Consultation on a Licensing Framework for Broadband Radio Service (BRS) — 2500 MHz Band

7. Conditions of Licence for Existing BRS Licensees in the 2500 MHz Band

151. In DGRB-005-09, Consultation on Transition to Broadband Radio Service (BRS) in the Band 2500-2690 MHz,Footnote 23 Section 6, Industry Canada stated that all conditions of licence and authorizations (i.e. MCS, BRS and MDS broadcasting certificates) are subject to change following the consultation on the policy and licensing framework for the auction of available and liberated spectrum in the band 2500-2690 MHz in order to allow for licence conditions to be aligned and consistent with future licences issued in this frequency band. Therefore, effective the auction closing date, Industry Canada is proposing that certain conditions of licence for existing 2500 MHz BRS licences be updated to harmonize with the conditions of licence of auctioned licences. The remaining conditions of licence that are not updated, for example, the licence term and the deployment requirements, will remain consistent with the conditions initiated in the June 2010 Decisions on the Transition to Broadband and Radio Service (BRS) in the Band 2500-2690 MHz and Consultation on the Changes Related to the Band Plan.Footnote 24

152. In DGRB-005-09, Section 9.2, Industry Canada also indicated that it will consult on a licence fee for BRS licences; the consultation may take place after the auction of available spectrum. Until such time, the existing fees will continue to apply.

153. It should be noted that licences are 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 pursuant to paragraph 5(1)(b) of the Radiocommunication Act. The Minister may do so for a variety of reasons, including furtherance of the policy objectives related to the band. Such action would normally only be undertaken after consultation.

154. Industry Canada proposes that the six following conditions of licence be modified for existing 2500 MHz BRS licensees:

155. Treatment of Existing Spectrum Users: Existing BRS licensees would be required to comply with all displacement/transition polices and the obligations to protect grandfathered stations in Manitoba. For information regarding existing licensees in the 2500 MHz band, see Section 3.4 of this document.

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

The licensee must comply with all displacement and/or transition policies set out in SMSE 005-11,Footnote 25 Decisions on the Band Plan for Broadband Radio Service (BRS) and Consultation on a Policy and Technical Framework to License Spectrum in the Band 2500-2690 MHz. In addition, the licensee must not cause harmful interference to the grandfathered stations in Manitoba as per SMSE- 005-11.

7-1 Industry Canada is seeking comments on the proposed wording of the condition of licence related to the existing BRS licensees’ treatment of existing spectrum users.

157. Spectrum Aggregation Limit: The competitive measures, as outlined in Section 6 regarding the 2500 MHz spectrum auction, would be harmonized for existing BRS licensees.

158. As stated in SMSE-002-12, Decision C2-4, in areas where existing 2500 MHz BRS licensees have spectrum licence holdings in excess of the spectrum aggregation limit of 40 MHz in the 2500 MHz band, the licensee would not be required to divest any such holdings in order to meet the aggregation limit. 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 aggregation limit has been met or exceeded. As per SMSE-002-12, Decision C2-5, licensees planning to transfer any of their existing spectrum licence 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 the auction process. Information regarding licensees planning to reduce existing spectrum licence holdings in order to increase their eligibility to bid in the related licence areas is provided in Section 8.1 Application to Participate.

159. 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. Subordinate licences may not count towards the licensee’s aggregation limit if the licensees demonstrate to the satisfaction of Industry Canada that they will be competing in the applicable service area. For further information on the application of the spectrum aggregation limit as it relates to associated entities that hold subordinate licences, see Section 5 of this document.

160. 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.

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

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

A limit of 40 MHz in the 2500 MHz band, excluding the restricted bands at 2570-2575 MHz and 2615-2620 MHz, applies to all licensees, with the exception of the Northwest Territories, Yukon and Nunavut service areas, where there is no limit.

The spectrum aggregation limit will apply for five years following the close of the 2500 MHz auction. Therefore, no transfer of licences or issuance of new licences will be authorized that allows a licensee to increase their spectrum licence holdings above the spectrum aggregation limit during this period. Any change in ownership or control granting a right or interest to another licensee in this band may be considered as a 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 this spectrum aggregation limit. Such a request must be made in advance of any proposed transactions within its knowledge.

7-2 Industry Canada is seeking comments on the proposed wording of the condition of licence related to the spectrum aggregation limit for existing BRS licensees.

