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

Posted on Industry Canada website: January 10, 2014
(updated on April 1st, 2015)



NOTE 1: Changes to the Table of Key Dates (published on July 28, 2014) have resulted in a single application date to be accompanied by 100% of the pre-auction financial deposit. Therefore, the information included in Sections 8.3 — Pre-auction Financial Deposits and 8.4 — Process to Submit the Applications and Financial Deposits related to separate deposits of 5% and 95% no longer apply.

NOTE 2: Updated Annex C - 2500 MHz Band Site – specific Grandfathered Licences in Manitoba as of April 2015.


1. Intent

Through the release of this paper, Industry Canada hereby announces the decisions resulting from the consultation process undertaken in Canada Gazette notice DGSO-004-12, Consultation on a Licensing Framework for Broadband Radio Service (BRS) — 2500 MHz Band.Footnote 1 This document serves as a companion document to the Policy and Technical Framework: Mobile Broadband Services (MBS) — 700 MHz Band, Broadband Radio Service (BRS) — 2500 MHz Band,Footnote 2 announced in Canada Gazette notice SMSE-002-12, 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, announced in Canada Gazette notice SMSE-005-11, and Decisions on the Transition to Broadband Radio Service (BRS) in the Band 2500-2690 MHz and Consultation on Changes Related to the Band Plan, released in Canada Gazette notice DGSO-001-10.

All comments and reply comments received in response to this consultation are available on Industry Canada's website at http://www.ic.gc.ca/spectrum. Comments and/or reply comments were received from Bell Mobility Inc. (Bell), Bragg Communications Inc. (Eastlink), the British Columbia Broadband Association (BCBA), the Canadian Wireless Telecommunications Association (CWTA), Data & Audio-Visual Enterprises Wireless Inc. (Mobilicity), Globalive Wireless Management Corp. (WIND), the Kativik Regional Government, MTS Allstream, Public Mobile Inc., Quebecor Media Inc. and Videotron G.P. (Quebecor), Rogers Communications Partnership (Rogers), SaskTel, SSi Group of Companies (SSi), Dr. Gregory Taylor and Dr. Catherine Middleton (of Ryerson University), TELUS Communications Company (TELUS), and Xplornet Communications Inc. and Xplornet Broadband Inc. (Xplornet).

The following document (hereinafter referred to as the Framework) sets out the rules and procedures for participation in the competitive licensing process for spectrum in the 2500 MHz band. The Framework includes details related to the auction format and rules, the application process and timelines, and the conditions of licence that will apply to licences issued following the auction process and to existing BRS spectrum licences.


2. Background

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.

In developing a licensing framework for BRS in the 2500 MHz band, Industry Canada has been guided by the objectives stated in Section 7 of the Telecommunications Act, the policy objective stated in the Spectrum Policy Framework for CanadaFootnote 3 (SPFC) 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 4 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.

Industry Canada was also guided by the general approaches and processes outlined in the Framework for Spectrum Auctions in Canada (FSAC),Footnote 5 which was revised in March 2011.

Industry Canada makes no representation or warranties about the use of this spectrum for particular services. Applicants should be aware that this auction represents an opportunity to become a licensee, subject to certain conditions and regulations. An Industry Canada auction does not constitute an endorsement by the Department of any particular service, technology or product, nor does a spectrum licence constitute a guarantee of business success. Applicants should perform their individual due diligence before proceeding as they would with any new business venture.


3. General

In SMSE-002-12, Policy and Technical Framework: Mobile Broadband Services (MBS) — 700 MHz Band, Broadband Radio Service (BRS) — 2500 MHz,Footnote 6 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, for a total of 61 service areas;
  • 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 bandFootnote 7) 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.
  • 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 up to 60 calendar days after the publication of this Framework. In the event that Industry Canada decides to offer the returned licences as part of the 2500 MHz auction process, an addendum to the Framework will be published in order to inform prospective participants of any additional licence offerings.

