PCS-2 GHz - Consultation on the Proposed Policy and Licensing Procedures for the Auction of Additional PCS Spectrum in the 2 GHz Frequency Range

4. Definition of Licences

4.1 Spectrum Licences

The authorizations available for assignment will be spectrum licences which are defined in subparagraph 5(1)(a)(i.1) of the Radiocommunication Act as authorizations "in respect of the utilization of specified radio frequencies within a defined geographic area".

The attributes of these spectrum licences and the conditions that will be attached to them are the subject of the sections that follow. The Department proposes that the elements laid out in the Framework for Spectrum Auctions in Canada document be generally adopted for this licensing process.

4.2 Spectrum Structure

The current PCS spectrum structure consists of six symmetrically paired blocks in the frequency range 1850-1990 MHz, as shown in Figure 1. This structure was adopted in 1995 and has been the basis for licensing PCS systems both in Canada and the United States. This structure has also been adopted by some other countries in the Americas. In Canada, blocks A/A', B/B', D/D', and F/F' are currently licensed to PCS operators, leaving the remaining spectrum, a total of 40 MHz in blocks C/C' and E/E', available for licensing. Since 1996, PCS operators in Canada and in many other countries have deployed PCS systems known as second generation (2G), utilizing digital technologies.

Figure 1

Frequency block C/C' is 15+15 MHz of paired spectrum in the bands 1895-1910 MHz and 1975-1990 MHz. The lower block is adjacent to spectrum designated for licence-exempt PCS devices. The upper block is adjacent to a mobile satellite downlink band. The E/E' block is 5+5 MHz of paired spectrum situated between the PCS blocks B/B' and F/F', both of which are currently licensed. The frequency bands of the E/E' blocks are 1885-1890 MHz and 1965-1970 MHz.

The current frequency block structure was adopted in Canada in 1995 to meet a number of objectives, including:

1. Ensuring sufficient spectrum to foster competition in voice and data services.
2. Making available different block sizes to allow operators to meet the spectrum aggregation limit requirements.
3. Harmonizing with the U.S. block plan to facilitate roaming and cross-border sharing.
4. Avoiding technological problems that could affect the availability and cost of equipment if a different block plan were used.

From a regulatory standpoint, cellular/PCS operators may use any technology, provided they meet a certain minimum set of technical requirements to ensure interference-free operation. The Department plans to continue this policy for the licensing of the spectrum in PCS blocks 'C' and 'E'.

Canadian cellular/PCS operators currently use a blend of analogue and digital technology to serve subscribers, and multi-mode handsets allow operators to incrementally transition to more spectrally efficient digital technologies. The deployment of second-generation cellular/PCS systems is at various stages of roll-out in Canada. The following table represents the technology map for cellular/PCS services in Canada:

Table 1 - Access Technologies Used in Cellular/PCS Spectrum

Cellular 800 MHz	Sub-band A	Mobility Canada members	- AMPS (analogue) - CDMA (digital) known as ANSI-95B (based on a 1.25 MHz channel bandwidth)
	Sub-band B	Cantel	- AMPS (analogue) - TDMA (digital) known as ANSI-136 (based on a 30 kHz channel bandwidth)
PCS 1.9 GHz	A/A'	Microcell	- PCS1900 (digital) (GSM technologies at 1.9 GHz) (based on a 200 kHz channel bandwidth)
	B/B'	Clearnet	- CDMA (digital) known as ANSI-95B (based on a 1.25 MHz channel bandwidth)
	D/D'	Mobility Canada members	- CDMA (digital) known as ANSI-95B (based on a 1.25 MHz channel bandwidth)
	F/F'	Cantel	- TDMA (digital) known as ANSI-136 (based on a 30 kHz channel bandwidth)

In examining the spectrum structure for the 'C' and 'E' blocks, consideration should be given to a number of factors.

1. Enabling Future Evolution

A second-generation system is a digital system that provides higher spectrum efficiency for voice communications combined with limited data capability due to the data rate limitation of the access technology. Third-generation systems, known as 3G (IMT-2000), are systems based on ITU IMT-2000 approved standards that provide high data rate capability, therefore allowing a wide range of multimedia services, including Internet applications and video-oriented services. Initial targets for data rates include up to 2 Mbps for in-building/low mobility applications, up to 384 kbps for pedestrian environments, and up to 144 kbps for vehicular environments. Services may include Internet access, multimedia applications, video conferencing, e-commerce transactions, and e-mail.

It is expected that licensees will offer various transitional stages between 2G and 3G services. Furthermore, the Department encourages current, and any future, PCS licensees to adopt business strategies that will enable them to incorporate their existing licensed spectrum into their planning for evolution to 3G services.

