Policy and Technical Framework
Mobile Broadband Services (MBS) — 700 MHzBand
Broadband Radio Service (BRS) — 2500 MHz Band

PART C - Decisions on Spectrum Packaging and the Licensing of Broadband Radio Service (BRS) in the 2500 MHz Band

C2. Measures to Promote Competition

234. As indicated in SMSE-005-11, general policy-related issues were addressed in the 700 MHz consultation document.52 These issues included the drivers for spectrum demand, the possible need to promote competition in the Canadian wireless services market and specific mechanisms applicable to both the 700 MHz and 2500 MHz auctions. Through SMSE-005-11, Industry Canada sought views on the mechanisms specifically related to the 2500 MHz band. In particular, Industry Canada consulted on whether it should use mechanisms such as spectrum aggregation limits (spectrum caps) and/or spectrum set-asides to promote competition in the wireless services market.

Summary of comments

235. Measures to promote competition — General. Bell, Rogers, SaskTel and SSi were all of the view that there is no need for any such measures. These companies generally submitted that there is already sufficient competition in the wireless services market and that market forces will ensure that the spectrum is put to its best use.

236. On the other hand, other respondents believed that Industry Canada should intervene in the 2500 MHz auction in order to promote competition in the wireless market. EastLink, MTS Allstream, Niagara Networks, PIAC, Public Mobile, QMI, Shaw, TELUS, WIND and Xplornet each proposed various measures to promote competition, including in rural areas. These parties all cited the large amount of spectrum currently held in the 2500 MHz band by the Inukshuk partnership of Bell and Rogers and most argued that Bell, Rogers and Inukshuk should not be allowed to participate in the 2500 MHz auction. In addition, Public Mobile argued that SaskTel should also be barred from bidding in Saskatchewan where it is already a licensee in the 2500 MHz band. Public Mobile, supported by PIAC, further suggested that any service provider with more than 20 MHz of unused spectrum in any commercial mobile band should also not be allowed to participate in the 2500 MHz auction.

237. In addition to the possible implementation of spectrum caps or set-asides, Industry Canada sought comments on whether there are other mechanisms that should be considered and applied in the 2500 MHz band in order to promote competition.

238. In this regard, MTS Allstream recommended that Industry Canada maintain mandatory antenna tower and site sharing and roaming obligations as a condition of licence on all commercial mobile wireless licences. Similarly, Shaw suggested that Industry Canada extend mandated roaming and tower and site sharing for holders of spectrum in the 2500 MHz band. Shaw was also of the opinion that the current rules related to mandated roaming and tower and site sharing require reform.

239. RIM recommended that the auction be structured in a manner to avoid the fragmentation of the 2500 MHz band. RIM stated that this can be achieved with auction procedures which lock out non-contiguous bids or through post-auction assignment of individual channels to ensure that they are contiguous.

240. Rogers was of the opinion that roll-out requirements are the most effective mechanism to promote competition.

241. Measures to promote competition — Spectrum caps. Bell, Rogers, SaskTel and SSi opposed the use of spectrum caps, which they considered would interfere with the efficient allocation of spectrum. Rogers, however, was of the view that a cap on the amount of spectrum which could be obtained in the 2500 MHz auction (i.e. an in-auction cap) would be preferable to either an overall spectrum cap or a set-aside. As well, EastLink and Niagara Networks did not support a spectrum cap, as both considered that a set-aside would be more effective in ensuring that new licensees have access to the 2500 MHz band.

242. Two types of spectrum cap were proposed. Specifically, an in-auction 2500 MHz spectrum cap was proposed by Public Mobile and Xplornet for eligible bidders. Other parties, including MTS Allstream, PIAC, QMI, Shaw, TELUS and WIND, advocated an in-band cap, which would take into consideration the current 2500 MHz holdings of existing licensees.

243. Those parties which advocated the use of spectrum caps in the 2500 MHz band proposed spectrum caps of varying sizes. Table C5 summarizes these proposals:

Table C5 — Proposed spectrum cap53 sizes
Proposal* Type of spectrum cap recommended Respondent supporting

*Bell, EastLink, Niagara Networks, Rogers, SaskTel and SSi did not support the use of a spectrum cap.
**Refer to Figure C2 for a map of the Regions.

