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

## 4. Auction Format and Rules

35. The auction format should be simple, fair and transparent for bidders; one that leads to an efficient assignment of spectrum. In the selection of an auction format and related rules, consideration is given to the characteristics of the spectrum being auctioned, for example, the quantity and size of the blocks, their geographic characteristics, as well as the similarities and complementarities that may exist among the blocks.

### 4.1 Auction Format

36. Industry Canada used the Simultaneous Multiple Round Ascending (SMRA) auction format in its first auction in 1999 and in four of its six subsequent spectrum auctions.Footnote 17 The SMRA auction format has been used in spectrum auctions in many countries for more than 15 years. Countries that have used this format in recent spectrum auctions include Italy, Germany, Mexico, Spain, the United States, as well as the Special Administrative Region of Hong Kong.

37. In an SMRA auction, all licences are auctioned simultaneously over a series of rounds. In each round, bids are submitted on individual licences at the announced prices. At the end of each round, a standing high bidder is identified for each licence. The standing high bidder is then committed to the licence and cannot withdraw its bid without the possibility of incurring a penalty. The standing high bidder is released from its commitment when outbid by another bidder. When a licence receives at least one bid, the price for the licence increases in the next round. As the prices rise gradually over multiple rounds, bidders gather information about how the other auction participants value the licences. This price discovery helps to reduce a bidder’s uncertainty regarding the value of the licences. Bidders are able to respond to these changes in prices accordingly, shifting their bids to licences that continue to be consistent with their business objectives. Activity rules are in place to compel active bidding and encourage truthful bids throughout the auction, that is, bidding that is consistent with how they truly value the licences. The auction ends when a round passes in which no new bids are received on any licences.

38. The SMRA auction format is a well understood, effective approach to assigning spectrum licences and it remains popular to date; however, it does have some weaknesses. The most notable weakness is the exposure risk, that is, the possibility that a bidder will win some but not all of the licences needed for its business case and may be left stranded with licences that cannot be used as effectively. In an SMRA auction format, bidding is for individual licences only, leaving bidders which seek to aggregate blocks of licences that are contiguous and/or across multiple service areas, vulnerable to the exposure risk.

39. In an SMRA auction, in order to mitigate the exposure risk, bidders are able to withdraw their standing high bids, switching to other desired licences or withdrawing from the auction altogether. However, they may be subject to withdrawal penalties, which are in place to discourage bidders from bidding frivolously and then withdrawing their bids.

40. Advancements in auction theory and design have led to the development of new auction formats and rules. Industry Canada has been examining these new developments in consideration of the auction format and rules for the 700 MHz and 2500 MHz auctions. One of these advancements is the combinatorial clock auction (CCA) format, which is a variation of the SMRA format in that all licences are auctioned at the same time over multiple rounds. Similar to the SMRA format, the CCA format provides a simple bidding process for participants, including a price discovery stage; however, instead of bidding on individual licences, bidders express their demand for a package of licences at the prevailing prices. The use of package bidding eliminates the exposure risk inherent in the SMRA format. Furthermore, unlike the SMRA format, the CCA format does not require the identification of a "standing high bidder" that is held responsible for individual licences at the end of each round, which makes it easier for bidders to move to substitute licences in response to price changes.

### 4.2 Proposed Auction Format for the 2500 MHz Auction

41. Industry Canada proposes to implement a CCA format for the 2500 MHz auction. Pricing and activity rules are established to encourage truthful bidding throughout the auction (see Section 4.2.3). Industry Canada proposes to limit the amount of information disclosed regarding bidding activity during the auction process (see Section 4.2.4). Further information on the proposed CCA format and auction rules for the 2500 MHz auction can be found in Annex D.

42. CCAs have been used in several countries since 2008, including the United Kingdom, the Netherlands, Denmark, Austria and Switzerland, and are planned for upcoming digital dividend auctions in Australia, Ireland and the United Kingdom. Industry Canada is also proposing to use the CCA format for the upcoming 700 MHz auction.

#### 4.2.1 Proposed Auction Attributes

43. One of the key attributes of the CCA is the use of package bidding wherein for each round, the bidder specifies the set of licences that it would like, at the announced prices, and submits a single bid for the package. The package bid is treated as an all-or-nothing bid and the package is awarded in its entirety, or not at all. Bidding on a package of licences eliminates the possibility that a bidder will win some but not all the licences needed for its business case and may be left stranded with licences that cannot be used as effectively, that is, there is no exposure risk. This is particularly important given the regional nature of the licences to be auctioned and the potential for strong and varied complementarities across these regional licences.

Generic Licences

44. A category is a single block of spectrum or a grouping of similar (generic) blocks of spectrum that is made available for auction. A category in a given service area is referred to as a product.

45. Generic licences are blocks of spectrum that are sufficiently similar and comparable in value such that they can be offered in a single category in each service area. The use of generic licences simplifies the bidding process, as it reduces the possible number of combinations on which bids may be placed.

46. For the upcoming 2500 MHz auction, Industry Canada is proposing two categories of licences, paired and unpaired. For the paired categories, Industry Canada is proposing that the following licences be treated as generic in service areas of the respective regions:

• Region A: blocks C/C’ to G/G’ (five paired generic licences);
• Region B: blocks E/E’ to G/G’ (three paired generic licences); and
• Region C: blocks A/A’ to B/B’ and E/E’ to G/G’ (five paired generic licences).

47. In both Region A and Region C, the unpaired category would consist of one unpaired licence, either H or I, in each service area. The unpaired blocks are not available in Region B.

48. The generic licence categories were determined based on the anticipated substitutability of the blocks. In creating the generic licence categories, Industry Canada considered the frequency location in the band, the block size, and possible technology and interference constraints.

49. In Region C, some of the products are currently subject to the operations of grandfathered licensees: in Winnipeg (paired blocks A/A’, paired blocks E/E’ to G/G’ and unpaired block H) and in Brandon (paired blocks E/E’ to F/F’ and unpaired block H). It is unclear whether the operations of the grandfathered licensees affect the value of these licences sufficiently to warrant separate categories. Industry Canada is therefore proposing to auction the five paired blocks as generic licences, with bidders able to express their preferences for specific licences in the assignment stage of the auction.

50. Consequently, there would be two categories for the 43 service areas of Region A, one which includes five paired generic licences and one that includes one unpaired licence. For the 16 service areas in Region B, there would be one category that includes three paired generic licences. For the two service areas in Region C, there would be two categories, one that includes five paired generic licences and one that includes a single unpaired licence. In total, two categories and 106 products are proposed for the 2500 MHz auction. Table 3 illustrates the categories and products that are proposed for the 2500 MHz auction.

Table 3 — Proposed product configuration for 2500 MHz auction
Paired Unpaired Products
A/A’ B/B’ C/C’ D/D’ E/E’ F/F’ G/G’ H I

Note: Products available for auction are indicated by an "X."

Region A
(43 service areas)
X X X X X   X 86
(2 × 43)
Region B
(16 service areas)
X X X     16
(1 × 16)
Region C
(2 service areas)
X X     X X X X   4
(2 × 2)
Total   106

51. It is recognized that contiguous spectrum within a service area is preferable to non-contiguous spectrum in terms of technological efficiency. It is also Industry Canada’s understanding that any user equipment operating in the 2500 MHz paired spectrum will be able to operate across the complete 2500 MHz paired spectrum, and so acquiring contiguous blocks within a service area may be more important than acquiring the same block(s) across multiple service areas.

52. For those products comprised of multiple generic licences, bidders will be able to specify the number of contiguous licences that they would like to acquire as part of their package. Industry Canada is proposing that winners of multiple licences receive contiguous licences within a given product, with the opportunity to express their preference for specific contiguous frequencies in the assignment stage of the auction. This guarantee of contiguity may impact the ability of some bidders to obtain the same blocks of spectrum across a collection of service areas.

#### 4.2.2 Overview of the CCA Process

53. There are typically two stages in the CCA process: the allocation stage, and if there are generic licences, the assignment stage. The process is shown in Figure D1 of Annex D.

54. In the allocation stage, the number of spectrum licences that a bidder wins in each service area is determined. It consists of the following:

• clock rounds, a series of rounds where, in each round, bidders submit a bid for a package of licences (some of which may be generic) in response to prices announced by Industry Canada. The clock rounds continue until there is no excess demand for any of the licences. This is the price discovery stage of the auction.
• a supplementary round, a single round where bidders have the opportunity to make additional bids for packages of licences at prices that are decided by the bidder, but subject to limits that are based on their clock round bids.

55. The assignment stage is where winning bidders have the opportunity to make additional bids to express their preferences for particular frequency assignments within the generic licences that they have won.

56. The assignment stage will consist of a sequence of rounds. Each assignment round will determine the specific frequencies to be assigned to winners of generic licences in one or more of the paired products. Assignment rounds will not be required for any of the products containing unpaired licences, as there is only one unpaired licence in each of those products.

57. Given the large number of service areas, Industry Canada is proposing to run product-by-product assignment rounds in descending order of the populations of the associated service areas, conducting a separate assignment round for each product, where necessary. This process will enable bidders to know which specific frequencies they have won in the most populated service areas before they participate in the assignment rounds for the adjacent, less populated service areas. However, two or more products will be aggregated into a single assignment round if all of the following criteria are met: the products are in the same region (i.e. Region A, Region B or Region C); their service areas form a contiguous geographic area; and the winners, and the number of generic licences they have won are sufficiently similar across service areas, according to predefined criteria. This may result in a separate assignment round for each service area. Industry Canada welcomes suggestions for alternative methods of conducting the assignment stage, including suggestions for ways to minimize the number of rounds in the assignment stage.

58. In the event that more than one licence in a product remains unallocated at the end of the allocation stage, Industry Canada is proposing to retain the unallocated licences as a contiguous block within a product. This proposal may affect the specific frequency options available in the assignment rounds and the possibility of obtaining the same blocks of spectrum across service areas, as the combination of the block of unallocated licences and the licences won by the bidder(s) must be feasible. Industry Canada is not proposing to specify the exact blocks that it will retain as unallocated, but rather to let the bidding in the assignment stage determine which specific frequency blocks remain unallocated. This will provide more flexibility for bidders to express their preference for a particular assignment. This is consistent with other spectrum auctions held internationally; for example, Austria, Denmark and Switzerland specified that unallocated licences in the 2.6 GHz band would be contiguous in the upper end of the band.

59. As announced in SMSE-002-12, a spectrum aggregation limit of 40 MHz in each service area of the 2500 MHz band, with the exception of the Northwest Territories, Yukon and Nunavut, will apply to all bidders. The limit includes both the paired and unpaired spectrum available for auction and any 2500 MHz spectrum licence holdings that a bidder may already have, but excludes the restricted bands at 2570-2575 MHz and 2615-2620 MHz. Therefore, bidders will not be permitted to bid on additional licences in a service area which would result in their spectrum aggregation limit being exceeded.

60. The use of the CCA format and, in particular, the use of generic licences, is expected to contribute to a reduction in the length of the auction, in comparison with the length of an SMRA auction. As well, Industry Canada would use activity-based increments in the clock rounds, where bid increments for a product reflect the level of demand. This is also expected to shorten the auction duration, as round prices would increase more quickly for products with higher demand.

#### 4.2.3 Proposed CCA Rules

61. The proposed activity and pricing rules for the 2500 MHz auction are designed to encourage truthful bidding and to promote price discovery throughout the auction. These are described below and further elaborated in Annex D.

Activity Rules

62. In previous SMRA auctions, Industry Canada used an eligibility-based activity rule where each licence was assigned a specific number of eligibility points. Bidders were then required to bid actively on a certain number of eligibility points in order to maintain their ability to bid in subsequent rounds. In general, the required level of activity increased through the different stages of the auction, from a minimum of 70% in the first stage to 100% in the final stage. This allowed bidders the flexibility to switch their bids to other licences in response to price changes, thereby mitigating the exposure risk.

63. With the use of an eligibility-based activity rule, a bidder could respond to price increases by bidding on fewer licences, which would result in a decrease of eligibility points in subsequent rounds. As a general rule, eligibility points cannot be increased once they have been reduced. Consequently, a bidder was not able to switch its bid to a package that was larger in terms of eligibility points but relatively less expensive.

64. In the 2500 MHz auction, Industry Canada is proposing activity rules in the allocation stage that will afford bidders the flexibility to bid on their most preferred packages. The proposed rules will also ensure that bids in the supplementary round are consistent with the bidders’ preferences expressed in the clock rounds.

Revealed Preference/Eligibility Point Hybrid Activity Rule

65. In the clock rounds, Industry Canada proposes to use a hybrid activity rule, which includes an eligibility points-based activity rule in conjunction with a revealed preference activity rule. A revealed preference activity rule constrains bids based on the bids submitted in previous rounds.

66. To begin, each licence will be assigned a specific number of eligibility points (see Annex D, Section 7). In every clock round, bidders will be required to bid on 100% of their eligibility if they wish to maintain the same level of eligibility in subsequent rounds. When a bidder reduces its bid to a smaller package, then its eligibility for the next round will be reduced accordingly.

67. In addition, a revealed preference rule is proposed, which will allow bidders to exceed their eligibility in order to bid on packages that have become comparatively less expensive relative to every prior round where the bidder reduced its eligibility. This will afford bidders greater flexibility to fully express their preferences in the clock rounds of the auction, ensuring that the activity rules do not prevent a bidder from bidding on its most preferred package. Further information on the proposed activity rules in the clock rounds can be found in Annex D, Section 8. As well, a detailed example of the proposed revealed preference activity rule is included in Annex E and an algebraic description of the revealed preference rule is included in Annex F.

Revealed Preference Limit

68. In the supplementary round, Industry Canada is proposing to limit bids based on revealed preference with respect to the bids that a bidder submitted in the clock rounds. The rule, referred to as the “revealed preference limit,” encourages truthful bidding throughout the auction, not just in its latter stages. Further information on the proposed revealed preference limit in the supplementary round can be found in Annex D, Section 10.

69. All valid bids submitted in the clock rounds and the supplementary round are binding bids, and are included in determining the winning packages and base prices after the end of the supplementary round. Bids cannot be withdrawn. Bid withdrawals were permitted in the SMRA auction format to mitigate the exposure risk inherent in the auction design. Bid withdrawals are not necessary in the CCA format because bidding is for a package of licences and bidders do not risk acquiring only some of the licences that they require.

Pricing Rules

70. In the CCA format, prices are determined at the end of the allocation stage and after each assignment round. Base prices are calculated at the end of the allocation stage following the supplementary round, taking into consideration all valid bids from the clock rounds and supplementary round. Assignment prices are determined after each assignment round, in which bidders that have won generic licences in the allocation stage bid for specific assignments. The assignment prices are incremental to the base prices. The final price to be paid by a bidder will be determined following the assignment stage, and is equal to the bidder’s base price plus the sum of all associated assignment prices. If the sum of a bidder's assignment prices is zero, then the final price will be equal to the base price determined at the end of the allocation stage.

71. Two common pricing rule options for calculating the prices to be paid by winning bidders are a first-price rule and a second- price rule. A first-price rule requires winning bidders to pay the full amount of their winning bid. A second-price rule requires each winning bidder to pay an amount that is sufficient to ensure that no other bidder, or group of bidders, was prepared to pay more than the winning bidder for the licence(s) in question.

72. Under a first-price rule, the bidder has a strong incentive to bid less than its true value, which can lead to inefficient outcomes. A second-price rule promotes a more efficient outcome by increasing the incentive for bidders to bid their true value. Bidders, knowing that they will only be required to pay the minimum amount necessary to win their package, will have the incentive to bid truthfully during the entire auction.

73. Industry Canada is proposing to use a second-price rule to determine the base price to be paid by winning bidders for their packages of generic licences won at the end of the allocation stage, and to determine assignment prices to be paid by winning bidders for their specific licence assignments.

74. There are several approaches to determine second prices in a CCA. Industry Canada proposes to apply bidder-optimal core prices and to use the "nearest Vickrey" approach, which is one of most common approaches used for CCAs. Further information on the proposed pricing rules is provided in Annex G.

#### 4.2.4 Information Disclosure

75. In previous SMRA auctions, Industry Canada made all information regarding the bidding activity of all bidders available after each round. Although this transparency facilitated price discovery, it also increased the potential for anti-competitive behaviour. Industry Canada proposes to use anonymous bidding during the 2500 MHz auction. After each clock round, bidders would be provided with information regarding their own bidding activity in the previous round and their eligibility for the next round. In addition, bidders will be informed of the aggregate demand for each product from the previous round and the price of each product for the next round. The aggregate demand and price information from the end of each clock round would also be made available on Industry Canada’s website.

76. With the use of anonymous bidding, enough information will still be provided to permit price discovery, allowing bidders to make informed decisions regarding their bidding strategies. Bidders will be able to focus on their valuations for the licences, the level of aggregate demand and the prices rather than on the bidding behaviour of their individual competitors. Thus, the potential for anti-competitive behaviour is minimized and the bidding process is simplified.

77. At the end of the allocation stage, each bidder will be informed of its own winning package and the associated base price to be paid. All bidders will be informed of the number of winning bidders and the number of licences within each product that have been allocated.

78. After each assignment round, each participating bidder will be informed of the specific licences that it was assigned and the associated assignment price.

79. At the end of the assignment stage, Industry Canada will inform winning bidders of the final price they will have to pay for the licences they have won.

80. Industry Canada is proposing to make the following information publicly available following the conclusion of the auction:

• the list of winning bidders, licences won and final prices to be paid;
• the bid submitted by each bidder in every clock round, including the bidder’s identity;
• the supplementary bids submitted by each bidder, including the bidder’s identity; and
• the assignment bids submitted by each bidder, including the bidder’s identity.

81. Full disclosure of all bidding information at the end of the auction will allow all interested parties to verify the results of the auction, facilitating greater transparency regarding the winner and price determination.

82. Consistent with past practice, the identity of applicants and qualified bidders will be made available to the public prior to the auction, so that all bidders have knowledge of the identity of the other bidders.

#### 4.2.5 Summary

83. The proposed CCA format has many advantages. The exposure risk is eliminated, anti-competitive behaviour is reduced, substitution among similar licences is enhanced and the duration of the auction will likely be reduced. In addition, the proposed activity rules, which combine both eligibility points and revealed preference, will provide flexibility for bidders to bid on their preferred packages as prices rise. These aspects create a more straightforward bidding process for participants and improve the effectiveness of the auction process.

4-1 Industry Canada is seeking comments on its proposal to use the CCA format, as well as the general attributes outlined above, including:

• (a) the products available for auction, e.g. the categorization of generic licences;
• (b) the use of product-specific stages in the assignment round, ordered by population;
• (c) the combined eligibility point and revealed preference activity rule in the clock rounds, and the revealed preference limit in the supplementary round;
• (d) the use of a second-price rule;
• (e) the information to be disclosed during and post-auction;
• (f) the guarantee of contiguity for generic licences won within a product; and
• (g) the contiguity of blocks retained by Industry Canada.