2. Compatibility Issues Between Different Technologies and Bands of Operation

Vendors are currently developing new chip sets to address compatibility problems between different access technologies and different bands of operation. It is expected that multi-mode and multi-band handsets will be available in the next few years, thus facilitating roaming and re-sale arrangements. However, while this approach may be attractive in an environment where only 2G technologies are used, the addition of 3G technologies to the possible combination of mode and bands may impact the cost and availability of those handsets.

3. Channel Bandwidth Requirements

Different 2G access technologies require different channel bandwidths (e.g., 1.25 MHz for CDMA, 200 kHz for GSM and 30 kHz for TDMA). The 3G (IMT-2000) standards developed by the ITU will require wider channel bandwidths to accommodate the higher data rate requirements (e.g., multiples of 5 MHz channels).

4. Spectrum Efficiency

In general, the choice of access technology will have an impact on spectrum utilization efficiency for a given spectrum block size. In addition, a small amount of spectrum may also be required as a guard band between systems, either to permit deployment in the same spectrum block or to protect systems using adjacent blocks. The size of the guard band is technology-dependent.

Based on these factors, the Department seeks comments on:

1. the minimum size of frequency sub-blocks that would support practical implementation of 2G and initial deployment of 3G (IMT-2000) services, given the frequency block size of the C/C' and E/E' blocks;
2. the preferred sub-block structure of the spectrum in the C/C' and E/E' blocks, taking into account engineering issues, business factors, and the Department's desire to see greater competition and advanced services in all regions of Canada;
3. the implications on roaming and cross-border sharing arrangements of the sub-division of the C/C' and E/E' blocks;
4. the technical challenges that would exist in the context of 2G deployment, initial 3G deployment, and the anticipated evolution from 2G to 3G.

Further factors also need to be considered if a sub-division of the C/C' and E/E' blocks is envisaged, such as the need for paired, symmetrical frequency blocks. As cellular/PCS networks address growing requirements to offer multimedia and internet protocol based (IP-based) services, there may be a need to address asymmetrical traffic flows. The asymmetry in the data flow between the forward and reverse paths may necessitate the establishment of asymmetrical paired blocks for Frequency Division Duplexing (FDD). Therefore, the Department seeks additional comments on:

• the need for operators to have contiguous spectrum blocks in the band 1850-1990 MHz, given the wide range of access technologies available to operators for both 2G and 3G applications;
• the need, if any, to adjust the spectrum block structure to align with asymmetrical traffic flows, taking into account the growing developments in IP-based services over cellular/PCS systems; and
• the need for special provisions to accommodate Time Division Duplexing (TDD) technology in the frequency block structure.

4.3 Geography

4.3.1 National Versus Regional Licensing

Since the introduction of cellular services in 1985, the Department has encouraged national mobile coverage of cellular and PCS services through licensing on a national basis, and by requiring that certain roll-out obligations be met by service providers. There has been considerable success in the achievement of this objective.

The cellular operators have now extended their cellular coverage to serve over 93% of the population. In the early phase of implementation, the cellular operators were committed to serve 23 urban centres situated in all regions of Canada. Since the early years of cellular service, the main driver for expansion has been the pressure of competition. The Department has not imposed any additional obligations to increase coverage beyond the roll-out commitments contained in the original conditions of licence. In 1998, the Department issued Radio Systems Policy 019 (RP-019), Policy for the Provision of Cellular Service by New Parties⁵, to further stimulate the implementation of cellular services and wireless local loops in under-served and unserved areas of Canada.

In the case of Rogers Cantel Inc., an authorization was granted to serve all regions of Canada. A second national cellular radio infrastructure was facilitated by granting licences to the regional telephone companies operating under the Mobility Canada alliance. While accommodating these companies' initiatives to develop national service, the Department has never imposed any requirement to offer contiguous national service through roaming and marketing arrangements.⁶

The conditions of licence imposed on PCS licensees in 1995 address national coverage as follows:

"Condition - 1.0 Full National Coverage

In order to realize the Government's objective of full coverage, you must implement your system substantially in accordance with the full five year plan contained in your detailed submissions to the Department notwithstanding any stated conditions therein. In addition, you and any entities with which you have submitted an application for 2 GHz PCS, must offer a reasonable level of service in all regions of Canada within two years of the date of this authorization."

The PCS operators have now extended their PCS coverage to all regions of Canada.

Thus the Canadian public now enjoys two analogue cellular infrastructures which will continue to provide national coverage augmented by third party cellular coverage. These infrastructures are being overlayed with digital technology at 800 MHz and 2 GHz. Furthermore, the Department will continue to enforce the 2 GHz roll-out compliance of the PCS licensees as committed to in their five-year business plans. Continued resale and roaming on analogue cellular services, among all licensees, will also help maintain national service. The resale of PCS service as imposed in the conditions of licence for all PCS operators will assist systems of compatible technology to integrate into national systems.

