Consultation on a Licensing Framework for Mobile Broadband Services (MBS) — 700 MHz Band

5. Bidder Participation — Affiliated and Associated Entities

60. In SMSE-002-12, Decision B3-4, it was indicated that Industry Canada would consult with a view to revising the rules on associated and affiliated entities to provide improved flexibility and clarity.

61. It has been noted that several Canadian service providers have entered into different forms of network and spectrum sharing arrangements, driven by the investment and spectrum efficiencies that such arrangements can bring, particularly in rural areas. However, in previous auctions, parties entering into agreements and arrangements that were deemed to be either affiliated or associated entities were only permitted to participate in the auction process through a single bidder.

62. In support of the stated policy objectives of competition, investment and timely deployment to rural areas, and in light of the current scarcity of spectrum in the 700 MHz band, the high demand for capacity by customers (driven by the use of smart phones and tablets), the high cost of network deployment, particularly in rural areas, as well as the spectrum and network efficiencies that can be achieved through such arrangements, Industry Canada recognizes that changes to the rules should be considered.

63. The intent of the proposed changes is to provide increased flexibility in the treatment of a certain subset of associated entities such that they could be allowed to participate in the auction as separate entities, and have the spectrum cap apply separately to them, as long as this would not have an adverse impact on the integrity of the auction, or the intent of the spectrum caps.

64. Proposed Definition of Associated Entities: As a basis for participating in the 700 MHz auction, Industry Canada proposes that associated entities be defined as follows:

Any entities that enter into any partnerships, joint ventures, agreements to merge, consortia or any arrangements, agreements or understandings of any kind, either explicit or implicit, relating to the acquisition or use of any spectrum in the 700 MHz band will be treated as Associated Entities. Typical roaming and tower sharing agreements would not cause entities to be deemed associated.

65. Depending on the nature of the association, it may not preclude the ability of the entities to participate separately in the auction or to have the spectrum caps applied individually.

66. Auction integrity and transparency: In order to ensure auction integrity and transparency, all entities wishing to participate in the auction process will be required to disclose in writing, as part of their application, the names of affiliated and associated entities. It is proposed that a narrative also be submitted, describing all key elements and the nature of the affiliation or association in relation to the acquisition of the spectrum licences being auctioned and, the post-auction relationships of the said entities. It is proposed that this would include arrangements with another potential bidder that relate in any way to the future use of the 700 MHz spectrum directly or indirectly.

67. Some examples of arrangements that would require disclosure include, but are not limited to, agreements to establish a joint network using spectrum licences acquired by each of the entities and agreements with respect to a joint backhaul network. It is also proposed that agreements such as significant joint equipment purchases be disclosed. Typical roaming and tower sharing agreements and other agreements, such as the purchase of backhaul capacity, would not cause entities to be deemed associated entities and hence need not be disclosed.

68. The submitted narrative would be made available to other bidders and to the public on Industry Canada’s website prior to the auction in order to ensure transparency of the licensing process.

69. Eligibility to participate separately in the auction: In the past, associated entities were not permitted to participate in an auction separately. It is now proposed that associated entities could be permitted to apply to Industry Canada to participate in the auction separately. The submitted narrative would be assessed to determine whether permitting both entities to participate separately would negatively impact the integrity of the auction process. The auction integrity would be best assured by the transparent disclosure of the relationships between bidders participating in the auction. Industry Canada may request additional documents. Any information considered by the applicant to be confidential should be properly marked as such. If Industry Canada deems it necessary to disclose any information marked as confidential, the applicant would be consulted prior to release.

70. Eligibility to have caps apply to associated entities separately: It is proposed that in addition to the above, associated entities could request that the spectrum caps apply individually. To obtain this approval, entities would be required to demonstrate that they intend to compete separately in the applicable licence area and continue to function as competitors to a level satisfactory to Industry Canada. In making this determination, Industry Canada would consider all relevant factors. Depending on the nature of the agreement, documentation may be required that sets out the details of the association, including copies of all arrangements or agreements, for example agreements related to network architecture and spectrum use and documents related to corporate decision making, marketing and customer information, sales and financing. Assessment criteria may include, but would not be limited to, consideration of the degree to which the entities would offer branded services, pricing and device selection that are unique from the other. For additional information on the application of the spectrum cap for associated entities, refer to the condition of licence entitled "Spectrum Aggregation Limits" in Section 6 of this document.

71. It should be noted that agreements between associated entities may have an impact on obligations to serve rural areas (see Section 6).

72. Bidders are reminded that the provisions of the Competition Act apply independently of, and in addition to, the proposed policy.

