Policy and Licensing Procedures for the Auction of Spectrum Licences in the 2300 MHz and 3500 MHz Bands

10. Amendments and Supplements and Clarification Questions to the Policy and Licensing Procedures for the Auction of Spectrum Licences in the 2300 MHz and 3500 MHz Bands

10.6 Auction Design and Rules

10.6.1 Bid Increments

In Section 8.6 of the Policy which explains how the bid increments will be calculated, it is noted that the new bid price for the next round would be rounded up to the nearest two significant digits. The auction software will in fact round the new bid price up to three significant digits from the left (e.g. a bid increment of 567,894 would be rounded up to 568,000 and a bid increment of 718.75 would become 719).

10.6.2 Responses to Clarification Questions Related to Auction Design and Operation

Question 49

In the examples provided please confirm that there is an error in Question 1. (i.e. Since the actual activity (288) level exceeds the required activity level (300)...). (Reference Section 8.5)

Answer:

There is indeed an error in Example 1 of Section 8.5 of the Policy. The final sentence in the example should read: "Since the actual activity (300) level exceeds the required activity level (288), Bidder X will maintain its full 480 eligibility points for the next round."

Question 50:

"full information on the bids placed by all bidders will be made available each round." (Reference Section 8.2.)

Please clarify: 

  1. Exactly what information will be released at the end of each round?
  2. The form in which this information will be released.
  3. Whether the information from the end of any particular round will be available throughout the auction in the form of history data files?

Answer:

At the end of each round, the following information will be published for each licence: the standing high bidder; the bid amount; and the identity of all the bidders placing bids. In addition, information on bidders' eligibility points, activity, the total dollar amount of all standing high bids, remaining/used waivers and any withdrawals, made in that round will be provided. Also, overall measures of aggregate eligibility, and aggregate activity will be published.

Designated bidders will be able to monitor current and historical round results by reviewing and/or downloading the results from the Previous Round Results section on the Auction Management System Web site. The Department will also publish current and historical round result summary information and complete round result data files on the Department's Bid Tracking Web site.

Further information on the file formats of the downloadable round result files is available at http://www.ic.gc.ca/eic/site/smt-gst.nsf/fra/sf08951.html in the document entitled Round Result File Formats.

The following questions are closely related and will be answered together.

Question 51:

No information is given in the Procedures about the length and timing of auction rounds.

  1. When will this information be made available?
  2. What discretion will the auctioneer have to alter the length and timing of rounds?
  3. Will bidders be permitted to submit requests for changes to the length and timing of rounds during the auction for review of the auctioneer?

Question 52:

If no definitive decision has yet been taken with regard to the length and timing of rounds, can you give an indication of likely length and timing of rounds, for guidance purposes only?

Answer:

As with past spectrum auctions, the Department expects to run between 4 and 8nbsp;rounds per day. The rounds will typically last between 30 minutes – 60 minutes with an equal amount of time between rounds for the analysis of the round results. The exception will be during the first week of bidding, in which the Department expects the rounds to be longer (approximately two hours), so as to afford all bidders the opportunity to become more familiar with the auction process.

The bidding schedule for the first week of the auction will be sent to all auction applicants as part of the Bidder Information Document. All future weekly schedules will be announced on the Thursday of the preceding week. Qualified bidders will receive this announcement via the Important Message from Industry Canada section of the Auction Management System Web site. This announcement will also be made available on the Spectrum Management and Telecommunications Web site. Bidders will have until 12 p.m. Eastern Time the following day to send any requests for modifications to the proposed schedule and supporting information to the Auction Manager for consideration.

The Auction Manager has the discretion to alter the length and timing of rounds.

Question 53

Please clarify when technical information about the number, format and structure of auction data files will be made available. Is it correct to assume that these will be similar to those used for the PCS auction? Will sample data files be provided?

The technical information is currently available on the file formats of the downloadable round result files is at http://www.ic.gc.ca/eic/site/smt-gst.nsf/fra/sf08951.html in the document entitled Round Result File Formats. The format and structure of auction data files will be the same as those used for the 24/38 GHz and PCS auctions.

10.7 Post-Auction Procedures

10.7.1 Responses to Clarification Questions Related to Eligibility Documentation

Question 54:

Please define "expeditiously".(Reference Section 9.4.)