Mobility Canada announced in May 1999 that it planned to restructure in order to create two competing groups. TELUS Mobility would be the keystone of one group, while the other would be an alliance of the Mobility Canada members from Saskatchewan east. Resale and roaming arrangements have been developed between the two groups to ensure continuation of national service for their customers.

The Department's objective of national coverage has now largely been met, and it is confident that both market forces and the policy measures currently in place will see the continuation of strong national networks. Due to variances across Canada in terms of population levels and densities, demographics, and economic activity, current and potential future licensees may have different needs for meeting the service requirements of various regions across the country.

4.3.2 Geographic Dimension of Licences for Spectrum in Blocks 'C' and 'E'

Auctioning national frequency blocks might be advantageous to potential new entrants seeking to compete against established national players. Assigning new spectrum in national frequency blocks might also contribute to the national coverage objective discussed in the previous section.

On the other hand, auctioning new spectrum as national blocks may not be in the best interest of those who wish to serve regional niche markets, or of those needing regional spectrum to complete their networks or to address spectrum shortages which inhibit increases in the capacity of networks in particular areas.

Within the context of the eligibility issues discussed in section 3.2, the Department seeks comment as to whether national spectrum blocks, regional spectrum blocks, or a combination of both would be appropriate.

Given the likelihood that mobile services will be offered with this new spectrum, reasonably large service areas would appear warranted. Therefore, should regional spectrum blocks be offered, the Department proposes that Tier 2 service areas, as defined in the document entitled Service Areas for Competitive Licensing⁷, be used. (See Table 2 in section 8.1 for more data on Tier 2 service areas.)

With reference to section 3.2 above, the Department also seeks comment on the following issues:

• If regional PCS licensees previously under the former Mobility Canada consortium were eligible to bid for additional spectrum to expand their coverage beyond their present serving areas, would it be desirable as a public policy to require them to serve all regions of Canada? If such a policy were desirable, how might this objective be achieved?
• If spectrum were identified specifically for new entrants, would it be desirable that they be required to serve all regions of Canada? If such a policy were desirable, how might this objective be achieved?
• If new entrants were eligible to participate in the auction but with no spectrum specifically identified for them, would it be desirable that they be required to serve all regions of Canada? If such a policy were desirable, how might this objective be achieved?

4.4 Displacement of Microwave Incumbents

The spectrum in the band 1850-1990 MHz was designated for the implementation of PCS service under the 1995 policy, Wireless Personal Communications Services in the 2 GHz Range⁸. In that document, provisions were made to gradually displace the fixed microwave systems using this spectrum. A transition policy was adopted with specific rules for the release of spectrum for PCS systems and the orderly displacement of fixed microwave installations.

In October 1994, the Department revised the Canadian Table of Frequency Allocations⁹ and established that priority be given to mobile service in the band 1850-1990 MHz as of July 1, 1997. The Department also established that fixed stations would need to be displaced where necessary to accommodate mobile service based on a spectrum utilization policy (see footnote C35 of the Canadian Table of Frequency Allocations). In November 1994, Industry Canada placed a moratorium on the licensing of new fixed microwave systems in this band.

In the transition provisions of the 1995 PCS policy, the Department established, among other things, that:

"For any fixed frequency assignment subject to displacement, the notification period will be a minimum of 4 years for microwave equipment that has been licensed for 10 years or less at the time of the notification, with the exception of frequency assignments authorized to PCS licensees and their affiliates, and the cellular carriers, in which case a minimum notification period of 2 years will apply. Frequency assignments for which the microwave equipment has been licensed for more than 10 years at the time of notification will be given a minimum notification period of 2 years. Earlier displacement may be achieved through mutual agreements between PCS operator(s) and the affected fixed station operator(s)."

These provisions for the displacement of fixed microwave systems have worked well in the early introduction of PCS service. A large number of fixed frequency assignments in large urban areas and some major highways have been displaced since the transition policy was announced. However, as the Department prepares for the licensing of additional PCS spectrum, it is appropriate to review the time-lines established in the 1995 transition policy for the displacement of fixed frequency assignments.

The case could be made to reduce the notification period for all fixed frequency assignments in this spectrum to provide PCS operators greater flexibility to expand their services, considering that a moratorium on further licensing of fixed systems was established some five years ago (since October 1994), that the secondary status of fixed service became effective on July 1, 1997 (footnote C35), and that microwave equipment in operation is over ten years old. On the other hand, there are a number of microwave systems operating in rural and remote areas where the PCS spectrum may not be needed for a number of years, where there is the possibility of PCS operation that will not be affected by fixed systems, or where fixed microwave operators may elect to operate on a secondary basis and accept potential interference from PCS systems.