## 5. Bidder Participation — Affiliated and Associated Entities

84. In SMSE-002-12, Decision C2-3, Industry Canada indicated that it would consult the public with a view to revising the rules on associated and affiliated entities to provide improved flexibility and clarity.

85. 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.

86. In support of the stated policy objectives of competition investment, and in light of 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.

87. 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 aggregation limit 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 aggregation limit.

88. Proposed Definition of Associated Entities: As a basis for participating in the 2500 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 2500 MHz band will be treated as Associated Entities. Typical roaming and tower sharing agreements would not cause entities to be deemed associated.

89. 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 aggregation limit applied individually.

90. 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 2500 MHz spectrum directly or indirectly.

91. 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.

92. 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.

93. 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.

94. Eligibility to have aggregation limits apply to associated entities separately: It is proposed that in addition to the above, associated entities could request that the spectrum aggregation limit 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 each other. For additional information on the application of the spectrum aggregation limit for associated entities, refer to the condition of licence entitled "Spectrum Aggregation Limit" in Section 6 of this document.

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

96. 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 requirement would provide Industry Canada with the additional time necessary to assess the association between the entities and decide on the associated entities’ ability to participate in the auction separately, and have the aggregation limit apply individually, if so requested. Should the request be denied, only one of the associated entities will be eligible to apply to participate in the auction.

97. 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.

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

5-1 Industry Canada is seeking comments on its proposed changes to the definition and rules related to associated entities. Specifically, comments are sought on:

• (a) the types of agreements that should be captured under the definition of associated entities;
• (b) the amount of information to be disclosed to the public prior to the auction;
• (c) 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;
• (d) the proposal that entities that are deemed associated entities may apply to be treated as separate entities for participation in the auction;
• (e) the proposal that associated entities may request to have the spectrum aggregation limit apply to them separately, based on an analysis of their association and of whether they intend to compete in the same licence service area;
• (f) the criteria to be considered in determining whether the entities are competing; and
• (g) the proposal that no changes be made to the affiliated entities rule.

### 5.1 Prohibition of Collusion

99. 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.

100. 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.

101. 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 2500 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.

102. 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.

5-2 Industry Canada is seeking comments on the rules prohibiting collusion that would apply to bidders in the 2500 MHz auction.

## 6. Conditions of Licence for Spectrum Licences to be Auctioned in the 2500 MHz Band

103. Industry Canada proposes that the following conditions apply to licences issued through the auction process for spectrum in the 2500 MHz band. Some updated conditions of licence are being proposed for existing 2500 MHz licences in order to harmonize them with licences to be auctioned (see Section 7).

104. 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.

105. 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.

106. 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.

107. The 2500 MHz band has the potential to facilitate the offering of high-capacity broadband services to Canadians. Given that the use of this band for mobile services is globally harmonized, there is little risk that there will be any usage changes to this spectrum in the foreseeable future. It is also unlikely that any developments in technology would result in a change to another use that is incompatible with mobile broadband.

108. In light of the above, Industry Canada is proposing that auctioned spectrum licences in the 2500 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.

6-1 Industry Canada is seeking comments on its proposal to issue spectrum licences in the 2500 MHz band with a 20-year licence term.

109. Spectrum Aggregation Limit: 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 2500 MHz band, the competitive measures announced in SMSE-002-12 are:

• Decision C2-1: With the exception of licensees in the Northwest Territories, Yukon and Nunavut, all licensees are subject to a spectrum aggregation limit 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 licence holdings, including both paired and unpaired spectrum, by each licensee in each licence area.
• Decision C2-2: The spectrum aggregation limit 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 aggregation limit during this period.

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

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 put in place for the 2500 MHz auction will continue for five years from the date of the licence issuance. Therefore, no transfer of licences or issuance of new licences will be authorized if it would result in a licensee exceeding 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 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.

111. In certain areas, existing 2500 MHz licensees hold licences in excess of the spectrum aggregation limit of 40 MHz in the 2500 MHz band. 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 divest additional 2500 MHz spectrum in these areas. As stated in SMSE-002-12, Decision C2-4, these licensees would not be permitted to acquire additional spectrum in those areas where the aggregation limit has been met or exceeded, but will be permitted to transfer existing 2500 MHz spectrum licence holdings thereby reducing their spectrum licence holdings prior to the auction in order to be eligible to participate. Information regarding licensees planning to transfer 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.

112. If the proposal in Section 5 is adopted, associated entities requesting that the spectrum aggregation limit be applied individually rather than jointly, would be required to demonstrate to the satisfaction of Industry Canada that they will be competing in the applicable service area.

113. 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 meet the criteria with respect to competing in the applicable service area. For further information on the application of the spectrum aggregation limit as it relates to associated entities and subordinate licences, see Section 5 of this document.

114. 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.

6-2 Industry Canada is seeking comments on the proposed wording of the condition of licence related to the spectrum aggregation limit.

115. 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.

116. As noted above, where competitive measures have been put in place, either to limit the amount of spectrum held by a licensee (spectrum aggregation limit), 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 2500 MHz band, transfers are not permitted where they will result in a licensee exceeding the spectrum aggregation limit. However, Industry Canada may consider requests to exchange spectrum licences under certain conditions.

117. 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.

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 in 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 that already exceed 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.

118. 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 a variety of reasons including furtherance of the policy objectives related to the 2500 MHz band.

119. 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.

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

6-3 Industry Canada is seeking comments on the proposed wording of the condition of licence related to transferability and divisibility.

121. Eligibility: Generally, spectrum licences contain an eligibility condition of licence, which 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 that 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.

122. On June 29, 2012, the Jobs, Growth and Long-term Prosperity Act (Bill C-38) received royal assent, whereby amendments were made to the Telecommunications Act, to lift the foreign investment restrictions for telecommunications companies that hold less than a 10-percent share of the total Canadian telecommunications market. Amendments are reflected in section 16 of the published version of the Telecommunications Act.

123. 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.

124. The proposed wording for the condition of licence for spectrum in the 2500 MHz band now refers to the "applicable" subsection of the Regulations, as follows:

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.

6-4 Industry Canada is seeking comments on the proposed wording of the condition of licence related to eligibility criteria.

125. Treatment of Existing Spectrum Users: For information regarding existing licensees in the 2500 MHz band, see of this document.

126. 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 18 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.

6-5 Industry Canada is seeking comments on the proposed wording of the condition of licence related to the treatment of existing spectrum users.

127. 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.

128. Section 5 of the Radiocommunication Act states that the Minister of Industry 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 procedures 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 these procedures may result in its alteration or removal and other sanctions against the operator as per the Radiocommunication Act.

129. Industry Canada is therefore proposing 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.

6-6 Industry Canada is seeking comments on the proposed wording of the condition of licence related to radio station installations.

130. 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 be applied:

131. 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.

6-7 Industry Canada is seeking comments on the proposed wording of the condition of licence related to the provision of technical information.

132. Compliance with Legislation, Regulation and Other Obligations: Licensees must comply with the requirements set out for use of the radio frequency spectrum in general and for the specific frequency band being licensed. In some cases, these requirements are legislative. The proposed wording for the condition of licence is as follows:

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 this band, as amended from time to time.

6-8 Industry Canada is seeking comments on the proposed wording of the condition of licence related to compliance with legislation, regulation and other obligations.

133. 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 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.

134. 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.

6-9 Industry Canada is seeking comments on the proposed wording of the condition of licence related to technical considerations, and international and domestic coordination.

135. 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."

136. 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; with the exception of existing BRS licences (see . Forbearance may be granted where Industry Canada deems it warranted.

137. 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 issuance 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.

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

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.

6-10 Industry Canada is seeking comments on the proposed wording of the condition of licence related to lawful intercept requirements.

140. 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) .

6-11 Industry Canada is seeking comments on the proposed condition of licence related to the research and development requirement.

141. General Deployment Requirement: In accordance with SMSE-002-12, a general deployment requirement will apply to licensees in the 2500 MHz band. Decision C2-7 states that: A general rollout obligation applicable to all 2500 MHz licences will continue to apply. Industry Canada will consult on the details of the general deployment requirement (e.g. population coverage required and time frame).

142. This condition will apply to all licences issued through this process, regardless of the amount of spectrum that licensees hold. The objective of this general rollout requirement is to ensure that the 2500 MHz spectrum 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.

143. 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 to 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 2500 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.

144. 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.

145. 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 4 — Proposed General Deployment Requirements
Tier 3 Service Area Name Minimum Population
CoverageTable note *
3-01 Newfoundland and Labrador 30%
3-02 Prince Edward Island 30%
3-03 Mainland Nova Scotia 40%
3-04 Cape Breton 30%
3-05 Southern New Brunswick 50%
3-06 Western New Brunswick 30%
3-07 Eastern New Brunswick 30%
3-08 Bas du fleuve / Gaspésie 15%
3-09 Québec 50%
3-10 Chicoutimi-Jonquière 40%
3-11 Eastern Townships 30%
3-12 Trois-Rivières 30%
3-13 Montréal 50%
3-14 Upper Outaouais 10%
3-15 Ottawa / Outaouais 50%
3-16 Pembroke 15%
3-17 Abitibi 30%
3-18 Cornwall 50%
3-19 Brockville 40%
3-20 Kingston 50%
3-21 Belleville 40%
3-22 Cobourg 30%
3-23 Peterborough 50%
3-24 Huntsville 30%
3-25 Toronto 50%
3-26 Barrie 30%
3-27 Guelph / Kitchener 50%
3-28 Listowel / Goderich / Stratford 15%
3-29 Niagara-St. Catharines 50%
3-30 London / Woodstock / St. Thomas 50%
3-31 Chatham 50%
3-32 Windsor / Leamington 50%
3-33 Strathroy 50%
3-34 North Bay 40%
3-35 Sault Ste. Marie 50%
3-36 Sudbury 50%
3-37 Kirkland Lake 30%
3-38 Thunder Bay 40%
3-39 Winnipeg 50%
3-40 Brandon 20%
3-41 Regina 40%
3-42 Moose Jaw 25%
3-44 Edmonton 50%
3-45 Medicine Hat / Brooks 30%
3-46 Lethbridge 40%
3-47 Calgary 50%
3-48 Red Deer 25%
3-49 Grande Prairie 25%
3-50 Kootenays 15%
3-51 Okanagan / Columbia 40%
3-52 Vancouver 50%
3-53 Victoria 50%
3-54 Nanaimo 40%
3-55 Courtenay 50%
3-56 Thompson / Cariboo 40%
3-57 Prince George 40%
3-58 Dawson Creek 30%
4-170 Yukon 20%
4-171 Nunavut 20%
4-172 Northwest Territories 20%

6-12 Industry Canada is seeking comments on the application of the general deployment condition of licence as stated above. Specifically, comments are sought on:

• (a) the population coverage, as specified in Table 4, for each licence service area; and
• (b) the proposed time frame.

146. Mandatory Antenna Tower and Site Sharing: Industry Canada proposed changes to the mandatory antenna tower and site sharing conditions of licence through a separate process announced in Canada Gazette notice DGSO-001-12.Footnote 21 The related decisions will be announced separately. 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.

6-13 Industry Canada is seeking comments only on the proposed wording of the condition of licence related to mandatory antenna tower and site sharing.

147. Mandatory Roaming: Industry Canada proposed changes to the mandatory roaming condition of licence through a separate process announced in Canada Gazette notice DGSO-001- 12.Footnote 22 The related decisions, including the applicability of the mandatory roaming condition to the 2500 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.

6-14 Industry Canada is seeking comments only on the proposed wording of the condition of licence related to mandatory roaming.

148. 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 2500 MHz licensees.

