition to, the policies contained in this Notice.

10.5 Communication during the auction process

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

149. Prior to the auction, an applicant who wishes to participate separately in the licensing process but has approached another potential bidder to discuss a joint infrastructure build, a joint equipment purchasing agreement or a potential spectrum sharing agreement related to the spectrum being auctioned, such that communications that fall within the definition of associated entities have taken place, must disclose the nature of this association. Entities applying to participate separately are required to make a declaration that they have not entered into and will not enter into any agreements or arrangements of any kind with any competitor regarding the amount to be bid, bidding strategies or the particular licence(s) on which the applicant or competitor will or will not bid. In the case where discussions that contravene the prohibition of collusion rules have occurred, the entities would only be permitted to participate in the auction as one single bidder, or only one of the entities could participate.

10.6 Forming a consortium

150. If a consortium has been established, any entity involved in the discussions related to the formation of the consortium would no longer be eligible to participate separately in the auction. However, the entity participating in the auction would not be deemed to have contravened the collusion rules. In this case, the entities forming the consortium would no longer be deemed competitors for the purpose of the auction, and discussions regarding issues that would otherwise contravene the anti-collusion rules, such as bidding strategies, may then take place. However, each entity in the consortium would continue to be subject to the prohibition of collusion rules outside of the consortium itself.

151. Where potential bidders enter into negotiations toward forming a consortium, those communications may breach collusion rules and will also fall within the definition of making the entities associated. As noted in section 10.3, this association must be disclosed. In a case where consortium discussions are not successful, entities involved in these discussions will not be allowed to participate as separate bidders in the auction; only one of the entities could participate and that entity must disclose the existence and nature of the consortium discussions.

10.7 Discussion regarding beneficial ownership

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

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

• any change to the beneficial ownership of the applicant that provides a new party with a beneficial interest or which significantly alters the beneficial ownership structure is effected at least 10 days before the commencement of bidding
• the applicant informs the Minister immediately in writing of any change in beneficial ownership, which will be reflected in its published qualified bidder information on ISED’s Spectrum management and telecommunications website
• the applicant informs the Minister in writing in advance of any pending change in beneficial ownership that may enter the public domain via an announcement or by public release

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

10.8 Other communication rules

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

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

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

158. ISED will consider making unallocated licences available for licensing through an alternative process, which could include another auction or some other process. The timing and form of such a process will depend on the demand for remaining licences. ISED may conduct a public consultation should it consider it necessary.

159. ISED will accept written questions soliciting clarification of the rules and policies set out in this Notice from the date of publication up to the deadline specified in the Table of Key Dates. Written questions and ISED responses will be made available on ISED’s website. Questions of a similar nature and subject matter may be grouped and summarized. Questions regarding bidding procedures will be addressed in packages intended for qualified bidders, and will not be included in this clarification process unless they are deemed to be critical information for potential bidders requiring an immediate response. Applicants are encouraged to submit questions as soon as possible.

160. ISED may also amend or supplement any of the rules or procedures contained in this Notice. Any such amendment or supplement will be published on ISED’s website and will be sent to all qualified bidders.

161. All ISED publications related to spectrum management and telecommunications are available on the Spectrum management and telecommunications website.

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

Innovation, Science and Economic Development Canada
Senior Director, Spectrum Policy Branch
6th Floor, East Tower
235 Queen St
Ottawa ON     K1A 0H5

Telephone: 343-551-0539
TTY: 1-866-694-8389
Email: spectrumauctions-encheresduspectre@ised-isde.gc.ca

This annex lists all of the licences available in this auction of residual licences by the band, including product number, service area name, 2016 population, block details and reserve prices.

Table A1 lists the licences that will be auctioned using a combinatorial (package) format.

Table A2 lists the licences that will be auctioned individually.