73. Associated entities wishing to participate in the auction separately would be required to submit their application at least 30 days in advance of the final application deadline to participate in the auction. This would provide Industry Canada the additional time required to make an assessment of the association and provide a decision on the associated entities’ ability to participate in the auction separately, and have the cap apply individually, if so requested. Should the request be denied, the associated entities would be required to select which member entity will apply to participate in the auction.

74. Definition of Affiliated Entities: It is proposed that the definition of affiliated entities remain essentially as it was for the AWS auction, as follows:

An affiliated entity 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.

75. Please note that all entities participating in the auction will be subject to the same prohibition of collusion rules, as stated in Section 5.1 – Prohibition of Collusion.

Industry Canada is seeking comments on its proposed changes to the definition and rules related to associated entities. Specifically, comments are sought on:

  • the types of agreements that should be captured under the definition of associated entities;
  • the level of information to be disclosed to the public;
  • the provision that typical roaming and tower sharing be specifically excluded from the revised definition of associated entities and whether other types of agreements such as the purchase of backhaul capacity should be deemed excluded;
  • the proposal that entities that are deemed associated entities may apply to be treated as separate entities for participation in the auction;
  • the proposal that associated entities may request to have the spectrum caps apply to them separately, based on an analysis of their association and of whether they intend to compete in the same licence service area;
  • the criteria to be considered in determining whether the entities are competing; and
  • the proposal that no changes be made to the affiliated entities rule.

5.1 Prohibition of Collusion

76. As in previous auctions, in order to ensure the integrity of the bidding process, all applicants will be prohibited from cooperating, collaborating, discussing or negotiating agreements with other bidders regarding the licences being auctioned or the post-auction market structure. This prohibition will be in effect from the deadline to submit applications to participate in the auction until the deadline for the final payment of winning bids.

77. The rules regarding prohibition of collusion used for the AWS auction were essentially stated as follows:

Applicants are prohibited from cooperating, 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 winning bids.

The application form to participate in the auction will include 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, “competitor” means any entity, other than the applicant and/or its affiliates or associated entities, which could potentially be a bidder in this auction based on its qualifications, abilities or experience.

78. In order to maintain the integrity of the auction, bidders are prohibited from signalling either publicly or privately, their bidding intentions or post-auction market structure related to spectrum in the 700 MHz band, while the auction is ongoing. This would include comments or any communication with or via the media. An example would be making a public announcement regarding which licences the company intends to bid on or its rollout intentions.

79. Given that Industry Canada is proposing to allow the participation of some associated entities as separate bidders in this auction process, the prohibition of collusion rules are proposed as follows:

From the date of application until the deadline for the final payment on winning bids, each applicant is prohibited from cooperating, collaborating, discussing, negotiating or entering into agreements, arrangements or understandings with any competitors regarding the licences being auctioned, bids or bidding strategies in the auction, or the post auction market structure. Each applicant is also prohibited from signalling its bidding intentions, either publicly or privately, from the application deadline until the end of the bidding process.

The application form to participate in the auction will include a declaration that the applicant will be required to sign certifying that the applicant has not entered into any agreements, arrangements or understandings of any kind with any competitor, other than those disclosed to Industry Canada, regarding the spectrum licences being auctioned or the post-auction market structure. The applicant must also certify that it will not discuss during the auction, any agreements, arrangements or understandings of any kind with any competitor, including its disclosed associated entities, regarding the spectrum licences being auctioned or the post-auction market structure. For the purposes of this certification, "competitor" means any entity, other than the applicant and/or its affiliates, which could potentially be a bidder in this auction based on its qualifications, abilities or experience.

Should a bidder fail to comply with this prohibition, it may be subject to disqualification from the auction and/or forfeiture penalties.

Industry Canada is seeking comments on the rules prohibiting collusion that would apply to bidders in the 700 MHz auction.



6. Conditions of Licence for Spectrum in the 700 MHz Band

80. Industry Canada proposes that the following conditions apply to all licences issued through the auction process for spectrum in the 700 MHz band. It should be noted that the licence is subject to the relevant provisions in the Radiocommunication Act and the Radiocommunication Regulations. For example, the Minister continues to have the power to amend the terms and conditions of spectrum licences (paragraph 5(1)(b) of the Radiocommunication Act). The Minister may do so for reasons including furtherance of the policy objectives related to the band. Such action would normally only be undertaken after consultation.