149. 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. 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 to the address below. Confidential information provided will be treated in accordance with subsection 20(1) of the Access to Information Act. Manager, Emerging Networks Spectrum Management Operations Branch Industry Canada 300 Slater Street, 15th Floor Ottawa, Ontario K1A 0C8 150. 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 analyzing each licensee’s individual performance against its conditions of licence. In addition, it allows Industry Canada to monitor the effectiveness of these conditions in meeting the policy objectives regarding the band and the department’s intent that the spectrum be deployed in a timely manner for the benefit of Canadians. 6-15 Industry Canada is seeking comments on the proposed condition of licence related to the requirement for annual reporting. ## 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 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 at0.14/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. ## 9. Bidder Training and Support 189. Qualified bidders will receive the necessary information to participate in the auction several weeks prior to the start of the auction. Information will include a user manual for the auction system, instructions and passwords to access the secure auction system, along with the schedules for training, mock auctions and the start of the bidding process. 190. 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. 191. On May 30, 2012, Industry Canada held an auction design information session to assist potential 700 MHz and 2500 MHz auction participants in gaining a greater understanding of the proposed auction format and rules. DVDs of the information session are available by contacting: Information Session, Spectrum Auctions Spectrum Auction Branch Industry Canada 300 Slater Street Ottawa, Ontario K1A 0C8 Telephone: 613-991-0179 Fax: 613-957-4076 E-mail: ic.spectrumauctions-encheresduspectre.ic@canada.ca ## 10. Post-auction Licensing Process for Unassigned Licences 192. 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. ## 11. Licence Renewal Process 193. Following the end of the initial licence 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. 194. 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. 195. 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. 196. 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. 11-1 Industry Canada is seeking comments on the proposed renewal process for spectrum licences in the 2500 MHz band. ## 12. Clarification Questions Process 197. 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. ## 13. Submitting Comments 198. Respondents are requested to provide their comments in electronic format (WordPerfect, Microsoft Word or Adobe PDF) to the following e-mail address: ic.spectrumauctions-encheresduspectre.ic@canada.ca. 199. Written submissions should be addressed to the Director General, Spectrum Auctions Branch, DGSA, Industry Canada, 300 Slater Street, Ottawa, Ontario K1A 0C8. 200. All submissions should cite the Canada Gazette, Part I, the publication date, the title and the notice reference number (DGSO-004-12). Parties should submit their comments no later than November 19, 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. 201. Industry Canada will also provide interested parties with the opportunity to reply to comments from other parties. Reply comments will be accepted until December 17, 2012. 202. 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. ## 14. Related Information 203. 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. 204. For further information concerning the process outlined in this document or related matters, contact: Manager, Spectrum Auction Policy Spectrum Auction Branch Industry Canada 300 Slater Street Ottawa, Ontario K1A 0C8 Telephone: 613-954-3323 Fax: 613-957-4076 E-mail: ic.spectrumauctions-encheresduspectre.ic@canada.ca ## Annex A — Spectrum Availability in the 2500 MHz Band as of June 2012 (Subject to change prior to the 2500 MHz spectrum auction) Region A Tier No. Region Name Frequency blocks available for auction (indicated by "X") Paired spectrum (10 + 10 MHz) Unpaired spectrum (25 MHz) A/A’ B/B’ C/C’ D/D’ E/E’ F/F’ G/G’ H I 3-01 A Newfoundland & Labrador X X X X X X 3-02 A Prince Edward Island X X X X X X 3-03 A Mainland Nova Scotia X X X X X X 3-04 A Cape Breton X X X X X X 3-05 A Southern New Brunswick X X X X X X 3-06 A Western New Brunswick X X X X X X 3-07 A Eastern New Brunswick X X X X X X 3-10 A Chicoutimi-Jonquière X X X X X X 3-11 A Eastern Townships X X X X X X 3-14 A Upper Outaouais X X X X X X 3-16 A Pembroke X X X X X X 3-17 A Abitibi X X X X X X 3-18 A Cornwall X X X X X X 3-19 A Brockville X X X X X X 3-20 A Kingston X X X X X X 3-21 A Belleville X X X X X X 3-22 A Cobourg X X X X X X 3-23 A Peterborough X X X X X X 3-24 A Huntsville X X X X X X 3-28 A Listowel / Goderich / Stratford X X X X X X 3-31 A Chatham X X X X X X 3-32 A Windsor / Leamington X X X X X X 3-33 A Strathroy X X X X X X 3-34 A North Bay X X X X X X 3-35 A Sault Ste. Marie X X X X X X 3-36 A Sudbury X X X X X X 3-37 A Kirkland Lake X X X X X X 3-38 A Thunder Bay X X X X X X 3-44 A Edmonton X X X X X X 3-45 A Medicine Hat / Brooks X X X X X X 3-46 A Lethbridge X X X X X X 3-47 A Calgary X X X X X X 3-48 A Red Deer X X X X X X 3-49 A Grande Prairie X X X X X X 3-50 A Kootenays X X X X X X 3-54 A Nanaimo X X X X X X 3-55 A Courtenay X X X X X X 3-56 A Thompson / Cariboo X X X X X X 3-57 A Prince George X X X X X X 3-58 A Dawson Creek X X X X X X 4-170 A Yukon X X X X X X 4-171 A Nunavut X X X X X X 4-172 A Northwest Territories X X X X X X Region B Tier No. Region Name Frequency blocks available for auction (indicated by "X") Paired spectrum (10 + 10 MHz) Unpaired spectrum (25 MHz) A/A’ B/B’ C/C’ D/D’ E/E’ F/F’ G/G’ H I 3-08 B Bas du fleuve / Gaspésie X X X 3-09 B Québec X X X 3-12 B Trois-Rivières X X X 3-13 B Montréal X X X 3-15 B Ottawa / Outaouais X X X 3-25 B Toronto X X X 3-26 B Barrie X X X 3-27 B Guelph / Kitchener X X X 3-29 B Niagara-St. Catharines X X X 3-30 B London / Woodstock / St. Thomas X X X 3-41 B Regina X X X 3-42 B Moose Jaw X X X 3-43 B Saskatoon X X X 3-51 B Okanagan / Columbia X X X 3-52 B Vancouver X X X 3-53 B Victoria X X X Region C Tier No. Region Name Frequency blocks available for auction (indicated by "X") Paired spectrum (10 + 10 MHz) Unpaired spectrum (25 MHz) A/A’ B/B’ C/C’ D/D’ E/E’ F/F’ G/G’ H I 3-39 C Winnipeg X X X X X X 3-40 C Brandon X X X X X X ## Annex B — 2500 MHz Band Site-specific Fixed Service Licenseesas of June 2012 Annex B — 2500 MHz Band Site-specific Fixed Service Licensees as of June 2012 Licensee Location Latitude Longitude Corresponding Tier 3 area TX FREQ (MHz) RX FREQ (MHz) BELL ALIANT REGIONAL COMM. INC. MONT APICA (RR) 475842 712550 3-09 2588 2358 BELL ALIANT REGIONAL COMM. INC. CHUTES DES PASSES 495105 711023 3-10 2351 2581 CHANTIERS CHIBOUGAMAU LTEE MONT CARBONNEAU, QC 501241 734100 3-10 2351.3 2581.3 BELL ALIANT REGIONAL COMM. INC. ALMA (RR) 483432 713335 3-10 2358 2588 BELL ALIANT REGIONAL COMM. INC. ALMA (RR) 483432 713335 3-10 2358 2588 BELL ALIANT REGIONAL COMM. INC. ALMA (RR) 483432 713335 3-10 2358 2588 BELL ALIANT REGIONAL COMM. INC. ALMA (RR) 483432 713335 3-10 2358 2588 CHANTIERS CHIBOUGAMAU LTEE MONT CARBONNEAU, QC 501241 734100 3-10 2358.3 2588.3 BELL ALIANT REGIONAL COMM. INC. LAC DES GRANDES POINTES 490918 712741 3-10 2581 2351 CHANTIERS CHIBOUGAMAU LTEE BUDEMONT, QC 503842 731019 3-10 2581.3 2351.3 BELL ALIANT REGIONAL COMM. INC. ST ANDRE DE METABETCHOUAN 482107 715429 3-10 2588 2358 BELL ALIANT REGIONAL COMM. INC. METABETCHOUAN (CH. CARON) 482307 715207 3-10 2588 2358 BELL ALIANT REGIONAL COMM. INC. ST NAZAIRE (RANG NO 8) 483720 712944 3-10 2588 2358 BELL ALIANT REGIONAL COMM. INC. ST HENRI DE TAILLON,CH PLAGE WILSON 483754 714733 3-10 2588 2358 BELL ALIANT REGIONAL COMM. INC. L'ASCENSION (RANG NO 7) 484052 713751 3-10 2588 2358 BELL ALIANT REGIONAL COMM. INC. LAC DES GRANDES POINTES 490918 712741 3-10 2588 2358 CHANTIERS CHIBOUGAMAU LTEE BUDEMONT, QC 503842 731019 3-10 2588.3 2358.3 TELEBEC, DIVISION DE BELL ALIANT CHAPAIS 494640 745038 3-17 2295.5 2525.5 TELEBEC, DIVISION DE BELL ALIANT LG 2, RR, QUEBEC 534705 773659 3-17 2295.5 2525.5 TELEBEC, DIVISION DE BELL ALIANT JOUTEL 492715 781926 3-17 2315.5 2545.5 CHANTIERS CHIBOUGAMAU LTEE TOURNEMINE LA TOUR, QC 505353 725210 3-17 2358.3 2588.3 TELEBEC, DIVISION DE BELL ALIANT LAC OPEMISCA 495003 745849 3-17 2525.5 2295.5 TELEBEC, DIVISION DE BELL ALIANT BAIE JAMES (LG2, AEROPORT) 533741 774137 3-17 2525.5 2295.5 TELEBEC, DIVISION DE BELL ALIANT MILE 72, QC 492658 780712 3-17 2545.5 2315.5 CHANTIERS CHIBOUGAMAU LTEE CAMP CLAVERIE, QC 502830 732438 3-17 2581.3 2351.3 CHANTIERS CHIBOUGAMAU LTEE MONT BOURBEAU, QC 495654 742041 3-17 2588.3 2358.3 WESTCOAST ENERGY INC. DEVON (10-12-63-12W6M) ALBERTA 542611 1194016 3-49 2351 2581 TELUS Communications Company SPILLIMACHEEN BC 505400 1162037 3-50 2535 2305 TELUS Communications Company GOLDEN BC 511625 1165917 3-51 2305 2535 TELUS Communications Inc. TOFINO BC 490846 1255400 3-54 2305 2535 TELUS Communications Inc. MT OZZARD, BC 485733 1252935 3-54 2535 2305 TELUS Communications Company BEAVERLY BC 534826 1225749 3-57 2299 2529 TELUS Communications Company TABOR MOUNTAIN BC 535444 1222706 3-57 2529 2299 Northwestel Inc. PINK MOUNTAIN BC 570416 1225227 3-58 2323.3 2553.3 Northwestel Inc. ATICK CREEK BC 570955 1224025 3-58 2323.3 2553.3 Northwestel Inc. JEDNEY, BC 571333 1221322 3-58 2323.3 2553.3 Northwestel Inc. JEDNEY, BC 571333 1221322 3-58 2330.3 2560.3 WESTCOAST ENERGY INC. PERRY CREEK BC 550945 1210829 3-58 2337 2567 WESTCOAST ENERGY INC. SOUTH SUKUNKA (MR20) BC 551801 1214103 3-58 2337 2567 Northwestel Inc. JOHN KITTS 563825 1213013 3-58 2337.3 2567.3 Northwestel Inc. BLUEBERRY FARMS, BC (SUB) 564008 1212821 3-58 2337.3 2567.3 Northwestel Inc. PINK MOUNTAIN BC 570416 1225227 3-58 2337.3 2567.3 WESTCOAST ENERGY INC. LITTLE PRAIRIE BC 544022 1202904 3-58 2344 2574 WESTCOAST ENERGY INC. LITTLE PRAIRIE BC 544022 1202904 3-58 2344 2574 WESTCOAST ENERGY INC. LITTLE PRAIRIE BC 544022 1202904 3-58 2344 2574 WESTCOAST ENERGY INC. BULLMOOSE (MR16) BC 550858 1212708 3-58 2344 2574 WESTCOAST ENERGY INC. PERRY CREEK BC 550945 1210829 3-58 2344 2574 WESTCOAST ENERGY INC. BRAZION PLANT (MR56) BC 552355 1220831 3-58 2344 2574 Northwestel Inc. MONTEITH CREEK REPEATER BC 563000 1220357 3-58 2344.3 2574.3 Northwestel Inc. ATICK CREEK BC 570955 1224025 3-58 2344.3 2574.3 Northwestel Inc. GLEAM BC 573154 1211322 3-58 2344.3 2574.3 WESTCOAST ENERGY INC. A4658 (D-13-G/93-I-9 BP1) BC 543547 1200921 3-58 2351 2581 WESTCOAST ENERGY INC. A4256 (B-57-G/93-I-9 BP3) BC 543743 1201229 3-58 2351 2581 WESTCOAST ENERGY INC. A4254 (A-65-E/93-I-9 BP2) BC 543805 1202539 3-58 2351 2581 WESTCOAST ENERGY INC. AS 10 (MR50) 545158 1210725 3-58 2351 2581 WESTCOAST ENERGY INC. LBV 53 BC 545640 1210857 3-58 2351 2581 WESTCOAST ENERGY INC. AS 9 (MR49) 545651 1210930 3-58 2351 2581 WESTCOAST ENERGY INC. SUKUNKA JUNCTION NORTH BC 552036 1213926 3-58 2351 2581 Northwestel Inc. GERRY HEYER CAMP BC 562552 1222744 3-58 2351.3 2581.3 Northwestel Inc. FEDERAL RANCH BC 562618 1222341 3-58 2351.3 2581.3 Northwestel Inc. GRAHAM RIVER FARMS BC 562745 1222047 3-58 2351.3 2581.3 Northwestel Inc. INDIAN UNION PECIFIC BC 562854 1221928 3-58 2351.3 2581.3 Northwestel Inc. SAM CRAIK BC 562936 1221550 3-58 2351.3 2581.3 Northwestel Inc. MONTEITH CREEK REPEATER BC 563000 1220357 3-58 2351.3 2581.3 Northwestel Inc. CRYSTAL SPRING FARM (UDO) BC 563037 1221315 3-58 2351.3 2581.3 Northwestel Inc. GEORGE GIENIE BC 563050 1220840 3-58 2351.3 2581.3 Northwestel Inc. ART MCLEAN RANCH 563058 1221103 3-58 2351.3 2581.3 Northwestel Inc. CRYSTAL SPRING FARM (WITZEL) BC 563102 1221740 3-58 2351.3 2581.3 Northwestel Inc. GRAHAM HALFWAY RIVER SUBDIVISION BC 563112 1221532 3-58 2351.3 2581.3 Northwestel Inc. DAVE SIMPSON BC 563539 1222605 3-58 2351.3 2581.3 Northwestel Inc. BRUCE SIMPSON BC 563630 1222706 3-58 2351.3 2581.3 Northwestel Inc. M MCLEOD, BC 563814 1222750 3-58 2351.3 2581.3 Northwestel Inc. D MEGER, BC 563817 1222752 3-58 2351.3 2581.3 Northwestel Inc. SIEMER, BC 563822 1204118 3-58 2351.3 2581.3 Northwestel Inc. SCOBIE, BC 564159 1223128 3-58 2351.3 2581.3 Northwestel Inc. STADLER, BC 564217 1203709 3-58 2351.3 2581.3 Northwestel Inc. TRASK, BC 564337 1223257 3-58 2351.3 2581.3 Northwestel Inc. RUTZ, BC 564811 1203545 3-58 2351.3 2581.3 Northwestel Inc. PEE JAYS, BC 565307 1203321 3-58 2351.3 2581.3 Northwestel Inc. MACCABE MILLIGAN, BC 565518 1204450 3-58 2351.3 2581.3 Northwestel Inc. CNRL - MILLIGAN 570822 1203916 3-58 2351.3 2581.3 Northwestel Inc. GLEAM BC 573154 1211322 3-58 2351.3 2581.3 WESTCOAST ENERGY INC. LITTLE PRAIRIE BC 544022 1202904 3-58 2358 2588 WESTCOAST ENERGY INC. AS22 (SOUTH GRZ CNRL) BC 544629 1203348 3-58 2358 2588 WESTCOAST ENERGY INC. RED WILLOW BC (D-13-H/94-I-15) 545153 1203016 3-58 2358 2588 WESTCOAST ENERGY INC. AS28 (BABCOCK CNRL) BC 545444 1205859 3-58 2358 2588 WESTCOAST ENERGY INC. SUKUNKA JUNCTION NORTH BC 552036 1213926 3-58 2358 2588 WESTCOAST ENERGY INC. KWOEN PLANT, BC 552302 1214159 3-58 2358 2588 WESTCOAST ENERGY INC. COMMOTION CREEK BC 553102 1215414 3-58 2358 2588 Northwestel Inc. BLUEBERRY BC 564307 1214554 3-58 2358.3 2588.3 Northwestel Inc. TOWNSEND CREEK BC 565918 1221008 3-58 2553.3 2323.3 Northwestel Inc. PRIME WEST ENERGY, BC 572031 1220208 3-58 2560.3 2330.3 WESTCOAST ENERGY INC. THUNDER MOUNTAIN BC 545715 1203535 3-58 2567 2337 WESTCOAST ENERGY INC. HERMAN MTN BC 545942 1210718 3-58 2567 2337 WESTCOAST ENERGY INC. A5262 (D-66-D/93-P-2) BC 550320 1205644 3-58 2567 2337 WESTCOAST ENERGY INC. HILL 4290 BC 551014 1205211 3-58 2567 2337 WESTCOAST ENERGY INC. WEST SUKUNKA (MR48) BC 551311 1214018 3-58 2567 2337 Northwestel Inc. BLUEBERRY FARM BC 564015 1212827 3-58 2567.3 2337.3 Northwestel Inc. AMOCO, BC 564938 1222145 3-58 2567.3 2337.3 Northwestel Inc. DUTCHIK, BC 565000 1223708 3-58 2567.3 2337.3 Northwestel Inc. RILEY BURSETH, BC 565126 1223826 3-58 2567.3 2337.3 Northwestel Inc. CAROL, BC 565347 1223931 3-58 2567.3 2337.3 Northwestel Inc. WAYNE MILLS, BC 565410 1223844 3-58 2567.3 2337.3 Northwestel Inc. DARRELL MILLS, BC 565413 1223934 3-58 2567.3 2337.3 Northwestel Inc. MARSHALL MILLS, BC 565519 1224004 3-58 2567.3 2337.3 Northwestel Inc. DUKE ENERGY BEG, BC 565607 1220455 3-58 2567.3 2337.3 Northwestel Inc. BORING RANCH, BC 565726 1224152 3-58 2567.3 2337.3 Northwestel Inc. KARL OSYMUELLER, BC 565813 1221914 3-58 2567.3 2337.3 Northwestel Inc. HEADWATERS RANCH, BC 565926 1223713 3-58 2567.3 2337.3 Northwestel Inc. LLOYD SIMPSON, BC 570053 1225327 3-58 2567.3 2337.3 Northwestel Inc. BRIAN, BC 570107 1222125 3-58 2567.3 2337.3 Northwestel Inc. GUTTNER, BC 570157 1224615 3-58 2567.3 2337.3 Northwestel Inc. KENNEDY, BC 570221 1223102 3-58 2567.3 2337.3 Northwestel Inc. PINK MOUNTAIN MOTOR INN, BC 570223 1223039 3-58 2567.3 2337.3 Northwestel Inc. SIMPSON CAMP, BC 570407 1223912 3-58 2567.3 2337.3 Northwestel Inc. ELLEN SIMPSON, BC 570413 1223827 3-58 2567.3 2337.3 Northwestel Inc. SPORTSMAN INN, BC 570435 1223452 3-58 2567.3 2337.3 Northwestel Inc. S AND S, BC 570438 1223334 3-58 2567.3 2337.3 Northwestel Inc. MAE'S KITCHEN, BC 570452 1223516 3-58 2567.3 2337.3 Northwestel Inc. WESTCOAST SIKANNI, BC 571207 1230042 3-58 2567.3 2337.3 Northwestel Inc. ANADARKO, BC 572315 1222345 3-58 2567.3 2337.3 WESTCOAST ENERGY INC. COMPASS HILL BC 542923 1200107 3-58 2574 2344 WESTCOAST ENERGY INC. A4659 (D-78-B/93-I-9 BP4) BC 543359 1201302 3-58 2574 2344 WESTCOAST ENERGY INC. AS20 (WAPITI BURLINGTON) BC 543931 1203531 3-58 2574 2344 WESTCOAST ENERGY INC. AS32 (WAPITI AMOCO) BC 544011 1203039 3-58 2574 2344 WESTCOAST ENERGY INC. AS21 (NORTH GRZ CNRL) BC 545339 1204004 3-58 2574 2344 WESTCOAST ENERGY INC. BULLMOOSE CREEK BC 551335 1212406 3-58 2574 2344 WESTCOAST ENERGY INC. BULLMOOSE CREEK BC 551335 1212406 3-58 2574 2344 WESTCOAST ENERGY INC. BRAZION CREEK BC 552140 1215827 3-58 2574 2344 WESTCOAST ENERGY INC. AS33 (SOUTH GRZ BURLINGTON) BC 544444 1204232 3-58 2574 2433 Northwestel Inc. MACCABEE FARM BC 563030 1220000 3-58 2574.3 2344.3 Northwestel Inc. FRIEDENS FARM BC 563049 1215148 3-58 2574.3 2344.3 Northwestel Inc. NEW INDIAN RESERVE BC 563049 1215757 3-58 2574.3 2344.3 Northwestel Inc. ALBERT SCHOLL BC 563144 1215555 3-58 2574.3 2344.3 Northwestel Inc. DILLE, BC 570221 1223107 3-58 2574.3 2344.3 Northwestel Inc. PINK MOTOR, BC 570223 1223039 3-58 2574.3 2344.3 Northwestel Inc. DON GORDON, BC 571500 1224317 3-58 2574.3 2344.3 Northwestel Inc. SHELLY CLARKE, BC 571740 1224745 3-58 2574.3 2344.3 Northwestel Inc. NOVA GAS, BC 572012 1224020 3-58 2574.3 2344.3 Northwestel Inc. COASTAL, BC 572020 1224029 3-58 2574.3 2344.3 Northwestel Inc. LENNOX CAMP 572251 1212530 3-58 2574.3 2344.3 Northwestel Inc. CRESTAR, BC 573108 1205219 3-58 2574.3 2344.3 Northwestel Inc. KAHNTAH, BC 580114 1203224 3-58 2574.3 2344.3 WESTCOAST ENERGY INC. COMPASS HILL BC 542923 1200107 3-58 2581 2351 WESTCOAST ENERGY INC. HERMAN MTN BC 545942 1210718 3-58 2581 2351 WESTCOAST ENERGY INC. CHAMBERLAIN BC (MR47) 550919 1213905 3-58 2581 2351 WESTCOAST ENERGY INC. WEST SUKUNKA (MR48) BC 551311 1214018 3-58 2581 2351 WESTCOAST ENERGY INC. BULLMOOSE CREEK BC 551335 1212406 3-58 2581 2351 WESTCOAST ENERGY INC. BURNT RIVER BC 551858 1220207 3-58 2581 2351 WESTCOAST ENERGY INC. BRAZION CREEK BC 552140 1215827 3-58 2581 2351 WESTCOAST ENERGY INC. AS19 (D-49-F/93-P-5) BC 552222 1215103 3-58 2581 2351 Northwestel Inc. COLT CREEK REPEATER BC 562931 1222322 3-58 2581.3 2351.3 Northwestel Inc. ZEKE 565718 1212514 3-58 2581.3 2351.3 WESTCOAST ENERGY INC. THUNDER MOUNTAIN BC 545715 1203535 3-58 2588 2358 WESTCOAST ENERGY INC. THUNDER MOUNTAIN BC 545715 1203535 3-58 2588 2358 WESTCOAST ENERGY INC. WABI BC 554006 1213459 3-58 2588 2358 Northwestel Inc. COLT CREEK REPEATER BC 562931 1222322 3-58 2588.3 2358.3 Northwestel Inc. NEWCAL ENERGY 562947 1213759 3-58 2588.3 2358.3 Northwestel Inc. LENNOX, BC 563309 1211628 3-58 2588.3 2358.3 Northwestel Inc. PURSUIT, BC 563336 1213548 3-58 2588.3 2358.3 Northwestel Inc. LENNOX RES, BC 563340 1211629 3-58 2588.3 2358.3 Northwestel Inc. NOVA, BC 563458 1211517 3-58 2588.3 2358.3 Northwestel Inc. DEADHORSE CREEK BC 563516 1214601 3-58 2588.3 2358.3 Northwestel Inc. DONALD KRUSE BC 563826 1214916 3-58 2588.3 2358.3 Northwestel Inc. KOBES BC 563828 1213932 3-58 2588.3 2358.3 Northwestel Inc. THEISSEN, BC 563915 1212551 3-58 2588.3 2358.3 Northwestel Inc. BLUEBERRY FARM BC 564015 1212827 3-58 2588.3 2358.3 Northwestel Inc. CHELLE, BC 564025 1211801 3-58 2588.3 2358.3 Northwestel Inc. EVERGREEN, BC 564032 1212139 3-58 2588.3 2358.3 Northwestel Inc. WEIBE RANCH 564054 1212201 3-58 2588.3 2358.3 Northwestel Inc. EVERGREEN ACRES, BC 564219 1212306 3-58 2588.3 2358.3 Northwestel Inc. TALISMAN, BC 564414 1213859 3-58 2588.3 2358.3 Northwestel Inc. BABKIRK, BC 565407 1215430 3-58 2588.3 2358.3 Northwestel Inc. ZEKE 565718 1212514 3-58 2588.3 2358.3 Northwestel Inc. UNOCAL, BC 565721 1215503 3-58 2588.3 2358.3 Northwestel Inc. TOWNSEND CREEK BC 565918 1221008 3-58 2588.3 2358.3 ## Annex C — 2500 MHz Band Site-specific Grandfathered Licences in Manitoba as of June 2012 Licensee Location Latitude Longitude Corresponding Tier 3 area TX FREQ (MHz) RX FREQ (MHz) HANOVER SCHOOL DIVISION #15 STEINBACH, MANITOBA-RSS ITV SYSTEM 493058 964113 3-39 2502.25 HANOVER SCHOOL DIVISION #15 STEINBACH, MANITOBA-RSS ITV SYSTEM 493058 964113 3-39 2503.75 HANOVER SCHOOL DIVISION #15 STEINBACH, MANITOBA-RSS ITV SYSTEM 493058 964113 3-39 2505.25 ST. JAMES ASSINIBOIA SCHOOL DIV. #2 WINNIPEG, MAN.-ST JAMES COLLEGIATE 495239 971317 3-39 2509 ST. JAMES ASSINIBOIA SCHOOL DIV. #2 WINNIPEG, MB-JOHN TAYLOR COLLEGIATE 495326 971849 3-39 2509 ST. JAMES ASSINIBOIA SCHOOL DIV. #2 WINNIPEG, MAN.-ST JAMES COLLEGIATE 495239 971317 3-39 2515 ST. JAMES ASSINIBOIA SCHOOL DIV. #2 WINNIPEG, MB-JOHN TAYLOR COLLEGIATE 495326 971849 3-39 2515 Prairie Rose School Division ELIE MB - WALDHEIM COLONY SCHOOL 495136 974949 3-39 2521 Prairie Rose School Division ELIE MB - BON HOMME COLONY SCHOOL 495233 975330 3-39 2521 Prairie Rose School Division ST.FRANCOIS MB - LAKESIDE COL. SCH. 495440 973355 3-39 2521 Prairie Rose School Division ST.FRANCOIS MB-BARRICKMAN COL. SCH. 495609 973617 3-39 2521 Prairie Rose School Division ST.FRANCOIS MB - MAXWELL COL. SCH. 495714 973848 3-39 2521 Prairie Rose School Division ST.EUSTACHE MB -IBERVILLE COL. SCH. 495819 974118 3-39 2521 Prairie Rose School Division POPLAR PT MB - POPLAR PT COL. SCH. 500227 975641 3-39 2521 Inukshuk Wireless Partnership WINNIPEG, MAN.-SUBSCRIBER STATIONS 495345 970821 3-39 2533 Inukshuk Wireless Partnership ELIE AREA, MAN.-SUBSCRIBER STATIONS 495406 974532 3-39 2533 Inukshuk Wireless Partnership SELKIRK AREA, MAN.-SUBSCRIBER STNS. 500837 965303 3-39 2533 Inukshuk Wireless Partnership CHATFIELD AREA, MAN-SUBSCRIBER STNS 504702 973417 3-39 2533 Inukshuk Wireless Partnership WINNIPEG, MAN.-SUBSCRIBER STATIONS 495345 970821 3-39 2539 Prairie Spirit School Division #50 ST. CLAUDE, MANITOBA-ITV SYSTEM 493936 982050 3-39 2539.3 Prairie Rose School Division ELIE MB - WALDHEIM COLONY SCHOOL 495136 974949 3-39 2545 Prairie Rose School Division ELIE MB - BON HOMME COLONY SCHOOL 495233 975330 3-39 2545 Prairie Rose School Division ST.FRANCOIS MB - LAKESIDE COL. SCH. 495440 973355 3-39 2545 Prairie Rose School Division ST.FRANCOIS MB-BARRICKMAN COL. SCH. 495609 973617 3-39 2545 Prairie Rose School Division ST.FRANCOIS MB - MAXWELL COL. SCH. 495714 973848 3-39 2545 Prairie Rose School Division ST.EUSTACHE MB -IBERVILLE COL. SCH. 495819 974118 3-39 2545 Prairie Rose School Division POPLAR PT MB - POPLAR PT COL. SCH. 500227 975641 3-39 2545 Inukshuk Wireless Partnership WINNIPEG, MAN.-SUBSCRIBER STATIONS 495345 970821 3-39 2551 Inukshuk Wireless Partnership WINNIPEG, MAN.-SUBSCRIBER STATIONS 495345 970821 3-39 2557 ST. JAMES ASSINIBOIA SCHOOL DIV. #2 WINNIPEG, MAN.-ST JAMES COLLEGIATE 495239 971317 3-39 2563 ST. JAMES ASSINIBOIA SCHOOL DIV. #2 WINNIPEG, MB-JOHN TAYLOR COLLEGIATE 495326 971849 3-39 2563 PRAIRIE ROSE SCHOOL DIVISION MIAMI, MAN-MIAMI COLLEGIATE (IITV) 492222 981414 3-39 2569 PRAIRIE ROSE SCHOOL DIVISION ELM CREEK, MB-ELM CREEK COLL (IITV) 494027 980011 3-39 2569 HANOVER SCHOOL DIVISION #15 GRUNTHAL, MAN.-SCHOOL ITV SYSTEM 492409 965137 3-39 2569.75 HANOVER SCHOOL DIVISION #15 NIVERVILLE MB-COLLEGIATE ITV SYSTEM 493605 970218 3-39 2569.75 HANOVER SCHOOL DIVISION #15 LANDMARK, MAN-COLLEGIATE ITV SYSTEM 494008 964913 3-39 2569.75 HANOVER SCHOOL DIVISION #15 GRUNTHAL, MAN.-SCHOOL ITV SYSTEM 492409 965137 3-39 2571.25 HANOVER SCHOOL DIVISION #15 NIVERVILLE MB-COLLEGIATE ITV SYSTEM 493605 970218 3-39 2571.25 HANOVER SCHOOL DIVISION #15 LANDMARK, MAN-COLLEGIATE ITV SYSTEM 494008 964913 3-39 2571.25 HANOVER SCHOOL DIVISION #15 GRUNTHAL, MAN.