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

7. Auction Process

131. The following section outlines the general process for submitting an application to participate in the 700 MHz auction, as well as the general requirements and rules that apply prior to, during and post-auction.

7.1 Application to Participate

132. To participate in an auction, all applicants must submit a completed application form, along with a financial deposit, details of the applicant’s beneficial ownership, information on any affiliations and associations as discussed in Section 5 of this document, and other corporate documentation as required. Industry Canada will make the relevant information available to the public prior to the auction, so that all bidders have knowledge of the identity of the other bidders.

7.2 Opening Bids

133. Opening bids are the prices for the spectrum licences at the start of the auction, and the minimum that will be accepted for each licence. The proposed opening bid prices can be found in Table 4 below.

134. The determination of the proposed 700 MHz opening bid prices takes into account the results of past Canadian auctions and reflects the relative value of the licences in the different service areas. As a minimum accepted price, the existing Cellular and PCS annual fees, adjusted to account for a licence term of 20 years using a 14% discount rate,Footnote 16 is used. The opening bid prices are rounded to the nearest thousand dollars.

135. With respect to the paired spectrum, nine of the 14 service areas have opening bids that are based on the minimum accepted price level. Three of the remaining five service areas (Eastern Ontario and Outaouais, Alberta and British Columbia) are 1.2 times this price level, whereas the two remaining service areas (Southern Ontario and Southern Quebec) are 2.6 times the minimum price level.

136. Given the current uncertainty with respect to the use and technology associated with the unpaired blocks D and E, their opening bid prices are also based on the minimum accepted price.

137. Bids at or above the proposed opening bid prices will ensure that Canadians obtain a fair return for the use of this spectrum and that, at a minimum, the revenue received will be comparable to the returns currently being received for similar spectrum resources.

138. The total amount of the proposed opening bids for all spectrum blocks is $897,324,000.

Table 4 — Proposed Opening Bid Prices
Service Area # Service Area Name 700 MHz Opening Bids
Paired Blocks
A, B, C, C1 and C2
Unpaired Blocks
D and E
$/MHz/pop Opening bid ($) $/MHz/pop Opening bid ($)
2-01 Newfoundland and Labrador 0.265 $1,364,000 0.265 $682,000
2-02 Nova Scotia and P.E.I. 0.265 2,814,000 0.265 1,407,000
2-03 New Brunswick 0.265 1,987,000 0.265 994,000
2-04 Eastern Quebec 0.265 4,421,000 0.265 2,211,000
2-05 Southern Quebec 0.687 39,042,000 0.265 7,530,000
2-06 Eastern Ontario and Outaouais 0.327 7,677,000 0.265 3,111,000
2-07 Northern Quebec 0.265 505,000 0.265 253,000
2-08 Southern Ontario 0.687 69,324,000 0.265 13,370,000
2-09 Northern Ontario 0.265 2,053,000 0.265 1,027,000
2-10 Manitoba 0.265 3,198,000 0.265 1,599,000
2-11 Saskatchewan 0.265 2,729,000 0.265 1,365,000
2-12 Alberta 0.327 11,936,000 0.265 4,836,000
2-13 British Columbia 0.327 14,388,000 0.265 5,830,000
2-14 Yukon, NWT and Nunavut 0.265 284,000 0.265 142,000
  Total per block   $161,722,000   $44,357,000
  Total all blocks $897,324,000

Note: Opening bids have been calculated based on paired blocks of 5+5 MHz and unpaired blocks of 5 MHz, irrespective of whether the paired block size is 5+5 MHz or 6+6 MHz, or that the unpaired block size is of 6 MHz.

Industry Canada is seeking comments on the proposed opening bids as presented in Table 4.

7.3 Proposed Eligibility Points for the 700 MHz Spectrum Auction

139. The proposed eligibility points associated with the licences being made available in the 700 MHz auction are based on the population per service area, bandwidth per block and the estimated value of the spectrum. The population data below are based on Statistics Canada’s 2011 census.

140. Proposed points per service area for paired and unpaired spectrum in the 700 MHz band are listed in Table 5. One eligibility point has been assigned for each 5 MHz of spectrum per 100,000 in population count in a service area rounded to the nearest 100,000 population for the majority of service areas. The five service areas of Southern Quebec, Eastern Ontario and Outaouais, Southern Ontario, Alberta and British Columbia are the exception. For these five service areas, the eligibility points per paired spectrum block have been adjusted in proportion to the opening bid prices.