Answer:

The Department will endeavour to review the documentation associated with the provisional winners' ownership and control structures in a timely manner to ensure that all required documentation has been received. As noted in Section 9.6 of the Policy, the time required to make a determination by the Department whether the Canadian ownership and control requirements have been met may take several months to complete, depending on the complexity of the provisional winners' ownership and control structures and the responsiveness of the winners in providing any required additional documentation.

10.7.2 Bid Forfeiture and Related Penalties

Upon review of the calculation of forfeiture penalties, the Department believes a portion of the current calculations to be distorted and, as such, wishes to replace the following text, under Section 9.3 of the Policy:

"If the licence is not sold in a subsequent licensing process, then the selling price will be deemed to be zero and the penalty will be calculated accordingly. An additional amount of (a) 3% of the original forfeited bid; or (b) $100,000 for each forfeited bid will be charged, regardless of the eventual selling price."

with

"If the licence is not sold in a subsequent licensing process, then the selling price will be deemed to be zero and the penalty will be calculated accordingly.An additional amount of the greater of (a) 3% of the original forfeited bid; or (b) $10,000 for each forfeited bid will be charged, regardless of the eventual selling price."

10.7.3 Responses to Clarification Questions Related to Enforcement of Aggregation Limits

Question 55:

"However at the end of the auction, holders of FCFS licences who have successfully bid on spectrum that puts them over the 100 MHz limit will be required to divest some of their holdings to meet the 100 MHz limit." (Section 3.4)

  1. Provide the period of time that such divestiture must take place.
  2. If there is not a prescribed time limit, please explain why not.
  3. What are the penalties for not complying within the timeframes?
  4. When will the divested spectrum become available through FCFS?

Answer:

The divestiture must occur prior to the issuance of the licence(s). The penalty for not complying with the requirement to divest some of their holdings is the forfeiture of the right to the licence(s) acquired during auction. Further details concerning bid forfeitures and related penalties can be found under Section 9.3 of the Policy.

The Minister will exercise its discretion in determining when the divested spectrum would become available in a licensing process. It is important to note that no spectrum would become available should a provisional winner divest its FCFS FWA spectrum holdings (assigned on a grid cell basis) for the Tier 4 service area licence, if the FCFS FWA spectrum holdings are encompassed by that Tier 4 service area.  Divested FCFS FWA grid cell licences would only become available in the post-auction FCFS process, in the event that an entity divests FCFS FWA spectrum in a service area that is not assigned during the auction.

For example, Entity A has several FWA grid cell licences that were assigned on a FCFS basis. All of these grid cell licences are located in one Tier 4 service area, Tier 4-200. Entity A participates in the 2300 MHz and 3500 MHz auction, and at the auction's close, is the provisional winner of 100 MHz of spectrum, in Tier 4-200. Entity A is required to divest some of its spectrum holdings, to meet the spectrum aggregation limit. If Entity A divests its FCFS FWA grid cell licences, retaining the 100 MHz of spectrum from the auction, since the FCFS FWA grid cell licences are encompassed by Tier 4-200, the grid cell licences divested will not be available for licensing. If Entity A divests FCFS FWA grid cell licences in a service area that is not assigned during the auction, this spectrum will become available via the post-auction FCFS process.

10.7.4 Responses to Clarification Questions Related to Post-Auction Licensing Procedures

The following questions relate to Section 9.7. Post-Auction Licensing Procedures

The Department indicates that "thirty days following the auction, licenses which received little or no bidding and remain unsold may be made available on a First Come, First Served (FCFS) basis. Licenses that received significant bidding activity but remain unsold through either withdrawn bids or forfeitures (see Section 9.3) may be made available via a future re-auction." (Emphasis added)

The following questions are closely related and will be answered together.

Question 56:

Will this later spectrum only be available through re-auction? If so, provide time frames.

Question 57:

Provide all reasons why this later spectrum will not be available on a first come first serve basis.

Question 58:

Provide the Department's definitions of "little bidding" versus "significant bidding" in the context of Section 9.7

Question 59:

Will there be reserve bids and if so, please provide them.

Question 60:

Will both WCS and FWA spectrum be made available through this proposed re-auction and FCFS process?

Answer:

The Minister will exercise its discretion when determining the appropriate licensing process for unassigned licences, following the auction of the 2300 MHz and 3500 MHz bands. The Department will be guided more by the principles of supply and demand, than levels of bidding activity (e.g. 'little' or 'significant'), using a First-Come, First-Served (FCFS) process where the Department is of the view that there is sufficient spectrum to meet anticipated demand, or a competitive licensing process, such as an auction, where anticipated demand exceeds supply, as outlined in Section 3 of the Guidelines on the Licensing Process and Spectrum Release Plan, RP-020 document.