81. Licence Term: Traditionally, spectrum licences auctioned by Industry Canada have been issued for a 10-year licence term. This duration was deemed to provide enough certainty in the marketplace to secure the investments necessary to acquire spectrum and build related networks. The revised Framework for Spectrum Auctions in Canada, published in March 2011, states that Industry Canada is now adopting a flexible approach in determining licence terms (up to 20 years) based on the specific spectrum being offered and subject to a public consultation preceding the specific auction or renewal process.

82. This decision was based on the recognition that licence terms in excess of 10 years would create greater incentive for financial institutions to invest in the telecommunications industry and for the industry itself to further invest in the development of network infrastructure, technologies and innovation.

83. The 700 MHz band has excellent propagation characteristics and is considered to be extremely important in the deployment of next generation mobile broadband services in rural areas, and in meeting the increasing demand and network congestion in urban areas. It has already been licensed in the United States and it is unlikely that any technical developments would result in a change to another use that is incompatible with mobile broadband.

84. In light of the above, Industry Canada is proposing that auctioned spectrum licences in the 700 MHz band have a licence term of 20 years. The proposed condition of licence is as follows:

The term of this licence is 20 years. At the end of this term, the licensee will have a high expectation that a new licence will be issued for a subsequent term through a renewal process unless a breach of licence condition has occurred, a fundamental reallocation of spectrum to a new service is required, or an overriding policy need arises.

Industry Canada is seeking comments on its proposal to issue spectrum licences in the 700 MHz band with a 20-year licence term.

85. Spectrum Aggregation Limits: Where competitive measures have been put in place, such as a limitation on the amount of spectrum held by a licensee, a condition of licence to that effect is typically applied to the licence in question. With respect to spectrum in the 700 MHz band, the competitive measures announced in SMSE-002-12 are:

  • Decision B3-1: A spectrum cap of two paired frequency blocks in the 700 MHz band (blocks A, B, C, C1 and C2) is applicable to all licensees.
  • Decision B3-2: A spectrum cap of one paired spectrum block within blocks B, C, C1 and C2 is applicable to all large wireless service providers. Large wireless service providers are defined as companies with 10% or more of the national wireless subscriber market share, or 20% or more of the wireless subscriber market share in the province of the relevant licence area.
  • Decision B3-6: The spectrum caps put in place for the 700 MHz auction will continue to be in place for five years following licence issuance. 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.

86. The wording for the proposed condition of licence is as follows:

The licensee must comply with the spectrum aggregation limits as follows:

  • A limit of two paired frequency blocks in the 700 MHz band (blocks A, B, C, C1 and C2) is applicable to all licensees.
  • A spectrum cap of one paired spectrum block within blocks B, C, C1 and C2 is applicable to all large wireless service providers. Large wireless service providers are defined as companies with 10% or more of the national wireless subscriber market share, or 20% or more of the wireless subscriber market share in the province of the relevant licence area.

The spectrum caps put in place for the 700 MHz auction will continue to be in place for five years following licence issuance. Therefore, no transfer of licences or issuance of new licences will be authorized that allows a licensee to exceed the spectrum caps during this period. Any change in ownership or control granting a right or interest to another licensee in this band may be considered as licence transfer for the purpose of this condition of licence whether or not the licensee name is changed as a result. The licensee must request approval by the Minister of Industry for any change that would have a material effect on its compliance with these spectrum aggregation limits. Such a request must be made in advance for any proposed transactions within its knowledge.

87. As noted in Section 5, associated entities requesting that the spectrum caps be applied individually rather than jointly, must demonstrate to the satisfaction of Industry Canada that they will be competing in the applicable service area.

88. Where licensees establish an agreement to share spectrum such that another entity has control over the use of the spectrum, a subordinate licence is required. This requirement applies to all spectrum sharing arrangements, whether the arrangement is established post-auction or was established and disclosed prior to the auction. Subordinate licences may not count towards the licensee’s aggregation limit if the licensees demonstrate to the satisfaction of Industry Canada that they meet the criteria with respect to competing in the applicable service area.

89. At any time, at the request of Industry Canada, the licensee will be required to provide updated information demonstrating ongoing compliance with this condition of licence.

Industry Canada is seeking comments on the proposed wording of the condition of licence related to the spectrum aggregation limits.

90. Licence Transferability and Divisibility: In general, licences obtained through an auction may be transferred in whole or in part (either in geographic area or in bandwidth) to a third party, subject to the conditions stated on the licence and other applicable regulatory requirements.

91. As noted above, where competitive measures have been put in place, either to limit the amount of spectrum held by a licensee (spectrum cap), or to restrict the eligibility of access to a specific spectrum band (set-aside), the ability to transfer and divide the licence in question will be similarly restricted. With respect to spectrum in the 700 MHz band, transfers are not permitted where they will result in a licensee exceeding the spectrum aggregation limit.

