Submission of Quebecor Media Inc., on Behalf of Itself and Videotron Ltd.

All submissions have been posted in the official language in which they were provided. All identifying information has been removed except the user name under which the documents were submitted.

Submitted by Quebecor Media inc. 2010-07-13 20:18:23 EDT

Theme(s): Digital Infrastructure

Executive Summary

The best way to improve the quality of digital infrastructure is to create the conditions that will encourage multiple private sector players to invest in that infrastructure, both wireline and wireless. True and lasting consumer benefits flow from facilities-based competition. In contrast, resale forms of competition, particularly those created by regulatory fiat, cannot generate the same benefits.

We are not great supporters of quantitative broadband speed targets, for the straightforward reason that we believe it is nearly impossible to predict end user consumption trends. If new applications arise that push even further the demand for higher speeds, properly incented network builders will find a way to satisfy that demand.

For there to be effective competition, there must be a level playing field between network operators. Both the CRTC and Industry Canada have shown themselves to be skilled at removing the barriers that stand in the way of effective competition. Examples include the CRTC's existing regime for affordable access to telephone company support structures and the new framework Industry Canada put in place in 2008 for mandatory roaming and antenna tower sharing. But both agencies must remain vigilant to new threats to the level playing field, such as Bell Canada's outrageous and anti-competitive proposal for exclusive access to deferral account funds to subsidize its wireless network.

Regarding the expansion of wireless broadband networks, it is time for Canada to engage a concrete action plan for greater spectrum availability, similar to what is being done in the United States.

Efficient business planning requires that firms take a comprehensive assessment of the resources that are available to them and make whatever trade-offs are required to arrive at an optimal investment decision. As a result, we recommend that a single auction be held to award spectrum in both the 700 MHz and the 2.5 GHz bands.

We also consider it essential that the Government of Canada retain a broad range of tools to allow it to effectively and flexibly manage the allocation of spectrum. An important tool in this regard is the use of spectrum caps, either on a band-specific, auction-specific or aggregate basis. Spectrum caps have been implemented and their benefits have been discussed in a number of countries in recent years.

Finally, we recommend that the Government's proposed spectrum inventory exercise be conducted as a high priority activity with the clear objective of identifying specific additional spectrum below 1 GHz. We further recommend that the Government publish a timeline with firm dates for the (preferably simultaneous) auction of the 700 MHz and 2.5 GHz bands, as well as other projected allocations, both above and below 1 GHz.

Submission

Consultation on a Digital Economy Strategy for Canada

Submission of Quebecor Media Inc., on behalf of itself and Videotron Ltd.

July 13, 2010

Table of Contents

Executive Summary

The best way to improve the quality of digital infrastructure is to create the conditions that will encourage multiple private sector players to invest in that infrastructure, both wireline and wireless. True and lasting consumer benefits flow from facilities-based competition. In contrast, resale forms of competition, particularly those created by regulatory fiat, cannot generate the same benefits.

We are not great supporters of quantitative broadband speed targets, for the straightforward reason that we believe it is nearly impossible to predict end user consumption trends. If new applications arise that push even further the demand for higher speeds, properly incented network builders will find a way to satisfy that demand.

For there to be effective competition, there must be a level playing field between network operators. Both the CRTC and Industry Canada have shown themselves to be skilled at removing the barriers that stand in the way of effective competition. Examples include the CRTC's existing regime for affordable access to telephone company support structures and the new framework Industry Canada put in place in 2008 for mandatory roaming and antenna tower sharing. But both agencies must remain vigilant to new threats to the level playing field, such as Bell Canada's outrageous and anti-competitive proposal for exclusive access to deferral account funds to subsidize its wireless network.

Regarding the expansion of wireless broadband networks, it is time for Canada to engage a concrete action plan for greater spectrum availability, similar to what is being done in the United States.

Efficient business planning requires that firms take a comprehensive assessment of the resources that are available to them and make whatever trade-offs are required to arrive at an optimal investment decision. As a result, we recommend that a single auction be held to award spectrum in both the 700 MHz and the 2.5 GHz bands.

We also consider it essential that the Government of Canada retain a broad range of tools to allow it to effectively and flexibly manage the allocation of spectrum. An important tool in this regard is the use of spectrum caps, either on a band-specific, auction-specific or aggregate basis. Spectrum caps have been implemented and their benefits have been discussed in a number of countries in recent years.

Finally, we recommend that the Government's proposed spectrum inventory exercise be conducted as a high priority activity with the clear objective of identifying specific additional spectrum below 1 GHz. We further recommend that the Government publish a timeline with firm dates for the (preferably simultaneous) auction of the 700 MHz and 2.5 GHz bands, as well as other projected allocations, both above and below 1 GHz.