Details concerning future licensing processes for unassigned spectrum licences following the auction of the 2300 MHz and 3500 MHz bands will be made available at an appropriate time, prior to those licensing processes.

Should unassigned spectrum be available in a re-auction process, it is likely that minimum opening bids would be used rather than reserve bids.

All unassigned spectrum licences from the auction of the 2300 MHz and 3500 MHz bands, be they WCS or FWA, will be considered by the Department for a future licensing process in accordance with RP-020.

Question 61

If there is bidding in an area, is it possible that after the auction closes, the Department will consider or assess that only "little bidding" has taken place on that area and declare that it will be placed in the first come first serve process? How will the bidder which believed it was successful be compensated?

As described in Section 8.14 of the Policy, the standing high bidders on each licence, at the auction's close, will be declared the provisional winners of those licences. Since these licences are not unsold, they will not be made available through another licensing process unless the provisional winner forfeits on those licences. The determination of provisional winners is irrespective of the level of bidding activity received on a licence.

Question 62

Will the consideration of a re-auction involve a public process or will the Department make this decision absent a public consultation?

Answer:

The Department, when considering a re-auction, will advise of its intentions by way of a Canada Gazette Notice. The Department may conduct a public consultation should the Department consider it in the public interest.

Question 63

Regarding the statement that the former spectrum "may" be made available on a FCFS basis, please provide the following:

  1. When that decision will be made by Industry Canada.
  2. The factors that will be taken into consideration when making that decision.
  3. The earliest date that Industry Canada will accept FCFS applications.

Answer:

The Department's decision to assign unsold licences on a FCFS basis will be made following the close of the auction of the 2300 MHz and 3500 MHz bands. The Department will not accept FCFS applications until it has established both a process for accepting applications and a period for determining interest. This process will be treated in accordance with the Guidelines on the Licensing Process and Spectrum Release Plan, RP-020, in which the principles of spectrum supply and demand are discussed.

The Department will exercise its discretion in determining when such a licensing process will occur, however, as stated in Section 9.7 of the Policy, the earliest date for a post-auction licensing process would be 30 days following the close of the auction.

The following questions are closely related and will be answered together.

Question 64:

Provide an estimated date as to when the Client Procedures Circular (CPC) outlining the details of the first come first serve process will be available. (Section 9.7.2)

Question 65:

Advise whether it will be before the auction commences. (Section 9.7.2)

Question 66:

Will the CPC pertain to WCS & FWA? If not, identify the other bands that will be included. (Section 9.7.2)

Answer:

The Department expects the publication of a Client Procedures Circular (CPC), outlining the details of the FCFS process, will occur following the close of the auction of the 2300 MHz and 3500 MHz bands. The existing CPC 2-1-19 will be revised to consider both FWA and WCS as well as the spectrum policies outlined in the 1998 (SP 3400–3700 MHz), Gazette Notices (DGTP-02-03 and DGTP-06-03 respectively), and Guidelines on the Licensing Process and Spectrum Release Plan, RP-020.

Question 67:

The Department indicated that first come first serve post-auction licenses "will have similar attributes and conditions as the licenses available during the auction. Specifically they will be issued for a 10 year term and with the exception of the eligibility criteria, will carry the same terms and conditions as the auctioned licenses." (emphasis added) (Reference Section 9.7)

Please explain why the eligibility criteria will not apply, and the degree of its non-application. For example:

Will non-Canadian carriers be permitted to acquire this spectrum?

Will non-Canadian "service providers" or "users" be permitted to acquire spectrum through this mechanism?

Indicate all other areas where the license conditions between the auction and the FCFS spectrum will differ.

Answer:

The eligibility criteria, as outlined in Section 3.3 of the Policy, states that all entities are eligible to apply and participate in the auction. However, successful bidders must be eligible to become radiocommunication carriers as described in section 10(2) of the Radiocommunication Regulations, and as such, must meet the related ownership and control requirements. The Department believes that such a restriction will effectively allow the assignment of licences during the auction, on a primary basis, to those entities most able to provide services to Canadians, by being eligible to become radiocommunication carriers.

