Licensing Framework for the Auction for Spectrum Licences for Advanced Wireless Services and other Spectrum in the 2 GHz Range
This licensing process is conducted in accordance with the Framework for Spectrum Auctions in Canada (October 2001). Licensees should also familiarize themselves with Client Procedures Circular 2-1-23.
The comments received in the consultation process indicated a general agreement with the Department's proposed steps for licensing spectrum in the 2 GHz range including Advanced Wireless Services, Personal Communications Services and 1670-1675 MHz, in accordance with the general rules outlined in the Framework for Spectrum Auctions in Canada. Theprocess by which interested parties may apply to participate in the auction is outlined below.
The application forms for participation in the auction can be obtained electronically from the Spectrum Management and Telecommunications website.
Please note that additional corporate documentation may be required as attachments to the application forms—refer to Appendix D (Checklist of Forms).
A summary of key dates associated with this licensing process is provided on page ii of this document, and on the Spectrum Management and Telecommunications website at http://www.ic.gc.ca/eic/site/smt-gst.nsf/eng/sf08840.html. Interested parties are advised to check the website for updates to the schedule of events.
The policies, rules and definitions associated with this licensing process are set out in:
- this document;
- Policy Framework for the Auction for Spectrum Licences for Advanced Wireless Services and other Spectrum in the 2 GHz Range;
- Canada Gazette notice DGTP-002-07, Consultation on a Framework to Auction Spectrum in the 2 GHz Range Including Advanced Wireless Services, Part I;
- Canada Gazette notice DGRB-010-07, Consultation on Proposed Conditions of Licence to Mandate Roaming and Antenna Tower and Site Sharing and to Prohibit Exclusive Site Arrangements and resulting decisions; and
- any written amendment or supplement that may be issued by the Department.
Applicants are prohibited from co-operating, collaborating, discussing or negotiating settlement agreements with competitors, relating to the licences being auctioned or relating to the post-auction market structure, until the deadline for the final payment on high bids.
Prospective bidders will note that the auction application form contains a declaration that the applicant will be required to sign certifying that the applicant has not entered into and will not enter into any 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. For the purposes of this certification the word competitor means any entity, other than the applicant, its Affiliates or Associated Entities, which could potentially be a bidder in this auction based on its qualifications, abilities or experience.
Prospective bidders should note that "affiliate" for the purposes of this licensing process (defined by reference to "control in fact") differs from "affiliate" for the purposes of the Competition Act. As such, in order to avoid contravening section 47 of the Competition Act, a bidder who enters into such an agreement or arrangement with any one or more of its Affiliates may have to make the agreement or arrangement known to the Department at or before the time when any subsequent agreement or arrangement is made.
All bids must be from unrelated competitors in order to preserve the integrity of competitive bidding. Therefore only one member of an Affiliate relationship or Associated Entity will be permitted to become a qualified bidder. This is based on the principle that only competitors should be permitted to participate in the auction. Affiliated and Associated Entities must, therefore, decide prior to the application deadline which entity will apply to participate in the auction.
All affiliations or associations must be disclosed at the time of the application. Please note however that any discussions or negotiations after the application deadline which create an association with competitors (i.e. any explicit or implicit agreement relating to the acquisition of the licences being auctioned or to the post-auction market structure) during the auction process are prohibited and will be considered to be collusion. Any applicant who has formed such an Association will be disqualified from participating in the auction and may be subject to revocation of existing licences. Therefore all such contact with competitors must be suspended until the final deadline for payment on high bids.
An affiliate is defined as:
A person who controls the entity, or who is controlled by the entity or by any person who controls the entity. "Control" means control in any manner that results in control in fact, whether directly through the ownership of securities or indirectly through a trust, agreement or arrangement, the ownership of a body corporate or otherwise. Control in fact is the ongoing power or ability, whether exercised or not, to determine or decide the strategic decision-making activities of an enterprise, or to manage or run the day-to-day operations of an enterprise.
"Affiliate", defined by reference to control in fact, differs from "affiliate" for the purposes of the Competition Act. Consequently in order to avoid contravening section 47 of the Competition Act, a bidder who enters into such an agreement or arrangement with any one or more of its Affiliates may have to make the agreement or arrangement known to the Department at or before the time when any subsequent agreement or arrangement is made.