162. Licence Transferability and Divisibility: It is proposed that this condition of licence be harmonized with that for auctioned spectrum as outlined in Section 6.

163. Industry Canada is proposing the following wording for the condition of licence on transferability and divisibility for existing BRS licensees:

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.

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 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 limit.

Industry Canada may consider requests from licensees to exchange spectrum blocks within the same geographic area provided that the exchange does not result in the spectrum aggregation limit being exceeded or an increase in spectrum licence holdings for existing licensees already exceeding the aggregation limit. Industry Canada may grant such requests based on the merits of the proposal.

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

164. 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 2500 MHz band.

165. 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 its spectrum licence holdings for the purposes of the spectrum aggregation limit, if it can demonstrate as part of its application that it will compete with its associated entities in the service area. For further information on the application of the spectrum aggregation limit as it relates to associated entities that hold subordinate licences, see Section 5 of this document.

166. Licence transfers may also be subject to the provisions of the Competition Act.

7-3 Industry Canada is seeking comments on the proposed wording of the condition of licence related to transferability and divisibility for existing BRS licensees.

167. Eligibility: The same amendments to the eligibility condition of licence that are being proposed for new licensees would apply to existing BRS licensees.

A licensee must comply on an ongoing basis with the applicable eligibility criteria 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.

7-4 Industry Canada is seeking comments on the proposed wording of the condition of licence related to eligibility criteria for existing BRS licensees.

168. Technical Considerations, and International and Domestic Coordination: Industry Canada proposes that the wording for this condition of licence be harmonized with that for auctioned spectrum as outlined in Section 6. 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 2500 MHz band. Spectrum licence holders are also subject to applicable international coordination agreements and arrangements between Canada, the United States and other foreign administrations.

169. 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 (RSS) and Standard Radio System Plans (SRSP), as amended from time to time. Where applicable, the licensee must use its best efforts to enter into mutually acceptable agreements with other parties for facilitating 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.

7-5 Industry Canada is seeking comments on the proposed condition of licence related to technical considerations, and international and domestic coordination for existing BRS licensees.

170. Lawful Intercept: Industry Canada is proposing changes to the lawful intercept condition of licence for existing BRS licences 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. Forbearance may be granted where Industry Canada deems it warranted. Greater detail regarding the proposed change is outlined in Section 6.

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

The 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.

7-6 Industry Canada is seeking comments on the proposed wording of the condition of licence related to lawful intercept requirements for existing BRS licensees.


8. Auction Process

172. The following section outlines the general process for submitting an application to participate in the 2500 MHz auction, as well as the general requirements and rules that apply prior to, during and post auction.

8.1 Application to Participate

173. 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.

174. In areas where an existing licensee has spectrum licence holdings in excess of the spectrum aggregation limit set out in SMSE-002-12, Decision C2-4, the licensee will not be required to divest any such holdings in order to meet the spectrum aggregation limit. However, such licensees will not be eligible to bid for additional licences or otherwise obtain additional licences in licence areas where the aggregation limit has been met or exceeded.

175. Licensees planning to transfer any of their existing spectrum licence 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 (SMSE-002-12, Decision C2-5). The submission date will be provided in the licensing framework.

176. Licensees planning to return any of their existing spectrum licence holdings to Industry Canada in order to increase their eligibility to bid in the related licence areas must do so by October 4, 2013. In the event that Industry Canada decides to offer the returned 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 any additional licence offerings (SMSE-002-12, Decision C2-6).

8.2 Opening Bids

177. Opening bids are the prices for the spectrum licences at the start of the auction, and the minimum amount that will be accepted for each licence. The proposed opening prices are based on the population in each service area and adjusted by their relative value. The proposed opening bid prices are for spectrum blocks of 20 MHz, irrespective of whether the block is a paired block of 10 + 10 MHz or an unpaired block of 20 MHz.Footnote 26 They can be found in Table 5 below.

178. The determination of the proposed opening bid prices takes into account recent market transactions for spectrum licences in Canada, recent prices paid for 2500 MHz spectrum licences assigned in international auctions and technical considerations. Service areas were grouped into four price levels according to Statistics Canada’s 33 defined census metropolitan areas (CMAs) and their population estimates. Based on relative values for these groups, service areas with a population greater than 2 million (3-25 Toronto, 3-13 Montréal and 3-52 Vancouver) were priced at $0.14/MHz/pop; for service areas that provide coverage to a CMA with a population between 1 million and 2 million, a rate of $0.10/MHz/pop was applied; and for service areas that provide coverage to a CMA with a population less than 1 million, a rate of $0.065/MHz/pop was applied. For all other service areas (those that do not provide coverage to a CMA), a base rate of $0.051/MHz/pop was applied.

