PCS-2 GHz — Consultation on the Proposed Policy and Licensing Procedures for the Auction of Additional PCS Spectrum in the 2 GHz Frequency Range

December 17, 1999
Spectrum Management and Telecommunications Policy

Table of Contents

  1. Introduction
  2. Background
  3. Spectrum Aggregation Limits and Eligibility to Acquire Spectrum
  4. Definition of Licences
  5. Technical Considerations
  6. Conditions of Licence
  7. Licensing Process and Auction Design
  8. Financial Aspects
  9. Submitting Your Comments

1. Introduction

On November 5, 1999, the Minister of Industry announcedFootnote 1 that the spectrum aggregation limit applying to personal communications services (PCS) would be raised from 40 MHz to 55 MHz, and that 40 MHz of additional spectrum for PCS would be licensed by auction. These actions were taken to ensure the availability of adequate spectrum resources to meet the needs of the expanding PCS market and also to enable the implementation of new offerings such as third-generation (3G) PCS.

The international community has been actively working through the International Telecommunication Union (ITU) on the development of international standards for 3G PCS (IMT-2000) since 1985. In October 1999, in Helsinki, the ITU was successful in completing the international standards for IMT-2000. IMT-2000 is a third-generation system that provides voice, data and multimedia services at a data rate much higher than that of existing cellular and PCS systems.

In order to facilitate the expansion and enhancement of existing personal communication services, the introduction of 3G PCS and/or the development of other new service offerings, the spectrum in the PCS 'C' and 'E' frequency blocks is being made available for licensing on an exclusive basis. This consultation paper solicits public comment on issues related to the licensing of this additional PCS spectrum.

Following the February 16, 2000 closing date for receipt of comments on this consultation paper, copies of all submissions will be made available to the public through Industry Canada's Web site, as well as through a commercial printing and copying service. Respondents are required to provide their comments in electronic format to facilitate posting on the Department's Web site.

After the close of the first comment period, a reply period will follow, to provide an opportunity for responses to the initial comments. Again, submission in electronic format is required. After the March 8, 2000 closing date of this second period, these reply comments will also be made available to the public.

2. Background

In 1983, Rogers Cantel Inc. and Canada's local telephone companies were selected to provide 800 MHz cellular telephony services in Canada. Rogers Cantel Inc. received 25 MHz of spectrum, as did the local telephone companies.

In 1995, authorizations to provide personal communications services (PCS) in the 2 GHz band were awarded. Two new entrants, Clearnet PCS Inc. and Microcell Networks Inc. were each granted 30 MHz of spectrum while the major incumbent cellular operators were each granted 10 MHz. One 30 MHz licence (block 'C') and one 10 MHz licence (block 'E') were kept in reserve.

Industry Canada (IC) has required incumbent cellular operators to provide new PCS entrants access to analogue cellular resale and roaming, to facilitate the early availability of national service to PCS subscribers. Furthermore, to promote the expansion of wireless mobile communications to unserved and under-served communities and along highways, the Department established a new party cellular policy in 1998 to give potential new licensees the ability to offer mobile and wireless access services in these areas.

Today, the 800 MHz cellular networks provide coverage to over 93% of the Canadian population. In addition, the capacity of the 800 MHz cellular systems is continuously being enhanced with the introduction of digital technologies. PCS services are now available to a large percentage of the population and in all regions of Canada. Many locations in Canada have access to four competing mobile wireless service providers.

In awarding licences for four of the six available PCS spectrum blocks in 1995, the Minister noted that his actions would promote a strong base from which to enhance competition in the provision of wireless telecommunication services. By reserving the remaining blocks, the Department provided an opportunity to respond to future innovations in a timely fashion. The Minister also stated that he would review the issue of access to the reserved spectrum in three years' time, and in keeping with this basic timetable, the Department is now proceeding to open this spectrum to further promote these objectives.

The Department expects that the demand for this additional PCS spectrum will exceed the available supply, and believes that reliance on the marketplace to select licensees will be in the public interest. Therefore, as announced by the Minister on November 5, 1999, the Department will license this spectrum by auction. The Department proposes that the elements laid out in the document entitled Framework for Spectrum Auctions in CanadaFootnote 2 be generally adopted for this licensing process.