I. Introduction and Overview

  1. Quebecor Media Inc. (QMI), on behalf of itself and its wholly-owned subsidiary Videotron Ltd. (Videotron), is pleased to provide the following submission is response to Improving Canada's Digital Advantage: Strategies for Sustainable Prosperity, the Government of Canada's Consultation Paper on a digital economy strategy for the country. The Government is to be commended for this timely and focused initiative, and we hope that our views will be of value as the Government undertakes to build upon the series of positive steps it has already taken to ensure that all Canadian businesses and consumers benefit from a digital infrastructure that is truly world class.
  2. QMI is a subsidiary of Quebecor Inc., a communications company with operations in North America, Europe and Asia. QMI owns operating companies in numerous media-related businesses including, in addition to Videotron: Sun Media Corporation, the largest publisher of newspapers in Canada; Canoe.ca., operator of a network of English and French language Internet properties in Canada; Quebecor Media Network, provider of flyer printing and distribution services; TVA Group Inc., operator of the largest French language over the air television network in Quebec, a number of specialty channels, and the English language over the air station Sun TV; Nurun Inc., a major interactive technologies and communications agency with offices in Canada, the United States, Europe and Asia; magazine publisher TVA Publishing Inc.; book publishers and distributors Sogides Group Inc. and CEC Publishing Inc.; Archambault Group Inc. and TVA Films, companies engaged in the production, distribution and retailing of cultural products; Le SuperClub Vidéotron ltée, a DVD and console game rental and retail chain; and Quebecor MediaPages, publisher of print and online directories.
  3. Videotron is an integrated communications company engaged in cable television, interactive multimedia development, Internet access services, cable telephony and wireless telephone service. Videotron is a leader in new technologies with its digital interactive television system and its broadband network, which supports high-speed cable Internet access, analog and digital cable television, and other services. As of March 31, 2010, Videotron was serving 1,785,500 cable television customers in Quebec, including 1,119,900 subscribers to its digital service. Videotron is the Quebec leader in high-speed Internet access, with 1,191,600 subscribers to its cable modem service as of March 31, 2010. As of the same date, Videotron had activated 85,300 handsets on its existing resale-based wireless telephone service and was providing cable telephone service to 1,043,000 Quebec households and organizations.
  4. Our submission will focus on the second section of the Consultation Paper, the section entitled Building a World-Class Digital Infrastructure. This is not to minimize the importance of the other sections, which address key issues ranging from the diffusion of digital technologies to content creation to digital skills development. But to be frank, "building" and "infrastructure" occupy very much of Videotron's attention at present. For not only does Videotron already operate Quebec's most advanced and most popular fixed line Internet access network, offering download speeds of up to 50 Mbps throughout our operating territory, but we are also on the verge of launching our own state-of-the-art High Speed Packet Access Plus (HSPA+) wireless network, bringing a powerful new competitive force to the Quebec wireless marketplace.
  5. When QMI and Videotron talk of building the digital infrastructure of the future, they know of what they speak.
  6. Our submission is divided into two parts. The first part will address the central importance of capital investment in securing Canada's digital future. We will argue that facilities-based competition is true competition, and will urge the Government to focus less on the setting of quantitative speed targets and more on ensuring that Canadian broadband network operators have the proper incentives to continue investing in their facilities to meet emerging needs, whatever they may be. We will also call on the government to continue its efforts to ensure a level playing field between network operators, particularly wireless operators.
  7. In the second part of our submission, we will focus more precisely on wireless spectrum availability and allocation issues, an area where the Government has a particularly crucial and active role to play in ensuring that all Canadian network operators have the means to provide the most advanced wireless broadband services possible, in both urban and rural areas. We will provide background on the Canadian and American policy environments, including the spectrum-related elements that are an integral part of the Federal Communications Commission's (FCC's) National Broadband Plan and President Obama's Presidential Memorandum entitled Unleashing the Wireless Broadband Revolution. We will then provide recommendations on issues we believe are key to ensuring the availability of mobile broadband everywhere and for everyone in Canada. Paramount in these recommendations are calls for greater predictability and the timely award of more spectrum to those carriers most willing to use it.

On the Matter of Investments and Investment Incentives

a) Facilities-Based Competition is True Competition

  1. The current Government has a strong history of recognizing and understanding the central role that private investment and market forces must play in any strategy to enhance Canada's digital infrastructure.
  2. This recognition and understanding first took form in the Governor in Council's 2006 policy direction to the Canadian Radio-television and Telecommunications Commission (CRTC)Footnote 1 to fulfill the objectives of the Telecommunications Act by "relying on market forces to the maximum extent feasible". It later found full expression in the Minister of Industry's 2008 policy for the auction of new Advanced Wireless Services (AWS) spectrum licences, whereby mechanisms were put in place to ensure that the incumbent wireless service providers could not block the arrival of new facilities-based entrants wishing to bring true wireless choice to Canadians.
  3. Still other government policy decisions have shown great consistency with this market- and facilities-based approach, among them the Governor in Council's 2009 direction to the CRTC to re-examine a wholesale regulatory decision on matching broadband speedsFootnote 2, and the Minister of Industry's judicious decision to initiate a competitive bidding process for the allocation of subsidies for the construction of broadband networks in remote parts of CanadaFootnote 3.
  4. What all of these decisions have in common is an understanding that the best way to improve the quality of digital infrastructure is to create the conditions that will encourage multiple private sector players to invest in that infrastructure. As stated succinctly at page 17 of the Consultation Paper:

    Market-led network-based competition continues to push investment in next generation infrastructure in Canada. Consistent with past government policy, it is expected that the private sector will drive future investment and innovation.