1. ISED will use a second price rule to determine the prices to be paid such that the price for a provisional winning bidder will be at least the reserve price but no higher than the actual bid amount. Second prices are often referred to as Vickrey prices and represent the opportunity cost of the bidder winning a licence or a package. More specifically, ISED will apply bidder optimal core prices and use the “nearest Vickrey” approach in determining the prices.

2. The second or Vickrey price for each provisional winning bidder (known as “Bidder J” in this explanation) is calculated as follows. First, from the value of the winning combination, subtract Bidder J’s winning bid (value A). Next, recalculate the winning combination for the hypothetical situation in which all of Bidder J’s bids are excluded, as if Bidder J had not participated (value B). The Vickrey price for Bidder J is calculated as the value of the winning combination with all Bidder J’s bids excluded (value B) minus the sum of the winning bids for all bidders other than Bidder J (value A); that is, value B minus value A. This is the minimum amount that the winning bidder could have bid in order to still have won, given the bids of all other bidders.

3. For a combinatorial auction, Vickrey price(s) could depend on package bids and the reserve prices. In addition, with package bidding, an extra payment beyond the Vickrey prices is sometimes required due to interaction between overlapping bids. If an additional payment is required, the payment will be proportionate to the number of blocks in the bidder’s package.

4. The prices to be paid by the winning bidders for the combinatorial bidding in each product must satisfy the following four conditions:

1. First condition: The price for a winning bid must be greater than or equal to the reserve price(s) for the licence(s) included in the bid but not more than the dollar amount of the winning bid.
2. Second condition: The set of prices must be sufficiently high that no alternative bidder or group of bidders is prepared to pay more than any winning bidder or group of winning bidders. If only one set of prices meets the first and second conditions, this determines the prices to be paid.
3. Third condition: If more than one set of prices fulfils the first and second conditions, the set (or sets) of prices minimizing the sum of prices across winning bidders is (are) selected. If only one set of prices satisfies these three conditions, this set determines the prices.
4. Fourth condition: If more than one set of prices satisfies the first three conditions, the set of prices that minimizes the weighted sum of squares of differences between the prices and the Vickrey prices will be selected. The weighting is proportionate to the number of blocks in the bidder’s package. This approach for selecting among sets of prices that minimize the sum of prices across winning bidders is referred to as the “nearest Vickrey” approach.

5. These conditions characterize a unique set of prices such that each provisional winning bidder pays no more than the dollar amount of its winning bid and pays at least the reserve price(s). ISED staff will calculate the prices for the allocation stage in each product, where available, that meet the conditions outlined above.

6. The following is an example of how prices are calculated. This example is based on Spectrum Auction Design [PDF: 714 KB] by P. Cramton.

7. Suppose there are four bidders, 1, 2, 3 and 4, bidding for two blocks in a product where only two blocks are available. The following bids are submitted (“b” designates the bidder, and the figure in brackets indicates the number of blocks in a package):

• b₁{1} = $28
• b₂{1} = $20
• b₃{2} = $32
• b₄{1} = $14

8. The bids of the four bidders are represented in figure B1.

9. In this example, the highest value combination of bids would allocate one block to Bidder 1 and one block to Bidder 2, generating $48 in value. There is no other allocation that yields a higher value.

10. To calculate the Vickrey price for Bidder 1, its winning bid ($28) is subtracted from the value of the winning combination ($48), resulting in $20. Next, the winning combination of packages is recalculated for the hypothetical situation in which Bidder 1’s bids are excluded. The best assignment, excluding Bidder 1, assigns one block to Bidder 4 at $14 and one block to Bidder 2 at $20, resulting in $34. The Vickrey price for Bidder 1 is the value of the winning combination of packages with all of Bidder 1’s bids excluded ($34) less the sum of the winning allocation stage bids for all bidders other than Bidder 1 ($20); that is, its Vickrey price is $14 ($34 - $20).