30 MHz (Region B**) and 40-50 MHz
(Regions A and C)
In-auction Xplornet
30 MHz (Region B) and 40 MHz (Region A) In-band WIND
40 MHz of paired spectrum
(Regions A, B and C)
In-band QMI
40 MHz of paired and unpaired combined
(Regions A, B and C)
In-band MTS Allstream, Shaw & TELUS
50 MHz of paired and unpaired combined (Regions A, B and C) In-band (PIAC)
In-auction (Public Mobile)
PIAC & Public Mobile

244. Xplornet proposed an in-auction spectrum cap of 30 MHz in Region B and 40 MHz or 50 MHz in Region A and Region C. In addition, Xplornet proposed a rural set-aside that would prevent existing BRS licensees from acquiring any additional 2500 MHz spectrum in rural areas.

245. WIND proposed that Rogers and Bell be prohibited from acquiring additional spectrum in the 2500 MHz band. WIND further proposed that an in-band spectrum cap of 30 MHz be applied in Region B and an in-band spectrum cap of 40 MHz be applied in Region A. WIND is of the view that this would enable a reasonable number of service providers to acquire a meaningful amount of 2500 MHz spectrum.

246. QMI proposed that an in-band spectrum cap of 40 MHz be applied in the paired spectrum only. QMI stated that “by virtue of this cap, the maximum quantity of paired spectrum that any one operator could hold in any geographic service area at the conclusion of the BRS auction would be 20+20 MHz.” In QMI's opinion, “any operator that already has, or bids to acquire, a full 20+20 MHz of BRS spectrum in any geographic service area will have a substantial holding with which to pursue its reasonable business objectives.” Moreover, QMI stated that its proposal ensures equitable access to the paired spectrum in the 2500 MHz band.

247. MTS Allstream, Shaw and TELUS supported an in-band spectrum cap of 40 MHz in order to promote equitable access to spectrum in the 2500 MHz band. Shaw viewed spectrum caps as an “effective, yet light-handed” mechanism to ensure that all carriers have reasonable opportunities to access the 2500 MHz spectrum. MTS Allstream also recommended that Bell and Rogers not be permitted to acquire any further spectrum in the band where they exceed the 40 MHz cap regardless of the status of their relationship through Inukshuk or otherwise. Similarly, TELUS argued that existing BRS licensees should not be permitted to bid to reacquire returned spectrum (blocks A9-A14 and A9'-A14'). Furthermore, TELUS was of the view that new BRS licensees should not be capped below 40 MHz, given Industry Canada's previous decisions regarding the return of spectrum in the 2500 MHz band by existing BRS licensees.

248. Public Mobile proposed that, along with its suggested block plan (a combination of 10+10 MHz and 15+15 MHz block sizes), a 50 MHz cap be applied in all Regions. Public Mobile submitted that Inukshuk and its affiliated shareholders should not be permitted to participate in the 2500 MHz auction, nor should SaskTel in Saskatchewan. Public Mobile further proposed that service providers with more than 20 MHz of unused spectrum in any commercial mobile band (including the PCS, Cellular or AWS spectrum) not be allowed to participate in the spectrum auction. Public Mobile stated that its overall proposal would allow for at least two new licensees in Region A and Region B, and that each licensee would have “enough spectrum to launch a robust and effective LTE offering.” However, Public Mobile indicated that if Industry Canada were to adopt 10+10 MHz block sizes, it would then support a spectrum cap of 40 MHz. Like Public Mobile, PIAC supported a spectrum cap of 50 MHz in the 2500 MHz band.

249. Despite the varying amount of the proposed spectrum caps, those who responded saw no requirement for existing BRS licensees to return additional spectrum in the event that their current holdings exceeded the proposed caps. However, respondents also argued that existing BRS licensees should not be permitted to acquire any additional 2500 MHz spectrum in these areas.