92. Industry Canada is proposing the following wording for the condition of licence on transferability and divisibility:

The licensee may apply, in writing, to transfer its licence in whole or in part (divisibility), in both the bandwidth and geographic dimensions in accordance with Client Procedures Circular CPC-2-1-23, Licensing Procedure for Spectrum Licences for Terrestrial Services, as amended from time to time. Licensees may apply to use a subordinate licensing process.

Industry Canada’s approval is required for each proposed subordinate licence or transfer, whether the transfer is in whole or in part. Industry Canada may define a minimum bandwidth and/or geographic dimension (such as the grid cell) for the proposed transfer.

The transferor(s) must provide an attestation and other supporting documentation demonstrating that all conditions, technical or otherwise, of the licence have been met. The transferee(s) must provide an attestation and other supporting documentation demonstrating that it meets the eligibility criteria, including documentation related to associates and affiliates demonstrating that the transfer is in accordance with any spectrum aggregation limits.

Subordinate licences may not count towards the licensee’s aggregation limit if the subordinate licensee demonstrates to the satisfaction of Industry Canada that the relevant licensees meet the criteria with respect to competing in the post auction market (see condition of licence regarding Spectrum Aggregation Limits).

The transferee must satisfy all applicable conditions of licence including, rural deployment and general deployment requirements.

93. Licensees must apply to Industry Canada for the issuance of subordinate licences prior to the implementation of any spectrum sharing agreements or any agreement that provides for another party to operate the licensee’s spectrum. For further information on these requirements, refer to Client Procedures Circular CPC-2-1-23, Licensing Procedure for Spectrum Licences for Terrestrial Services, as amended from time to time. These requirements are subject to revision and amendment for reasons including furtherance of the policy objectives related to the 700 MHz band. Licence transfers may also be subject to the provisions of the Competition Act.

94. Generally, a subordinate licence will count towards the spectrum aggregation limit in a service area in addition to licences held directly and those held by associates or affiliates. However, the proposed transferee may apply to have the subordinate licence(s) excluded from the calculation of their holdings for the purposes of the spectrum caps, if it can demonstrate as part of its application that it will compete with any associated entities in the service area. For further information on the application of the spectrum cap as it relates to associated entities which hold subordinate licences, see Section 5 of this document.

Industry Canada is seeking comments on the proposed wording of the condition of licence related to transferability and divisibility.

95. Eligibility: Generally, spectrum licences contain an eligibility condition of licence that reads as follows: The licensee must comply on an ongoing basis with the eligibility criteria for a radiocommunication carrier, including compliance with subsection 10(2) of the Radiocommunication Regulations. The licensee must notify the Minister of Industry of any change which would have a material effect on its eligibility. Such notification must be made in advance for any proposed transaction within its knowledge. For further information, refer to Industry Canada’s Client Procedures Circular CPC-2-0-15, Canadian Ownership and Control, as amended from time to time.

96. On March 14, 2012, the Minister of Industry announced that the Telecommunications Act will be amended to lift foreign investment restrictions for telecommunications companies that hold less than a 10-percent share of the total Canadian telecommunications market. Once amendments to the Telecommunications Act have been made, Industry Canada will update Client Procedures Circular CPC-2-0-15, Canadian Ownership and Control, in order to clarify the effects on spectrum licence holders operating under the Radiocommunication Act and Radiocommunication Regulations.

97. Given that the amendments are forthcoming, the proposed wording for the condition of licence for spectrum in the 700 MHz band now refers to the "applicable" subsection of the Regulations, as follows:

A licensee operating as a radiocommunication carrier must comply on an ongoing basis with the applicable eligibility criteria in subsection 10(2) of the Radiocommunication Regulations. The licensee must notify the Minister of Industry of any change that would have a material effect on its eligibility. Such notification must be made in advance for any proposed transactions within its knowledge.

For further information, refer to Client Procedures Circular CPC-2-0-15, Canadian Ownership and Control, as amended from time to time.

Industry Canada is seeking comments on the proposed wording of the condition of licence related to eligibility criteria.

Treatment of Existing Spectrum Users:

98. The proposed wording for the condition of licence is as follows:

The licensee must comply with the displacement policies set out in SMSE-002-12, Policy and Technical Framework: Mobile Broadband Services (MBS) — 700 MHz Band, Broadband Radio Service (BRS) — 2500 MHz Band.

Industry Canada is seeking comments on the proposed wording of the condition of licence related to the the treatment of existing spectrum users.