  5. In other words, what matters are advanced networks, and the incentives to build them.
  6. From this perspective, Canada is already in a privileged position. On the wireline side of things, we are one of the only countries in the world to benefit from two near-ubiquitous broadband networks: the hybrid copper-fibre network built by the traditional telephone companies and the hybrid coax-fibre network built by the traditional cable companies. On the wireless side of things, thanks to the pro-competitive conditions put in place by the current Government, no less than three fully independent HSPA+ broadband networksFootnote 4 are already available or will soon be available in every region of Canada.
  7. The competition between networks builders is ferocious, to the great benefit of Canadian consumers. Here, Videotron speaks from experience.
  8. In wireline, we were the first cable company in North America to commercially deploy DOCSIS® 3 technologyFootnote 5, launching service in Laval, Quebec in February 2008. By November 2009, we had completed the deployment of DOCSIS® 3 technology across the entirety of our bidirectional cable network. The service supports download speeds of 50 Mbps today, and with ongoing capital investment in network modernization and fibre extension, will be capable of supporting substantially higher speeds in the future. In response, Bell Canada, our major wireline competitor, has initiated an ambitious fibre-to-thenode and fibre-to-the-home building campaign, which will deliver impressive service speeds. Both companies are acutely aware that they cannot afford to stand still in the race for network supremacy.
  9. In wireless, Videotron is investing over $1 billion (including the cost of spectrum) in its new HSPA+ network, requiring the construction of no fewer than 800 new cell sites across Quebec and Eastern Ontario. This network will ultimately be capable of delivering download speeds of up to 21 Mbps, and has a well-defined migration path to fourth generation Long Term Evolution (LTE) technology enabling even faster broadband speeds. In anticipation of our arrival, our competitors - Rogers, Bell and Telus - have equipped themselves with their own HSPA+ networks and, not incidentally, have begun to show more competitiveness in their pricing.
  10. This last point is crucial. As the Government well understands, true and lasting consumer benefits flow from facilities-based competition. In contrast, resale forms of competition, particularly those created by regulatory fiat, cannot generate the same benefits, either in terms of service innovation or pricing flexibility.
  11. The debate about the merits of resale-based competition has recently been quite active before the CRTC. Most notably, in the proceeding initiated by Telecom Notice of Consultation 2009-261, Proceeding to consider the appropriateness of mandating certain wholesale high-speed access service, various resellers have put forward a series of models for what is, in effect, arbitrage-based competition in retail broadband markets. Unfortunately, little if any evidence exists either at the domestic or international level to suggest that such models have any lasting impact on competitive conditions in the retail marketplace.
  12. QMI and Videotron are themselves highly skeptical of the merits of resale as a source of lasting competitive advantage. As mentioned earlier, Videotron already has a small but significant wireless customer base obtained through the use of a Mobile Virtual Network Operator (MVNO, i.e. resale) arrangement with an underlying carrier partner. While this arrangement has permitted us to gain some knowledge of the wireless marketplace, it has proved itself to be inadequate to meet our more ambitious business objectives. Indeed, if we felt that an MVNO resale arrangement could truly allow us to have meaningful and lasting control over our wireless offerings, we would not be investing over $1 billion in our own HSPA+ network.
  13. The Government's Consultation Paper is unambiguous in its support for competitive facilities investment as the path to sustainable broadband competition. We applaud this realization and offer our full support.

b) Incentives rather than Targets

  1. The Consultation Paper makes explicit reference to quantitative broadband speed targets and asks parties for their views on what speeds or other service characteristics are needed by users.
  2. QMI and Videotron are not great supporters of quantitative broadband speed targets, for the straightforward reason that we believe it is nearly impossible to predict end user consumption trends with any meaningful degree of certainty.
  3. As the Consultation Paper itself points out, Facebook was made public only in 2006, and the iPhone was launched only in 2007. To these examples can be added many others. Who foresaw the explosion in video consumption that was made possible through YouTube? Who knows what will be the next great communications, gaming or service application?
  4. The magic of the Internet lies precisely in its unpredictability and its ability to absorb innovation from the unlikeliest of places. In such a fluid context, we believe it is much more relevant for the Government to concentrate on the framework for continued investment and innovation than to set quantitative speed targets. Ultimately, if new applications arise that push even further the demand for higher speeds in the consuming population, properly incented network builders and their international base of equipment suppliers will find a way to satisfy that demand. The intense pace of network investment in both wireline and wireless observed in Canada today is strong evidence of these positive forces at work.
  5. As an aside, we would note that, contrary to the strongly held belief in some quarters, the locus for innovation in the Internet world does not lie solely with the application developers. Network builders also must deploy enormous creative energies in finding means to better manage their networks to keep pace with the emergence of new applications and increased bandwidth consumption. Just building exponentially bigger pipes cannot do the job, at least not in a way that can keep the price of Internet access services affordable for businesses and consumers.
  6. Intelligent network builders augment their brute capital investments with creative economic or technical traffic management methods that ensure that all users share the growing bandwidth resources both equitably and efficiently. The CRTC recognized this fact in its landmark decision on Internet traffic managementFootnote 6, and in doing so helped to sustain a positive environment for continued investment and innovation by all players.

c) The Importance of a Level Playing Field

  1. It goes without saying that for there to be effective facilities-based competition, there must be a level playing field between facilities-based competitors. Achieving a level playing field, however, is easier said than done, particularly when competitors use vastly different technologies (e.g. some wired, some wireless) and have vastly different incumbency advantages.
  2. To date, both the CRTC and Industry Canada have shown themselves to be skilled at identifying and removing the barriers that stand in the way of effective facilities-based competition. For example, the vigorous competition that exists across Canada today between competing wireline broadband platforms - telco and cableco - would never had been possible in the absence of a workable and efficiently priced regime for cableco access to telco support structures (poles and conduits). These support structures were constructed over a decades-long period of telco incumbency, and there are obvious environmental and esthetic reasons for ensuring that they not be duplicated unnecessarily.
  3. The United States Federal Communications Commission (FCC) drew particular attention to the importance of reasonably-priced competitor access to support structures in its recent National Broadband Plan, wherein it stated (emphasis in the original):