11. Similarly, to calculate the Vickrey price for Bidder 2, its winning bid ($20) is subtracted from the value of the winning combination ($48), resulting in $28. Next, the winning combination of packages is recalculated for the hypothetical situation in which Bidder 2’s bids are excluded. The best assignment, excluding Bidder 2, assigns one block to Bidder 1 and one block to Bidder 4, resulting in a value of $42. The Vickrey price for Bidder 2 is the value of the winning combination of packages with all of Bidder 2’s bids excluded ($42) less the sum of the winning allocation stage bids for all bidders other than Bidder 2 ($28); that is, its Vickrey price is $14 ($42 - $28).

12. Hence, the Vickrey outcome is for Bidder 1 to pay $14 for one block and for Bidder 2 to pay $14 for one block. Total revenues with these payments are $14 + $14 = $28. As shown in figure B1, Bidder 1 can reduce its bid to $14 before being displaced by Bidder 4. Similarly, Bidder 2 can reduce its bid to $14 before being displaced by Bidder 4.

Figure B1: Example of calculating prices (in dollars)

13. However, these payments sum to $28, which is less than Bidder 3’s bid of $32 for two blocks. Therefore, Bidder 1 and Bidder 2 must split an additional payment of $4 ($32 - $28) to ensure that their combined payment is greater than that of Bidder 3, satisfying the condition that no other bidder or group of bidders was prepared to pay more for the licences in question. That is, Bidder 1 and Bidder 2 must collectively pay at least $32. The additional payment of $4 is split equally between the two bidders. Each bidder is, therefore, paying an additional $2 above its Vickrey price, with Bidder 1 paying $16 ($14 + $2) and Bidder 2 paying $16 ($14 + $2), as shown in figure B1.

14. As in the example above, two bidders won the same number of blocks; the additional payment of $4 is split equally between the two bidders. However, if bidders win a different number of blocks, the two bidders must split the extra payment proportionately to the number of blocks in their winning packages (the fourth condition).

C1: Example of a licence auctioned in one stage

The following examples illustrate different bidding scenarios, the provisional winning bid(s), and the price calculations for each.

Assume that three bidders are interested in the 3800 MHz band AW block in service area 4-001 St. John’s. Only one block is available in this service area across the 3500 MHz and the 3800 MHz bands, and it will be auctioned individually (no package bidding). Bidder 1 places a bid of $180,101, Bidder 2 places a bid of $167,627 and Bidder 3 places a bid of $250,125. Bidder 3 would be declared the provisional winner and must pay the second-highest bid value of $180,101.

C2: Example of allocation stage for licences auctioned in two stages

Suppose three bidders are interested in the 3800 MHz band licences covering service area 4-167 Prince George. Four blocks are available in this service area across the 3500 MHz and the 3800 MHz bands (blocks AH, AJ, AK and AL). These blocks will be auctioned in a combinatorial format. In the allocation stage, bidders can submit bids on packages of 1, 2, 3 or 4 blocks.

Bidder 1 submits one bid of $240,000 for a package of all four licences. Bidder 2 submits three bids: $50,000 for one block, $100,000 for two blocks and $200,000 for three blocks. Bidder 3 submits two bids: $60,000 for one block and $110,000 for two blocks. Considering the cap and pre-existing holdings, let us assume these bids are valid.

Bidder 2 would be declared the provisional winner for a package of three blocks, and Bidder 3 would be declared the provisional winner for one block, as the combination of their bids on these packages is higher than any other feasible combination of submitted bids.

To calculate the Vickrey price for Bidder 2, its winning bid ($200,000) is subtracted from the value of the winning combination ($260,000), resulting in $60,000. Next, the winning combination is recalculated for the hypothetical situation in which Bidder 2’s bids are excluded. The best allocation, excluding Bidder 2, grants all four licences to Bidder 1 at $240,000. The Vickrey price for Bidder 2 is the value of the winning combination with all of Bidder 2’s bids excluded ($240,000) less the sum of the winning bids for all bidders other than Bidder 2 ($60,000); that is, its Vickrey price is $180,000 ($240,000 - $60,000).