An associated entity is defined as:
Any entities who enter into any partnerships, joint ventures, agreements (including agreements in principle) to merge, consortia or any arrangements, agreements or understandings of any kind, either explicit or implicit, relating to the acquisition of the licences being auctioned or relating to the post-auction market structure, will be treated as Associated Entities. The existence of such agreements, arrangements or understandings must be disclosed in writing to the Department at the time of application and this information will be disclosed to other bidders and to the public. Changes made after the application deadline which create an Association with another applicant are not permitted, and any applicant who has formed such an Association will be disqualified from participating in the auction.
5.3.3 Presumption of Affiliate and Associated Entity Status
If a person owns, directly or indirectly, at least 20% of the entity's voting shares where the entity is a body corporate or where the entity is not a body corporate, at least 20% of the beneficial ownership in such entity, this will result in a refutable presumption that the person controls the entity. A person may attempt to refute the presumption of an affiliate relationship by submitting an affidavit or declaration, signed by an officer or other appropriate official, which sets out the specific ownership holdings of any person with a 20% or greater holding in the entity, affirms that the person does not control the entity, and sets out the reasons as to why the person does not control the entity. A copy of this affidavit will be made public. Such an affidavit or declaration must also be accompanied by supporting documentation and copies of all arrangements, agreements, or understandings between the subject entities. Such materials should be filed as part of the application materials, and in any event, no later than five business days after the publication of the qualified bidders. The Department reserves the right to request further information and to make its own determination regarding this matter.
In those cases where materials have been filed to refute a presumption of affiliate status, Industry Canada will apply a "control in fact" test to determine whether or not the entity has satisfactorily demonstrated that it is not affiliated with the other entity. Such determinations are done on a case-by-case basis. In making its determination, Industry Canada will generally request and review the type of information listed in Attachment E of the Application Form, Declaration of Ownership and Control by Provisional Winners of Spectrum Licences in the 2 GHz Range Including AWS, PCS and the Band 1670-1675 MHz. The Department reserves the right to request additional information. For example, the Department will require the entity to submit the following types of documentation for itself and any related holding company: the incorporation documents; bylaws; details of shareholdings; shareholder agreements; details related to the election of directors and appointment of officers of the company; complete details on the financial structure of the company, information regarding relationships between the parties; and copies of any agreements or arrangements which could affect whether the company or any related holding company are, or are not, controlled by another entity.
Any entity wishing to demonstrate why it should not be treated as an Associated Entity in the presence of the agreements, arrangements or understandings as outlined in Section 5.3.2 of this document, must, as part of its submission, include evidence and set out the reasons as to why an association does not exist. Such a submission must include a narrative, which will be made public, outlining the arguments as to why an association does not exist. Supporting documentation, as well as copies of all arrangements, agreements, or understandings between the subject entities must also be provided to the Department. The Department reserves the right to request additional information in order to make its determination.
Should the entities fail to provide all the relevant information in a timely fashion to allow the Department to complete its determination, or if the Department is not satisfied five business days prior to the date set for the mock auction that an association does not exist, then only one of those Associated Entities will be permitted to become a qualified bidder in the same service area.
It should be noted that during the Department's review of the materials filed to rebut the presumption of affiliate status, or to dispute the existence of an Associated Entity, the entities will be considered to be competitors and will be subject to the prohibition of collusion rules outlined above.
To participate in the auction, all applicants must submit a completed application form 4 and financial deposit. In the interest of providing both the Department and other bidders with adequate information on the identity of all bidders, applicants are required to fully disclose the beneficial ownership for every entity that owns, directly or indirectly, 10% or more of the applicant's voting shares, non-voting shares, partnership interests, or any other beneficial interests, as the case may be. The Department will make this information available to the public prior to the auction, so that all bidders have knowledge of the real identity of the other bidders. This information will be used, along with other documentation submitted by applicants, to determine the type of relationship, if any, that may exist between entities.
In order to enhance the integrity of the auction, the Department requires that all bidders submit a pre-auction financial deposit with their application to participate in the auction. The financial deposit is to be in the form of an irrevocable standby letter-of-credit. The elements required in a letter of credit and a sample letter-of-credit acceptable to the Department are provided in Attachment D of the Application Form.