179. The total amount of the proposed opening bids for all spectrum blocks is $251,853,000.

Table 5 — Proposed Opening Bid Prices
Service Area # Service Area Name Available Spectrum
(MHz)
$/MHz/pop Opening Bid ($)
  Total for a national licence $66,905,000
  Total for all blocks $251,853,000
3-01 Newfoundland and Labrador 120 0.065 665,000
3-02 Prince Edward Island 120 0.051 143,000
3-03 Mainland Nova Scotia 120 0.065 1,017,000
3-04 Cape Breton 120 0.051 137,000
3-05 Southern New Brunswick 120 0.065 223,000
3-06 Western New Brunswick 120 0.051 221,000
3-07 Eastern New Brunswick 120 0.065 466,000
3-08 Bas du fleuve / Gaspésie 60 0.051 300,000
3-09 Québec 60 0.100 2,009,000
3-10 Chicoutimi-Jonquière 120 0.065 476,000
3-11 Eastern Townships 120 0.065 703,000
3-12 Trois-Rivières 60 0.065 1,048,000
3-13 Montréal 60 0.140 11,773,000
3-14 Upper Outaouais 120 0.051 126,000
3-15 Ottawa / Outaouais 60 0.100 2,883,000
3-16 Pembroke 120 0.051 116,000
3-17 Abitibi 120 0.051 194,000
3-18 Cornwall 120 0.051 68,000
3-19 Brockville 120 0.051 85,000
3-20 Kingston 120 0.065 227,000
3-21 Belleville 120 0.051 199,000
3-22 Cobourg 120 0.051 64,000
3-23 Peterborough 120 0.065 267,000
3-24 Huntsville 120 0.051 80,000
3-25 Toronto 60 0.140 18,606,000
3-26 Barrie 60 0.065 871,000
3-27 Guelph / Kitchener 60 0.065 900,000
3-28 Listowel / Goderich / Stratford 120 0.051 137,000
3-29 Niagara-St. Catharines 60 0.065 476,000
3-30 London / Woodstock / St. Thomas 60 0.065 1,077,000
3-31 Chatham 120 0.051 103,000
3-32 Windsor / Leamington 120 0.065 504,000
3-33 Strathroy 120 0.051 174,000
3-34 North Bay 120 0.051 129,000
3-35 Sault Ste. Marie 120 0.051 135,000
3-36 Sudbury 120 0.065 229,000
3-37 Kirkland Lake 120 0.051 117,000
3-38 Thunder Bay 120 0.065 289,000
3-39 Winnipeg 120 0.100 2,064,000
3-40 Brandon 120 0.051 178,000
3-41 Regina 60 0.065 474,000
3-42 Moose Jaw 60 0.051 102,000
3-43 Saskatoon 60 0.065 728,000
3-44 Edmonton 120 0.100 2,930,000
3-45 Medicine Hat / Brooks 120 0.051 194,000
3-46 Lethbridge 120 0.051 180,000
3-47 Calgary 120 0.100 2,780,000
3-48 Red Deer 120 0.051 244,000
3-49 Grande Prairie 120 0.051 189,000
3-50 Kootenays 120 0.051 137,000
3-51 Okanagan / Columbia 60 0.065 537,000
3-52 Vancouver 60 0.140 7,517,000
3-53 Victoria 60 0.065 558,000
3-54 Nanaimo 120 0.051 190,000
3-55 Courtenay 120 0.051 117,000
3-56 Thompson / Cariboo 120 0.051 183,000
3-57 Prince George 120 0.051 191,000
3-58 Dawson Creek 120 0.051 67,000
4-170 Yukon 120 0.051 34,000
4-171 Nunavut 120 0.051 32,000
4-172 Northwest Territories 120 0.051 42,000

8-1 Industry Canada is seeking comments on the proposed opening bids as presented in Table 5.

8.3 Proposed Eligibility Points for the 2500 MHz Spectrum Auction

180. The proposed eligibility points associated with the licences being made available in the 2500 MHz auction are based on the population per service area and the estimated value of the spectrum. The population data below are based on Statistics Canada’s 2011 census.