99. Radio Station Installations: Radiocommunication and broadcasting services are important for all Canadians and are used daily by the public, safety and security organizations, government, wireless service providers, broadcasters, utilities and businesses. In order for radiocommunication and broadcasting services to work, antenna systems, including masts, towers and other supporting structures, are required. There is a certain measure of flexibility in the placement of antenna systems which is constrained to some degree by the need to achieve acceptable coverage for the service area, the availability of sites, technical limitations and safety. In exercising its mandate, Industry Canada believes that it is important that antenna systems be deployed in a manner that considers the local surroundings.

100. Section 5 of the Radiocommunication Act states that the Minister may, taking into account all matters that the Minister considers relevant for ensuring the orderly development and efficient operation of radiocommunication in Canada, issue radio authorizations and approve each site on which radio apparatus, including antenna systems, may be located. Furthermore, the Minister may approve the erection of all masts, towers and other antenna-supporting structures. Accordingly, proponents must follow the process outlined in Client Procedures Circular CPC-2-0-03, Radiocommunication and Broadcasting Antenna Systems, when installing or modifying an antenna system. Also, the installation of an antenna system or the operation of a currently existing antenna system that is not in accordance with this process may result in its alteration or removal and other sanctions against the operator in accordance with the Radiocommunication Act.

101. In accordance with the above, Industry Canada proposes the following wording for this condition of licence:

The licensee must comply with Client Procedures Circular CPC-2-0-03, Radiocommunication and Broadcasting Antenna Systems, as amended from time to time.

Industry Canada is seeking comments on the proposed wording of the condition of licence related to radio station installations.

102. Provision of Technical Information: Spectrum licences are issued for a specific geographic area and, as such, associated technical information for each radiocommunication installation is not required for the issuance of a spectrum licence. However, technical information associated with radiocommunication installations covered by the spectrum licence is required by Industry Canada to carry out certain spectrum management responsibilities. To provide this capability, Industry Canada requires information to maintain an up-to-date technical database of radiocommunication installations. Industry Canada therefore proposes that such a condition of licence continue to apply:

103. The proposed wording for the condition of licence is as follows:

When Industry Canada requests technical information on a particular station or network, the licensee must provide the information in accordance with the definitions, criteria, frequency and timelines specified. For further information, refer to Client Procedures Circular CPC-2-1-23, Licensing Procedure for Spectrum Licences for Terrestrial Services, as amended from time to time.

Industry Canada is seeking comments on the proposed wording of the condition of licence related to the provision of technical information.

104. Compliance with Legislation, Regulation and Other Obligations: Licensees are required to abide by the requirements set out for use of the radio frequency spectrum in general and for the specific frequency band being licensed. These requirements are fundamental, and in some cases, they are legislative requirements. There are no significant changes proposed to the wording for this condition of licence:

The licensee is subject to, and must comply with, the Radiocommunication Act, the Radiocommunication Regulations and the International Telecommunication Union’s Radio Regulations pertaining to its licensed radio frequency bands. The licence is issued on condition that the certifications made in relation to this licence are all true and complete in every respect. The licensee must use the assigned spectrum in accordance with the Canadian Table of Frequency Allocations and the spectrum policies applicable to these bands, as amended from time to time.

Industry Canada is seeking comments on its proposed condition of licence related to compliance with legislation, regulation and other obligations.

105. Technical Considerations, and International and Domestic Coordination: Industry Canada will work with the Radio Advisory Board of Canada to develop applicable Radio Standards Specifications (RSS) and Standard Radio System Plans (SRSP) in relation to the 700 MHz band. Spectrum licence holders are also subject to applicable international coordination agreements and arrangements between Canada, the United States and other foreign administrations.

106. Industry Canada proposes the following wording for this condition of licence:

The licensee must comply on an ongoing basis with the technical aspects of the appropriate Radio Standards Specifications and Standard Radio System Plans, as amended from time to time. Where applicable, the licensee must use its best efforts to enter into mutually acceptable sharing agreements that will facilitate the reasonable and timely development of their respective systems, and to coordinate with other licensed users in Canada and internationally.

The licensee must comply with the obligations arising from current and future frequency coordination agreements established with other countries and shall be required to provide information or take actions to implement these obligations as indicated in the applicable SRSP. Although frequency assignments are not subject to site licensing, the licensee may be required to furnish all necessary technical data for each relevant site.

Industry Canada is seeking comments on the proposed condition of licence related to technical considerations, and international and domestic coordination.