The Department has established the pre-auction financial deposits based on the licences on which the applicant wishes to be eligible to bid. Each of the licences has been assigned a specific number of eligibility points ("points") that are proportionate to the population covered by the licence. One eligibility point is approximately equal to 100 000 in population per 5 MHz of spectrum. Refer to Appendix B, which provides the eligibility points and opening bids for each of the licences. The calculation of eligibility points is further described in Section 6.2.
The Department believes that it is appropriate to require bidders to submit a deposit to ensure that the integrity of the auction is maintained. At the same time, however, the Department does not want to disadvantage those applicants who may only be interested in obtaining spectrum in a few areas. Therefore, the Department has decided that the financial deposit will be: $40 000 per eligibility point for the first 300 points, and $140 000 per eligibility point requested thereafter.
The Department reserves the right to request additional financial deposits during the auction. This will be determined by considering such factors as the standing high bids on a licence and the bidding activity. The additional financial deposit will be based on a percentage, not exceeding 50%, of the standing high bids for a licence for a specified round. Requests for additional financial deposits will be announced to bidders ahead of their implementation. Bidders will be provided two full business days to submit their additional financial deposits to the AWS Auction Manager (address provided in Section 1.2).
Financial deposit(s) will be returned to: any applicant not found to be a qualified bidder; any applicant that provides written notification to the Department of its withdrawal from the process prior to the auction's commencement; and any bidder whose eligibility is reduced to zero during the auction and that is not potentially liable for any withdrawal penalties.
5.4.2 How to Submit the Application and Financial Deposit
The application form, the associated documents that may be required (as per the instructions provided on the various forms), and the financial deposit are to be physically delivered by 5:00 p.m., Eastern Standard Time (EST), , to the AWS Auction Manager (address provided in Section 1.2). The Department reserves the right, under exceptional circumstances, to accept applications and associated documentation after this deadline, but prior to publication of the list of applicants.
Upon receipt of the application and the associated documentation, the Department will send notification to the applicant that the application materials have been received and confirming the amount of the deposit that has been submitted. This notice does in no way mean that the application materials or the deposit have been approved.
If, prior to the application deadline, an applicant wishes for any reason to amend any of the forms it has submitted and/or submit a new irrevocable standby letter of credit, it may submit one or more amended forms and/or a new irrevocable standby letter of credit with an accompanying letter explaining that the enclosed form(s) and/or letter of credit are to replace the one(s) previously submitted. Any such amendments are to be physically delivered to the AWS Auction Manager by 5:00 p.m. Eastern Standard Time (EST), .
Upon receipt of an amended form(s) and/or replacement irrevocable standby letter of credit, the Department will send notification to the applicant that the amended form(s) and/or letter of credit have been received. The notification will state the amount of the new letter of credit that has been submitted. The initial irrevocable standby letter of credit will also be returned to the applicant. This notice will in no way mean that the amended form(s) or the additional deposit have been approved.
Multiple letters of credit from one or more financial institutions will be permitted within reason. The Department will treat the financial deposit for an applicant as being the sum of the amounts of each accepted letter of credit. Each letter of credit must comply with the conditions laid out herein concerning letters of credit. No letter of credit shall have any conditions requiring the Department to draw on the letters in any particular order of priority, or requiring any letter to be drawn upon completely before drawing upon any other letter.
A list of all applicants will be made public via Industry Canada's Spectrum Management and Telecommunications website on . The publication of this list does in no way mean that these applicants have been approved as qualified bidders.
The Department will begin to review the application forms (and any associated documents) and the accompanying irrevocable standby letters of credit after the closing date for the submission of applications. In this initial review, the Department will identify any errors in the application forms or the letters of credit. It will also determine any additional information related to any Affiliate or Associated Entity of the applicant, if required.
Following the initial review period, the Department will provide applicants with an opportunity to correct any errors or inconsistencies in their application or letter of credit that have been identified by the Department, and will request the required additional information related to the Affiliates or Associated Entities, where applicable. The original applications may be returned to the applicant with a brief statement outlining any discrepancy(ies) and/or omission(s), or requesting additional information. The applicant will be invited to resubmit the corrected form and/or the additional information and to physically deliver this to the Manager, Wireless Networks at the address provided in Section 4.12, by the date specified in the statement.