250. MTS Allstream, QMI, Rogers, Shaw and TELUS were of the view that the cap should be shared among associated entities and affiliated companies. MTS Allstream and Shaw argued that Bell, Rogers and Inukshuk should be treated as associated entities. QMI suggested the same if Industry Canada could not obtain a firm public commitment from Bell and Rogers that they would not jointly build or operate any mobile wireless network using BRS spectrum. Rogers indicated that it does not anticipate building and operating a joint LTE network with Bell using 2500 MHz spectrum and stated that any cap which may apply to Rogers should only apply to Rogers' share of the Inukshuk 2500 MHz spectrum holdings. TELUS stated that it was not an affiliate of Bell and maintained that the definition of associated entities should not seek to prohibit roaming or other network access arrangements that reduce costs and speed up deployment of services.

251. The proposed duration of any such cap varied among those parties who provided comments. Xplornet stated that the cap should remain in place for an indefinite period of time. MTS Allstream, PIAC and Shaw suggested a five-year cap (with PIAC proposing a minimum of five years). Shaw and MTS Allstream added that whether a cap continued to be necessary should be reviewed after the initial five-year cap period. Rogers did not propose a specific amount of time but stated that, should a cap be imposed, it should remain in effect for as short a period as possible. TELUS' approach to setting a duration on the cap varied based on the bidder. TELUS proposed that Industry Canada set a cap on existing BRS licensees that would remain in effect for a minimum of two years, whereas for the band entrants, the cap would be lifted after the closing of the auction in order to facilitate the consolidation of spectrum.

252. Measures to promote competition — Spectrum set-aside. Bell, MTS Allstream, Public Mobile, QMI, Rogers, SaskTel, Shaw, SSi and TELUS all opposed a set-aside where eligibility to bid for a specific block is limited to entities that meet predefined criteria. Many of these parties argued that the set-aside mechanism is susceptible to gaming opportunities. However, some of the parties54 proposed that Bell, Rogers, Inukshuk and, in some cases, SaskTel in Saskatchewan and TELUS be barred from the auction.

253. EastLink proposed that, in Region A, 30+30 MHz paired spectrum and 20 MHz unpaired spectrum be set aside for service providers with less than 10% of the national wireless market. In Region B, EastLink proposed that the set-aside be 20+20 MHz of paired spectrum. EastLink submitted that its proposal would allow for at least two service providers with less than 10% of the national wireless market to enter the market in each licence area and “would not unfairly prevent larger existing carriers from acquiring the spectrum they may desire for their future plans.”

254. Niagara Networks was of the opinion that, given Bell, Rogers and TELUS' commercial mobile spectrum holdings in various frequency bands, these companies should be completely excluded from participating in this spectrum auction. However, Niagara Networks argued that, "in the event that Industry Canada decides to allow TELUS to participate for any reason, the returned spectrum (blocks A9-A14 and A9'-A14') should be set aside for new entrants only."

255. PIAC supported setting aside sufficient spectrum for service providers holding less than 10% of the national wireless market.

256. Xplornet proposed that a rural set-aside be implemented to prevent existing BRS licensees from acquiring any additional 2500 MHz spectrum in rural areas.

Discussion

257. As stated in Part A above, Industry Canada has concluded that targeted measures related to the 2500 MHz auction are required in order to meet the objectives related to competition, investment and services in Canada. Having considered the comments received, Industry Canada has thus analyzed the appropriateness of specific measures, such as spectrum aggregation limits and set-asides in the context of the 2500 MHz spectrum auction as discussed below.

258. Spectrum aggregation limits (spectrum caps) restrict the amount of spectrum that any eligible bidder and its affiliates can purchase or hold in a particular geographical region.

259. Setting the right cap amount is crucial. If the limit is too low, there may not be enough spectrum to satisfy the business needs of some companies. If it is set too high, it might fail to fulfil the goal of facilitating access to spectrum by multiple service providers. Another factor to be considered when applying a spectrum cap is how it should be applied, e.g. whether the cap should apply only to the spectrum being auctioned, to spectrum that is held across one or more bands, or whether it should apply differently across various bidders. How it is applied could constrain the efficient allocation of the spectrum.