For a complete list of policy decisions related to the 2500 MHz band, refer to Part C of SMSE-002-12.Footnote 8

3.1 Spectrum available for licensing

As per SMSE-005-11,Footnote 9 the following general band plan was adopted for BRS in the 2500 MHz band (see Figure 1). The 2500 MHz spectrum grid shown in the figure is based on 5 MHz blocks for referencing purposes only, as per SMSE-005-11.

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

Figure 1: General band plan for BRS in the band 2500-2690 MHz (the long description is located below the image)
Description

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 SMSE-005-11.

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

As per SMSE-005-11, Canada has been divided into three Regions for purposes of licensing the 2500 MHz band.Footnote 10 Figures 2 to 5 and Annex A show the amount of spectrum available in each of the three Regions.

Figure 2: Spectrum Available for Licensing by Region

Figure 2: Spectrum Available for Licensing by Region (the long description is located below the image)
Description

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

Figure 3: Spectrum available for licensing in Region A (the long description is located below the image)
Description

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

Figure 4: Spectrum available for licensing in Region B (the long description is located below the image)
Description

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

Figure 5: Spectrum available for licensing in Region C (the long description is located below the image)
Description

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.

As shown in Figures 3 to 5, a 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 the majority of service areas across Canada.

3.2 Radio Frequency Block Arrangement Description

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).

The BRS 2500 MHz block sizes and band plan and 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 MHzpaired
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

Figure 6: BRS Frequency Block Plan (the long description is located below the image)
Description

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.

The technical rules for operation within the 2500 MHz band will be provided in a Standard Radio System Plan (SRSP) and/or Radio Standards Specifications (RSS), which will be developed in consultation with industry.

3.3 Restricted Bands

As per 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 MHzFootnote 11 Industry Canada imposed two 5 MHz restricted bands, 2570-2575 MHz and 2615-2620 MHz, to mitigate interference between systems operating in the paired and unpaired spectrum.

Time Division Duplex (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 Frequency Division Duplex (FDD) operations in the paired spectrum.

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

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 SMSE-005-11Footnote 12 and are listed in Annex B.Footnote 13

Some operations authorized by site-specific licences in Manitoba are grandfathered, as stated in DGSO-001-10, Decisions on the Transition to Broadband Radio Service (BRS) in the Band 2500-2690 MHz and Consultation on Changes Related to the Band PlanFootnote 14 and licensees may continue to operate in the 2500 MHz band. These existing licensees are protected from harmful interference from BRS operations. An updated list is provided in Annex C.

Furthermore, there may be Multipoint Communications Systems (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 15Up-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

In accordance with the Canadian Table of Frequency Allocations,Footnote 16 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 service (RAS)Footnote 17 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.

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.

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

3.6 Tier Sizes

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
* Includes restricted band
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* unpaired 25 * 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* unpaired 25 * 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* unpaired 25 * 3 2

3.7 Service Area for Lloydminster (Alberta/Saskatchewan)

In the consultation, Industry Canada sought 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).

Summary of Comments

Three respondents commented on this issue. Rogers and TELUS both indicated that the status quo should prevail. TELUS considered that this would be consistent with Industry Canada's approach to all current mobile spectrum bands and that it would minimize technical interference issues and customer confusion.

SaskTel supported changing the boundary for service areas covering Lloydminster in order to align with the provincial boundary. SaskTel suggested that following provincial boundaries will allow for more competition in the area. As for interference concerns, SaskTel indicated that new technologies can be and are being used to mitigate potential interference.

Discussion

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,Footnote 18 have been established to accommodate various wireless services, applications and frequency bands.

The tier service areas were introduced in 1998 following a public consultation that stemmed from the amendments to the Radiocommunication Act, which introduced a new approach to spectrum licensing in 1996. At the time of consultation, there was general agreement among stakeholders regarding this approach and, to reduce possible interference issues and keep economic areas intact, deviations were made around provincial borders.