107. Lawful Intercept: Certain spectrum licences contain a lawful intercept condition of licence that requires the licensee to maintain interception capabilities so that information can be provided when required by a warrant. The current condition of licence reads as follows:

"Licensees using spectrum for circuit-switched voice telephony systems must, from the inception of service, provide for and maintain lawful interception capabilities as authorized by law. The requirements for lawful interception capabilities are provided in the Solicitor General’s Enforcement Standards for Lawful Interception of Telecommunications (Rev. Nov. 95). These standards may be amended from time to time.

The licensee may request the Minister of Industry to forbear from enforcing certain assistance capability requirements for a limited period. The Minister, following consultation with Public Safety Canada, may exercise the power to forbear from enforcing a requirement or requirements where, in the opinion of the Minister, the requirement is not reasonably achievable. Requests for forbearance must include specific details and dates indicating when compliance to the requirement can be expected."

108. Industry Canada is proposing changes to the lawful intercept condition of licence in order to bring the wording in line with current technologies. The proposed change is to remove the text "circuit-switched voice telephony" from the lawful intercept condition, as networks are no longer limited to circuit-switched technology. This proposed change does not affect existing spectrum licences issued under other licensing processes. Forbearance may be granted where Industry Canada deems it warranted.

109. The condition of licence refers to standards for lawful interception, entitled the Solicitor General’s Enforcement Standards for Lawful Interception of Telecommunications. Public Safety Canada is currently responsible for these standards, which were last revised in 1995. Public Safety Canada has informed Industry Canada that it is proposing modifications to the standards. Industry Canada is proposing to simply refer to the requirement to provide for and maintain lawful interception capabilities, in accordance with the enforcement standards in effect at the time of licence issue and as amended from time to time. For further information on proposed changes to the Solicitor General’s Enforcement Standards, please contact Public Safety Canada via the General Enquiries line at 1-800-830-3118.

110. In consideration of the above, the proposed wording of the condition of licence is as follows:

A licensee operating as a service provider using an interconnected radio-based transmission facility for compensation must provide for and maintain lawful interception capabilities as authorized by law and in accordance with the Solicitor General’s Enforcement Standards for Lawful Interception of Telecommunications, as amended from time to time.

The licensee may request the Minister of Industry to forbear from enforcing certain assistance capability requirements for a limited period. The Minister, following consultation with Public Safety Canada, may exercise the power to forbear from enforcing a requirement or requirements where, in the opinion of the Minister, the requirement is not reasonably achievable. Requests for forbearance must include specific details and dates indicating when compliance to the requirement can be expected.

Industry Canada is seeking comments on the proposed wording of the condition of licence related to lawful intercept requirements.

111. Research and Development: Currently, many long-term licencesFootnote 11 are subject to a condition of licence which requires licensees to invest a percentage of their adjusted gross revenues on research and development (R&D). In 2009, Industry Canada initiated DGRB-001-09, Consultation on Revisions to the Framework for Spectrum Auctions in Canada, in which comments were sought on the continued need for the R&D condition of licence. The resultant decision paperFootnote 12 stated that Industry Canada’s decision with regard to the R&D condition of licence would be the subject of a separate paper to be issued at a later date. At this time, no decision has been issued on the R&D condition of licence. Therefore, until such a time as a decision is released, Industry Canada proposes that the R&D condition of licence apply to licences in the 700 MHz band as stated below, but may be amended during the licence term.

112. The proposed wording of this condition of licence is as follows:

The licensee must invest, as a minimum, 2 percent of its adjusted gross revenues resulting from its operations in this spectrum, averaged over the term of the licence, in eligible research and development activities related to telecommunications. Eligible research and development activities are those which meet the definition of scientific research and experimental development adopted in the Income Tax Act. Adjusted gross revenues are defined as total service revenues, less inter-carrier payments, bad debts, third party commissions, and provincial and goods and services taxes collected. Businesses with less than $5 million in annual gross operating revenues are exempt from research and development expenditure requirements, except where they have affiliations with licensees that hold other licences with the research and development condition of licence and where the total annual gross revenues of the affiliated licensees are greater than $5 million.

To facilitate compliance with this condition of licence, the licensee should consult Industry Canada’s Guidelines for Compliance with the Radio Authorization Condition of Licence Relating to Research and Development (GL-03).

Industry Canada is seeking comments on the proposed condition of licence related to the research and development requirement.

113. Rural Deployment Requirements: As stated in SMSE-002-12, Industry Canada is implementing a specific condition of licence to promote service deployment in rural areas. A key intent of the licensing policy in the 700 MHz band is that the spectrum be deployed in a timely manner for the benefit of Canadians.

