Licensing Framework for the Auction for Spectrum Licences for Advanced Wireless Services and other Spectrum in the 2 GHz Range

7. Second Phase of the Auction

If required, this auction process will continue in a second phase which will commence within one year following the cessation of bidding in the first phase. A Canada Gazette notice will be issued, marking the commencement of the second phase of the auction and inviting interested parties to submit applications for unassigned licences. The second phase of the auction will use the existing tiers, opening bid amounts, and eligibility points, but may vary in terms of the process and eligibility to participate.

7.1 Bid Payment

Within ten business days of the cessation of bidding, each provisional licence winner will be required to submit an initial payment with a value equal to twenty percent (20%) of the sum of its standing high bids plus one-hundred percent (100%) of the sum of any penalties that it has incurred. This payment will be non-refundable. If the provisional licence winner fails to make this initial payment within the specified period, then the provisional licence winner's irrevocable standby letter of credit will be drawn upon.

If the value of the provisional licence winner's irrevocable standby letter of credit, combined with any partial payment, is less than the required amount, then the provisional licence winner will forfeit its rightto have the licence(s) issued to it and the provisional licence winner will be subject to the applicable forfeiture penalties.

A payment for the remaining eighty percent (80%) of the total of the high bids will be due within thirty business days of the cessation of bidding. If the provisional licence winner fails to make this final payment within the specified period, then the provisional licence winner's irrevocable standby letter of credit will be drawn upon. If the value of the provisional licence winner's irrevocable standby letter of credit, combined with any partial payment, is less than the required amount, then the provisional licence winner will forfeit its right to have the licence(s) issued to it and again, the provisional licence winner will be subject to the applicable forfeiture penalties.

A provisional licence winner who is in default of payment may not selectively forfeit on a subset of the licences on which it placed the high bid. If all required payments are not received, then the provisional licence winner will forfeit its right to have any AWS, PCS or 1670-1675 licence issued to it.

All payments must be made by certified cheque, bank draft, or wire transfer, payable to the Receiver General for Canada, drawn on a financial institution that is a member of the Canadian Payments Association.

It is important to note that these bid payments for the initial 10-year term are in lieu of any fees fixed for the radio authorization under the Radiocommunication Act or any other Act 5.

7.2 Payment of Penalties

Upon cessation of bidding, the sum of the standing high bids and the sum of any withdrawal penalties and other penalties incurred will be calculated for all bidders. If the final value of withdrawal penalties cannot be calculated at that time because one or more licences remain unsold, the full value of the withdrawn bid will be used as an interim proxy for the value of the withdrawal penalty.

Example:

Suppose that a bid of $1 000 000 was forfeited on licence X after the auction. The ultimate selling price of licence X will not be known until a subsequent licensing process and hence the value of the forfeiture penalty cannot be calculated until that time. The full value of the forfeited bid plus 3% ($1 030 000 in this example) would be used as the interim proxy forfeiture penalty until a subsequent licensing process. Bidders should note that a subsequent licensing process will not take place for at least a year.

For each bidder, one of the scenarios laid out below will apply.

  • If the sum of a bidder's standing high bids equals zero and the sum of its penalties equals zero, then that bidder's irrevocable standby letter of credit will be returned.
  • If the sum of a bidder's standing high bids equals zero and the sum of its penalties is greater than zero, then that bidder will be required to submit a payment for the full amount of the penalties within ten business days.

If payment for the full amount of the penalties is not received by the Department within ten business days, then the bidder's irrevocable standby letter of credit will be drawn upon for the amount in question. If the full amount of the irrevocable standby letter of credit, combined with any partial payment, is less than the required amount, then the difference will be owing and payable to the Receiver General for Canada 6.

  • If the sum of a bidder's standing high bids is greater than zero and the sum of its penalties is equal to zero, then that bidder will be required to: (1) submit payment with a value equal to twenty percent (20%) of the sum of the standing high bids within ten business days; and (2) submit a second payment with a value equal to eighty percent (80%) of the sum of the standing high bids within thirty business days.

    If either of the required payments is not received by the Department within the specified time-frames, then the bidder's irrevocable standby letter of credit will be drawn upon for the amount in question. If the value of the irrevocable standby letter of credit, combined with any partial payment, is less than the required amount, then the bidder will forfeit its right to have the licence issued to it and will be subject to the forfeiture penalties discussed in Section 7.3.

  • If the sum of a bidder's standing high bids is greater than zero and the sum of its penalties is greater than zero, then that bidder will be required to: (1) submit payment with a value equal to twenty percent (20%) of the sum of the standing high bids plus one-hundred percent (100%) of the sum of the penalties within ten business days; and (2) submit a second payment with a value equal to eighty percent of the sum of the standing high bids within thirty business days.