    Infrastructure such as poles, conduits, rooftops and rights of-way play an important role in the economics of broadband networks. Ensuring service providers can access these resources efficiently and at fair prices can drive upgrades and facilitate competitive entry. ... Recommendations to optimize infrastructure use include:

    • Establish low and more uniform rental rates for access to poles, and simplify and expedite the process for service providers to attach facilities to poles.7
  4. It will be important for the CRTC to keep a similar perspective in mind as it considers the positions put forward in the proceeding initiated by Call for comments - Review of the large incumbent local exchange carriers' support structure service rates, Telecom Notice of Consultation 2009-432.
  5. As for Industry Canada, it showed a high degree of understanding and sensitivity to the incumbency advantages of the established wireless players when, coincident with the process of allocating new licences in the AWS band, it set a new framework for mandatory roaming and antenna tower and site sharing, as well as a prohibition on exclusive site arrangementsFootnote 8. While these complex provisions have encountered some difficulty being implemented in practice and may yet require further refinement, the broad policy prescription that underlies them has been of undeniable benefit in opening the door to sustainable entry into the mobile wireless marketplace. Simply put, without these mandatory roaming and tower sharing provisions, no new entrant would have any chance of securing, in any reasonable timeframe, the necessary geographic service coverage to allow it to become a meaningful force in the wireless market.
  6. As a final note on the importance of a level playing field, QMI and Videotron would also like to draw attention to the anti-competitive threat than can arise from certain public initiatives to subsidize the deployment of broadband services in remote parts of Canada. As we will discuss in the following section, QMI and Videotron are strong believers in the importance of broadband as an enabler of the economic and social development of all Canadians, urban and rural. We also believe that wireless can have an important role to play in the provision of broadband service in remote regions. This being said, we are adamantly opposed to any initiative that would confer upon a single wireless carrier the exclusive right to use public funds to expand the geographic reach of its network to the direct competitive disadvantage of its competitors.
  7. Incredibly, this is precisely what Bell Aliant and Bell Canada (collectively, Bell) have proposed to the CRTC as a plan for the disposition of some $463 million in funds in their deferral accounts - accounts established in the early years of the last decade to accumulate excess revenues charged to telephone subscribers in the urban parts of the Bell territories. As described in detail in a letter by Robert Dépatie, President and CEO of Videotron, to the CRTC dated May 12, 2010Footnote 9, the Bell proposal to use its deferral account funds to expand its HSPA+ wireless network is a cynical abuse of the CRTC's process and an egregious anti-competitive assault on the wireless marketplace.
  8. The exclusive subsidy being requested by Bell, without any opportunity for other providers to put forward competing proposals, amounts to $463 million for 61,000 households, or $7590 per household. In dramatic contrast, when Industry Canada conducted a competitive bidding process for remote broadband Internet solutions under the Broadband Canada program, it succeeded in issuing a first round of awards amounting to only $76.7 million to cover 169,000 households, or only $454 per household.Footnote 10 Either Bell is 16.7 times less cost efficient per household than its competitors, or it is taking the Canadian public, its competitors and the CRTC for a ride. Either way, Bell's proposal cannot be allowed to proceed.
  9. Handing an incumbent player a $463 million exclusive gift while a new entrant competitor is investing roughly the same amount of money (net of spectrum acquisition costs) to get its own wireless network up and running is not what any reasonable person would call a level playing field.
  10. Furthermore, any suggestion that roaming privileges on the subsidized Bell network could be used to mitigate the anti-competitive effects is entirely without foundation. Several new entrants have already chosen their strategic domestic roaming partners and have not chosen Bell. Strategic roaming agreements often contain elements of exclusivity. Even where no exclusivity exists, it is not a simple undertaking to establish the back office systems necessary to engage in domestic roaming with a new partner. Finally, there is no guarantee that a second domestic roaming partner would operate on the same frequency bands as a first domestic roaming partner, raising potential handset compatibility issues.

III. On the Matter of Spectrum Availability and Allocation

a) Context - The Mobile Data Explosion

  1. We have seen how the Government, either directly or through its independent regulatory agencies such as the CRTC, exercises considerable influence over the nature and pace of investment in broadband infrastructure. We have also seen how, in the opinion of QMI and Videotron, the Government has generally exercised this influence in a pro-competitive manner that has enabled Canada to attain a privileged position in terms of the number and caliber of advanced broadband networks available (or soon to be available) to its citizens.
  2. The work, however, is far from over. One area which will be a growing focus of development in the years to come, and in which the Government has a particularly crucial and active role to play is the expansion of wireless broadband networks.
  3. As mobile access becomes an increasingly viable and attractive alternative to fixed access for all types of communications, be they voice, data, video or Internet applications, increased capacity and enhanced coverage will be required if Canada is to meet its broadband objectives. This will include both coverage of the vast Canadian geography, as well as excellent indoor coverage.
  4. Bandwidth requirements are expanding exponentially as consumers migrate their Internet, data and video usage unto their mobile devices, which have evolved from phones, to smartphones, to super smartphones and now to tablets such as the iPAD.
  5. As a matter of fact, the bandwidth requirements on mobile networks are not expected to merely double or triple or even quadruple over the next few years; they are expected to increase by 100% per year. As quoted in the recently released Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 2009-2014, "Globally, mobile data traffic will double every year through 2014, increasing 39 times between 2009 and 2014" (emphasis added).
  6. It is with this unprecedented challenge in mind, and from the perspective of a new entrant investing over $1 billion (including the cost of spectrum) just to get into the mobile business, that we respectfully submit the following comments and recommendations on the spectrum policy issues raised in the Consultation Paper.