260. A spectrum set-aside as part of an auction occurs where eligibility to bid for a specific block is limited to entities that meet predefined criteria. A set-aside was used in the 2008 AWS licensing process where only new entrants, defined as participants holding less than 10% of the national wireless market based on revenues, were permitted to bid on 40 out of 90 MHz of AWS spectrum. Restrictions were also imposed to ensure that the licences arising from set-aside spectrum would not be transferred to companies that did not meet the new entrant criterion for a period of five years from the date of issuance.

261. As discussed above, even some of the respondents who had been eligible to bid on the set-aside blocks in the 2008 AWS auction provided only limited support for the use of a set-aside in the 2500 MHz auction. While several parties argued that Bell and Rogers should be barred from participating in the 2500 MHz auction, which would effectively result in a set-aside for new licensees, only EastLink and Niagara Networks advocated a set-aside mechanism for the 2500 MHz auction. Furthermore, setting aside specific frequency blocks in the 2500 MHz band would be problematic given the mix of paired and unpaired spectrum and the equipment ecosystem, which is in its early stages of development. However, there was widespread support for the implementation of a spectrum cap — apart from those parties who opposed any sort of intervention mechanism whatsoever.

262. The implementation of an in-band spectrum cap would promote equitable access to the 2500 MHz spectrum. In addition, the implementation of an appropriately sized cap would enable the entry of new licensees in each region.

263. An in-band spectrum cap of 40 MHz in each region will ensure that four or more service providers have the opportunity to access the 2500 MHz band in many areas in Canada, and would thus promote the competition of wireless services in this band. The in-band spectrum cap will include both paired and unpaired spectrum, but exclude the restricted bands. A cap of this size would also provide opportunities for licensees to deploy high capacity networks. However, given the limited demand which is expected for spectrum in the Yukon, Northwest Territories and Nunavut, there will be no spectrum cap in those areas.

264. In certain areas, existing licensees already have spectrum holdings in excess of the spectrum cap of 40 MHz. Taking into consideration previous decisions related to the requirement to return spectrum during the MCS/MDS transition to BRS, existing licensees would not be required to return additional spectrum in these areas. However, these licensees would not be permitted to acquire additional spectrum in those areas where the cap has been exceeded.

265. With respect to the duration of the spectrum cap, the in-band spectrum cap of 40 MHz will be in effect for a period of five years from the issuance of a licence. This time frame reduces the attractiveness of the licences for speculators yet permits market adjustments within a reasonable period.

266. Rollout obligation. As noted in Part B, Industry Canada has made use of general rollout obligations in several licensing processes to encourage licensees to put the spectrum to use and to deter acquisition of spectrum licences by speculators and those whose intent is to preclude access to the spectrum by their competitors. There is currently a deployment condition of licence applicable to existing BRS licensees in this band. Several respondents have noted the importance of this requirement. This condition of licence will be reviewed along with other existing and proposed conditions of licence in the upcoming consultation on a licensing framework. At that time, comments will be sought on the specific details of the general deployment requirement that will apply to the 2500 MHz licences and the applicability to existing and prospective licensees.

267. Affiliated and associated entities rules. The licensing framework for the 2500 MHz band will set out auction rules and conditions of licences, including rules relating to the transfer of licences as they apply to affiliated and associated entities. As discussed in Section B3, Industry Canada will consult with stakeholders regarding the definition and application of rules for associated entities in the upcoming licensing framework consultation in the 700 MHz band. This will also be part of the upcoming licensing framework consultation in the 2500 MHz band.

Decisions related to measures to promote competition for the 2500 MHz band

C2-1: With the exception of licensees in the Yukon, Northwest Territories and Nunavut, all licensees are subject to a spectrum aggregation limit (“spectrum cap”) of 40 MHz in the 2500 MHz band, excluding the restricted bands at 2570-2575 MHz and 2615-2620 MHz. This amount represents the total spectrum holdings, including both paired and unpaired spectrum, by each licensee in each licence area.

C2-2: The spectrum cap shall remain in effect in the 2500 MHz band for a period of five years after the issuance of licences. Therefore, no transfer of licences or issuance of new licences will be authorized if it allows a licensee to exceed the spectrum cap during this period.

C2-3: Industry Canada will consult with a view to revising the rules on associated entities.