At the close of the auction, as stated in Section 9.7 of the Policy, the requirement that licensees be eligible to become radiocommunication carriers will be removed on post-auction licensing of unassigned licences. As such, radiocommunication carriers, radiocommunication service providers and radiocommunication users will be eligible for any post-auction licensing of unassigned spectrum. The Department believes it important that unassigned licence(s) be put to use, and that changing the post-auction eligibility criteria would be in the public interest. Radiocommunication carriers must meet the related ownership and control requirements for successful bidders in the auction, as noted above, and radiocommunication service providers and radiocommunication users must meet the eligibility criteria as described in Section 9(1) of the Radiocommunication Regulations.

Licences assigned in a post-auction licensing process will carry all of the other terms and conditions as the auctioned licences.

Question 68

In the event of two parties submitting a FCFS application on the same day, advise which party will be granted the spectrum, and the reasons why. (Section 9.7.2)

Answer:

The process will be outlined in the CPC. The Department will attempt to accommodate each applicant where possible. If, however, the Department determines that demand for unassigned licence(s) in an area exceeds supply, the Department may consider using an auction or other competitive process.

The following questions are closely related and will be answered together.

Question 69:

Advise whether FCFS applications can be submitted in advance of the auction commencing or concluding. If not, why not? (Section 9.7.2)

Question 70:

Are FCFS applications publicly available at the time the application is made? If not, when with they become public? (Section 9.7.2)

Answer:

It is important to differentiate between FWA spectrum currently available in rural and remote areas, on a FCFS licensing basis, and any unassigned licences, following the close of the 2300 MHz and 3500 MHz bands auction, that may be made available on a FCFS basis. Please note that the FCFS FWA spectrum currently available is by grid cells only, whereas any unassigned FWA or WCS licences, following the close of the auction, would be available for licensing by grid cell, as well as by Tier 4 service area.

As outlined in Section 4.1.3 of the Policy, licensing of FWA spectrum, in rural and remote areas, on a FCFS basis will continue until one month prior to the commencement of the auction, based on the restructured band and additional licensing guidelines outlined in Gazette Notices DGTP-006-03 and DGTP-002-03. At that point, all licensing activity for new FWA system applications in the band 3475-3650 MHz will cease. Anyone having been issued a licence or a written approval-in-principle will be treated as an FWA incumbent licensee. The list of these FWA incumbent licensees will be made available to the public in advance of the auction.

Applications for unassigned post-auction licences will not be accepted until the Department has determined both the licensing process and the associated dates.

Question 71

Will parties be able to submit multiple FCFS application exceeding the 100 MHz spectrum limit, given they may not succeed in receiving all of the spectrum requested. (Section 9.7.2)

Answer:

The spectrum aggregation limit of 100 MHz will remain in place for the duration of the auction and will continue to apply for two years following the close of the auction. The Department, therefore, will not accept multiple FCFS applications exceeding the 100 MHz spectrum limit. In developing the post-auction CPC for the FCFS process the Department may consider some of the principles outlined in the existing 1998 FCFS FWA policy (SP 3400–3700 MHz).

Question 72

"FWA spectrum acquired through the post-auction FCFS process (see Section 9.7) will count towards the spectrum aggregation limit for a period of two years after the close of the auction".

Explain fully what will occur after the two year period.

Answer:

Unless announced otherwise, after the two year period, the aggregation limit will cease automatically for all licences assigned before, during and after the 2300 MHz and 3500 MHz bands auction process.

Question 73

What maximum period of time will be required by the Department to complete its Ownership and Control determination for a given carrier?

Answer:

As outlined in Section 9.6 of the Policy, the time required to make a determination by the Department whether the Canadian ownership and control requirements have been met may take several months to complete, depending on the complexity of the provisional winners' ownership and control structures and the responsiveness of the winners in providing any required additional documentation.

Question 74

Will the 10 year license period commence after the Ownership and Control determination or at some other time? Please provide details.

Answer:

As outlined in Section 9.6 of the Policy, licences will be issued following the payment of the sum of standing high bids (and the sum of their penalties, if any) and, a determination by the Department that the Canadian ownership and control requirements have been met. The 10 year licence term will commence upon the issuance of the licence.

10.8 Appendices in the Policy

10.8.1 Calculation of Eligibility Points

Please note that there is an error in the eligibility points listed for property 4-159 (Merritt) in Appendix 7 of the Policy. The eligibility point value for this property is 1 point, not 10, as currently listed.


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