Archived — Frequently Asked Questions — 24 and 38 GHz

Wireless Broadband Communications at 24 and 38 GHz

Auction Policy and Licensing Procedures

1.  Why is Industry Canada going to use auctions to assign this spectrum?

Auctions offer a number of advantages: their ability to promote economically efficient use of spectrum, their openness and objectivity as an assignment mechanism, their procedural efficiency, and their ability to return appropriate compensation to Canadian taxpayers for the use of a public resource.

Auctions represent a valuable new spectrum management tool for those situations where it will be appropriate to rely on market forces for the selection of licensees.

2.  Does this mean that in the future, the only way spectrum will be assigned is through auctions?

No. The vast majority of licences will continue to be assigned on a first-come first-served basis, as the instances where the demand for spectrum exceeds the available supply tend to be the exception rather than the rule. Auctions are just one of the tools at the government's disposal to assign licences when there is mutually exclusive demand for spectrum.

3.  What are the main steps leading up to this licensing process?

The main steps leading up to the auction include:

Public Consultation - Completed January 29, 1999
Release of Final Policy Paper and Auctions Rules - Released May 29, 1999
Pre-Auction Information Sessions - Various Locations June 4-23, 1999
Receipt of Application to Participate in Auction - Deadline August 6, 1999
Auction Start - Expected Early October, 1999

Further information regarding the auction schedule is available on the department's Web site.

4.  What spectrum will Industry Canada be auctioning?

Spectrum in the 24 and 38 GHz bands will be auctioned in early October 1999.

There are no firm plans for other auctions at this time, but their application will be considered on a case-by-case basis

5.  Why is the department initiating a licensing process for the 24 and 38 GHz bands?

Increased demand for high-speed broadband telecommunications has resulted in the development of new equipment that can be used in the 24 and 38 GHz bands. The department is making this spectrum available to stimulate the provision of new broadband services.

6.  How much spectrum will be made available?

There will be 800 MHz of spectrum available in the 38 GHz band and 400 MHz available in the 24 GHz band. The 24 GHz band will be offered as one 400 MHz licence. The 38 GHz band will be packaged as follows: one 400 MHz licence and four 100 MHz licences.

7.  Will these frequency bands align with those in the U.S.?

Yes. The frequency band structure will align perfectly with that of the U.S. Canadian service providers will benefit from a combined North American equipment marketplace through the greater availability of equipment and minimal customization costs. Our equipment manufacturers will likewise benefit through greater market opportunities.

8.  What will be the size of the service areas?

The services that will be offered in the 24 and 38 GHz bands are best suited for licensing on a regional basis. For this auction, the spectrum will be offered in each of the 59 Tier 3 service areas defined in the department's document entitled Service Areas for Competitive Licensing. These service areas are based on groupings of Statistics Canada's 1996 Census Divisions and Subdivisions.

9.  What type of licence will be granted?

Spectrum licences will be granted. These are defined in the Radiocommunication Act as authorizations "in respect of the utilization of specified radio frequencies within a defined geographic area". Licences will not be issued for the radio apparatus.

10.  What is the length of the licence term?

The auctioned licences will have a ten-year term with a high expectation of renewal. The intention is to renew auctioned licences for subsequent ten-year terms unless a breach of licence condition occurs, a fundamental reallocation of spectrum to a new service is required (e.g., a reallocation by the International Telecommunication Union), or an overriding policy need arises (e.g., a spectrum reallocation to address a national security issue).

11.  Can auction winners sell their licences to a third party?

Yes. Winners will be able to sell their licences to a third party, either in whole or in part. The third party will be subject to the eligibility restrictions and conditions of licence existing at the time of the transfer.

12.  What type of auction will be used?

A simultaneous multiple round auction process will be used. In a simultaneous multiple-round auction, multiple licences are open for bidding at the same time and bidding remains open on all licences as long as acceptable bids are placed on any of the licences. Bidding occurs in a sequence of rounds. The results of each round are announced to the bidders prior to the start of the next round. The auction is run on computer with on-line bidding.

13.  Will there be a reserve price?

Yes. There will be a modest reserve price. This is in accordance with the principle that all spectrum users should make a contribution toward the costs of spectrum management. For a large service area like Toronto, the reserve price for a 100 MHz spectrum licence will be $120,000. Other examples for the same 100 MHz bandwidth include Vancouver at $60,000 and Quebec City at $30,000. For a small service area with a population under 100,000, the reserve price will be $2,500 for a 100 MHz spectrum licence.

14.  Will successful bidders pay for their licences in a lump-sum payment or in instalment payments?

Winning bidders will be required to pay for their licences up front. In the 24 and 38 GHz consultation paper, released in August 1998, Industry Canada proposed that winning bids be paid in full shortly after the close of an auction, as opposed to using an instalment payment scheme. This proposal was supported in the comments received.

Successful bidders will be required to pay 20 per cent of their winning bids within 10 business days of the auction's close and the remaining 80 per cent within 30 business days of the auction's close.

15.  What happens if a winning bidder cannot pay for a licence?

After the conclusion of the auction, any bidder who has submitted the high bid on a licence but fails to comply with the specified payment schedule will forfeit their right to the licence. A re-auction will take place and, if the re-auction price is lower than the forfeited bid, the bidder will be required to pay a penalty. This penalty will correspond to the difference between the forfeited bid and the eventual selling price. Furthermore, an additional 3 per cent of the original forfeited bid will be charged to account for the administrative expenses incurred to reassign the licence.

16.  Will the licence fees of LMCS incumbents be recalibrated on the basis of results from this auction?

No. LMCS incumbents' licence fees will not be recalibrated on the basis of results from the 24 and 38 GHz auction.

17.  How much money does Industry Canada expect to generate from auctions?

The department will not be making any estimates concerning potential revenue generated from auctions. The government's objective in conducting auctions is not to raise revenue, but rather to award licences fairly, efficiently and effectively so as to ensure that the Canadian public derives the maximum possible benefit from the spectrum resource.

18.  Will auctions mean higher prices for consumers?

No. Prices for consumer services will be set according to demand and supply in the consumer services marketplace. If one firm raises its prices, consumers will switch to a competitor. Firms will base their bids upon, among other things, the prices at which they will be able to sell their services to consumers. Auction bids thus depend on consumer prices; consumer prices do not depend on auction bids.

19.  Other administrations have encountered some problems with spectrum auctions. How will the department address these problems in Canada?

While most auctions that were conducted in other countries have been considered a success, a few problems have nonetheless been encountered.

Based on expert advice and continued analysis of auctioning around the world, Industry Canada is confident that it has found effective solutions to these problems:

  • bid withdrawal problems can be alleviated by implementing a withdrawal penalty;
  • defaults can be avoided by requiring bids to be paid in lump sum amounts; and
  • bid signalling and erroneous bid submission problems have been addressed through simple auction design modifications.
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