C2-4: In areas where an existing licensee already has holdings in excess of the spectrum cap set out in Decision C2-1, the licensee will not be required to relinquish any such holdings in order to meet the limit of the spectrum cap. However, such licensees will not be eligible to bid for additional licences in the auction process or otherwise obtain additional licences in licence areas where the cap has been exceeded.

C2-5: Licensees planning to transfer any of their existing holdings in order to increase their eligibility to bid in the related licence areas must do so prior to submitting an application to participate in this auction process.

C2-6: Licensees planning to relinquish any of their existing holdings to Industry Canada in order to increase their eligibility to bid in the related licence areas must do so at least six months prior to the proposed auction date. In the event that Industry Canada decides to offer these relinquished licences as part of the 2500 MHz auction process, an addendum to the licensing framework for the 2500 MHz auction will be published in order to inform prospective participants of the additional licence offerings.

C2-7: A rollout obligation applicable to all 2500 MHz licences will continue to apply. Industry Canada will consult on the details of the general deployment requirements (e.g. population coverage required and time frame) and their applicability as part of the upcoming consultations on a licensing framework in this band.

Other details related to the rules and licensing process for the 2500 MHz band will be the subject of an upcoming consultation.

C3. Promoting Service Deployment in Rural Areas

268. Industry Canada sought comments on whether specific measures could be adopted within the 2500 MHz spectrum auction process to promote service deployment of BRS in rural areas.

Summary of comments

269. SSi expressed the view that deployment incentives, such as tax incentives, portable subsidies, rebates from the amount paid at spectrum auction or reduction of licence fees, can encourage licensees to deploy or improve mobile broadband service in remote, rural, unserved and underserved areas. SaskTel suggested a condition of licence that would require licensees to demonstrate use of the spectrum within five years of licensing. Further, SaskTel proposed that licensees be required to demonstrate the provision of services beyond census metropolitan areas (CMAs) within their licensed areas.

270. Xplornet indicated that “the economics of 2500 MHz infrastructure and global equipment standards enable providers to extend services at consumer prices which are equivalent to urban prices. Thus, 2500 MHz spectrum is a very effective band to deploy broadband services to rural Canada for which there is no real economic wireline equivalent.” Xplornet further commented that “the propagation characteristics of 2500 MHz are very well suited when it comes to communications with fixed household or business equipment, particularly in rural areas with open terrain.” As such, Xplornet recommended that Industry Canada adopt rural rollout obligations to further the deployment of services in rural areas. Its proposal to unbundle rural areas (see Section C1.3) from urban areas and set aside spectrum for rural areas would, in its view, ensure that the capacity requirements in rural areas are addressed and “prevent winning bidders from sitting on rural spectrum as the large incumbent service providers have done in the past.”

271. Rogers commented that Xplornet's proposal “would involve a complex and time-consuming redistribution of geographic areas and would introduce countless new situations where competing wireless networks would abut one another and potentially interfere with each other. It will therefore introduce considerable delay and risk to the process of licensing BRS spectrum. Further, Xplornet has not demonstrated that its proposal will not result in serious and detrimental impacts on inter-carrier frequency coordination and mitigation of inter-system interference.” Rogers proposed “that operators that are not prepared to implement services in certain geographic areas can avail themselves of Industry Canada's subordinate licensing policy such that rollout in these areas can be achieved by parties that are prepared to implement services in such areas.”

272. Several respondents, including Bell, MTS Allstream, Public Mobile, QMI, Rogers and Shaw, were of the opinion that, given its propagation characteristics, the 2500 MHz spectrum is not conducive to the deployment of mobile wireless services in rural areas. These parties commented that, given the amount of bandwidth available, the 2500 MHz band is an excellent candidate band to increase capacity in localized areas. Some of these parties also commented that it would cost substantially more (relative to lower frequency bands, such as the 700 MHz) to deploy in rural areas and could potentially disadvantage smaller service providers. TELUS commented that while there will be applications for BRS in rural and remote areas, they will be limited and secondary to services provided through lower frequency bands, such as 700 MHz.

273. Bell, Public Mobile, QMI and Shaw believed that market forces should drive the demand and deployment of BRS in rural areas. Bell commented that no requirement for any specific measures, such as a rollout requirement in the 2500 MHz spectrum auction process, is needed to ensure deployment of BRS in rural and remote areas. On the other hand, parties such as MTS Allstream, QMI, Rogers, SaskTel Shaw, and TELUS recommended that Industry Canada establish rollout targets similar to those established for AWS licensees.

