Archived — Gazette Notice DGRB-002-04

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Department of Industry

Radiocommunication Act

Notice No. DGRB-002-04 - Licensing Process for Unassigned 2300 MHz and 3500 MHz Spectrum Licences

Intent

This Notice is to inform interested parties of the process that the Department will use to assign spectrum licences for the bands 2300 MHz and 3500 MHz not assigned during the February 2004 spectrum auction. The Department intends to adopt a two phase residual licence auction process.

Discussion

In September 2003, the Minister of Industry initiated a competitive licensing process for spectrum licences in the bands 2300 MHz and 3500 MHz. There were five spectrum licences available in 172 service areas across the country (with the exception of the 3500 MHz licences on Vancouver Island): one 15+15 MHz licence in the 2300 MHz band; three 25+25 MHz licences and one 25 MHz licence in the 3500 MHz band. In February 2004, the Department proceeded with the auction which resulted in 392 out of the 848 spectrum licences being awarded to successful bidders.

The Policy and Licensing Procedures for the Auction of Spectrum Licences in the 2300 MHz and 3500 MHz Bands (found at http://www.ic.gc.ca/eic/site/smt-gst.nsf/eng/sf06438.html) for the February 2004 auction describes how the appropriate licensing process for these unassigned licences would be determined. The Department has evaluated the options available and believes that it is now an appropriate time to offer the unassigned 2300 MHz and 3500 MHz frequency band spectrum, through a two phase residual licence auction.

The spectrum licences available, including their opening bids, are listed as an attachment to the application form, which can be found at http://www.ic.gc.ca/eic/site/smt-gst.nsf/eng/sf06080.html.

A complete list of provisional licence winners and respective licences awarded following the February 2004 auction is available at http://www.ic.gc.ca/eic/site/smt-gst.nsf/eng/sf01503.html.

Further details on the February 2004 spectrum auction licensing process are available on the Auction of the 2300 MHz and 3500 MHz Frequency Bands Web page, found at http://www.ic.gc.ca/spectrumauctions.

Decision and Process

The Department will make the spectrum available through a two phase residual licence auction process.

The licences awarded under the auction process will be subject to the same requirements as those in the Policy and Licensing Procedures for the Auction of Spectrum Licences in the 2300 MHz and 3500 MHz Bands.

Applicants should also note that, except as modified below, the auction rules for the February 2004 auction will apply to this auction process, including, in both the first and the second phase, the enforcement of the spectrum aggregation limit and the imposition of withdrawal penalties.

The residual licence auction process will take place in two phases. The first phase, "Round 0", is for the identification and allocation of licences where the supply is greater than the demand (i.e. there is no contention for licences). This first phase commences immediately with the release of this gazette notice. The opening bid price for licences in the residual licence auction will be the same as the opening bid prices used in the February 2004 auction.

The second phase, Round 1 and subsequent rounds, is for the allocation of licences where the demand for licences exceeds the available supply. The time between these two phases may be as little as a few weeks or as much as several months. The commencement of the second phase will be sooner, if for example, the number of bidders is relatively low for licences where there is contention. In that situation, rather than using the Internet and conducting the auction over a period of several weeks, the Department may ask bidders to travel to Ottawa where the auction would take place in a central location over a much shorter period of time. If however, the physical location and number of bidders precludes this option, then the Department may opt to use a fully secured Internet auction that may not commence until sometime in the next year. A decision on the timing as well as the form and format for this second phase of the allocation process will be announced shortly after the close of the first phase.

All interested parties must submit an application, as well as a financial deposit. Similar to the process outlined in the Policy and Licensing Procedures for the Auction of Spectrum Licences in the 2300 MHz and 3500 MHz Bands, for the February 2004 auction, the Department will review the applications received and will conduct a bidder qualification process. Applicants will be contacted by the Department regarding the status of their application, as well as other auction details. To simplify the application process, the Department has modified the rules and formula for the financial deposit. The details are included on the application form which can be found at http://www.ic.gc.ca/eic/site/smt-gst.nsf/eng/sf06080.html.

Unlike past auction processes, in the first phase of this residual licence auction, applicants must identify the specific licences that they are interested in bidding on in Round 0. The licences identified will be considered to be the bid of the applicant in Round 0, subject to confirmation by the Department of the applicant being a Qualified Bidder and having sufficient eligibility points to cover a bid on all those licences. For licences, where the applicant is the sole bidder, the applicant will be treated as the standing high bidder on those licences. As in previous auctions, bidders will be given the opportunity to withdraw their standing high bids but, to encourage meaningful bids and to ensure that no loss of revenue occurs as a result of such withdrawals, a bid withdrawal penalty corresponding to the incurred loss of revenue caused by this withdrawal will be imposed. Additional details and examples of withdrawal penalties can be found in the Policy and Licensing Procedures for the Auction of Spectrum Licences in the 2300 MHz and 3500 MHz Bands.

In early September, 2004 the Department will publish the list of qualified bidders and the Round 0 bids. Applicants who have bid on a licence in the first phase will be given the opportunity to withdraw any or all of those bids, subject to bid withdrawal penalties, by providing written notice using the address below, by no later than 5:00 p.m. EST on the 5th business day following the publication of the Round 0 bids. It should be noted that withdrawals which reduce contention but still result in at least one standing high bidder on the withdrawn licence will not generally result in a withdrawal penalty. The end of the withdrawal period will be the close of Round 0.

As soon as possible after the close of Round 0, the Department will publish a list indicating the provisional winners of licences on which only one bid remains active, as well as the status of the other remaining licences. The process for awarding the licences resulting from phase one, will begin prior to the commencement of phase two and could end prior to the close of the auction. As such, these licences will not be available during subsequent rounds, unless, for example, a provisional licence winner withdraws (subject to withdrawal penalties) on such a licence, or fails to meet the payment deadline for such licence.

Within 10 business days of the close of Round 0, each provisional licence winner will be required to submit payment in full for all the licences provisionally won, as well as bidder eligibility documentation (outlined in Attachment E of the Application to Participate in Residual Licence Auction form). As in past auctions, if provisional licence winners fail to make this final payment within the specified period, then their financial deposit will be drawn upon.

For licences where there is more than one continued application (i.e. demand continues to exceed the supply after the opportunity for withdrawals), the allocation will occur in the second phase of the auction. In attempting to maximize the number of non-contended licences that are awarded through phase one, the Department recognizes that it is introducing an exposure risk for those applicants who are interested in a package of licences.

As noted above, following the close of Round 0, the Department will issue a notice with details on the timing as well as the form and format for phase two of the residual licence auction. If the second phase does not occur shortly after the close of phase one, the financial deposits will be returned to the applicants and they, and others will be invited to reapply for phase two at a later date.

Application Deadline

To ensure full consideration, applications must be submitted no later than 5:00 p.m. EST August 23, 2004 to Industry Canada at the following address:

Manager, Wireless Networks
Radiocommunications and
Broadcasting Regulatory Branch
300 Slater Street, 15th Floor
Ottawa, Ontario
K1A 0C8

Obtaining Copies

Copies of this Notice and documents referred to are available electronically on the Spectrum Management and Telecommunications Web site at: http://www.ic.gc.ca/spectrum.

Official printed copies of gazette notices can be obtained from the Canada Gazette Web site at: www.gazette.gc.ca/index-eng.html or by calling the sales counter of Canadian Government Publishing at 819-941-5995 or 1-800-635-7943.

July 9, 2004

______________________
Jan Skora
Director General
Radiocommunications and
Broadcasting Regulatory Branch