The Department is of the view that in certain situations, the notification period for the displacement of fixed assignment may delay the expansion of PCS service. In a recent transition policy¹⁰ to open spectrum at 2 GHz for the mobile satellite service, the Department established January 1, 2003 as the earliest date for microwave displacement with a two-year notification period. In the next two to four years, wireless PCS capability promises to evolve as a significant high-speed data access component with a rich level of services based on the Internet, including e-commerce. An argument could be made that PCS service providers should not be disadvantaged, compared to wireline carriers, by having to wait for a long period to gain access to the spectrum.

Industry Canada seeks comments on accelerating the existing transition provisions for all licensed PCS spectrum (1850-1910/1930-1990 MHz) so that Canadians, wherever they live, can benefit from new PCS services over a relatively short implementation period. The Department proposes the following:

• As of January 1, 2001, all fixed frequency assignments subject to displacement will be afforded a minimum of a two-year notification period.
• Fixed microwave operators will have to file with the Department by January 1, 2001 their plans to migrate their fixed service operations to other frequency bands (in particular for high market areas and in the vicinity of major highways), and be able to accommodate a transition over a one-year notification period.
• As of January 1, 2002, all fixed frequency assignments will be afforded a minimum of a one-year notification period.
• Starting on January 1, 2002, the Department may establish geographic areas and serve notification that all fixed frequency assignments in these areas must cease operation within one year.

In April 1997, the Department issued Spectrum Utilization Policy 1910 MHz (SP 1910 MHz), entitled Licence Exempt Personal Communications Services in the Frequency Band 1910-1930 MHz)¹¹. The provisions of the transition policy are summarized as follows:

• a minimum notification period of two years for the displacement of a fixed station frequency assignment to accommodate non-nomadic PCS devices;
• a minimum notification period of three years for the displacement of fixed station frequency assignments across the country to accommodate nomadic PCS devices.

The Department also seeks comment on whether it would be appropriate, and to what extent, that similar accelerated provisions apply to the licence-exempt PCS spectrum in the sub-band 1910-1930 MHz.

4.5 Licence Tenure

The Department proposes that licences have a ten-year term and a high expectation of renewal at the end of the term. That is to say, the Department intends to generally renew licences for subsequent ten-year terms unless a breach of licence condition occurs, a fundamental reallocation of spectrum to a new service is required (e.g., a change in the international allocation), or an overriding policy need arises (e.g., a spectrum reallocation to address a national security issue). To provide a more stable investment climate for licensees, a consultation process will commence no later than two years prior to the end of the licence term if the Department foresees the possibility that a licence will not be renewed. The imposition of any renewal fees in the subsequent term will also be addressed in a consultation process which will commence no later than two years prior to the end of the licence term.

In the event of bankruptcy or insolvency of a licence holder, the status and treatment of the licence will be subject to the general laws of bankruptcy and insolvency.

4.6 Transferability and Divisibility

The Department proposes that auctioned licences will be transferable and divisible (i.e., transferable in part in the spectral and/or bandwidth dimensions) subject to the following conditions and guidelines:

• All eligibility criteria and other conditions that apply to a licence, including those related to interference management, will continue, as applicable, should the licence be transferred.
• Should an auction winner transfer its licence to another party, for example, four years into a ten-year licence term, the second party will only receive a licence term equal to the remaining six years, but will be eligible for the same licence renewal provisions as the original licensee.
• All proposed licence transfers must comply with any spectrum aggregation limits or other measures intended to preclude anti-competitive behaviour that may be in place. (It should be noted that any licence transfer may also be subject to the provisions of the Competition Act.)
• In order to maintain compatibility with the Department's database, licences will be divisible in the geographic dimension only in terms of Spectrum Grid cells¹². Thus, when an auctioned licence is divided, the minimum geographic size that any one of the new divisions may take is one Spectrum Grid cell. The individual Spectrum Grid cells are sufficiently small that even with this restriction, an extremely high degree of flexibility will be available to the parties involved in determining the size and shape of sub-divided portions of a licence.
• There will be no minimum limit to divisibility in the bandwidth dimension.
• Written notification will be required of all proposed licence transfers. The Department will also request attestations or other documentation to ensure that the points above (e.g., compliance with the eligibility criteria and other conditions of licence) have been satisfactorily addressed. Once a licence transfer has been registered, the Department will revoke the original licence and issue a new licence(s) in its place.
• The Department will maintain a publicly accessible database listing all auctioned licences and the respective licensee, and will update the database upon a licence transfer.

It should be noted that the licences of incumbent cellular and PCS operators are not subject to this more liberalized transferability regime at this time. The transfer of an existing radio licence to another party continues to be subject to a full review of the application by the Department and the approval of the Minister. The Department would be favourably disposed, however, to requests for any post-auction spectrum transfers needed to rationalize the holdings of all PCS licensees.