-SCHOOL ITV SYSTEM 492409 965137 3-39 2575 HANOVER SCHOOL DIVISION #15 LANDMARK, MAN-COLLEGIATE ITV SYSTEM 494008 964913 3-39 2575 HANOVER SCHOOL DIVISION #15 GRUNTHAL, MAN.-SCHOOL ITV SYSTEM 492409 965137 3-39 2581 HANOVER SCHOOL DIVISION #15 NIVERVILLE MB-COLLEGIATE ITV SYSTEM 493605 970218 3-39 2581 HANOVER SCHOOL DIVISION #15 NIVERVILLE MB-COLLEGIATE ITV SYSTEM 493605 970218 3-39 2587 HANOVER SCHOOL DIVISION #15 LANDMARK, MAN-COLLEGIATE ITV SYSTEM 494008 964913 3-39 2587 HANOVER SCHOOL DIVISION #15 GRUNTHAL, MAN.-SCHOOL ITV SYSTEM 492409 965137 3-39 2502.25 BORDER LAND SCHOOL DIVISION DOMINION CITY, MB-SCHOOL ITV SYSTEM 490827 970957 3-39 2502.25 2563.75 PRAIRIE ROSE SCHOOL DIVISION ELM CREEK, MB-ELM CREEK COLL (IITV) 494027 980011 3-39 2502.25 2577.25 HANOVER SCHOOL DIVISION #15 LANDMARK, MAN-COLLEGIATE ITV SYSTEM 494008 964913 3-39 2503.75 BORDER LAND SCHOOL DIVISION VITA, MANITOBA-SCHOOL ITV SYSTEM 490746 963347 3-39 2503.75 2562.25 HANOVER SCHOOL DIVISION #15 NIVERVILLE MB-COLLEGIATE ITV SYSTEM 493605 970218 3-39 2505.25 PRAIRIE ROSE SCHOOL DIVISION MIAMI, MAN-MIAMI COLLEGIATE (IITV) 492222 981414 3-39 2505.25 2574.25 ST. JAMES ASSINIBOIA SCHOOL DIV. #2 WINNIPEG, MB.-STURGEON CREEK SCHOOL 495312 971607 3-39 2509 ST. JAMES ASSINIBOIA SCHOOL DIV. #2 WINNIPEG, MB.-STURGEON CREEK SCHOOL 495312 971607 3-39 2515 Prairie Rose School Division ELIE, MANITOBA-ST. PAUL COLLEGIATE 495427 974534 3-39 2521 Inukshuk Wireless Partnership ELIE, MANITOBA-CHMI TV TX SITE 495226 974427 3-39 2533 Inukshuk Wireless Partnership WINNIPEG, MANITOBA-TD CENTRE 495344 970822 3-39 2533 Inukshuk Wireless Partnership SELKIRK, MANITOBA 500924 965839 3-39 2533 Inukshuk Wireless Partnership CHATFIELD, MANITOBA 504945 973333 3-39 2533 Inukshuk Wireless Partnership WINNIPEG, MANITOBA-TD CENTRE 495344 970822 3-39 2539 Prairie Rose School Division ELIE, MANITOBA-ST. PAUL COLLEGIATE 495427 974534 3-39 2545 Inukshuk Wireless Partnership WINNIPEG, MANITOBA-TD CENTRE 495344 970822 3-39 2551 Inukshuk Wireless Partnership WINNIPEG, MANITOBA-TD CENTRE 495344 970822 3-39 2557 BORDER LAND SCHOOL DIVISION WOODMORE, MANITOBA-ITV REPEATER 490804 965358 3-39 2562.25 2503.75 ST. JAMES ASSINIBOIA SCHOOL DIV. #2 WINNIPEG, MB.-STURGEON CREEK SCHOOL 495312 971607 3-39 2563 BORDER LAND SCHOOL DIVISION WOODMORE, MANITOBA-ITV REPEATER 490804 965358 3-39 2563.75 2502.25 Prairie Spirit School Division #50 ST. CLAUDE, MANITOBA-ITV SYSTEM 493936 982050 3-39 2564.15 PRAIRIE ROSE SCHOOL DIVISION CARMAN, MB-CARMAN COLLEGIATE (IITV) 493011 975946 3-39 2569 PRAIRIE ROSE SCHOOL DIVISION CARMAN, MB-CARMAN COLLEGIATE (IITV) 493011 975946 3-39 2569 HANOVER SCHOOL DIVISION #15 STEINBACH, MANITOBA-RSS ITV SYSTEM 493058 964113 3-39 2569.75 HANOVER SCHOOL DIVISION #15 STEINBACH, MANITOBA-RSS ITV SYSTEM 493058 964113 3-39 2571.25 PRAIRIE ROSE SCHOOL DIVISION CARMAN, MB-CARMAN COLLEGIATE (IITV) 493011 975946 3-39 2574.25 2505.25 HANOVER SCHOOL DIVISION #15 STEINBACH, MANITOBA-RSS ITV SYSTEM 493058 964113 3-39 2575 PRAIRIE ROSE SCHOOL DIVISION CARMAN, MB-CARMAN COLLEGIATE (IITV) 493011 975946 3-39 2577.25 2502.25 HANOVER SCHOOL DIVISION #15 STEINBACH, MANITOBA-RSS ITV SYSTEM 493058 964113 3-39 2581 HANOVER SCHOOL DIVISION #15 STEINBACH, MANITOBA-RSS ITV SYSTEM 493058 964113 3-39 2587 Prairie Spirit School Division #50 BRUXELLES, MANITOBA-IITV HUB SITE 492944 985200 3-40 2501.05 Prairie Spirit School Division #50 BRUXELLES, MANITOBA-IITV HUB SITE 492944 985200 3-40 2503.15 Prairie Spirit School Division #50 BRUXELLES, MANITOBA-IITV HUB SITE 492944 985200 3-40 2505.25 Prairie Spirit School Division #50 BRUXELLES, MANITOBA-IITV HUB SITE 492944 985200 3-40 2507.35 Prairie Spirit School Division #50 BRUXELLES, MANITOBA-IITV HUB SITE 492944 985200 3-40 2510.5 Prairie Spirit School Division #50 BRUXELLES, MANITOBA-IITV HUB SITE 492944 985200 3-40 2513.65 Prairie Spirit School Division #50 BRUXELLES, MANITOBA-IITV HUB SITE 492944 985200 3-40 2516.28 Prairie Spirit School Division #50 BRUXELLES, MANITOBA-IITV HUB SITE 492944 985200 3-40 2518.9 Inukshuk Wireless Partnership BRANDON AREA, MAN-SUBSCRIBER STNS. 495049 995710 3-40 2533 Inukshuk Wireless Partnership MINNEDOSA/SHOAL LAKE, MB-SUBSC STNS 502106 1001214 3-40 2533 Inukshuk Wireless Partnership FOXWARREN AREA, MAN-SUBSCRIBER STNS 503102 1010907 3-40 2533 Inukshuk Wireless Partnership RIDING MTN AREA, MB-SUBSCIBER STNS. 503155 992800 3-40 2533 Inukshuk Wireless Partnership DAUPHIN AREA, MAN.-SUBSCRIBER STNS. 510858 1000300 3-40 2533 Prairie Spirit School Division #50 BALDUR, MANITOBA-TRI LEAF COLONY 492014 991354 3-40 2539 Prairie Spirit School Division #50 PILOT MOUND, MAN.-WINDY BAY COLONY 492052 985400 3-40 2539 Prairie Spirit School Division #50 CYPRESS RIVER, MB-CYPRESS R COLONY 493447 990910 3-40 2539 Prairie Spirit School Division #50 HOLLAND, MANITOBA-OAKRIDGE COLONY 493558 984800 3-40 2539 Prairie Spirit School Division #50 GLENBORO, MANITOBA-MILLSHOF COLONY 493559 992029 3-40 2539 Prairie Spirit School Division #50 TREHERNE MANITOBA-SHADY LANE COLONY 494422 983908 3-40 2539 Inukshuk Wireless Partnership BRANDON AREA, MAN-SUBSCRIBER STNS. 495049 995710 3-40 2539 Prairie Spirit School Division #50 CARTWRIGHT, MANITOBA-IITV SYSTEM 490553 992008 3-40 2539.3 Prairie Spirit School Division #50 TREHERNE, MANITOBA-IITV SYSTEM 493720 984154 3-40 2539.3 Prairie Spirit School Division #50 NOTRE DAME DE LOURDES, MB-IITV RPTR 493449 983756 3-40 2564.15 Prairie Spirit School Division #50 GLENORA, MANITOBA-IITV REPEATER 491507 990931 3-40 2566.25 Prairie Spirit School Division #50 NOTRE DAME DE LOURDES, MB-IITV RPTR 493449 983756 3-40 2568.35 Prairie Spirit School Division #50 MANITOU, MANITOBA-IITV SYSTEM 491206 983234 3-40 2582.7 Prairie Spirit School Division #50 PILOT MOUND, MANITOBA-IITV SYSTEM 491209 985401 3-40 2582.7 Prairie Spirit School Division #50 GLENORA, MANITOBA-IITV REPEATER 491507 990931 3-40 2582.7 Prairie Spirit School Division #50 BALDUR, MANITOBA-IITV SYSTEM 492308 991418 3-40 2582.7 Prairie Spirit School Division #50 SOMERSET, MANITOBA-ITV SYSTEM 492427 983936 3-40 2582.7 Prairie Spirit School Division #50 SWAN LAKE, MANITOBA-ITV SYSTEM 492447 984733 3-40 2582.7 Prairie Spirit School Division #50 GLENBORO, MANITOBA-IITV SYSTEM 493330 991655 3-40 2582.7 Prairie Spirit School Division #50 NOTRE DAME DE LOURDES, MB-IITV RPTR 493449 983756 3-40 2582.7 Prairie Spirit School Division #50 SOMERSET, MANITOBA-ITV SYSTEM 492427 983936 3-40 2501.05 Prairie Spirit School Division #50 PILOT MOUND, MANITOBA-IITV SYSTEM 491209 985401 3-40 2503.15 Prairie Spirit School Division #50 MANITOU, MANITOBA-IITV SYSTEM 491206 983234 3-40 2505.25 Prairie Spirit School Division #50 GLENBORO, MANITOBA-IITV SYSTEM 493330 991655 3-40 2507.35 Prairie Spirit School Division #50 NOTRE DAME DE LOURDES, MB-IITV RPTR 493449 983756 3-40 2510.5 Prairie Spirit School Division #50 GLENORA, MANITOBA-IITV REPEATER 491507 990931 3-40 2513.65 Prairie Spirit School Division #50 BALDUR, MANITOBA-IITV SYSTEM 492308 991418 3-40 2516.28 Prairie Spirit School Division #50 SWAN LAKE, MANITOBA-ITV SYSTEM 492447 984733 3-40 2518.9 Inukshuk Wireless Partnership HAYFIELD, MANITOBA-CKX TV TX SITE 494005 1000042 3-40 2533 Inukshuk Wireless Partnership NEWDALE, MANITOBA 502038 1001109 3-40 2533 Inukshuk Wireless Partnership RIDING MOUNTAIN, MANITOBA 502840 993450 3-40 2533 Inukshuk Wireless Partnership FOXWARREN, MANITOBA 503114 1010425 3-40 2533 Inukshuk Wireless Partnership BALDY MOUNTAIN, MANITOBA 512814 1004312 3-40 2533 Inukshuk Wireless Partnership HAYFIELD, MANITOBA-CKX TV TX SITE 494005 1000042 3-40 2539 Prairie Spirit School Division #50 GLENORA, MANITOBA-IITV REPEATER 491507 990931 3-40 2539.3 Prairie Spirit School Division #50 NOTRE DAME DE LOURDES, MB-IITV RPTR 493449 983756 3-40 2539.3 Prairie Spirit School Division #50 CARTWRIGHT, MANITOBA-IITV SYSTEM 490553 992008 3-40 2566.25 Prairie Spirit School Division #50 TREHERNE, MANITOBA-IITV SYSTEM 493720 984154 3-40 2568.35 Prairie Spirit School Division #50 BRUXELLES, MANITOBA-IITV HUB SITE 492944 985200 3-40 2582.7 ## Annex D — The Combinatorial Clock Auction (CCA) Format 1. Industry Canada is proposing to use a combinatorial clock auction (CCA) format for the 2500 MHz band auction. A CCA is a bidding process that includes a price discovery stage, similar to the SMRA auction format. However, the CCA format also has attributes that remove or reduce some design concerns associated with the SMRA format. In particular, in a CCA, bidders are able to bid for packages of licences instead of individual ones, eliminating the risk that bidders may win some but not all of the licences that they desire. This is particularly important given the regional nature of the licences to be auctioned and the strong and varied complementarities that exist between these licences. 2. Other attributes are being proposed for the 2500 MHz auction, such as the use of generic licences and anonymous bidding. Generic licences are blocks of spectrum that are similar in terms of frequency location in the band, block size, technology and interference constraints and are of comparable value, such that they can be grouped together in a “single category” in each service area for bidding purposes in the auction. The use of generic licences will decrease bidding complexity by reducing the number of combinations on which bids may be placed, and will enhance the possibility of substitution among licences. The use of anonymous bidding will reduce the potential for gaming strategies. Pricing rules and activity rules that encourage truthful bidding throughout the auction process, i.e. bidding in a manner that is consistent with how a bidder truly values the package, will further improve the process. ### 1. Overview of the CCA 3. A CCA consists of two stages, the allocation stage and the assignment stage (Figure D1). In the allocation stage, the number of spectrum licences that a bidder will win in each service area is determined, as well as the base price to be paid by each winning bidder. Where generic licences are offered, an additional stage is needed to determine the specific frequencies that will be assigned to each winning bidder. This stage is referred to as the assignment stage. ### Figure D1: CCA Process Description of Figure D1 Figure D1 is a flow chart representing a visual description of the combinatorial clock auction (CCA) process and portraying the sequence of steps included in the process. The CCA consists of two stages, the allocation stage and the assignment stage. The allocation stage includes two steps, the first of which is called the clock rounds and the second is called the supplementary round. The clock rounds are a series of rounds in which bidders submit bids on categories of licences. In any round, if there is excess demand in any category of licences, the price of those licences will increase and the clock rounds will continue until such a time as there is no excess demand in any category of licences. When there is no longer excess demand in any category of licences, the process will move to the supplementary round. The supplementary round is a single round where bidders have the opportunity to make additional bids. At the end of the allocation stage, the winning bidders and the base prices are determined. If there were no generic licences offered or won in the allocation stage, an assignment stage is not necessary and the auction ends at the conclusion of the allocation stage. If there were any generic licences offered and won in the allocation stage, the process then moves to the assignment stage. At the end of the assignment stage, winning assignments and final prices are determined. This signifies the end of the auction. ### 2. The Allocation Stage 4. The allocation stage of the auction determines the winning bidders and the number of licence blocks that they have won. The allocation stage is divided into two phases: the clock rounds and the supplementary round. All valid bids submitted during both phases of the allocation stage are used to determine the winning packages and base prices. 5. The clock rounds allow for price discovery, helping to reduce a bidder’s uncertainty regarding the value of the licences. Bidders are able to respond to the changes in prices accordingly, shifting their bids to licences that continue to be consistent with their business objectives. 6. During each clock round, bidders are able to bid on only one package of licences; however, there may be other packages that they would be interested in winning. The supplementary round provides bidders with an opportunity to improve bids that they placed in the clock rounds and/or to submit bids that they were eligible to bid on but unable to submit in the clock rounds. 7. All bidders are subject to a spectrum aggregation limit of 40 MHz in each service area, with the exception of the Northwest Territories, Yukon and Nunavut, where no aggregation limit applies. The aggregation limit includes both the paired and the unpaired spectrum available for auction, along with any spectrum licence holdings that bidders already have, but excludes the restricted bands at 2570-2575 MHz and 2615-2620 MHz. Therefore, with the exception of the Northwest Territories, Yukon and Nunavut, bidders will not be permitted to bid on additional licences in a service area where their spectrum aggregation limit would be exceeded. The auction software will not allow bidders to submit a bid that exceeds their spectrum aggregation limit. ### 3. Clock Rounds 8. The allocation stage begins with the clock rounds. Licences or sets of generic licences (substitutable licences of comparable value) are separated into categories and are defined prior to the auction. 9. For the 2500 MHz auction, Industry Canada is proposing two categories of licences, paired and unpaired, with the following blocks available in each service area of the identified regions (Table D1): Region A (43 service areas) • blocks C/C’ to G/G’ (five paired generic licences of 10 + 10 MHz); • block I (one unpaired licence of 25 MHz); Region B (16 service areas) • blocks E/E’ to G/G’(three paired generic licences of 10 + 10 MHz); Region C (2 service areas) • blocks A/A’ to B/B’ and E/E’ to G/G’ (five paired generic licences of 10 + 10 MHz); and • block H (one unpaired licence of 25 MHz). Table D1 — Proposed product configuration for 2500 MHz auction Paired Unpaired Products Note: Products available for auction are indicated by an "X." A/A’ B/B’ C/C’ D/D’ E/E’ F/F’ G/G’ H I Region A (43 service areas) x x x x x x 86 (2 × 43) Region B (16 service areas) x x x 16 (1 × 16) Region C (2 service areas) x x x x x x 4 (2 × 2) Total 106 10. A category in a given service area is referred to as a product. Given the proposal of two categories in Region A (43 service areas), one category in Region B (16 service areas) and two categories in Region C (two service areas), 106 products are proposed for the 2500 MHz auction. 11. The licences are auctioned simultaneously over multiple clock rounds. In each round, bidders indicate the number of licences in each product on which they would like to bid given the prevailing prices. The bid could be for “0,” “1” or “2” licences for a product in any category containing multiple generic licences except for products in the Northwest Territories, Yukon and Nunavut, where bids of “3,” “4” or “5” licences are also permitted (since these service areas are not subject to the spectrum aggregation limit of 40 MHz in the 2500 MHz band). For a product in an unpaired block category, which contains only one licence, the bid could be for “0” or “1” licence. All of the individual bids placed by a bidder in a given round are considered to be a single package bid, creating an all-or-nothing bid. The price of the package bid is equal to the sum of the bids for individual products, evaluated at the prevailing clock prices. 12. When there is excess demand for a product, its price increases in the next round. There is excess demand for a product when the number of bids exceeds the number of licences available. 13. To remain in the auction, a bidder must submit a valid bid for at least one licence in the first clock round. This bid cannot be withdrawn and will be part of the bids considered in determining the assignment of licences at the end of the allocation stage. All valid bids submitted during the clock rounds are binding and will be considered in determining both winning packages and base prices after the supplementary round ends. 14. In the clock rounds, bidding remains open on all products until there is no excess demand for any of the products. ### 4. Conclusion of Bidding in the Clock Rounds 15. The clock rounds end when there is a round in which there is no excess demand for any of the products. This round is referred to as the final clock round. The package on which a bidder placed a bid in the final clock round is referred to as its final clock package. At this point, Industry Canada will announce that the clock rounds have ended and that the auction will proceed to the supplementary round (see Section 9). 16. In the final clock round, all licences may be tentatively allocated. Conversely, there may be some unallocated licences in the final clock round due to a licence never having received a bid, and/or bidders reducing or substituting their demands in any clock round, including the final clock round. 17. If all of the licences are tentatively allocated, then the bids placed in the final clock round are the provisional winning bids. If there are still some unallocated licences, a bidder can guarantee that it will win its final clock package by submitting a supplementary bid that increases the dollar amount of its final clock package bid by at least the final clock price of the unallocated licences minus the opening bid prices of the unallocated licences. This guarantee may be compromised if all other supplementary bids do not include, at a minimum, all licences contained in the bidder’s final clock package. ### 5. Information in the Clock Rounds 18. At the beginning of each clock round, bidders have access to sufficient information to permit price discovery and inform their bidding strategy. This information includes their own bids from the previous round and the number of eligibility points that they will have in the next round, as well as the aggregate demand for each product from the previous round and the prices for each product in the next round. It is proposed that bidders would not be informed about the individual bids submitted by other bidders or the remaining eligibility of other bidders. ### 6. Bid Increments 19. Industry Canada is consulting on the opening bid amounts for each of the licences being auctioned. The opening bid amounts being proposed can be found in Table 5, Section 8.2 of the main document. In the first clock round, the price of each licence is equal to the opening bid price as stated in the final licensing document. 20. During subsequent clock rounds, if there is excess demand for a given product, the prices for the given product increase in the next round. Industry Canada will use activity-based increments as a mechanism to determine the bid increments. The increment for each product is based on the excess demand for the product during the previous round. Products that generate greater excess demand are subject to a larger bid increment than products that generate less excess demand, all other things being equal. Bid increments increase more quickly for products with higher demand, potentially shortening the length of the auction. If there is no excess demand, the price for the product does not increase in the next round. 21. Industry Canada will decide on the bid increments for the 2500 MHz auction. Details concerning the calculation of bid increments will be included in the final licensing framework. ### 7. Eligibility Points 22. Each of the 318 licences has been assigned a specific number of eligibility points that are related to the population covered by the licence and the estimated value of the spectrum. 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. Section 8.3 of the main document lists the proposed eligibility points associated with the paired and unpaired blocks of spectrum being auctioned, as well as the population of their respective service areas. 23. In their applications, applicants must indicate the total number of “points” worth of licences on which they wish to bid. This number defines a bidder’s initial level of eligibility points and hence, the maximum number of licences a bidder is eligible to bid on at the start of the auction. Eligibility points are also used to determine the financial deposit that must be submitted with the application. 24. Bidder eligibility points cannot be increased once the auction has started. ### 8. Activity Rules in the Clock Rounds 25. Activity rules have been established to encourage truthful bidding throughout the clock rounds. This facilitates the price discovery process, allowing bidders to make changes to their bidding strategies dynamically throughout the auction, in response to increasing prices. The activity rules discourage a bidder from misrepresenting its preferred package, as doing so will limit the bidder’s ability to bid on what it really wants later in the auction. 26. The activity rules in the clock rounds consist of an eligibility point rule and a revealed preference rule. The two rules work in combination to accommodate their relative shortcomings. The motivation for using both rules is to ensure that the activity rules do not prohibit bidders from bidding on their most preferred package. 27. Bidders begin each round with a set number of eligibility points and these determine the maximum activity level for that round. For example, a bidder with 100 eligibility points can bid on licences whose total sum of associated points is 100 or less. 28. The eligibility point rule considers the size of the package that the bidder is bidding on, where size is the sum of the eligibility points for each licence in the package. The eligibility point activity rule requires bidders to bid on packages of the same size or smaller as prices rise. When a bidder switches to a package that is smaller than the package it has previously bid on, (that is, with licences that are worth fewer eligibility points), its eligibility is reduced. A round in which a bidder’s eligibility is reduced is called an eligibility-reducing round. These rounds play a special role in the proposed activity rules of the 2500 MHz auction. 29. In Round 1, a bidder’s eligibility is established by its pre-auction financial deposit submitted at the time of application. In subsequent rounds, a bidder’s eligibility is determined by its activity level in the previous round. Therefore, if a bidder wishes to maintain the same eligibility level as in the previous round, its activity level must correspond to the same number of eligibility points in each round. A bidder’s eligibility points can never increase. 