114. Further to Decision B4-2 of SMSE-002-12, a condition of licence will apply to 700 MHz licensees which ensures that those that have access to more than one paired block of spectrum will be subject to a deployment requirement based on their existing High Speed Packet Access (HSPA) network footprint, as follows:

  1. In each licence area where a licensee holds two or more paired blocks of spectrum in the 700 MHz band, or has access to two or more paired blocks of spectrum in the 700 MHz band through association, that licensee must deploy its 700 MHz spectrum:
    1. to cover 90% of the population of its existing HSPA network footprint within five years of the date of the issuance of the 700 MHz licence; and
    2. to cover 97% of the population of its existing HSPA network footprint within seven years of the date of the issuance of the 700 MHz licence.
  2. Coverage provided only through a roaming agreement is not considered to be part of the licensee’s HSPA network footprint.
  3. Existing HSPA network footprint coverage is the coverage in effect as of the release date of the policy paper SMSE-002-12.Footnote 13

115. Following the release of SMSE-002-12, HSPA network operators were required to submit information regarding the coverage of their existing HSPA networks, which will be used to assess licensees’ performance against this condition of licence. Operators with joint networks were required to identify which portion of the existing joint network footprint will be attributable to each of the potential 700 MHz licensees.

116. Where a licence is transferred during the initial seven years, the requirement for the new licensee to deploy will continue to be based on the initial licence issuance date.

117. The proposed wording of the condition of licence is as follows:

Where a licensee holds a licence for two or more paired blocks of 700 MHz spectrum in a licence area, or has access to two or more paired blocks of 700 MHz spectrum in a licence area either directly or indirectly, that licensee must deploy 700 MHz spectrum:

  1. to cover 90% of the population of its HSPA network footprint as of March 2012, within five years of the issuance of the initial 700 MHz licence; and
  2. to cover 97% of the population of its HSPA network footprint as of March 2012, within seven years of the issuance of the initial 700 MHz licence.

118. In interpreting the above-noted condition, Industry Canada proposes that "access to two or more paired blocks of spectrum" would include scenarios where a 700 MHz licensee has an agreement with another licensee in the same service area that provides for the latter to operate some, or all of the spectrum licensed to the primary licensee (e.g. where the licensees are associated and Industry Canada has determined that the spectrum caps will apply individually). In addition agreements where licensees are associated through an agreement that provides the ability to influence the use of the spectrum would count as indirect access. The assessment to determine whether influence over the use of the spectrum exists would be based on a review of the same documents set out in Section 5, paragraph 70. Industry Canada may also consider the nature of the relationship between the two parties.

119. Industry Canada would not consider tower and site sharing as agreements that provide "access" for this condition of licence.

120. Furthermore, typical roaming agreements would not be considered as providing "access to two or more blocks of paired spectrum" for the purpose of this condition of licence, as typical roaming agreements are generally restricted to accessing capacity on the host network only.

Industry Canada is seeking comments on the application of the proposed wording of the licence condition related to rural deployment requirements. Specifically, comments are sought on the assessment of "access to two or more blocks of paired spectrum" for the purposes of this condition of licence.

121. General Deployment Requirement: In accordance with SMSE-002-12, a general deployment requirement will also apply to licensees in the 700 MHz band. Decision B3-5 states that: A general rollout obligation applicable to all 700 MHz commercial licences will apply. Industry Canada will consult on the details of the general deployment requirement (e.g. population coverage and time frame).

122. This condition will apply to all 700 MHz licensees, regardless of the number of blocks that they hold. The objective of this general rollout requirement is to ensure that the 700 MHz spectrum, a highly valued and limited public resource, is deployed in a timely manner. As well, such a condition will serve to deter the acquisition of spectrum licences by speculators and those whose intent is to prevent access to the spectrum by their competitors.

123. Similar conditions of licence have been applied to previously auctioned spectrum licences in order to encourage the deployment of systems and to dissuade speculative spectrum acquisition. The intent is to encourage either the deployment of spectrum or the transfer of the spectrum licence where another entity may have a use for it. Prior to the AWS auction, deployment was required to 50% of the population in the licence area or a level acceptable to Industry Canada. In the AWS auction, different levels were set for each licence area based on the population of the major urban centres for that particular licence area. It is proposed that the AWS levels be used as deployment requirements for the 700 MHz licences. It is further proposed that these levels be required within 10 years of the licence issuance to allow market forces to determine the best pace of deployment, while providing an opportunity to intervene if the spectrum is left unused for an extended period of time.

124. Where a licence is transferred during the initial 10 years, the requirement for the new licensee to deploy will continue to be based on the initial licence issuance date.

125. The proposed wording of the condition of licence is as follows:

Licensees will be required to demonstrate to the Minister of Industry that their spectrum has been put to use, as specified in the table below, within 10 years of the initial issuance of the licence.