141. The equivalent of a national licence, 14 service areas covering the country, comprised of one block of paired spectrum would have 1,220 eligibility points associated with it; the equivalent of a national licence of one block of unpaired spectrum would have 335 eligibility points associated with it.

Table 5 — Proposed Eligibility Points for the 700 MHz Band
Service Area # Service Area Name Population Eligibility Points per Paired Blocks
(A, B, C, C1 and C2)
Eligibility Points per Unpaired Blocks
(D and E)
2-01 Newfoundland and Labrador 514,641 10 5
2-02 Nova Scotia and P.E.I. 1,061,846 21 11
2-03 New Brunswick 749,942 15 7
2-04 Eastern Quebec 1,668,394 33 17
2-05 Southern Quebec 5,683,036 295 57
2-06 Eastern Ontario and Outaouais 2,347,808 58 23
2-07 Northern Quebec 190,605 4 2
2-08 Southern Ontario 10,090,766 523 101
2-09 Northern Ontario 774,775 15 8
2-10 Manitoba 1,206,968 24 12
2-11 Saskatchewan 1,029,812 21 10
2-12 Alberta 3,650,167 90 37
2-13 British Columbia 4,399,939 109 44
2-14 Yukon, NWT and Nunavut 107,215 2 1
Total   33,475,914 1,220 335

Note: Eligibility points have been calculated based on paired blocks of 5+5 MHz and unpaired blocks of 5 MHz, irrespective of whether the paired block size is 5+5 MHz or 6+6 MHz, or that the unpaired block size is of 6 MHz.

Industry Canada is seeking comments on the proposed eligibility points for spectrum licences in the 700 MHz band, as outlined in Table 5 above.

7.4 Pre-auction Deposits

142. In order to enhance the integrity of the auction, Industry Canada requires that all bidders submit a pre-auction financial deposit with their auction application. The deposit is to be in the form of a certified cheque or money order payable to the Receiver General for Canada, or an irrevocable standby letter of credit.

143. Similar to previous auctions, Industry Canada proposes to determine the value of the pre-auction financial deposit based on the licences on which the applicant wishes to be eligible to bid. Each licence has been assigned a specific number of eligibility points that are approximately proportionate to the population covered by the licence, as demonstrated in Table 5 above. For spectrum licences to be auctioned in the 700 MHz band, it is proposed that the financial deposit be equal to $130,000 per eligibility point.

144. An individual bidder requesting to be eligible to bid on the equivalent of one national paired block would have to submit a deposit covering 1,220 points, which would equate to $158,600,000 (i.e. $130,000 x 1,220). Financial deposit(s) will be returned to any applicant that is found not to be a qualified bidder and to any applicant that provides written notification to Industry Canada of its withdrawal from the process prior to the auction’s commencement. Financial deposits will be returned to unsuccessful bidders once the auction has closed.

Industry Canada is seeking comments on the proposed pre-auction deposits as outlined above.

7.5 Bid Payment and Forfeiture Penalties

145. Within 10 business days following the close of the auction, each provisional licence winner will be required to submit 20 percent (20%) of its winning bids. This payment will be non refundable. The remaining portion of the winning bids will be due within 30 business days of the auction’s close.

146. Following the conclusion of the auction, winning bidders that fail to comply with the specified payment schedule or fail to come into compliance with the eligibility requirements of the Radiocommunication Regulations, will forfeit their right to the licence. Furthermore, non compliant bidders will be subject to a penalty in the amount of the difference between the forfeited bid and the eventual selling price of the licence (determined by a subsequent licensing process) if the eventual selling price is lower than the forfeited bid.


8. Bidder Training and Support

147. Qualified bidders will receive the necessary information to participate in the auction several weeks prior to the start of the auction. Information will include, but will not be limited to, a user manual for the auction system, instructions on how to access the secure auction system, along with the related system passwords, the schedule for training and mock auctions, and the schedule for the start of the bidding process.

148. A mock auction will be held, likely during the week prior to the start of the auction, in order to allow qualified bidders to better familiarize themselves with the auction system.

149. In order to assist potential bidders in gaining a greater understanding of the proposed auction format and rules, Industry Canada will hold an information session on May 30, 2012. The session will provide an overview of the proposed auction format and rules for the 700 MHz auction.

