Archived — Additional Clarification Question and Answer for the Auction of Additional PCS Spectrum in the 2 GHz Frequency Range

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Question Submitted October 25, 2000: 

In the answer to question 53 of Amendments and Supplements and Clarification Questions to the Policy and Licensing Procedures for the Auction of Additional Spectrum in the 2 GHz Frequency Range ("the Amendments"), the Department indicated that, while it would not provide answers to questions submitted after the August 11, 2000 deadline, seeking clarification or interpretation of the Policy, it would, at its discretion, provide answers in the event that a significant new issue was raised. The following question arises not from the Policy itself, but from a change in the Policy enunciated in the Amendments, that in our view raises a significant issue. It arises, specifically, from the following provision in section 10.3.2 of the Amendments, "Changes which create an Association with another applicant after the application deadline will not be permitted." The question is, will the Department consider a two week extension of the application deadline, to November 28, 2000, or, in the alternative, will the Department, while maintaining the application deadline, consider extending the period for creating Associations among applicants ("the Association deadline") to November 28, 2000? An affirmative answer to either alternative would, in our respectful submission, take into account the following factors related to the Association deadline, viz. that it

  1. represents a significant change from the Policy;
  2. represents a significant change in policy from the 24/38 GHz auction held last year;
  3. was introduced only last week, without any public input or comment - indeed without any question having been raised on point - by interested parties;
  4. places a severe time limitation on the ability of potential bidders to develop associations that would allow forstronger, better financed bidding entities;
  5. works to the particular disadvantage of smaller potential bidders; and
  6. works to the disadvantage of the auction process itself.

An affirmative answer to either alternative would, in our view, help ensure a fairer and more successful auction without the necessity of delaying the start of the bidding beyond the January 15, 2001 start date. We would request that the answer be provided by Friday, October 27, 2000.

Answer:

Given that the Policy was released on June 28, 2000, and that the original deadline for applications was August 28, 2000, the Department believes that ample time has been provided to interested parties to allow them to form appropriate partnerships and alliances for the purposes of participating in the auction. In addition, the Department believes that the four weeks provided to review the amendments, supplements and responses to the clarification questions and to finalize the composition of bidding entities is sufficient.

It is important to note that the text in the document, Amendments and Supplements and Clarification Questions to the Policy and Licensing Procedures for the Auction of Additional Spectrum in the 2 GHz Frequency Range, which reads, "Changes which create an Association with another applicant after the application deadline will not be permitted", is intended to ensure a fair and competitive auction. Applicants are strongly advised to note the prohibitions outlined in section 6.5: "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." Parties should be aware that an alliance between two competitors followed either by only one of those entities bidding in the auction, or by both entities bidding in the auction but on complementary licences, would be construed, prima facie, as an agreement or arrangement regarding particular licences on which the entities will not bid. The creation of a separate deadline during which associations with other applicants could be effected would run counter to this important objective. Further, any modification to the application deadline would result in a delayed auction start date. Therefore, the Department is not inclined to extend the application deadline to participate in the auction beyond November 14, 2000, nor are we inclined to create a separate deadline to allow for the creation of associations among applicants.

The Department does, however, recognize that in the responses to certain questions, it is not clear whether changes to the status of applicant or qualified bidder which do not create an association with another applicant are permitted. The Department wishes to facilitate access to capital, while not unduly reducing the competitiveness of the auction. Therefore, the Department hereby clarifies that applicants and qualified bidders may make changes to their ownership structure after the application deadline and before the auction start date. In the interest of providing other bidders with adequate information on the identity of all bidders, any changes which result in an entity holding 10% or more of the applicant's voting shares, non-voting shares, partnership interests, or any other beneficial interests, must be disclosed to the Department. This information will be made available to the public so that all bidders have knowledge of the real identity of the other bidders. Any such changes will be made available via updates to the beneficial ownership information on the Department's Web site.

Interested parties are also reminded that the provisions of the Competition Act apply independently of, and in addition to, the provisions of the Policy.

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