To calculate the Vickrey price for Bidder 3, its winning bid ($60,000) is subtracted from the value of the winning combination ($260,000), resulting in $200,000. Next, the winning combination is recalculated for the hypothetical situation in which Bidder 3’s bids are excluded. The best allocation, excluding Bidder 3, grants three licences to Bidder 2 at $200,000 and one licence to a reserve bidder (one licence remains unsold). The Vickrey price for Bidder 3 is the value of the winning combination with all of Bidder 3’s bids excluded ($248,000) less the sum of the winning bids for all bidders other than Bidder 3 ($200,000); that is, its Vickrey price is $48,000 ($248,000 - $200,000).

In some cases, the Vickrey price may not be high enough to ensure that no alternative bidder or group of bidders is prepared to pay more for the licences in question, so an additional payment above Vickrey prices is required. If such a payment is necessary, ISED will weigh the portion of the additional payment on the winning package sizes in terms of the number of blocks.

In this example, the total amount of Vickrey prices calculated for Bidder 2 and Bidder 3 is $228,000 ($180,000 + $48,000), which is less than Bidder 1’s bid of $240,000 for all four licences. Therefore, Bidder 2 and Bidder 3 must split an additional payment of $12,000 ($240,000 - $228,000) to satisfy the condition that no other bidder or group of bidders were prepared to pay more for the licences in question. Since Bidder 2 won three licences and Bidder 3 won one, the additional payment of Bidder 2 is $9,000 ($12,000 × 3 / 4) for a final payment of $189,000 ($180,000 + $9,000). Similarly, the additional payment of Bidder 3 is $3,000 ($12,000 × 1 / 4) for a final payment of $51,000 ($48,000 + $3,000).

C3: Example of assignment stage for licences auctioned in two stages

For the service area considered in Example C2, there will be an assignment stage (Example C3). Bidders 2 and 3 will be invited to bid on the assignment stage options. Bidder 2, which won three blocks in the allocation stage, will be presented with two assignment options: AH.AJ.AK and AJ.AK.AL. Bidder 3, which won one block in the allocation stage, will be presented with four assignment options: AH, AJ, AK and AL.

Bidder 2 submits one bid of $5,000 for AH.AJ.AK assignment. Bidder 3 submits three bids: $6,000 for assignment of AH, $20,000 for AJ and $2,000 for AL.

Bidder 3’s $20,000 bid for AJ assignment is inconsistent with the contiguous spectrum assignment to Bidder 2. Therefore, this bid will not be a part of the solution for the winner and price determination.

The winning combination that respects the contiguity rules is the bids for assigning AH.AJ.AK to Bidder 2 and AL to Bidder 3 for a total of $7,000 ($5,000 + $2,000).

To calculate the Vickrey price for Bidder 2, its winning bid ($5,000) is subtracted from the value of the winning combination ($7,000), resulting in $2,000. Next, the winning combination is recalculated for the hypothetical situation in which Bidder 2’s bids are set to zero. The best assignment, excluding Bidder 2, assigns AH to Bidder 3 at $6,000. The Vickrey price for Bidder 2 is the value of the winning combination with all of Bidder 2’s bids set to zero ($6,000) less the sum of the winning bids for all bidders other than Bidder 2 ($2,000); that is, its Vickrey price is $4,000.

To calculate the Vickrey price for Bidder 3, its winning bid ($2,000) is subtracted from the value of the winning combination ($7,000), resulting in $5,000. Next, the winning combination is recalculated for the hypothetical situation in which Bidder 3’s bids prices are set to zero. The best assignment, excluding Bidder 3, assigns AH.AJ.AK to Bidder 2 at $5,000. The Vickrey price for Bidder 3 is the value of the winning combination with all of Bidder 3’s bids set to zero ($5,000) less the sum of the winning bids for all bidders other than Bidder 3 ($5,000); that is, its Vickrey price is $0 ($5,000 - $5,000).