30. If a bidder falls short of the required activity level in any round, its eligibility point level is reduced accordingly, so that the total points worth of licences on which it can bid in the next round are limited in relation to its actual activity level in the current round. For example, consider an eligibility point rule where the activity level is 100%. If a bidder starts the round with 100 eligibility points but bids on licences worth only 80 eligibility points, in the subsequent round that bidder’s eligibility will drop to 80 points. The bidder’s eligibility remains at 80 points until a round in which it bids on a package worth fewer than 80 points, at which time its eligibility would be reduced accordingly. 31. However, there are some shortcomings with using only the eligibility point rule. Price discovery might be lessened, as there is an incentive for bidders to choose only larger packages when prices are low, rather than a package that may work better for them, so that they maintain a higher number of eligibility points for later in the auction. Furthermore, an eligibility point rule may prevent a bidder from making a desirable substitution to a package that is larger in terms of associated eligibility points, but which has become relatively less expensive. In such a case, the eligibility point rule would prevent the bidder from bidding on its most preferred package. 32. A revealed preference rule would lessen these problems, as it allows bidders to exceed their eligibility points in order to bid on packages that have become comparatively less expensive. Revealed preference refers to the information that a bidder discloses regarding its inclination toward one package versus another. In particular, if a bidder chooses one package over another given a certain price differential between the two packages, then the bidder should always choose the same package given the same price differential. This rule would afford bidders greater flexibility to fully express their preferences in the clock rounds of the auction, ensuring that activity rules do not prevent a bidder from bidding on its most preferred package. 33. For example, suppose that a bidder desires either a smaller package, X, or a larger package, Y, but not both. At the current prices, X is preferred, but in subsequent rounds, the prices for the licences in X increase much faster than the prices for the licences in Y. As a result, the bidder prefers Y to X at the new prices. The revealed preference rule allows the bidder to switch from X to Y because Y is now the better value. In contrast, the eligibility point rule would not allow the switch because Y is larger than X. This example illustrates the problem with using the eligibility point rule exclusively and the advantage of using the eligibility point rule in combination with the revealed preference rule. Revealed Preference/Eligibility Point Hybrid Activity Rule 34. A revealed preference/eligibility point hybrid activity rule is being proposed for each clock round. It comprises both an eligibility point rule and a revealed preference rule. 35. The proposed eligibility point activity requirement for the 2500 MHz auction is 100%. Specifically, in each round, a bidder is required to bid on licences whose total sum of associated points is equal to 100% of its eligibility points if it wishes to maintain that eligibility level in the subsequent round. 36. The bidder can always place a bid for any package that is within its current eligibility. However, as prices increase, a bidder’s eligibility is generally reduced. There may be a point in the auction where the bidder wishes to switch to another package that is larger, but is relatively less expensive. With the revealed preference rule, the bidder can bid on a larger package than would be permitted by the bidder’s current eligibility provided that the package satisfies the revealed preference rule with respect to each prior eligibility-reducing round. 37. However, bidding on a larger package will not increase the bidder’s eligibility in subsequent rounds. Furthermore, a bidder will be unable to bid on a package with associated eligibility points that exceeds its initial eligibility. For an algebraic description of the revealed preference rule in the clock rounds, see . For an example of the revealed preference rule in the clock rounds, refer to . 38. The combination of the two activity rules will allow a bidder to bid on its most preferred package in every clock round. A bidder can continue to bid just as it would under the eligibility point rule. The only difference is that the bidder is given some extra flexibility to bid on a larger package provided that the bid on the larger package satisfies revealed preference, i.e. the bid involves a switch to a package that has become relatively less expensive. 39. As a result, price discovery is improved and the final clock allocation becomes a better predictor of the auction outcome. ### 9. Supplementary Round 40. The second phase of the allocation stage is the supplementary round. The supplementary round is a single round process, in which bidders have the opportunity to place additional bids for packages, subject to constraints that are based on the bids that they placed in the clock rounds of Annex D). These additional bids could be used to improve bids on packages previously submitted in the clock rounds and/or to submit bids for which they were eligible to bid on, but unable to in the clock rounds. 41. In the clock rounds, a bidder is allowed to bid on only one package of licences per round. As there may be other packages that a bidder would be interested in winning, the supplementary round provides bidders with an opportunity to submit bids on multiple packages that they were willing and eligible to bid on in the clock rounds, but did not necessarily bid on. 42. If there are licences that remain unallocated at the end of the clock rounds, the supplementary round provides bidders with the opportunity to win some or all of the unallocated licences. Bidders also have the opportunity to guarantee that they win their final clock package by submitting a supplementary bid that increases the dollar amount of their final clock package by at least the value of the unallocated licences as evaluated at the final clock prices minus the opening bid prices of the unallocated licences. This guarantee may be compromised if all other supplementary bids do not include at a minimum, all licences contained in the bidder’s final clock package. 43. If all of the licences are allocated at the end of the clock stage, then the supplementary round will not affect the final clock allocation. However, the supplementary round provides an opportunity for bidders to be reassured that they themselves were not prepared to pay more than the winning bidders for the licences in question. ### 10. Activity Rules in the Supplementary Round 44. Activity rules in the supplementary round encourage truthful bidding throughout the allocation stage of the auction, not just in the latter stages. The proposed activity rules ensure that supplementary bids are consistent with bids from the previous rounds. 45. Any bidder that placed at least one valid bid in the clock rounds may submit bids in the supplementary round. A bidder is not required to submit bids in the supplementary round if it does not so desire. 46. All licences are available for bidding in the supplementary round so that bidders can improve on bids submitted during the clock rounds, or submit bids for packages of licences not expressed in the clock rounds. 47. A bidder can only make one supplementary bid for a given package of licences. For the 2500 MHz auction, the limit on the number of different packages for which a bidder will be allowed to place supplementary bids will be no lower than 500 different packages and will be announced after the bidder qualification period. 48. The bid amount for a supplementary bid must be at least the sum of the opening bid prices for all the licences included in the package. Furthermore, if a bidder submitted a bid for a certain package in the clock rounds, the supplementary bid amount must be at least the bidder’s highest bid for that package. Revealed Preference Limit 49. Each bid in the supplementary round must satisfy the following revealed preference limit activity rule. 50. Revealed Preference Limit: There is no limit on the supplementary bid amount for the final clock package, which is the package that the bidder bid on in the final clock round. All other supplementary bids must satisfy revealed preference with respect to the final clock round, regardless of whether the supplementary bid package is larger or smaller than the final clock package. 51. In addition, supplementary bids for packages that are larger than the final clock package, as measured by eligibility points, must satisfy revealed preference with respect to each eligibility-reducing round, beginning with the last round in which the bidder had sufficient eligibility to bid on the package. The application of the revealed preference limit to limit bids on packages larger than the final clock package could have the effect of creating a chain of constraints on the dollar amount of a supplementary bid relative to the dollar amount of other supplementary bids submitted by the bidder. 52. There is an exception to the above. A supplementary bid for a package comprised solely of the bidder’s final clock package plus some or all of the unallocated licences only needs to satisfy revealed preference with respect to the final clock round. This is to provide bidders with additional flexibility in bidding on licences that are unallocated as of the final clock round. By relaxing the constraints on bids for such packages, the probability of awarding unallocated licences can be improved without reducing the probability that any bidder receives its final clock package. 53. These activity rules guarantee that the final clock allocation will not change if there are no unallocated licences. Each winner is guaranteed to win its final clock package without making any supplementary bids. If there are unallocated licences, each winner is guaranteed to win at least its final clock package by submitting a supplementary bid that increases the dollar amount of its final clock package by at least the value of the unallocated licences as evaluated at the final clock prices minus the opening bid prices of the unallocated licences. This guarantee may be compromised if all other supplementary bids do not include at a minimum, all licences contained in the bidder’s final clock package. 54. The revealed preference limit with respect to the final clock package provides the bidder with an incentive to bid on the most preferred package throughout the clock rounds. This is because supplementary bids are limited by bids submitted in the clock rounds. Given that the bidder does not know which round will be the final clock round, the bidder will be motivated to always bid truthfully to improve its chance of winning its most preferred package; otherwise the bidder will be constrained in the supplementary round. 55. Industry Canada will decide on the process for submitting supplementary bids. Details concerning the process will be included in the final licensing framework. ### 11. Determining the Winning Packages in the Allocation Stage 56. All valid bids received from bidders in the clock rounds and the supplementary round are considered for the determination of winning packages. In addition, a reserve bid for every licence, at the opening bid price, will be included in the determination of winning bidders at the end of the allocation stage. This process will act as though Industry Canada is a bidder in the auction, placing a bid on every licence at the opening bid price. The inclusion of a reserve bid for every licence is to ensure that the incremental value that a bidder would be prepared to pay for an additional licence is at least the opening bid price of that licence. The reserve bids will not be treated as a package, but rather as having been placed by different bidders so that any number of reserve bids can be selected in the winning combination. 57. An algorithm will be used to identify the highest value combination of valid bids with each bidder winning at most one of its packages. If there is only one combination of bids that meets the criterion, this will be the winning outcome that determines the winning packages and winning bidders. 58. If there is more than one set of valid bids having the equal highest value, the tie will be resolved, first, by minimizing the number of "lost licences," where a lost licence is a licence that was included in the bidder’s final clock package but is not included in an alternate package that could be assigned to the bidder. The rationale for selecting the combination of valid bids that minimizes the number of lost licences as the first tie-breaking rule is to select an assignment that is the most similar to the final clock allocation. 59. If there is still a tie, the second tie-breaking rule is to select the combination of valid bids which includes the greatest quantity of spectrum, measured in terms of eligibility points. Note: If reserve bids are part of the winning combination, the eligibility points associated with the reserve bids will not count towards the eligibility points of the winning combination. This is to maximize the quantity of spectrum that is allocated. If, subsequently, there is still a tied outcome, the tie will be broken by a pseudo-random number generator built into the auction software. 60. Industry Canada will decide how best to validate the results following the use of the algorithm. Further details will be included in the final licensing framework. This will include details of the algorithm to be used and also how Industry Canada intends to validate the results following the use of this applicable algorithm. ### 12. Determining the Base Price in the Allocation Stage 61. The base price is the minimum amount that the winning bidder will pay for its generic winning packages. It does not include the additional, incremental amount that the winning bidders may pay to be assigned specific licences in the assignment stage. The base price is determined using all valid bids submitted by all bidders during the allocation stage. 62. Industry Canada is proposing to use a second-price rule to calculate the base prices such that winning bidders, individually and collectively, will pay the lowest amount that they could have bid on their package of licences and still have won. In other words, a winning bidder will pay an amount that is sufficient to ensure that there is no other bidder or group of bidders prepared to pay more for the licences. This amount is typically less than the actual winning bid submitted in the allocation stage, either in the clock rounds or the supplementary round, and must be greater than or equal to the total sum of the opening bid prices for the combination of licences included in their winning package. The benefit of using a second-price rule is that it encourages bidders to bid truthfully, potentially leading to a more efficient outcome. 63. Industry Canada is proposing to apply bidder-optimal core prices and to use the "nearest Vickrey" approach to determine the base prices. Further information on the determination of base prices can be found in Annex G. ### 13. Information at the End of the Allocation Stage 64. At this point, bidders will know with certainty the number of licences that they have won; however, where there are generic licences, bidders will not necessarily know the specific licences that have been assigned to them. 65. At the end of the allocation stage, each bidder will be informed of its own winning package, along with the base price that it will pay for its package. All bidders will be informed of the number of winning bidders and the number of licences within each product that have been allocated. ### 14. The Assignment Stage 66. As there are generic licences, the auction will then advance to the assignment stage, where the specific assignment of the generic licences will be determined. Only bidders that have won one or more generic licences during the allocation stage will participate in the assignment stage. 67. The assignment stage will consist of a sequence of assignment rounds. In each assignment round, bidders will be presented with a set of frequency range options available to them for the products being assigned in the round. The options will comprise contiguous frequency ranges of a product, corresponding to the number of licences that the bidder won in the allocation stage and taking into consideration the number of licences allocated to other bidders. 68. Industry Canada is considering how best to structure the assignment rounds to enable winning bidders to bid effectively for their preferred frequency assignments across multiple service areas. Industry Canada is proposing to run product-by-product assignment rounds in descending order of the populations of the associated service areas, conducting a separate round for each product that requires an assignment round. This process would enable bidders to know which specific frequencies they have won in the most populated service areas before they participate in the assignment rounds for the adjacent, less populated service areas. However, two or more products would be aggregated into a single assignment round if all of the following criteria are met: the products are in the same region (i.e. Region A, Region B or Region C); their service areas form a contiguous geographic area; and the winners, and the number of generic licences they have won are sufficiently similar across service areas, according to predefined criteria. 69. Winning bidders will be allowed to submit top-up bids for the specific licence(s) that they most prefer in each service area. This bid reflects the incremental value that the bidders place on winning these particular frequency blocks. 70. Winning bidders do not have to place bids in the assignment stage if they do not have an assignment preference, as they are guaranteed the number of generic licences that they have already been allocated. Each winning bidder has both a right and an obligation to purchase one of the frequency range options presented to it in the assignment round. 71. An algorithm will be used to identify the combination of specific assignments of licences that result in the highest bid amount. In the event of a tied outcome with more than one specific assignment producing the same total value, the tie will be broken by a pseudo-random number generator built into the auction software. 72. Similar to the determination of base prices in the allocation stage, a second-price rule will be used to determine the assignment price to be paid for the assignment of specific licences such that winning bidders will pay an amount sufficient to ensure that there is no other bidder or group of bidders prepared to pay more for the licence(s). 73. The additional amount paid for the assignment of specific licences, known as the assignment price, is calculated for the package of licences assigned in a given assignment round and not for each individual licence. The assignment price for each winning assignment stage bid will be no greater than the corresponding winning bid amount; however, given the pricing rule, it is likely that the assignment price will be less than the winning bid amount and could even equal zero. As there will be multiple assignment rounds, an individual bidder may have multiple assignment prices. The final price paid by a bidder is equal to the bidder’s base price plus the sum of all associated assignment prices. If the sum of a bidder's assignment prices is zero, then its final price will be equal to its base price, determined at the end of the allocation stage. 74. Industry Canada is proposing to apply bidder-optimal core prices and to use a “nearest Vickrey” approach to determine assignment prices. Further information on the determination of assignment prices can be found in Annex G. ### 15. Restrictions in the Assignment Stage 75. Industry Canada is proposing that the assignment options be limited such that if there is more than one unallocated licence in a product, the unallocated licences within the product will be retained as a contiguous block. This proposal may affect the specific frequency options available in the assignment rounds and the possibility of obtaining the same blocks of spectrum across service areas. 76. Industry Canada will decide on the process for submitting assignment bids. Details concerning the process for submitting bids in the assignment stage will be included in the final licensing framework. ### 16. Information After each Assignment Round 77. After each assignment round, Industry Canada will determine the winning assignment bids and the assignment prices for the given round. Each bidder in the assignment round will be informed of the specific licences it was assigned in the given round and the associated assignment price. ### 17. Final Price 78. At the end of the assignment stage, Industry Canada will determine the final price to be paid by each winning bidder. The final price to be paid by a winning bidder is equal to the bidder’s base price for its generic licences plus the sum of the assignment price(s) associated with the bidder’s specific licence assignments. ### 18. Information at the End of the Auction 79. Industry Canada is proposing to make the following information publicly available following the conclusion of the auction: • the list of winning bidders, licences won and final prices to be paid; • the bid submitted by each bidder in every clock round, including the bidder’s identity; • the supplementary bids submitted by each bidder, including the bidder’s identity; and • the assignment bids submitted by each bidder, including the bidder’s identity. ## Annex E — Example of the Proposed Activity Rules 1. For the purposes of this example, only two products will be considered: product X and product Y. Suppose that product X contains two generic licences in it, X1 and X2, each with an eligibility of 50 points, and that product Y contains two generic licences, Y1 and Y2, each with an eligibility of 25 points. 2. A single bidder, Bidder A, would like to obtain two licences of X1/X2. This package will be denoted as (2, 0). However, if the price of the package with two licences of X1/X2 exceeds the price of a package with one X1/X2 licence and one Y1/Y2 licence by more than$500,000, then Bidder A would prefer a package with one X1/X2 licence and one Y1/Y2 licence, denoted as package (1, 1).