b) The Canadian and American Policy Environments

  1. It is evident from the Consultation Paper that the Government of Canada has already given some thought to the role spectrum policy will play in building the digital Canada of tomorrow.
  2. The following are excerpts from the Consultation Paper related to spectrum issues. We have highlighted in bold the statements on which we wish to comment further in the context of this consultation:

    Access to spectrum will continue to drive the emergence and adoption of new wireless devices, services and applications. To support interoperability and economies of scale for equipment, Canadian commercial spectrum is aligned with the U.S. and is generally harmonized on a regional or global basis. The challenge of effectively managing spectrum is exacerbated by an increasing number of competing interests, rapidly evolving technology, and the high and growing demand for wireless broadband. In order to meet these demands, Industry Canada intends to provide access to additional spectrum through re-purposing the 2500 MHz band to allow flexible use, including mobile broadband services, and making available the 700 MHz band for next generation wireless as the analogue broadcast services are transitioned to digital television in 2011. Consultations are also planned for the 70, 80, 90 GHz bands and the 1.4 GHz band for broadband use.

    Providing timely access to spectrum will be key to ensuring network capacity is in place to meet wireless broadband demand growth. In view of international trends and rapidly growing demand, Industry Canada will inventory spectrum use with a view to better understand where opportunities exist for more intensive use or reallocation. For example, Industry Canada will investigate the use of television white spaces - portions of bands unused in certain geographical areas - to deploy new low power technologies. White space technologies would help meet the growing demand for spectrum and encourage innovation in applications development in Canada. Industry Canada will continue to investigate options to remove regulatory obstacles to the efficient functioning of markets, to facilitate secondary markets for spectrum authorizations, and to develop a fee structure that could incent a more efficient use of spectrum. In addition, to improve predictability and transparency regarding spectrum management priorities, Industry Canada will publish a timetable for upcoming auctions and consultations.

  3. In the United States, spectrum considerations are also at the core of the public discussions and negotiations to support the growth of innovative mobile broadband applications over the next decade. These discussions, however, have progressed considerably farther than in Canada, with specific objectives and timelines now having been proposed.
  4. Specifically, on March 16, 2010, the FCC released its much awaited National Broadband Plan identifying specific objectives and a detailed action plan. A critical element to build tomorrow's mobile broadband communications infrastructure is to make available an additional 500 MHz of spectrum over the next ten years, roughly doubling the amount of spectrum already awarded. The FCC's detailed agenda further recommends that this would include 300 MHz of high value spectrum between 225 MHz and 3.7 GHz to be made available within five years. The release of additional spectrum from broadcast television applications, in addition to the first wave of 700 MHz spectrum already auctioned off at the start of 2008, as well as further AWS spectrum, is key to achieving the 300 MHz target within five years.
  5. Subsequently, on June 28, 2010, only two months after the publication of the FCC National Broadband Plan, President Obama released a Presidential Memorandum entitled Unleashing the Wireless Broadband Revolution which includes the following four point plan:
    1. identifying and planning for the release of an additional 500 MHz of new spectrum;
    2. providing the tools to reallocate spectrum effectively such as incentives for both government and commercial spectrum holders to release frequencies that could be put to better use;
    3. enabling spectrum to be put to its highest value uses, including licensing more spectrum for mobile broadband, providing unlicensed spectrum for start ups and innovative technologies and better sharing of spectrum; and
    4. using auction proceeds to promote public safety, job-creating infrastructure and deficit reduction.
  6. The Presidential Memorandum on wireless broadband further clearly identifies that the US Secretary of Commerce will work with the FCC and the National Telecommunications and Information Association (NTIA) to complete by October 1, 2010 a specific plan and timetable for the release of the additional 500 MHz of spectrum required to fulfill the needs of a mobile broadband society.
  7. QMI and Videotron submit it is time for Canada to engage a similar, concrete action plan for greater spectrum availability, with particular emphasis on getting more spectrum into the hands of those carriers most willing to use it.
  8. In our comments below, we will begin with specific recommendations related to the anticipated auction of frequencies in the 700 MHz and 2.5 GHz bands. We will then make additional recommendations for the further expansion of available spectrum.