150. Further details on the logistics and agenda for the information session are available at http://www.ic.gc.ca/eic/site/smt- gst.nsf/eng/sf10373.html.


9. Post-auction Licensing Process for Unassigned Licences

151. Industry Canada will consider making unassigned licences available for licensing through an alternative process, which could include a subsequent auction at a later date following the close of the initial auction. The timing and form of such a process will depend on the demand for the available licences. Industry Canada may conduct a public consultation should it consider it necessary.


10. Licence Renewal Process

152. Following the end of the initial licence term, licensees will have a high expectation of renewal. New licences will be issued for a subsequent term through a formal renewal process unless the Minister determines that a breach of licence condition has occurred, a fundamental reallocation of the spectrum to a new service is required, or an overriding policy need arises. In the absence of the previously outlined determinations, the renewal process facilitates the continued provision of services by existing licensees.

153. As part of the licence renewal process, the Minister of Industry retains the power to fix and amend the terms and conditions of spectrum licences during the term of the licence and at the end of the term in accordance with subsection 5(1) of the Radiocommunication Act. As noted in the FSAC, licence fees that reflect some measure of market value will apply to licences issued through a renewal process. Accordingly, the renewal process will serve to determine whether new licences will be issued, the terms and conditions that will apply to the new licences and the applicable licence fees.

154. Generally, approximately two years prior to the end of the licence term, Industry Canada will review whether there is a need for a fundamental reallocation of the spectrum to a new service, or whether an overriding policy need has arisen. A review of the licensee’s continued compliance with the conditions of licence will also begin. Industry Canada will launch a public consultation to discuss whether or not, in light of the above-noted issues, new licences should be issued for a subsequent term. The consultation paper will also propose, and invite comments on, licence conditions and fees that would apply during the subsequent licence term.

155. For long-term spectrum licences, Industry Canada’s assessment of a licensee’s eligibility towards a subsequent licence term will generally include, among other factors, a review of the licensee’s continued compliance with all conditions of licence, including any deployment requirements, a scan of the general environment (e.g. use of the band by other licensees and international developments) and a review of the demand for spectrum from other parties.

156. It is proposed that the renewal process include a public consultation process that would commence approximately two years prior to the end of the licence term wherein the above-noted issues will be discussed.

Industry Canada is seeking comments on the proposed renewal process for spectrum licences in the 700 MHz band.


11. Clarification Questions Process

157. As done in previous auctions, following a decision on the questions raised in this consultation paper, Industry Canada will accept written questions soliciting clarification of the rules and policies set out in the decision paper for a limited period of time, which will be specified in the final licensing framework. Written questions, submitted by the deadline, and Industry Canada’s responses will be made public on Industry Canada’s website.


12. Submitting Comments

158. Respondents are requested to provide their comments in electronic format (WordPerfect, Microsoft Word or Adobe PDF) to the following e-mail address: spectrum.auctions@ic.gc.ca.

159. Written submissions should be addressed to the Manager, Spectrum Auctions, DGSO, Industry Canada, 300 Slater Street, Ottawa, Ontario K1A 0C8.

160. All submissions should cite the Canada Gazette, Part I, the publication date, the title and the notice reference number (DGSO-002-12). Parties should submit their comments no later than June 25, 2012, to ensure consideration. Soon after the close of the comment period, all comments received will be posted on Industry Canada’s Spectrum Management and Telecommunications website at http://www.ic.gc.ca/spectrum.

161. Industry Canada will also provide interested parties with the opportunity to reply to comments from other parties. Reply comments will be accepted until July 25, 2012.

162. Following the initial comment period, Industry Canada may, at its discretion, request additional information if needed to clarify significant positions or new proposals. In such a case, the reply comment deadline may be extended.


13. Obtaining Copies

163. All spectrum-related documents referred to in this paper are available on Industry Canada’s Spectrum Management and Telecommunications website at http://www.ic.gc.ca/spectrum.

164. For further information concerning the process outlined in this document or related matters, contact:

Manager, Spectrum Auctions
Spectrum Management Operations Branch
Industry Canada
300 Slater Street
Ottawa, Ontario K1A 0C8

Telephone: 613-990-8881
Fax: 613-952-2708
E-mail: spectrum.auctions@ic.gc.ca


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