3. Eventually, if the prices become too high, Bidder A will be unable to afford two licences and will need to reduce its demand to one licence. In this case, Bidder A again prefers one licence from X1/X2, but will switch to one Y1/Y2 licence if the price of one X1/X2 licence, denoted as package (1, 0), exceeds the price of one Y1/Y2 licence, denoted as package (0, 1) by more than $500,000. 4. Bidder A’s total budget is$2,800,000. If the price of obtaining two licences becomes greater than this, Bidder A must reduce its demand to one licence.

### Round 1

5. In Round 1, the opening bid prices are announced; the opening bid price for X1/X2 is $1,000,000 per licence, and for Y1/Y2, it is$600,000 per licence. The price of a package with two X1/X2 licences is $2,000,000, whereas the price of a package with one X1/X2 licence and one Y1/Y2 licence is$1,600,000 (a price difference of $400,000). As Bidder A prefers two X1/X2 licences unless the price difference is greater than$500,000, Bidder A will bid for two X1/X2 licences, package (2, 0):

Annex E - Round 1
Product Price Bid Eligibility Points
X1/X2 $1,000,000 2 100 Y1/Y2$600,000 0 0
Total Package $2,000,000 (2, 0) 100 ### Round 2 6. In Round 1, several other bidders shared Bidder A’s preference for X1/X2, whereas few bidders bid on Y1/Y2. As a result, the prices in Round 2 are$1,200,000 for X1/X2 and $650,000 for Y1/Y2. The price for a package with two X1/X2 licences is$2,400,000, whereas the price for a package with one X1/X2 licence and one Y1/Y2 licence is $1,850,000 (a price difference of$550,000). As Bidder A prefers one X1/X2 licence and one Y1/Y2 licence when the price difference is greater than $500,000, Bidder A now bids on one licence of each category, package (1, 1), thereby reducing eligibility from 100 to 75 points. Annex E - Round 2 Product Price Bid Eligibility Points X1/X2$1,200,000 1 50
Y1/Y2 $650,000 1 25 Total Package$1,850,000 (1, 1) 75

### Round 3

7. In Round 2, the low price of Y1/Y2 caused many bidders to switch demand to that category. As a result, the price of Y1/Y2 increased at a faster rate than the price of X1/X2. The Round 3 prices are $1,250,000 for X1/X2 and$800,000 for Y1/Y2. The price for a package with two X1/X2 licences is $2,500,000, whereas the price for a package with one X1/X2 licence and one Y1/Y2 licence is$2,050,000. This price difference is only $450,000, so Bidder A would prefer to switch back to bidding on two X1/X2 licences, package (2, 0). 8. Using only an eligibility point activity rule, switching back at this point would be impossible because Bidder A would no longer have enough eligibility to bid for a package worth 100 points. This limitation could have the effect of creating a disincentive for Bidder A to bid on its most favourable package in Round 2. Bidder A would have needed to bid on a less profitable package in order to maintain its eligibility for as many rounds of the auction as possible. 9. With a revealed preference/eligibility point hybrid activity rule, however, Bidder A is free to switch back as long as the package satisfies revealed preference with respect to each prior eligibility point reducing round: Annex E - Round 3 Product Price Bid Eligibility Points X1/X2$1,250,000 2 100
Y1/Y2 $800,000 0 0 Total Package$2,500,000 (2, 0) 100 (Eligibility is 75)

10. In order to place a bid with eligibility points greater than its current eligibility (75 points), Bidder A must meet the revealed preference constraint with respect to each prior eligibility-reducing round. In this case, the only eligibility-reducing round is Round 2, where Bidder A decreased its eligibility from 100 points to 75 points. In other words, in order for Bidder A to be able to switch its bid from (1, 1) to (2, 0), the (2, 0) package had to become relatively cheaper than the (1, 1) package. Mathematically, the revealed preference constraint is stated as follows, where R refers to the round:

(Price of (2, 0) in R3) – (Price of (2, 0) in R2) ≤ (Price of (1, 1) in R3) – (Price of (1, 1) in R2)
($2,500,000 –$2,400,000) ≤ ($2,050,000 –$1,850,000)
$100,000 ≤$200,000

11. The price of package (2, 0) increased by $100,000 from Round 2 to Round 3, whereas the price of package (1, 1) increased by$200,000. Therefore, the constraint is satisfied and Bidder A is permitted to place the bid for the package (2, 0).

### Round 4

12. In Round 4, the price of X1/X2 increases to $1,400,000, whereas the price of Y1/Y2 increases to$1,000,000. The price for a package with two X1/X2 licences is $2,800,000, whereas the price for a package with one X1/X2 licence and one Y1/Y2 licence is$2,400,000. This price difference is only $400,000 so Bidder A prefers the same package as in Round 3: Annex E - Round 4 Product Price Bid Eligibility Points X1/X2$1,400,000 2 100
Y1/Y2 $1,000,000 0 0 Total Package$2,800,000 (2, 0) 100 (Eligibility is 75)

13. Bidder A’s eligibility is still only equal to 75, so it must meet the revealed preference constraint in order to place this bid. As before, the requirement is that the (2, 0) package needs to be relatively cheaper than the (1, 1) package (as compared to Round 2):

(Price of (2, 0) in R4) – (Price of (2, 0) in R2) ≤ (Price of (1, 1) in R4) – (Price of (1, 1) in R2)
($2,800,000 –$2,400,000) ≤ ($2,400,000 –$1,850,000)
$400,000 ≤$550,000

14. This constraint continues to be satisfied, that is, the price of the package (2, 0) increased by $400,000 which is no more than the increase in the price of the package (1, 1) from Round 2 to the current round, Round 4, which is$550,000. Bidder A is permitted to place this bid for the package (2, 0).

### Round 5

15. In Round 5, the price continues to increase on both products, with X1/X2 at $1,650,000 and Y1/Y2 at$1,200,000. As a result, both two-licence combinations, (2, 0) and (1,1) now exceed Bidder A’s budget of $2,800,000. Bidder A must decrease its demand to one licence. As the price of X1/X2 ($1,650,000) is $450,000 greater than the price of Y1/Y2 ($1,200,000), Bidder A places a bid for one X1/X2 licence, package (1, 0), given that Bidder A prefers one X1/X2 licence when the price of one X1/X2 licence exceeds the price of one Y1/Y2 licence by less than $500,000. 16. This bid further reduces Bidder A’s eligibility to 50 points. Bidder A is within its eligibility of 75 points, so there are no revealed preference constraints on this bid. Annex E - Round 5 Product Price Bid Eligibility Points X1/X2$1,650,000 1 50
Y1/Y2 $1,200,000 0 0 Total Package$1,650,000 (1, 0) 50

### Round 6

17. In Round 6, the price on X1/X2 increases at a faster rate, increasing the price difference to $550,000, which is greater than the$500,000 threshold. Bidder A thus switches its bid to one Y1/Y2 licence, package (0, 1) as Bidder A prefers one Y1/Y2 licence when the price of one X1/X2 licence exceeds the price of one Y1/Y2 licence by more than $500,000. This bid further reduces Bidder A’s eligibility to 25 points: Annex E - Round 6 Product Price Bid Eligibility Points X1/X2$1,800,000 0 0
Y1/Y2 $1,250,000 1 25 Total Package$1,250,000 (0, 1) 25

### Round 7

18. In Round 7, the price on Y1/Y2 increases at a faster rate than X1/X2. At Round 7 prices, Bidder A prefers one X1/X2 licence, as the price of one X1/X2 licence exceeds the price of one Y1/Y2 licence by less than $500,000, causing Bidder A to again desire to switch: Annex E - Round 7 Product Price Bid Eligibility Points X1/X2$1,850,000 1 50
Y1/Y2 $1,400,000 0 0 Total Package$1,850,000 (1, 0) 50 (Eligibility is 25)

19. In order to place this bid, Bidder A must satisfy revealed preference with respect to every round in which it has reduced its eligibility. Bidder A reduced its eligibility in Round 2, Round 5 and Round 6. It is helpful to summarize the prices and bids placed up to this point:

Annex E - Round 7
Product Price
Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7
X1/X2 $1,000,000$1,200,000 $1,250,000$1,400,000 $1,650,000$1,800,000 $1,850,000 Y1/Y2$600,000 $650,000$800,000 $1,000,000$1,200,000 $1,250,000$1,400,000
Bid (2, 0) (1, 1) (2, 0) (2, 0) (1, 0) (0, 1)

20. The constraints are as follows:

Constraint with respect to Round 2

(Price of (1, 0) in R7) – (Price of (1, 0) in R2) ≤ (Price of (1, 1) in R7) – (Price of (1, 1) in R2)
($1,850,000 –$1,200,000) ≤ ($3,250,000 –$1,850,000)
$650,000 ≤$1,400,000

21. The price of the package (1, 0) increased by $650,000 from Round 2 to the current round, Round 7, which is no more than the increase in the price of package (1, 1),$1,400,000, where package (1, 1) is the package that Bidder A bid on in Round 2.

Constraint with respect to Round 5

(Price of (1, 0) in R7) – (Price of (1, 0) in R5) ≤ (Price of (1, 0) in R7) – (Price of (1, 0) in R5)
($1,850,000 –$1,650,000) ≤ ($1,850,000 –$1,650,000)
$200,000 ≤$200,000

22. The price of the package (1, 0) increased by $200,000 from Round 5 to the current round, Round 7, which is no more than the increase in the price of the package (1, 0), where the package (1, 0) is the package that Bidder A bid on in Round 5. Constraint with respect to Round 6 (Price of (1, 0) in R7) – (Price of (1, 0) in R6) ≤ (Price of (0, 1) in R7) – (Price of (0, 1) in R6) ($1,850,000 – $1,800,000) ≤ ($1,400,000 – $1,250,000)$50,000 ≤ $150,000 23. The price of the package (1, 0) increased by$50,000 from Round 6 to the current round, Round 7, which is no more than the increase in the price of the package (0, 1), where the package (0, 1) is the package that Bidder A bid on in Round 6.

24. All three revealed preference constraints are satisfied, so Bidder A is permitted to place this bid.

### Supplementary Round

25. In the bidding of Round 7, the aggregate demand drops sufficiently that the clock rounds conclude, making Round 7 the final clock round. Bidder A is in the position of having a final clock package of one X1/X2 licence. Note that if there had only been an eligibility point activity rule in the clock stage, Bidder A would likely have, instead, a final clock package of one Y1/Y2 licence, a less desirable package.

26. With the revealed preference limit, Bidder A is now guaranteed to win its final clock package if all licences are sold in the clock rounds of the auction. If there are some unallocated licences in the final clock round, Bidder A can still guarantee winning its final clock package by submitting a bid, increasing the dollar amount by at least the final clock price of those unallocated licences minus the opening bid prices of the unallocated licences. This guarantee may be compromised if all other supplementary bids do not include at a minimum, all licences contained in the bidder’s final clock package.