c) A Simultaneous Auction in the 700 MHz and 2.5 GHz Bands

  1. There are currently two spectrum bands being considered for award in the short to medium term in Canada, namely the 700 MHz band and the 2.5 GHz band, both referenced in the Consultation Paper.
  2. The 700 MHz band consists of spectrum now occupied by television channels 52 to 67, which are to be freed up by the conventional broadcasters by no later than August 31, 2011Footnote 11 in both mandatory and non-mandatory markets for digital television. Approximately 60 MHz of spectrum will be freed up for mobile applications by this transition to digital television.
  3. The second frequency band coming up for award for mobile applications is the 2.5 GHz band, now known as the Broadband Radio Services (BRS) band, which is becoming available as a result of the partial return of spectrum originally awarded for broadcasting distribution and fixed and portable applications to Look Communications and Inukshuk Internet respectively. Approximately 60 MHz of spectrum will also be awarded for mobile applications in this frequency band.
  4. Both of these bands have already been identified for the deployment of fourth generation mobile LTE technology by the international industry group 3GPP in December 2009, as shown in Table 1 on the following page. Band VII in the table is the 2.5 GHz band, and bands XII, XIII and XIV are the 700 MHz bands.
  5. As will be discussed further below, the 700 MHz and 2.5 GHz are not fully substitutable, due to the superior propagation characteristics associated with bands below 1 GHz. This being said, they are both candidates for LTE deployment, and they are both coming available at more or less time.
  6. Efficient business planning requires that firms take a comprehensive assessment of the resources that are available to them and make whatever trade-offs are required to arrive at an optimal investment decision. QMI and Videotron submit that efficient business planning in the spectrum domain is facilitated when spectrum bands are made available at the same time, to the extent feasible.
Table 1 - Bands identified for LTE Deployment
Operating Band UL Frequencies UE transmit, Node B receive DL frequencies UE receive, Node B transmit
I 1920 - 1980 MHz 2110 -2170 MHz
II 1850 -1910 MHz 1930 -1990 MHz
III 1710-1785 MHz 1805-1880 MHz
IV 1710-1755 MHz 2110-2155 MHz
V 824 - 849 MHz 869-894 MHz
VI 830-840 MHz 875-885 MHz
VII 2500-2570 MHz 2620-2690 MHz
VIII 880 - 915 MHz 925 - 960 MHz
IX 1749.9-1784.9 MHz 1844.9-1879.9 MHz
X 1710-1770 MHz 2110-2170 MHz
XI 1427.9 - 1447.9 MHz 1475.9 - 1495.9 MHz
XII 698 - 716 MHz 728 - 746 MHz
XIII 777 - 787 MHz 746 - 756 MHz
XIV 788 - 798 MHz 758 - 768 MHz
XV Reserved Reserved
XVI Reserved Reserved
XVII Reserved Reserved
XVIII Reserved Reserved
XIX 830 - 845MHz 875 - 890 MHz
XXI 1447.9 - 1462.9 MHz 1495.9 - 1510.9 MHz
  1. As a result, we recommend that a single auction be held to award spectrum in both the 700 MHz and the 2.5 GHz bands. This would provide all mobile carriers with the ability to assess their spectrum holdings in an integrated and strategic manner and would yield a higher level of certainty which in turn is a key element to stimulate long term investment.
  2. We note that deployment of LTE technologies has already begun in the United States in the 700 MHz band, and in Europe in the 2.6 GHz band (the European equivalent of the North American 2.5 GHz band).
  3. We further note that there should be no procedural impediments to conducting an integrated 700 MHz / 2.5 GHz auction in Canada. None of the specific consultation processes leading to the auction for either band have yet been initiated. Industry Canada has only recently issued its decision regarding the mandatory conversion of spectrum in the 2.5 GHz band to BRS at the end of March 2011. And according to the recent CRTC Broadcasting Regulatory Policy 2010-167, all frequencies currently used by conventional TV channels 52 to 69 in the 700 MHz band must be vacated in all markets by August 31, 2011.
  4. QMI and Videotron believe that the Canadian mobile broadband industry would reap significant benefits from an integrated auction and that the enhanced certainty provided by such an auction could only contribute to continued high levels of capital investment by mobile carriers.

d) Spectrum Allocation Tools - Getting More Spectrum into the Hands of those Carriers Most Willing to Use It