Discussion

274. The 2500 MHz spectrum is recognized as being highly valued. In assessing the need for advanced wireless services in rural Canada, consideration was given to the benefits of both the 700 MHz and 2500 MHz bands.

275. Consistent with the comments received, it is recognized that, although the 2500 MHz spectrum is highly valuable for mobile systems, the propagation characteristics are such that it is not ideal spectrum for mobile systems covering large areas such as rural and remote areas. Overall, a requirement for any 2500 MHz licensee to deploy to a very high percentage of the population (similar to the requirement being imposed in the 700 MHz band) would be overly burdensome. There is, however, the potential for rural areas to benefit from providers which are interested in establishing either fixed or mobile systems in rural areas where there is a desire to increase network capacity. As noted in Section C1.3 (Tier sizes), recognizing the shorter propagation range of the 2500 MHz spectrum in comparison to the 700 MHz band, the impact of potential for interference from adjacent licence areas will be less and, hence, smaller licence areas are more practical for the 2500 MHz band than for the 700 MHz band. This decision to auction licences based on smaller licence areas will provide increased opportunity for those who are not interested in serving the major metropolitan areas to bid on licences for the less populated areas.

276. With regard to suggestions that financial incentives be linked to rural deployment, programs such as Broadband Canada: Connecting Rural Canadians and various provincial programs have provided incentives in the past to help this type of deployment. The establishment of these programs and the use of tax incentives are outside of Industry Canada's mandate under the Radiocommunication Act and are thus outside of the policy and licensing considerations of this consultation.

277. With respect to suggestions submitted to redefine licence areas to unbundle rural areas from urban areas, as noted in Section C1.3, it has been determined that Tier 3 licence areas are the most appropriate due to the potential for interference between adjacent licence areas. As a result, the suggestion to redefine the Tier 4 licence areas is not being undertaken for this licensing process. In comparison to the Tier 2 licence areas being used for licensing of 700 MHz spectrum, the decision to license using Tier 3 service areas for the 2500 MHz band will provide more opportunity for rural service providers to acquire licences without major urban areas included.

278. Given the number of blocks available for auction and the cap on 2500 MHz holdings as set out in sections C1 and C2, it is anticipated that opportunities will exist for bidders that are interested in only the smaller centres and outlying rural areas.

279. The remoteness of some regions creates far greater complexity and cost than urban build-outs. As such, there is a marginal or, at times, a lack of a business case to support the significant investment and higher operational costs required to deploy to rural areas. In some rural and remote areas, the high cost of deployment may not be commercially viable today without government subsidy, such as the program Broadband Canada: Connecting Rural Canadians or the various provincial programs available, although new technology developments may improve the outlook.

280. As stated in Section C2, a requirement for general deployment similar to previous licensing processes will apply. Rural service providers participating in the 2500 MHz auction will have increased opportunity to acquire licences for the specific area of interest as a result of the decision to auction smaller licence areas (Tier 3) and to implement a spectrum cap in this band.

C4. Spectrum Utilization Policy

281. In November 1991, Industry Canada issued SP-2500 MHz, Spectrum Utilization Policy for the Fixed and Broadcasting Services in the Band 2500-2686 MHz. This document is currently under review and will be updated to reflect the decisions made following the MCS/MDS transition to BRS.


Footnotes

  1. 52 See SMSE-018-10 – Consultation on a Policy and Technical Framework for the 700 MHz Band and Aspects Related to Commercial Mobile Spectrum.
  2. 53The proposed spectrum caps do not include the restricted bands at 2570-2575 MHz and 2615-2620 MHz.
  3. 54 EastLink, MTS Allstream and Public Mobile proposed that Bell, Rogers and Inukshuk be barred from bidding in the 2500 MHz auction. Public Mobile also proposed that SaskTel be barred from bidding in Saskatchewan. Niagara Networks and PIAC proposed that Bell, Rogers, Inukshuk and TELUS be barred from bidding.
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