Applicants who do not comply with this request will have their application to participate in the auction rejected. Applications that are rejected, including those for which an opportunity has been provided to correct errors or inconsistencies identified by the Department, but are still found to be deficient, will be returned to the applicant with a letter indicating they have been rejected. The letter will outline the deficiencies and will include the applicant's irrevocable standby letter of credit.
Those applicants who have submitted acceptable application materials, including the accompanying financial deposit, will receive a Qualified Bidder Certificate and the necessary software, instructions, and codes to allow them to use the Department's automated bidding system. This includes encryption software that allows bids to be submitted securely over the Internet. Qualified bidders will also receive information on mock auctions and an online webcast presentation in the weeks following the application deadline, which will allow bidders to better familiarize themselves with the auction system. The date of the opening day of bidding is included in the Table of Key Dates.
A list of all qualified bidders, the licences for which they are eligible to bid, and their initial level of eligibility points will be made public via Industry Canada's Spectrum Management and Telecommunications website, on the date noted in the Table of Key Dates.
Applicants wishing to withdraw their application materials and have their irrevocable standby letters of credit returned may do so, without prejudice, by sending a written request to the AWS Auction Manager at the address provided in Section 1.2. This request is to be physically delivered to the AWS Auction Manager prior to 5:00 p.m. (EST) on the business day preceding the opening of the auction.
Only the Authorized Representative of the bidding company may notify the AWS Auction Manager of any material changes in the information submitted in application documents. Written notification must be sent by the Authorized Representative to the address provided in Section 1.2, within five business days of such change.
Should a qualified bidder wish to change his or her contact information, or the name of one or more of the designated bidders, the Authorized Representative may notify the AWS Auction Manager on his or her behalf.
A request to change a designated bidder should be made prior to the activation of the digital signature and encryption keys
Industry Canada may respond to questions clarifying the AWS Policy Framework.
The Department may also amend or supplement the auction rules and procedures contained in this document. Any such amendment or supplement will be published on Industry Canada's Spectrum Management and Telecommunications website and will be sent to all qualified bidders.
Written questions asking for clarification of rules or policies will be accepted until . Questions received by the deadline, along with the Department's written answers, will be made public by . These answers will be considered as clarification of the policies set out in the AWS Policy Framework, and as amendments or supplements to the rules set out in this document.
From time to time, the Department will also update the list of "frequently asked questions" (FAQ) on the website, however these questions and their responses are for information purposes only and will not form part of the official procedures.
The Department's automated auction system features a user-friendly web browser interface. The auction will be run over the Internet and bids will be encrypted and digitally signed to ensure security and authenticity. Each entity that is qualified to participate in the auction may designate up to three individuals to submit bids on its behalf.
The results of each round will be accessible to bidders through the auction system. These results will also be posted on Industry Canada's Spectrum Management and Telecommunications website so that anyone who is interested may monitor the auction's progress. At the close of a bidding round, the Auction Management System (AMS) automatically tabulates the bids for that round and within a few minutes posts the results for designated bidders to examine. General public availability of these results takes only a few minutes longer as results are transferred to Industry Canada's Spectrum Management and Telecommunications website. A bid tracking tool that can be used to analyze round results will be made available to the public. It is important to note, however, that the Department will not be providing any form of user support for the bid tracking tool.
To access and run the Department's auction software with maximum performance, the following platforms are recommended.
(1) Use of one of the following web browsers and JVMs (Java Virtual Machine):
- Microsoft Internet Explorer 5.5-6.0 SP1/SP2 with Sun JVM 1.4.2/1.5, Microsoft JVM
- Netscape Navigator 7.0 with Sun JVM 1.4.2
- Mozilla FireFox 1.0 with Sun JVM 1.4.2
- Mozilla 1.7.2 with Sun JVM 1.4.2
(2) Run your choice of the preceding on one of the following Operating Systems:
- Microsoft Windows NT 4 SP4 and higher
- Microsoft Windows 2000 Professional Edition
- Microsoft Windows XP Professional edition SP1/SP2
(3) Access the Internet through a reliable connection to the Canadian Internet backbone via high-speed Internet connection.
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