  1. There currently exists in Canada an enormous disparity in the absolute spectrum holdings of the different mobile wireless carriers. The new entrant carriers that emerged from the 2008 AWS auction hold a limited quantity of spectrum in a single, relatively high frequency band. In contrast, the incumbent carriers hold ample quantities of spectrum at multiple low and high frequency bands, much of which was acquired through comparative selection processes for generations of technology that either no longer exist or will soon be obsolete.
  2. In light of these realities and the threat to sustainable competition if any one carrier or group of carriers is able to secure a disproportionate hold on the nation's spectrum resources, QMI and Videotron consider it essential that the Government of Canada retain a broad range of tools to allow it to effectively and flexibly manage the allocation of spectrum.
  3. An important tool in this regard is the use of spectrum caps, either on a band-specific, auction-specific or aggregate basis. Beyond facilitating a more equitable distribution of the spectrum resource at the time of auction, spectrum caps also have the particular merit of providing a defence against an undue consolidation of the industry post-auction. For a Government interested in ensuring lasting competition, this should not be a negligible consideration. History in Canada and elsewhere shows that incumbent players do not often hesitate in absorbing smaller, innovative players if given the chance.
  4. Spectrum caps were once in place in Canada to limit the acquisition of spectrum by individual carriers to a reasonable level to maintain a competitive playing field, but were eliminated in 2004. However, spectrum caps have been implemented and their benefits have been discussed in a number of countries in recent years, of which we highlight a few below:
    • In Germany, spectrum caps were part of the recently completed simultaneous auction of frequencies in the 800 MHz band, the 2.6 GHz band and other bands. Only the most sought after spectrum in the 800 MHz band was the subject of a cap. In fact, two different spectrum caps were applied during the same auction to different carriers, depending on their spectrum holdings prior to the auction, namely one cap set at two blocks of two times 5 MHz (a total of 20 MHz) for one type of incumbent licence holder, and another cap set at three blocks of two times 5 MHz (a total of 30 MHz) for another type of incumbent licence holder. There were no caps applied to potential new entrants but, in the end, no new entrants were qualified to bid. Therefore, in effect, the German 800 MHz spectrum caps were a tool for the German government to allocate spectrum below 1 GHz among existing players.
    • In New Zealand, spectrum caps on 3G spectrum (in the 2.1 GHz frequency range) have been in place for close to ten years. A cap set at 15 MHz of 3G spectrum was initially implemented in 2001 for three years with rights reserved to extend it past that period. The cap was first extended to 2007 and then again to 2010. On May 19, 2010, the cap was extended yet again, but with some modifications. The cap on 3G spectrum was increased from 15 to 25 MHz since, as it turns out, 3G deployment in New Zealand is also happening using the original cellular frequency bands below 1 GHz.
    • In the United Kingdom, the Independent Spectrum Broker (ISB) has recommended a temporary overall cap on mobile Frequency Division Duplexing (FDD) spectrum to be set at two times 60 MHz, as well as a temporary restriction on current holders of spectrum below 1 GHz regarding their ability to obtain spectrum in a future auction of 800 MHz spectrum if they do not return spectrum in the 900 MHz band originally awarded for 2G mobile services. The overall objective pursued is one of spectrum equity between the different carriers which entered the market at different periods and were thus not all able to secure spectrum below 1 GHz.
    • Lastly, in France, the regulator has already taken action on the question of spectrum equity below and above 1 GHz between the various carriers when it issued a fourth mobile carrier license to Free Mobile in January 2010, as quoted in: "De plus, Free Mobile est autorisé à utiliser 5 Mhz duplex dans la bande 900 MHz après restitution par les trois opérateurs mobiles existants."Footnote 12
  5. The inclusion of a geographic component to a spectrum cap is also an element of particular interest in the Canadian industry environment now that there are significant regional mobile carriers. Most countries award spectrum on a national basis only and thus a geographic component to a spectrum cap is not meaningful to them.
  6. QMI and Videotron will have specific recommendations regarding spectrum caps to put forward in upcoming spectrum auction consultations. In the meantime, we urge the Government to give heed to the international precedents just listed and begin active consideration of how best to employ this tool to maintain a competitive playing field in the Canadian wireless sector.

e) Freeing Up More Spectrum Below 1 GHz should be a Top Priority

  1. As already briefly mentioned above, lower wireless frequency bands are considered to be especially valuable due to their advantageous propagation characteristics. Use of spectrum below 1 GHz significantly reduces the number of antenna sites, and hence the cost, required to provide coverage in rural areas, and also provides improved in-building coverage, both of which are key elements to achieving the goal of ubiquitous mobile broadband coverage.
  2. Canadian incumbent mobile carriers, namely Bell, TELUS, Rogers, MTS Allstream and SaskTel, already benefit from significant spectrum holdings below 1 GHz, going back to their original spectrum licenses in 1984 to provide analog cellular service. Rogers currently holds 25 MHz of spectrum in the 800 MHz band across the country. The other incumbent carriers hold the same quantity of 800 MHz spectrum in each of their respective incumbent telephone company territories.
  3. In fact, only the AWS new entrants such as Videotron do not currently hold any spectrum below 1 GHz.
  4. Rectifying this inequity may be a near-term consideration in the design of spectrum caps for an upcoming spectrum auction. But looking even farther afield, it will be important that the Government give serious effort to identifying and freeing up for mobile service additional spectrum bands below 1 GHz. The 60 MHz of broadcast spectrum now being freed up in the 700 MHz band is a good start, but will be insufficient to meet the total needs of the industry considering the number of players vying for spectrum below 1 GHz in any given area.
  5. 20 MHz of contiguous spectrum will be required to yield the maximum bandwidth using LTE technology. The current plan for the 700 MHz band does not provide enough spectrum for every Canadian carrier to obtain 20 Mhz.
  6. In the Consultation Paper, the Government indicates that it plans to inventory potentially available spectrum that could be reused for mobile: "In view of international trends and rapidly growing demand, Industry Canada will inventory spectrum use with a view to better understand where opportunities exist for more intensive use or reallocation".
  7. QMI and Videotron applaud this important initiative, and we recommend that this inventory be conducted as a high priority activity with the clear objective of identifying specific additional spectrum below 1 GHz.
  8. In this regard, we note that the Broadband Action Agenda of the FCC's National Broadband Plan has already tentatively identified additional spectrum below 1 GHz that could be made available for terrestrial broadband with the objective that it "should be made newly available for mobile use within five years."Footnote 13