Table 3 — Proposed General Deployment Requirements
Tier 2 Service Area Name Minimum Population Coverage*

* Based on most recent census information available at the time of assessment.

2-01 Newfoundland and Labrador 30%
2-02 Nova Scotia and P.E.I 30%
2-03 New Brunswick 40%
2-04 Eastern Quebec 50%
2-05 Southern Quebec 50%
2-06 Eastern Ontario and Outaouais 50%
2-07 Northern Quebec 30%
2-08 Southern Ontario 50%
2-09 Northern Ontario 50%
2-10 Manitoba 50%
2-11 Saskatchewan 40%
2-12 Alberta 50%
2-13 British Columbia 50%
2-14 Yukon, NWT and Nunavut 20%

 

Industry Canada is seeking comments on the application of the general deployment condition of licence as stated above. Specifically, comments are sought on:

  • the population coverage, as specified in Table 3, for each licence service area; and
  • the time frame proposed whereby the requirement must be met.

 

126. Mandatory Antenna Tower and Site Sharing: Industry Canada is seeking input from stakeholders on the implementation of changes proposed to the mandatory antenna tower and site sharing conditions of licence through a separate process announced through Canada Gazette notice DGSO-001-12.Footnote 14 Stakeholders interested in the 700 MHz licensing process are encouraged to participate in that consultation process, as changes will affect the 700 MHz licensees. The proposed wording of the condition of licence is as follows:

Licensees must comply with the mandatory antenna tower and site sharing requirements set out in Client Procedures Circular CPC-2-0-17, Conditions of Licence for Mandatory Roaming and Antenna Tower and Site Sharing and to Prohibit Exclusive Site Arrangements, as amended from time to time.

Industry Canada is seeking comments on the proposed wording of the condition of licence related to mandatory antenna tower and site sharing. Comments on the specifics of the requirements should be submitted through the process announced through Canada Gazette notice DGSO-001-12.

127. Mandatory Roaming: Industry Canada is seeking input from stakeholders on the implementation of changes proposed to the mandatory roaming condition of licence through a separate process announced through Canada Gazette Notice DGSO-001-12.Footnote 15 Stakeholders interested in the 700 MHz licensing process are encouraged to participate in that consultation process, as changes may affect the 700 MHz licensees. The related decisions, including the applicability of the mandatory roaming condition to the 700 MHz band, will be announced separately. If the condition is applied, the proposed wording is as follows:

The licensee must comply with the mandatory roaming requirements set out in Client Procedures Circular CPC-2-0-17, Conditions of Licence for Mandatory Roaming and Antenna Tower and Site Sharing and to Prohibit Exclusive Site Arrangements, as amended from time to time.

Industry Canada is seeking comments on the proposed wording of the condition of licence related to mandatory roaming. Comments on the specifics of the requirements should be submitted through the process announced in Canada Gazette notice DGSO-001-12.

128. Annual Report: Currently, spectrum licences include a requirement to submit an annual report to Industry Canada to provide some basic information on spectrum use and existing company reports. This provides valuable information without requiring extensive report generation by the licensees. It is proposed that this requirement apply to 700 MHz licensees.

129. The proposed wording of the condition of licence is as follows:

The licensee must submit an annual report for each year of the licence term, which includes the following information:

  • a statement indicating continued compliance with all conditions of licence;
  • an update on the implementation and spectrum usage within the area covered by the licence;
  • existing audited financial statements with an accompanying auditor’s report;
  • a report of the research and development expenditures for licensees operating as radiocommunication carriers as set out in these conditions of licence. Industry Canada reserves the right to request an audited statement of research and development expenditures with an accompanying auditor’s report;
  • supporting financial statements where licensees are claiming an exemption based on an annual gross revenue of less than $5 million; and
  • a copy of any existing corporate annual report for the licensee’s fiscal year with respect to the authorization.

130. All reports and statements are to be certified by an officer of the company and submitted, in writing, within 120 days of the licensee’s fiscal year end. Where a licensee holds multiple licences, spectrum implementation reports should be broken down by service area. This information, including the extent of implementation and spectrum usage, is important for reasons including the analysis of each licensee’s individual performance against its conditions of licence, and to monitor the effectiveness of these conditions in meeting the policy objectives of the band and Industry Canada’s intent that the spectrum be deployed in a timely manner for the benefit of Canadians. Confidential information provided will be treated in accordance with subsection 20(1) of the Access to Information Act.

Industry Canada is seeking comments on the proposed condition of licence related to the requirement for annual reporting.