27. Now, suppose that Bidder A wishes to increase its bid on the package (1, 1) (i.e. one X1/X2 licence and one Y1/Y2 licence) to its maximum budget of $2,800,000. This package is larger than Bidder A’s final clock package in terms of eligibility points. Therefore, Bidder A must satisfy revealed preference with respect to its final clock package, as well as with respect to each eligibility-reducing round beginning with the last round in which Bidder A had sufficient eligibility to bid on the package (1, 1), i.e. beginning with Round 5. Therefore, Bidder A’s supplementary bid for the package (1, 1) must meet the revealed preference conditions with respect to Round 5, Round 6 and Round 7. 28. The revealed preference constraints are as follows, starting with the final clock package constraint: Revealed preference with respect to the final clock package (Sup Bid on (1, 1)) – (Price of (1, 1) in R7) ≤ (Highest Bid on (1, 0)) – (Price of (1, 0) in R7) (Sup Bid on (1, 1)) ≤ (Highest Bid on (1, 0)) + (Price of (1, 1) in R7) – (Price of (1, 0) in R7) (Sup Bid on (1, 1)) ≤$1,850,000 + $3,250,000 –$1,850,000
(Sup Bid on (1, 1)) ≤ $3,250,000 Revealed preference with respect to Round 6 (Sup Bid on (1, 1)) – (Price of (1, 1) in R6) ≤ (Highest Bid on (0, 1)) – (Price of (0, 1) in R6) (Sup Bid on (1, 1)) ≤ (Highest Bid on (0, 1)) + (Price of (1, 1) in R6) – (Price of (0, 1) in R6) (Sup Bid on (1, 1)) ≤$1,250,000 + $3,050,000 –$1,250,000
(Sup Bid on (1, 1)) ≤ $3,050,000 Revealed preference with respect to Round 5 (Sup Bid on (1, 1)) – (Price of (1, 1) in R5) ≤ (Highest Bid on (1, 0)) – (Price of (1, 0) in R5) (Sup Bid on (1, 1)) ≤ (Highest Bid on (1, 0)) + (Price of (1, 1) in R5) – (Price of (1, 0) in R5) (Sup Bid on (1, 1)) ≤$1,850,000 + $2,850,000 –$1,650,000
(Sup Bid on (0, 1)) ≤ $1,400,000 31. So, without any supplementary bids placed on the final clock package, the highest supplementary bid that Bidder A can place on the (0, 1) package is$1,400,000 because Bidder A bid $1,850,000 for (1, 0) in the final clock round. However, if for example Bidder A places a supplementary bid on its final clock package of$2,300,000, then Bidder A may also place a supplementary bid on the (0, 1) package of up to $1,850,000. ## Annex F — Algebraic Description of Proposed Revealed Preference Activity Rules in the Clock Rounds and the Supplementary Round ### Revealed Preference in the Clock Rounds 1. The activity rule in the clock rounds allows for a bidder to always be able to place a bid on any package that is within the bidder’s current eligibility. As well, in any round, the bidder can bid on a larger package than would be permitted by the bidder’s current eligibility provided that the package satisfies revealed preference with respect to each prior eligibility-reducing round. However, bidding on a larger package does not increase the bidder’s eligibility in subsequent rounds. A bidder will never be allowed to place a bid on a package that exceeds its initial eligibility. 2. A product refers to a particular category in a given service area. Industry Canada is proposing two categories of licences, paired and unpaired, with two categories in Region A (43 service areas), one category in Region B (16 service areas) and two categories in Region C (two service areas). In total 106 products will be available in the 2500 MHz auction. Region A — 86 products • blocks C/C’ to G/G’ (five generic licences of 10 + 10 MHz); • block I (one licence of 25 MHz); Region B — 16 products • blocks E/E’ to G/G’(three generic licences of 10 + 10 MHz); Region C — 4 products • blocks A/A’ to B/B’ and E/E’ to G/G’ (five generic licences of 10 + 10 MHz); and • block H (one licence of 25 MHz). 3. A package in clock round t satisfies revealed preference with respect to an earlier clock round s for a given bidder if the bidder’s package Qt has become relatively less expensive than the package on which the bidder bid in clock round s, Qs, as the clock prices have progressed from the clock prices in clock round s to the clock prices in clock round t. Algebraically, the revealed preference constraint is the condition that: $\sum_{i=1}^m (Q_{t,i}× (P_{t,i} − P_{s,i})) \le \sum_{i=1}^m (Q_{s,i}× (P_{t,i} − P_{s,i}))$ where: i” indexes the products; m” is the number of products, where the maximum number of products proposed for the 2500 MHz auction is 106; Qt,i is the quantity of the ith product bid in clock round t; Qs,i is the quantity of the ith product bid in clock round s; Pt,i is the clock price of the ith product bid in clock round t; and Ps,i is the clock price of the ith product bid in clock round s. 4. A bidder’s package, Qt, of clock round t is consistent with revealed preference in the clock rounds if it satisfies the revealed preference constraint with respect to all eligibility-reducing rounds prior to clock round t for the given bidder. ### Revealed Preference in the Supplementary Round 5. There is no limit on the supplementary bid amount for the final clock package. The activity rule in the supplementary round states that all supplementary bids must satisfy the revealed preference limit with respect to the final clock round regardless of whether the supplementary bid package is larger or smaller than the final clock package. 6. In addition, supplementary bids on packages that are larger than the final clock package must satisfy the revealed preference limit with respect to each eligibility-reducing round, beginning with the last round in which the bidder had sufficient eligibility to bid on the package, unless the increase in package size is due to placing bids on unallocated licences, where unallocated licences are those licences where supply is greater than aggregate demand in the final clock round. 7. Let Q denote the package on which the bidder wishes to place a supplementary bid. Let Qs denote the package on which the bidder bid in clock round s and let Bs denote the bidder’s highest dollar amount bid in the auction for package Qs, whether the highest dollar amount was placed in a clock round or a supplementary round. 8. A supplementary bid, B, for the package Q satisfies the revealed preference limit with respect to a clock round s, if B is less than or equal to the highest dollar amount bid on the package bid in clock rounds, that is, Bs plus the price difference in the respective packages, Q and Qs, using the clock prices of clock round s. Algebraically, the revealed preference limit is the condition that: $B \le B_s + \sum_{i=1}^m (P_{s,i} × (Q_{i} − Q_{s,i}))$ where: i” indexes the products; m” is the number of products; Qi is the quantity of the ith product in the package Q; Qs,i is the quantity of the ith product in the package Qs of clock round s; Ps,i is the clock price of the ith product in clock round s; B is the dollar amount of the supplementary bid for the package Q; and Bs is the highest dollar amount bid on package Qs either in a clock round or in the supplementary round. 9. In addition, for supplementary bid package Q, let T(Q) denote the last clock round in which the bidder’s eligibility was at least the number of eligibility points associated with the package Q. 10. A given bidder’s collection of supplementary bids is consistent with the revealed preference limit if the supplementary bid for the package Q, with a dollar amount, B, for the given bidder satisfies the following conditions: • (a) for a package Q, comprising the entire final clock package plus any or all licences that are provisionally unallocated to any bidder in the final clock round, the dollar amount, B, must satisfy the revealed preference limit, as specified in paragraph 8, with respect to the final clock round only; note that this places no constraint on the dollar amount of a supplementary bid for the final clock package; • (b) for any package Q, comprising other than the entire final clock package plus any or all licences that are provisionally unallocated to any bidder in the final clock round, the dollar amount B must satisfy the revealed preference limit, as specified in paragraph 8 with respect to the final clock round and with respect to every eligibility-reducing round equal to T(Q) or later. 11. Note that, in the application of paragraph 8, the package Qs may itself be subject to a revealed preference limit with respect to another package. Thus, the rule may have the effect of creating a chain of constraints on the dollar amount of a supplementary bid for a package Q relative to the dollar amounts of other clock bids or supplementary bids. 12. See Annex E for an example of the revealed preference activity rules. ## Annex G — Proposed Pricing Rule 1. Prices are determined at two points in the auction: first at the end of the allocation stage to determine the base prices, which are the minimum that winning bidders will pay for their winning packages; and second, at the end of the assignment stage to determine the incremental payments for specific licences, known as assignment prices. Industry Canada is proposing to use a second-price rule to determine the prices to be paid by winning bidders. More specifically, Industry Canada proposes to apply bidder-optimal core prices and to use the "nearest Vickrey" approach in determining both the base prices and the assignment prices. The final price paid by a winning bidder is the sum of the base price and the assignment price(s). Base Prices 2. Each winning allocation stage bid has an associated price for the package of licences contained within the bid, known as the base price. A separate base price is determined for each winning bidder. 3. Industry Canada is proposing the use of a second-price rule to calculate base prices such that the base price for a winning bidder will be at least the opening bid price, but no higher than the actual amount bid. Second prices are often referred to as Vickrey prices and represent the opportunity cost of the bidder winning the package. 4. The Vickrey price for each winning Bidder J is calculated as follows. First, from the value of the winning combination of packages (see, Annex D), subtract Bidder J’s winning bid (value A). Next, recalculate the winning combination of packages in the hypothetical situation where all Bidder J’s bids are excluded, as if Bidder J had not participated in the auction (value B). The Vickrey price for Bidder J is defined as the value of the winning combination of packages with all Bidder J’s bids excluded (value B) minus the sum of the winning allocation stage bids for all bidders other than Bidder J (value A), that is, B – A. 5. An extra payment beyond the Vickrey prices is sometimes required as a result of complementarities. In the event that an extra payment is required, the payment to be made will be adjusted proportionate to the size of the bidder’s package as measured by the bidder’s winning package evaluated at the opening bid prices. 6. The set of base prices for the winning allocation stage bids must satisfy the following conditions: • (a) First condition: The base price for a winning allocation stage bid must be greater than or equal to the opening bid prices for the licences included in the package associated with the winning bid, but not more than the dollar amount of the winning bids. • (b) Second condition: The set of base prices must be sufficiently high that there is no alternative bidder, or group of bidders prepared to pay more than any winning bidder or group of winning bidders. If there is only one set of base prices that meet the first and second conditions, this determines the base prices for the allocation stage. • (c) Third condition: If there are many sets of base prices that fulfil the first and second condition, the set(s) of base prices that minimize(s) the sum of base prices across winning bidders is selected. If there is only one set of base prices satisfying these three conditions, this determines the base prices for the allocation stage. • (d) Fourth condition: If there is more than one set of base prices that satisfy the first three conditions, the set of base prices that minimize the weighted sum of squares of differences between the base prices and the Vickrey prices will be selected. The weighting is relative to the price of the bidder’s package evaluated at the opening prices. This approach for selecting among sets of base prices that minimize the sum of base prices across winning bidders is referred to as the “nearest Vickrey” approach. 7. These conditions characterize a unique set of base prices such that each winning bidder pays no more than the dollar amount of its winning bid and pays at least the aggregate value of the opening bid prices for the package of licences. 8. A software algorithm will be used to determine the set of base prices that meets the conditions outlined above. 9. The following is an example of how base prices are calculated. This example is based on the 2012 Spectrum Auction Design paper by P. Cramton (http://www.cramton.umd.edu/papers2005-2009/cramton-spectrum-auction-design.pdf). 10. Suppose that there are five bidders, 1, 2, 3, 4, 5, bidding for two licences, A and B. The following bids are submitted (“b” designates the bidder): b1{A} =$28

b2{B} = $20 b3{AB} =$32

b4{A} = $14 b5{B} =$12

11. The bids of the five bidders are represented in Figure G1.

12. In this example, the highest value combination of bids would assign licence A to Bidder 1 and licence B to Bidder 2, generating $48 in value. There is no other assignment of the licences that yields a higher value. 13. To calculate the Vickrey price for Bidder 1, Bidder 1’s bid is removed. The best assignment without Bidder 1 assigns licence A to Bidder 4 at$14 and licence B to Bidder 2 at $20, resulting in$34. The sum of the winning bids for all bidders other than Bidder 1 is $20 ($48 – $28). Thus, the Vickrey price for Bidder 1 is$14 ($34 –$20). Similarly, if Bidder 2’s bid is removed, then the best assignment is to assign licence A to Bidder 1 and licence B to Bidder 5, resulting in a value of $40. The sum of the winning bids for all bidders other than Bidder 2 is$28 ($48 –$20). Thus, the Vickrey price for Bidder 2 winning B is $12 ($40 – $28). 14. Hence, the Vickrey outcome is for Bidder 1 to pay$14 for licence A and for Bidder 2 to pay $12 for licence B. Total revenues with these payments are$14 + $12 =$26. As shown in Figure G1, this means that Bidder 1 can reduce its bid to $14 before being displaced by Bidder 4. Similarly, Bidder 2 can reduce its bid to$12 before being displaced by Bidder 5.

15. The problem is that these payments sum to $26, which less than Bidder 3’s bid of$32 for both licences A and B. Therefore, Bidder 1 and Bidder 2 must split an additional payment of $6 ($32 – $26), to ensure that their combined payment is greater than that of Bidder 3, satisfying the condition that no other bidder or group of bidders were prepared to pay more for the licences in question. That is, Bidder 1 and Bidder 2 must pay, collectively, at least$32.

### Figure G1 — Example of Calculating Base Prices

Description of Figure 1

This figure is a graph illustrating the example in paragraph 9 of Annex G, which demonstrates how to calculate base prices using a second-price rule and why an additional payment beyond second prices is sometimes required.

16. If the opening bid prices for licence A and licence B are the same amount, the additional payment of $6 is split equally between the two bidders. Each bidder is therefore paying an additional$3 above its Vickrey price, with Bidder 1 paying $17 ($14 + $3) and Bidder 2 paying$15 ($12 +$3), as shown in Figure G1. However, if the opening bid prices for the two licences are different amounts, the two bidders must split the extra payment proportionately, in reference to the opening bid amounts (the fourth condition). For example, if the opening bid price for licence A is $8 and the opening bid price for licence B is$4, then the opening bid price of Bidder 1’s package is twice as large as that of Bidder 2. Therefore, Bidder 1 would pay twice as much as Bidder 2 of the extra payment, with Bidder 1 paying an additional $4, for a total payment of$18 and Bidder 2 paying an additional $2, for a final payment of$14.

Assignment Prices

17. The assignment stage will consist of a sequence of assignment rounds. Industry Canada proposes to run product-by-product assignment rounds, in descending order of the populations of the associated service areas, conducting a separate assignment round for each product, where necessary. This process would enable bidders to know which specific frequencies they have won in the most populated service areas before they participate in the assignment rounds for the adjacent, less populated service areas. However, two or more products would be aggregated into a single assignment round if all of the following criteria are met: the products are in the same region (i.e. Region A, Region B or Region C); their service areas form a contiguous geographic area; and the winners, and the number of generic licences they have won are sufficiently similar across service areas, according to predefined criteria.

18. The assignment bid is a package bid for the specific frequency locations of all licences being assigned within the round. The assignment prices will be determined from the set of assignment stage bids for the products being assigned in that round.

19. Industry Canada is proposing to use a second-price rule to calculate assignment prices. The assignment price is attributable to the entire collection of licences assigned in a given assignment round and not to individual licences that comprise the package.

20. For the purpose of calculating assignment prices, the Vickrey price for each winning Bidder J is calculated as follows. First, from the value of the winning combination of assignment bids (see paragraph 71, Annex D), subtract Bidder J’s winning bid (value A). Next, recalculate the winning combination of assignment bids in the hypothetical situation where all Bidder J’s assignment bids are equal to zero, as if Bidder J did not have a preference for any of the assignment options it was presented in the round (value B). The Vickrey price for Bidder J is defined as the value of the winning combination of assignment bids with all Bidder J’s bids set to equal zero (value B) minus the sum of the winning assignment bids for all bidders other than Bidder J (value A), that is, B - A.

21. The assignment stage prices for each winning assignment bid in a given assignment round must satisfy the following conditions:

• (a) First condition: The assignment prices must be positive or zero and not more than the dollar amount of the winning assignment stage bid.
• (b) Second condition: The set of assignment prices must be sufficiently high that there is no alternative combination of valid assignment bids that sum to more than the winning assignment bids. If there is only one set of assignment prices that satisfies the first two conditions, this determines the assignment prices.
• (c) Third condition: If there are many sets of assignment prices that fulfil the first and second conditions, the set(s) of assignment prices that minimize(s) the sum of assignment prices across winning assignment stage bids is selected. If there is only one set of assignment prices that satisfies these three conditions, this determines the assignment prices.
• (d) Fourth condition: If there are many sets of assignment prices that satisfy the first three conditions, the set of assignment prices that minimizes the weighted sum of squares of differences between the assignment prices and the Vickrey prices will be selected. The weighting is relative to the price of the bidder’s package evaluated at the opening prices. This approach for selecting among sets of assignment prices that minimize the sum of assignment prices across winning assignment bids is referred to as the “nearest Vickrey” approach.

22. A software algorithm will be used to determine the set of assignment prices that meet the conditions outlined above.

## Annex I — Summary of the Proposals for Consideration

Proposals presented on a licensing framework for Broadband Radio Service (BRS) in the 2500 MHz band.

Proposals related to the service area for Lloydminster (Alberta/Saskatchewan)

3-1 Industry Canada is seeking comments on whether or not the service area boundary for licences in the 2500 MHz band should deviate from the provincial boundary around the City of Lloydminster, (Alberta/Saskatchewan).

Proposals related to the auction format and rules

4-1 Industry Canada is seeking comments on its proposal to use the CCA format, as well as the general attributes outlined above, including:

• (a) the products available for auction, including the categorization of generic licences;
• (b) the use of product-specific stages in the assignment round, ordered by population;
• (c) the combined eligibility point and revealed preference activity rule in the clock rounds, and the revealed preference limit in the supplementary round;
• (d) the use of a second-price rule;
• (e) the information to be disclosed during, and post-auction;
• (f) the guarantee of contiguity for generic licences won within a product; and
• (g) the contiguity of blocks retained by Industry Canada.

Proposals related to bidder participation

5-1 Industry Canada is seeking comments on its proposed changes to the definition and rules related to associated entities. Specifically, comments are sought on:

• (a) the types of agreements that should be captured under the definition of associated entities;
• (b) the level of information to be disclosed to the public prior to the auction;
• (c) 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;
• (d) the proposal that entities that are deemed associated entities may apply to be treated as separate entities for participation in the auction;
• (e) the proposal that associated entities may request to have the spectrum aggregation limit apply to them separately, based on an analysis of their association and of whether they intend to compete in the same licence service area;
• (f) the criteria to be considered in determining whether the entities are competing; and
• (g) the proposal that no changes be made to the affiliated entities rule.

5-2 Industry Canada is seeking comments on the rules prohibiting collusion that would apply to bidders in the 2500 MHz auction.

Proposals related to the conditions of licence for spectrum licences to be auctioned in the 2500 MHz band

6-1 Industry Canada is seeking comments on its proposal to issue spectrum licences in the 2500 MHz band with a 20-year licence term.

6-2 Industry Canada is seeking comments on the proposed wording of the condition of licence related to the spectrum aggregation limit.

6-3 Industry Canada is seeking comments on the proposed wording of the condition of licence related to transferability and divisibility.

6-4 Industry Canada is seeking comments on the proposed wording of the condition of licence related to eligibility criteria.

6-5 Industry Canada is seeking comments on the proposed wording of the condition of licence related to the treatment of existing spectrum users.

6-6 Industry Canada is seeking comments on the proposed wording of the condition of licence related to radio station installations.

6-7 Industry Canada is seeking comments on the proposed wording of the condition of licence related to the provision of technical information.

6-8 Industry Canada is seeking comments on the proposed wording of the condition of licence related to compliance with legislation, regulation and other obligations.

6-9 Industry Canada is seeking comments on the proposed wording of the condition of licence related to technical considerations, and international and domestic coordination.

6-10 Industry Canada is seeking comments on the proposed wording of the condition of licence related to lawful intercept requirements.

6-11 Industry Canada is seeking comments on the proposed condition of licence related to the research and development requirement.

6-12 Industry Canada is seeking comments on the application of the general deployment condition of licence as stated above. Specifically, comments are sought on:

• (a) the population coverage, as specified in Table 4, for each licence service area; and
• (b) the time frame proposed.

6-13 Industry Canada is seeking comments only on the proposed wording of the condition of licence related to mandatory antenna tower and site sharing.

6-14 Industry Canada is seeking comments only on the proposed wording of the condition of licence related to mandatory roaming.