f) The Government Should Publish a Precise Timeline for Spectrum Award Processes

  1. QMI and Videotron reiterate that predictability and the timely award of a sufficient amount of good quality spectrum to those most willing to use it are of paramount importance. Our last recommendation therefore relates to the need to published precise timelines for future auctions.
  2. We recommend the Government of Canada adopt an approach similar to what is being done in the United States, based on the examples below:
    • In the case of the American auction of AWS spectrum, the process began in 2002 with the establishment of a process to relocate government users out of the lower portion of the band (1710-1755 MHz). Relocation costs and a timeline were communicated by the NTIA to the FCC in December 2005. This notice required the FCC to auction the released frequencies within eighteen months. The auction was originally scheduled for June 2006, but was delayed slightly and was finally conducted in August 2006.
    • In the case of the auction of liberated spectrum in the 700 MHz band, the process was initiated by the Deficit Reduction Act of 2005 - Title III DTV Act (enacted in early 2006), which set the original digital television transition date of February 2009 (later extended to June 2009). This Act required the auction of liberated or recovered analog spectrum to be started no later than January 28, 2008, with proceeds received no later than June 30, 2008. The auction rulemaking processes began in August 2006 and the auction itself began on January 24, 2008.
  3. In contrast, while a date has been known for several years for the transition to digital TV in Canada, the timeline for the future auction of the liberated 700 MHz spectrum is still unknown. This situation persists even though, as highlighted earlier in this submission and as per CRTC, the spectrum associated with the TV channels 52 to 69 must be freed up in all mandatory and non-mandatory markets in Canada by August 31, 2011.
  4. In fact, Canadian carriers operate with very little information regarding their ability to obtain additional spectrum, a key input to the investment decisions they need to make to build the digital infrastructure of the future. The need for mobile spectrum below 1 GHz is particularly relevant for QMI and its operating entity Videotron.
  5. Therefore, we recommend that the Government of Canada publish a timeline with firm dates for the (preferably simultaneous) auction of the 700 MHz and 2.5 GHz bands, as well as other projected allocations, both above and below 1 GHz. This publication would enable the development of integrated strategies and would help to clear the way for QMI and Videotron to continue to fulfill our objective of bringing the most advanced broadband services possible to as many people as possible in our serving territories.

    All of which is respectfully submitted.

Footnotes

  1. 1 Order issuing a Direction to the CRTC on Implementing the Canadian Telecommunications Policy Objectives, P.C. 2006-1534. (back to footnote reference 1)
  2. 2 Order refering back to the Canadian Radio-television and Telecommunications Commission (CRTC) Telecom Decision CRTC 2008-117 and Telecom Order 2009-111, requiring the CRTC to conduct broader hearings to examine the implications on investment in advanced telecommunications networks, competition, consumer choice and innovation, P.C. 2009-2007. (back to footnote reference 2)
  3. 3 See the terms and conditions of the Broadband Canada program at http://www.ic.gc.ca/eic/site/719.nsf/eng/home. (back to footnote reference 3)
  4. 4 The Rogers network, the Bell-Telus joint build network, and at least one new entrant network. (back to footnote reference 4)
  5. 5 DOCSIS® = Data over Cable Service Interface Specification, a standard developed by CableLabs® and contributing companies. (back to footnote reference 5)
  6. 6 Review of Internet traffic management practices of Internet service providers, Telecom Regulatory Policy CRTC 2009-657, 21 October 2009. (back to footnote reference 6)
  7. 7 FCC National Broadband Plan, March 2010, Executive Summary, page xii. (back to footnote reference 7)
  8. 8 The policy decision to introduce these provisions formed part of Gazette Notice DGTP-07-007, Policy Framework for the Auction for Spectrum Licences for Advanced Wireless Services and other Spectrum in the 2 GHz Range, December 2007. The detailed provisions were later formalized in Gazette Notice DGRB-002-08, Conditions of Licence for Mandatory Roaming and Antenna Tower and Site Sharing and to Prohibit Exclusive Site Arrangements, February 2008. (back to footnote reference 9)
  9. 9 See http://www.crtc.gc.ca/public/partvii/2008/8638/c12_200817505/1397543.PDF. (back to footnote reference 9)
  10. 10 In recent days, Industry Canada has made three additional funding announcements, increasing the total funds awarded to date to $112.6 million for 208,200 households, or an average of only $541 per household. On this basis, Bell remains 14 times less efficient than its competitors in the use of subsidy funds for broadband expansion. (back to footnote reference 11)
  11. 11 Broadcasting Regulatory Policy CRTC 2010-167, paragraph 181 "the Commission considers it important to maintain 31 August 2011 as the date for the transition to DTV for conventional television stations in the mandatory markets and to ensure that channels 52 to 69 are made available for new uses" and paragraph 188 (regarding non mandatory markets) "the Commission notes that, should a broadcaster outside the mandatory markets choose not to convert to digital, that broadcaster must either move its service to a channel outside the 52 to 69 range, or cease operations of its analog transmitter(s)". (back to footnote reference 11)
  12. 12 Décision autorisant la société Free Mobile à utiliser des fréquences pour établir et exploiter un réseau radioélectrique de troisième génération ouvert au public, Décision No 2010-0043, le 12 janvier 2010. (back to footnote reference 12)
  13. 13 FCC National Broadband Plan, Broadband Action Agenda, page 1. (back to footnote reference 13)

If the following document is not accessible to you, please contact the person below for assistance in obtaining the documents in the appropriate format.

Guylaine Verner
Industry Canada | Industrie Canada
300 Slater Street, Ottawa ON K1A 0C8 | 300, rue Slater, Ottawa ON K1A 0C8
Guylaine.Verner@ic.gc.ca
Telephone | Téléphone 613-990-6456
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