Proposals and questions on the various licence definition and licensing process issues are laid out in the following sections.

3. Spectrum Aggregation Limits and Eligibility to Acquire Spectrum

3.1 Spectrum Aggregation Limits

As noted in Radio Systems Policy 021 (RP-021), Revision to the PCS Spectrum Cap and Timing for Licensing Additional PCS SpectrumFootnote 3, published November 5, 1999, any PCS licensee is eligible to hold radio licences covering, in any geographical area, frequency assignments aggregating up to a total of 55 MHz of spectrum. This aggregation will consist of:

  1. spectrum within the PCS band 1850-1990 MHz;
  2. other spectrum that may be identified for PCS in subsequent proceedings;
  3. spectrum licensed for cellular mobile radiotelephony services, and for similar public high-mobility radiotelephony services, other than air-to-ground telephony and mobile-satellite services;
  4. spectrum as defined in (a), (b) and (c) above that is licensed to any affiliateFootnote 4 of the entity; and
  5. spectrum as defined in (a), (b) and (c) above that is licensed to any other entity which has an operating and/or marketing arrangement with the subject entity (or with any of its affiliates), in the same geographical area, for the provision of uniformly-branded or jointly offered telecommunications services.

3.2 Eligibility to Acquire Spectrum

The Department is guided by the following competition principle with regard to the circumstances under which a company's eligibility to acquire spectrum in an area should be restricted.

A company that currently provides telecommunications services should be restricted from holding certain licences if:

  1. that company possesses market power in the supply of one or more telecommunications services in a region covered by the licence to be auctioned;
  2. a new entrant is likely to use the licence to provide services in competition with that company's existing services; and
  3. the anti-competitive effects of that company's acquisition of a licence are not outweighed by the potential economies of scope arising from the integration of the spectrum in question into that company's existing network.

Other than this principle, the Department has made no policy or statement suggesting that an otherwise eligible entity would be precluded from having access to the spectrum to be licensed.

The Department notes that increasing competition in cellular and PCS services has provided the benefits of lower costs and expanded service offerings to Canadian consumers. The Department is also mindful of the large capital outlays that have been committed by the existing cellular and PCS service providers in order to roll out the network infrastructure required to meet consumer demand and Departmental licensing requirements.

Policy measures designed to guarantee the entry of new service providers may further enhance the level of competition in the market-place and promote the positive trends for consumers noted above. On the other hand, splintering of the mobile wireless telecommunications market among a greater number of players could weaken the position of some players in the short term and lead to potentially anti-competitive market consolidation in the longer term. Allowing the possible entry of new parties but not identifying spectrum exclusively for them could represent a balance between these two competing tensions.

For the purpose of discussion in this context, potential applicants for new PCS spectrum could be categorised as:

  1. Cellular/PCS licensees currently required by condition of existing licence to provide service in all regions of Canada.
  2. Cellular/PCS licensees whose present authority is to provide service within a particular region but who might wish to have additional spectrum within that authorized region, or to expand beyond that region.
  3. New entrants not currently licensed for the provision of cellular/PCS service.

The Department seeks comments as to whether and how the public interest would be served by limiting the eligibility of any potential applicants to participate in the auction.

In addition, the Department would be interested in any views as to whether a certain amount of spectrum should be identified for which only new entrants would be eligible to bid. Those supporting such a view should stipulate the amount of spectrum that should be reserved and indicate how such provisions would be in the public interest.

Furthermore, the Department invites comments as to how it should view the potential eligibility of any party that is licensed for the provision of personal communication services under the Radiocommunication Act but is not in compliance with its existing licence conditions. Specifically, the Department requests views as to whether such parties (and their affiliates) should be required to be compliant with existing PCS licence conditions before being eligible to acquire additional spectrum.

Finally, the Department solicits input on any other factors that respondents believe are relevant to the eligibility of entities to participate in the auction.

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