6-15 Industry Canada is seeking comments on the proposed condition of licence related to the requirement for annual reporting.

Proposals related to the conditions of licence for existing BRS licensees in the 2500 MHz band

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

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.

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.

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

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.

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.

Proposals related to the auction process

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

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.

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

Proposals related to the licence renewal process

11-1 Industry Canada is seeking comments on the proposed renewal process for spectrum licences in the 2500 MHz band.

October 2012

## 1. Intent

1. Through the release of this paper, Industry Canada is hereby initiating a consultation on a licensing framework for Broadband Radio Service (BRS) in the band 2500-2690 MHz (also known as the 2500 MHz band) as announced in Canada Gazette notice SMSE-002-12, Policy and Technical Framework: Mobile Broadband Services (MBS)700 MHz Band, Broadband Radio Service (BRS)2500 MHz Band.Footnote 1

2. In February 2011, through Canada Gazette notice SMSE-005-11, Decisions on a Band Plan for Broadband Radio Service (BRS) and Consultation on a Policy and Technical Framework to License Spectrum in the Band 2500-2690 MHz,Footnote 2 Industry Canada announced its decisions related to the adoption of a new band plan, as well as the mapping of Multipoint Communications Systems (MCS) and Multipoint Distribution Service (MDS) licensees into the new BRS band plan.

3. In SMSE-005-11, Industry Canada also initiated the consultation on a policy and technical framework to license spectrum in the 2500 MHz band. The subsequent decisions were announced in the document.

4. Industry Canada is now seeking comments on licensing considerations related to auction format, rules and processes, as well as on conditions of licence for spectrum in the 2500 MHz band. Although many of the proposals in this consultation are similar to those presented in the April 2012 Consultation on a Licensing Framework for Mobile Broadband Services (MBS) — 700 MHz Band,Footnote 4 the two consultations will involve separate considerations and decisions. The inclusion of similar proposals herein should not be taken as an indication of a decision or direction taken by Industry Canada.

## 2. Background

5. The Minister of Industry, through the Department of Industry Act, the Radiocommunication Act and the Radiocommunication Regulations, with due regard to the objectives of the Canadian telecommunications policy set out in section 7 of the Telecommunications Act, is responsible for spectrum management in Canada. As such, the Minister is responsible for developing national policies for spectrum utilization and ensuring effective management of the radio frequency spectrum resource.

6. In developing a licensing framework for BRS in the 2500 MHz band, Industry Canada will be guided by the objectives stated in section 7 of the Telecommunications Act, the policy objective stated in the Spectrum Policy Framework for Canada (SPFC)Footnote 5 to maximize the economic and social benefits that Canadians derive from the use of the radio frequency spectrum, and the policy objectives outlined in SMSE-002-12, Footnote 6 as follows:

• sustained competition in the wireless telecommunications services market so that consumers and businesses benefit from competitive pricing and choice in service offerings;
• robust investment and innovation by wireless telecommunications carriers so that Canadians benefit from world-class networks and the latest technologies; and
• availability of these benefits to Canadians across the country, including those in rural areas, in a timely fashion.

7. Industry Canada will also be guided by the general approaches and processes outlined in the Framework for Spectrum Auctions in Canada (FSAC),Footnote 7 revised in March 2011.

## 3. General

8. In SMSE-002-12, Industry Canada announced specific policy decisions related to the licensing process for spectrum in the 2500 MHz band. Consistent with those decisions, the following provides an overview of the licences to be auctioned:

• licences will be "spectrum licences in respect of the utilization of specified radio frequencies within a defined geographic area," as defined in subparagraph 5(1)(a)(i.1) of the Radiocommunication Act;
• licences will be auctioned using Tier 3 service areas (58 service areas), except in the Northwest Territories, Yukon and Nunavut, where Tier 4 service areas (three service areas) will be used;
• in the bands 2500-2570 MHz and 2620-2690 MHz ("the paired spectrum"), the spectrum will be licensed in blocks of 10 + 10 MHz in each available service area;
• in the band 2570-2620 MHz ("the unpaired spectrum"), the spectrum will be licensed in blocks of 25 MHz (which includes the respective 5 MHz restricted band)Footnote 8 in each available service area;
• a total of 318 licences will be offered;
• excluding the restricted bands (2570-2575 MHz and 2615-2620 MHz), a spectrum aggregation limit of 40 MHz will apply in each service area of the 2500 MHz band, except in the Northwest Territories, Yukon and Nunavut where there is no limit. This amount represents the total spectrum licence holdings in the 2500 MHz band, including both paired and unpaired spectrum, by each licensee in each licence area;
• in service areas where an existing licensee already has spectrum licence holdings in excess of the spectrum aggregation limit, 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 in the auction process or otherwise obtain additional licences in service areas where the limit has been met or exceeded.

9. For a complete list of policy decisions related to the 2500 MHz band, refer to Section C of SMSE-002-12.Footnote 9

### 3.1 Spectrum Available for Licensing

10. As per SMSE-005-11, the following general band plan was adopted for BRS in the 2500 MHz band (see Figure 1). Also shown in the figure is the 5 MHz block grid used for referencing purposes in SMSE-005-11.

#### Figure 1 — General band plan for BRS in the band 2500-2690 MHz

Description of Figure 1

This chart shows the general band plan for Broadband Radio Service (BRS) in the band 2500-2690 MHz. Channels A1 to A14 (2500 to 2570 MHz) are paired with channels A1’ to A14’ (2620 to 2690 MHz). Networks using frequency division duplex (FDD) technology will use channels A1 to A14 for the transmission of their terminal equipment, whereas channels A1’ to A14’ will be used for the transmission of their base stations. Channels B1 to B10 (2570 to 2620 MHz) are unpaired channels. Networks using time division duplex (TDD) technology will use these channels for all equipment. In addition, channel B1 at 2570 MHz to 2575 MHz and channel B10 at 2615 MHz to 2620 MHz are also referred to as restricted bands. Operation in the restricted bands is specified in document

* Note: The policy with respect to operation in the restricted bands (2570-2575 MHz and 2615-2620 MHz) is specified in SMSE-005-11.

11. Figures 2 to 5 and Annex A show the amount of spectrum available in the three RegionsFootnote 10 of Canada:

#### Figure 2 — Map of Regions

Description of Figure 2

This figure shows a map of Canada with respect to the amount of spectrum to be auctioned. Three Regions are shown. Region A has 50 + 50 MHz (paired) and 25 MHz (unpaired). These areas are the Atlantic Provinces, most of Quebec, most of Ontario, the province of Alberta, most of British Columbia, Yukon, Northwest Territories and Nunavut. Region B has 30 + 30 MHz (paired) to be auctioned. These areas are southern areas of Ontario, Quebec and British Columbia, as well as the province of Saskatchewan. Region C is Manitoba and has 20 + 20 MHz (paired), 30 + 30 MHz (paired) and 25 MHz (unpaired) to be auctioned.

#### Figure 3 — Spectrum available for licensing in Region A

Description of Figure 3

This chart shows that in Region A, channels A5 to A14 paired with A5’ to A14’ (2520 to 2570 MHz paired with 2640 MHz to 2690 MHz), a total of 50 + 50 MHz of paired spectrum is available for auction. In addition, channels B6 to B10 (2595 MHz to 2620 MHz), a total of 25 MHz of unpaired spectrum is also available for auction. The figure also shows that in the unpaired spectrum channel B10 (2615 MHz to 2620 MHz), 5 MHz is a restricted band.

#### Figure 4 — Spectrum available for licensing in Region B

Description of Figure 4

This chart shows that in Region B, channels A9 to A14 paired with A9’ to A14’ (2540 MHz to 2570 MHz paired with 2660 MHz to 2690 MHz), a total of 30 + 30 MHz of paired spectrum is available for auction.

#### Figure 5 — Spectrum available for licensing in Region C

Description of Figure 5

This chart shows that in Region C, channels A1 to A4 paired with A1’ to A4’ (2500 MHz to 2520 MHz paired with 2620 MHz to 2640 MHz) and channels A9 to A14 paired with A9’ to A14’ (2540 MHz to 2570 MHz paired with 2660 MHz to 2690 MHz), a total of 50 + 50 MHz of paired spectrum is available for auction. In addition, channels B1 to B5 (2570 MHz to 2595 MHz), a total of 25 MHz of unpaired spectrum is also available for auction. The figure also shows that in the unpaired spectrum channel B1 (2570 MHz to 2575 MHz), 5 MHz is a restricted band.

12. As shown in minimum of 30 + 30 MHz and a maximum of 50 + 50 MHz of paired spectrum are available for licensing throughout Canada. As well, 25 MHz of unpaired spectrum (including the respective 5 MHz restricted band) is available for licensing in most areas across the nation.

### 3.2 Radio Frequency Block Arrangement Description

13. In accordance with SMSE-002-12, Policy and Technical Framework, Mobile Broadband Services (MBS)700 MHz Band, Broadband Radio Service (BRS)2500 MHz Band,

• the band 2500-2570 MHz, which is paired with the band 2620-2690 MHz, is divided into seven 10  + 10 MHz paired blocks with a frequency separation of 120 MHz; and
• the band 2570-2620 MHz is divided into two 25 MHz unpaired blocks. The unpaired blocks will each include a 5 MHz restricted band separating the paired and unpaired spectrum (i.e. 2570-2575 MHz and 2615-2620 MHz).

14. The BRS 2500 MHz band plan and block sizes are shown in Table 1 and Figure 6 respectively.

Table 1 — BRS Frequency Blocks
Block Frequencies Total Spectrum Pairing
A / A’ 2500-2510 MHz / 2620-2630 MHz 10 + 10 MHz paired
B / B’ 2510-2520 MHz / 2630-2640 MHz 10 + 10 MHz paired
C / C’ 2520-2530 MHz / 2640-2650 MHz 10 + 10 MHz paired
D / D’ 2530-2540 MHz / 2650-2660 MHz 10 + 10 MHz paired
E / E’ 2540-2550 MHz / 2660-2670 MHz 10 + 10 MHz paired
F / F’ 2550-2560 MHz / 2670-2680 MHz 10 + 10 MHz paired
G / G’ 2560-2570 MHz / 2680-2690 MHz 10 + 10 MHz paired
H 2570-2595 MHz 25 MHz
(includes 5 MHz restricted band)
unpaired
I 2595-2620 MHz 25 MHz
(includes 5 MHz restricted band)
unpaired

#### Figure 6 — BRS Frequency Block Plan

Description of Figure 6

This chart shows the frequency blocks, used for licensing purposes, in the 2500 MHz band. The frequency blocks are made up of the channels described in Figure 1. In the current figure, the band 2500-2570 MHz is divided into seven 10 MHz blocks, labelled Blocks A to G. This band is paired with the band 2620-2690 MHz, also divided into seven 10 MHz blocks, labelled Blocks A’ to G’. The band 2570-2620 MHz is divided into two 25 MHz unpaired blocks, labelled Blocks H and I. These unpaired blocks each include a 5 MHz restricted band (RB) separating the paired and unpaired spectrum (i.e. the band 2570-2575 MHz in Block H and the band 2615-2620 MHz in Block I). Operation in the restricted bands is specified in document SMSE-005-11.

*Restricted Band

Note: The policy with respect to operation in the restricted bands 2570-2575 MHz and 2615-2620 MHz is specified in SMSE-005-11.

15. Various channel sizes may be used within the blocks depending on technology choices of the licensee, subject to the applicable Standard Radio System Plan (SRSP) and/or Radio Standards Specifications (RSS).

16. For Frequency Division Duplex (FDD) operations in the paired spectrum, the subscriber-to-base links are to be deployed in the band 2500-2570 MHz, and the base-to-subscriber links are to be deployed in the band 2620-2690 MHz.

17. The operation of non-FDD systems in the bands 2500-2570 MHz and 2620-2690 MHz are subject to the operation and displacement policy in SMSE-005-11.

18. Time Division Duplex (TDD) systems may operate in the band 2570-2620 MHz.

### 3.3 Restricted Bands

19. As per SMSE-005-11, Industry Canada decided to impose 5 MHz restricted bands, 2570-2575 MHz and 2615-2620 MHz, to mitigate interference between systems operating in the paired and unpaired spectrum.

20. TDD operations by licensees within the restricted bands 2570-2575 MHz and 2615-2620 MHz are permitted on a no-protection, no-interference basis with respect to FDD operations in the paired spectrum.

21. The technical rules for operation within the 2500 MHz band restricted bands will be provided in an SRSP and/or RSS.

### 3.4 Existing Licensees in the 2500 MHz Band

22. Site-specific fixed service licensees currently operate in the 2500 MHz band in certain areas of British Columbia and Quebec. These existing licences are subject to transition policies set-out in and are listed in Annex B. The site-specific licences in Alberta and the Canadian Radio television Telecommunications Commission (CRTC) licence-exempt broadcasting stations discussed in SMSE-005-11 are no longer in operation.

23. Site-specific licences in Manitoba are grandfathered, as stated in and may continue to operate in the 2500 MHz band. These existing licensees are protected from harmful interference from BRS. An updated list of the grandfathered licences in Manitoba is provided in Annex C.

24. Furthermore, there may be MCS and BRS licensees that operate in the 2500 MHz band and that have yet to transition their systems to the new band plan. These systems are subject to the transition policies set out in SMSE-005-11.Footnote 13 Up-to-date lists of MCS and BRS licensees are available through Industry Canada’s Spectrum Licence Browser at http://sd.ic.gc.ca/pls/engdoc_anon/speclic_browser\$.startup.

### 3.5 Services in Adjacent Bands

25. In accordance with the Canadian Table of Frequency Allocations,Footnote 14 authorized stations may be operating the following services within the adjacent frequency bands:

• mobile-satellite service (MSS) downlink operations in the band 2483.5-2500 MHz;
• radio astronomy serviceFootnote 15 (RAS) in the band 2690-2700 MHz;
• ground-based radar operations in the band 2700-2900 MHz for aeronautical radionavigation services or meteorological purposes; and
• shore-based radar operations in the band 2850-2900 MHz for maritime radionavigation services.

26. In light of the above, BRS operations in the 2500 MHz band will be required to coexist and may need to be coordinated with the operations of authorized stations in the aforementioned bands.

27. Further details will be provided in a SRSP and/or RSS, which will be developed in consultation with industry.

### 3.6 Tier Sizes

28. All spectrum blocks (paired and unpaired) available for auction shall be licensed on a Tier 3 basis, with the exception of the Northwest Territories, Yukon and Nunavut, where Tier 4 licence areas will be used. Table 2 summarizes the frequency blocks, tiers and the number of licences available for the 2500 MHz auction. Annex A provides a more detailed table of spectrum availability for all licence areas.

Table 2 — Block size, tiers and number of licences available for the 2500 MHz auction in each Region
Block Frequency Pairing MHz Tier Licences
Region A
(excluding the Northwest Territories, Yukon and Nunavut)
C/C’ 2520-2530 MHz / 2640-2650 MHz paired 10 + 10 3 40
D/D’ 2530-2540 MHz / 2650-2660 MHz paired 10 + 10 3 40
E/E’ 2540-2550 MHz / 2660-2670 MHz paired 10 + 10 3 40
F/F’ 2550-2560 MHz / 2670-2680 MHz paired 10 + 10 3 40
G/G’ 2560-2570 MHz / 2680-2690 MHz paired 10 + 10 3 40
I 2595-2620 MHz Table note * unpaired 25 Table note * 3 40
Region A
(the Northwest Territories, Yukon and Nunavut only)
C/C’ 2520-2530 MHz / 2640-2650 MHz paired 10 + 10 4 3
D/D’ 2530-2540 MHz / 2650-2660 MHz paired 10 + 10 4 3
E/E’ 2540-2550 MHz / 2660-2670 MHz paired 10 + 10 4 3
F/F’ 2550-2560 MHz / 2670-2680 MHz paired 10 + 10 4 3
G/G’ 2560-2570 MHz / 2680-2690 MHz paired 10 + 10 4 3
I 2595-2620 MHz Table note * unpaired 25 Table note * 4 3
Region B E/E’ 2540-2550 MHz / 2660-2670 MHz paired 10 + 10 3 16
F/F’ 2550-2560 MHz / 2670-2680 MHz paired 10 + 10 3 16
G/G’ 2560-2570 MHz / 2680-2690 MHz paired 10 + 10 3 16
Region C A/A’ 2500-2510 MHz / 2620-2630 MHz paired 10 + 10 3 2
B/B’ 2510-2520 MHz / 2630-2640 MHz paired 10 + 10 3 2
E/E’ 2540-2550 MHz / 2660-2670 MHz paired 10 + 10 3 2
F/F’ 2550-2560 MHz / 2670-2680 MHz paired 10 + 10 3 2
G/G’ 2560-2570 MHz / 2680-2690 MHz paired 10 + 10 3 2
H 2570-2595 MHz Table note * unpaired 25 Table note * 3 2

### 3.7 Service Area for Lloydminster (Alberta/Saskatchewan)

29. In SMSE-002-12, Industry Canada indicated that Tier 3 and Tier 4 service areas will be used to license the frequency blocks for the auction of 2500 MHz spectrum licences. It also stated that the tier boundaries around Lloydminster, Saskatchewan, would be discussed in the 700 MHz and 2500 MHz consultations on licensing issues.

30. The issue concerning Lloydminster was raised by SaskTel in its response to SMSE-005-11 in which it proposed that tier area boundaries around Lloydminster warrant further consideration by Industry Canada.

31. Industry Canada uses service areas, called tiers, for all competitive licensing processes. These areas are based on Statistics Canada’s Census Divisions and Subdivisions. Four tier sizes, as outlined in the document Service Areas for Competitive Licensing, have been established to accommodate various wireless services, applications and frequency bands. The definition of the service areas within these tiers and accompanying maps and data tables are available on Industry Canada’s website.Footnote 16

32. The smallest tier service areas roll up to fit within the larger tier areas. Some minor deviations from provincial borders exist. These deviations were made around provincial borders to avoid having a service area boundary cut through a population centre, thereby minimizing potential interference problems.

33. For example, a large portion of Lloydminster, which falls in both Saskatchewan and Alberta, has been captured by service area 4-129 Lloydminster (Alberta). Consequently, the majority of the City of Lloydminster is included in service area 4-129 Lloydminster (Alberta) and respectively in the Tier 3 service area 3-44 (Edmonton) and Tier 2 service area 2-12 (Alberta). As the smaller service area 4-129 is part of the Alberta tier, the effect is that the majority of the City of Lloydminster is currently part of the Alberta service area in tiers 2, 3 and 4.

34. Industry Canada considers that the rationale for the deviations around provincial borders continues to be valid and that any changes which would affect the licensing consistency of existing and future licensing processes are not warranted. Therefore, it is proposed that the current boundaries surrounding service area 4-129 (and thus tiers 3-44 and 2-12) continue to apply.

3-1 Industry Canada is seeking comments on whether the service area boundary for licences in the 2500 MHz band should deviate from the provincial boundary around the City of Lloydminster (Alberta/Saskatchewan).

Note: Annex I provides a summary of all proposals for consideration.

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