181. Proposed points per service area for paired and unpaired spectrum in the 2500 MHz band are listed in Table 6. The proposed eligibility points are for blocks of 20 MHz, irrespective of whether the block is a paired block of 10 + 10 MHz or an unpaired block of 20 MHz.Footnote 27

182. One eligibility point has been assigned per 50,000 in population for each 20 MHz block of spectrum (either paired or unpaired) in a service area. The eligibility points per spectrum block were then adjusted to reflect the estimated value of the spectrum licences as indicated by the opening bid price base rate.

183. There are 1,320 eligibility points associated with a 20 MHz national licence, which comprises 61 service areas covering the country.

Table 6 — Proposed Eligibility Points for the 2500 MHz Band
Service Area # Service Area Name Population Eligibility Points
per 20 MHz Block
Total     1,320
3-01 Newfoundland and Labrador 514,641 13
3-02 Prince Edward Island 140,204 3
3-03 Mainland Nova Scotia 786,567 20
3-04 Cape Breton 135,075 3
3-05 Southern New Brunswick 172,374 4
3-06 Western New Brunswick 217,152 4
3-07 Eastern New Brunswick 360,416 9
3-08 Bas du fleuve / Gaspésie 295,519 6
3-09 Québec 1,004,614 40
3-10 Chicoutimi / Jonquière 368,261 9
3-11 Eastern Townships 543,762 14
3-12 Trois-Rivières 810,609 21
3-13 Montréal 4,204,654 232
3-14 Upper Outaouais 124,011 2
3-15 Ottawa / Outaouais 1,441,718 57
3-16 Pembroke 114,135 2
3-17 Abitibi 190,605 4
3-18 Cornwall 67,207 1
3-19 Brockville 84,068 2
3-20 Kingston 175,801 4
3-21 Belleville 196,021 4
3-22 Cobourg 62,610 1
3-23 Peterborough 206,250 5
3-24 Huntsville 78,790 2
3-25 Toronto 6,645,088 366
3-26 Barrie 673,898 17
3-27 Guelph / Kitchener 696,136 18
3-28 Listowel / Goderich / Stratford 134,384 3
3-29 Niagara - St. Catherines 368,119 9
3-30 London/Woodstock / St. Thomas 832,870 21
3-31 Chatham 100,951 2
3-32 Windsor / Leamington 389,729 10
3-33 Strathroy 170,801 3
3-34 North Bay 126,711 3
3-35 Sault Ste. Marie 132,309 3
3-36 Sudbury 177,004 5
3-37 Kirkland Lake 114,942 2
3-38 Thunder Bay 223,809 6
3-39 Winnipeg 1,032,187 41
3-40 Brandon 174,781 3
3-41 Regina 366,413 9
3-42 Moose Jaw 100,292 2
3-43 Saskatoon 563,107 14
3-44 Edmonton 1,465,386 58
3-45 Medicine Hat / Brooks 190,930 4
3-46 Lethbridge 177,303 4
3-47 Calgary 1,390,206 55
3-48 Red Deer 240,343 5
3-49 Grande Prairie 185,998 4
3-50 Kootenays 134,351 3
3-51 Okanagan / Columbia 415,214 11
3-52 Vancouver 2,684,495 148
3-53 Victoria 431,520 11
3-54 Nanaimo 186,396 4
3-55 Courtenay 114,658 2
3-56 Thompson / Cariboo 179,949 4
3-57 Prince George 187,802 4
3-58 Dawson Creek 65,553 1
4-170 Yukon 33,584 1
4-171 Nunavut 31,906 1
4-172 Northwest Territories 41,455 1

8-2 Industry Canada is seeking comments on the proposed eligibility points for spectrum licences in the 2500 MHz band, as outlined in Table 6 above.

8.4 Pre-auction Deposits

184. 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.

185. 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 and adjusted for value, as proposed in Table 6 above. For spectrum licences to be auctioned in the 2500 MHz band, Industry Canada proposes that the financial deposit be equal to $50,000 per eligibility point.

186. An individual bidder wanting to be eligible to bid on the equivalent of one national paired block would have to submit a deposit covering 1,320 points, which would equate to $66,000,000 (i.e. $50,000 x 1,320). 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.

8-3 Industry Canada is seeking comments on the proposed pre-auction deposits as outlined above.

8.5 Bid Payment and Forfeiture Penalties

187. 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.

188. 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 revenue from bids or fees of the licence(s) (determined by a subsequent licensing process) if that revenue is lower than the forfeited bid.

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