    If either of the required payments are not received by the Department within the specified time-frames, then the bidder's irrevocable standby letter of credit will be drawn upon for the amount in question. If the value of the irrevocable standby letter of credit, combined with any partial payment, is less than the required amount, then the bidder will forfeit the right to have the licence issued and will be subject to the forfeiture penalties discussed in Section 7.3.

Example:

Bidder X withdraws a bid of $150 000 on Licence 1, which is eventually won by Bidder Y for $130 000. Bidder X withdraws a bid of $120 000 on Licence 2, which remains unsold upon cessation of bidding. Upon cessation of bidding, Bidder X is the standing high bidder on Licence 3 for $250 000 and Licence 4 for $300 000. In a subsequent licensing process following the cessation of bidding, Licence 2 is sold for $90 000.

Upon cessation of bidding, the sum of Bidder X's standing high bids is $550 000 and the sum of Bidder X's penalties is $140 000 (withdrawn bid of $150 000 less final selling price of $130 000 equals penalty of $20 000 for Licence 1 and withdrawn bid of $120 000 equals interim proxy penalty of $120 000 for Licence 2).

Within ten business days, Bidder X must submit a payment for $250 000 (20% of the value of the standing high bids equals $110 000 and 100% of the value of the penalties equals $140 000). Within thirty business days of the cessation of bidding, a payment for an additional $440 000 is required.

After the subsequent licensing process for Licence 2 is held, the correct penalty for Bidder X can be calculated as $30 000. Bidder X is then refunded $90 000.

7.3 Bid Forfeiture and Related Penalties

Following cessation of bidding, bidders who have submitted the high bid on a licence but fail to comply with the specified payment schedule or, as outlined in Section 4.3, fail to come into compliance with the eligibility requirements of the Radiocommunication Regulations, will forfeit their right to the licence. Furthermore, those bidders will be required to pay a penalty in the amount of the difference between the forfeited bid and the eventual selling price of the licence (determined by a subsequent licensing process), if the eventual selling price is lower than the forfeited bid 7. 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.

In the event of licence forfeiture, the bidder's irrevocable standby letter of credit will be drawn upon for the full amount of the interim proxy forfeiture penalty. If the interim proxy forfeiture penalty is greater than the full amount of the bidder's irrevocable standby letter of credit combined with any partial payment, or if the letter of credit has been returned before the forfeiture, then the difference will be owing and payable to the Receiver General for Canada 8.

Neither a bidder who forfeits on a licence, nor any of that bidder's Affiliates and Associated Entities, will be eligible to bid on it in any subsequent licensing process.

7.4 Eligibility Documentation

Bidders who are provisional licence winners will be required to submit documentation related to their compliance with the condition of licence,  Eligibility Criteria—Ownership and Control  discussed in Section 4.3 of this document. Provisional licence winners must submit The Declaration of Ownership and Control for Provisional Winners of Spectrum Licences in the 2 GHz Range, Including AWS, PCS, and the Band 1670-1675 MHz (see Attachment E of the Application Form), and all documents listed therein, within ten business days of the cessation of bidding.

The Department will review these documents expeditiously. The Department will then notify each provisional winner regarding compliance with the Canadian ownership and control requirements. In the event that a provisional licence winner does not, in the opinion of the Department, comply with the Canadian ownership and control requirements, the Department will require that the provisional licence winner make changes in order to become compliant. If the provisional winner fails to comply with the Canadian ownership and control requirements within sixty days after being notified by the Department of the required changes, then the provisional licence winner will forfeit the right to have issued any licences offered in this auction and will be subject to the penalties outlined in Section 7.3.

7.5 Issuance of Licences

Provisional winners of spectrum licences will have those licences issued to them on completion of the following: (1) payment of the sum of their standing high bids and the sum of their penalties, if any; and (2) a determination by the Department that the Canadian ownership and control requirements have been met. Depending on the complexity of the provisional winners' ownership and control structures and the responsiveness of the winners in providing any required additional documentation, this determination may take several months to complete.


Footnotes

5 As per subsection 5(1.3) of the Radiocommunication Act. (Return to content)

6 If a subsequent licensing process results in the calculated values of final withdrawal penalties being different from the interim proxy values, then the difference will be refunded to the bidders in question. (Return to content)

7 Suppose that a bid of $1 000 000 was forfeited on Licence X after the auction. The ultimate selling price of Licence X will not be known until a subsequent licensing process and hence the value of the forfeiture penalty cannot be calculated until that time. The full value of the forfeited bid plus 3% ($1 030 000 in this example) would be used as the interim proxy forfeiture penalty until a subsequent licensing process. (Return to content)

8 If a subsequent licensing process results in the calculated values of final forfeiture penalties being different from the interim proxy values, then the difference will be refunded to the bidders in question. (Return to content)


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