The deviations occur in five areas of the country where the use of provincial borders would divide a contiguous economic zone in two. These are comprised of one large population area (Gatineau/Ottawa) and four smaller areas, including the City of Lloydminster, which lies on the border of Saskatchewan (35% of the population) and Alberta (65% of the population). Based on population distribution, the decision was made in 1998 to draw the tier boundary such that the City of Lloydminster was in the Alberta tier areas, as that is where the majority of the population resides.

Redrawing the tier area boundary to follow the provincial border could result in increased interference, reduced spectral efficiency and lower quality of service to subscribers. This goes against the principles of the tier areas and of keeping a contiguous economic area intact.

Maintaining the current tier area structure would be consistent with all other spectrum auction processes undertaken since 1999, it would allow existing licensees serving the tier area to make use of their existing infrastructure to overlay the additional spectrum, and it would maintain a single licence area for the majority of the population in Lloydminster.

In the Licensing Framework for Mobile Broadband Services (MBS) — 700 MHz Band, it was determined that for the 700 MHz band,Footnote 19 the tier area would align with the provincial border for the purposes of that auction.

With respect to the 2500 MHz auction, it is noted that the only respondent who advocated for the licence area to be modified such that it would align with the border area is already holding spectrum in excess of the spectrum aggregation limits.

Decision

Based on the above, Industry Canada considers that the rationale for maintaining the deviation around provincial borders for the City of Lloydminster is valid. Therefore, for the licences included in the 2500 MHz auction, the current boundaries of service areas 3-43 and 3-44 will continue to apply.


4. Auction Format and Rules

As stated in the FSAC, Industry Canada's objective is to select an auction design that is optimal for the spectrum being offered and the circumstances that exist at the time. In most of its past auctions, Industry Canada has used a simultaneous multiple round ascending (SMRA) auction format. Advances in auction theory and design have led to the development of new auction formats and rules. One of these new auction formats 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, and which has been selected for use in the upcoming 700 MHz auction.

4.1 Auction Format

Industry Canada sought comments on its proposal to use the CCA format for the 2500 MHz auction.

Summary of Comments

Bell, Mobilicity, Public Mobile, Rogers, TELUS and WIND noted the potential advantages of the CCA format and supported its use for the 2500 MHz auction.

Regional operators (Eastlink, MTS Allstream, Quebecor, SaskTel, SSi and Xplornet) expressed concerns that the proposed auction format and rules favour national bidders. In particular, they argued that a national bid may be able to trump the bids of regional bidders. Eastlink and SaskTel suggested the use of the SMRA format. Rogers rejected the suggestion that the CCA discriminates against small or regional bidders.

A number of respondents proposed modifications to the supplementary round that would provide bidders with greater certainty in winning their final clock package. Some respondents (Mobilicity and MTS Allstream) suggested restrictions on what bidders would be allowed to bid on in the supplementary round or what bidders would be allowed to win (SaskTel). Other respondents suggested eliminating the supplementary round if there are no unallocated licences in the final clock round (Eastlink) or eliminating the supplementary round altogether (SSi).

Some respondents (Mobilicity, Public Mobile, Rogers, SaskTel, TELUS and Xplornet) also commented on the complexity of the auction format; with TELUS indicating that this may make it difficult to bid effectively during the auction. Concerns were also expressed about the complexity of the structure of the assignment round (Rogers and TELUS) and about the winner and price determination processes (Public Mobile and Rogers).

Discussion

Generally, the CCA format consists of an allocation stage and if generic licences are offered, an assignment stage. The allocation stage involves a series of multiple bidding rounds, called clock rounds followed by a single supplementary bidding round. At the end of the allocation stage bidders will know the number of licences they have won and the base price they are required to pay for them. When generic licences are being auctioned, the allocation stage is followed by the assignment stage. The assignment stage consists of another series of bidding rounds where bidders can submit bids on the specific frequency ranges they are interested in winning.

In the typical CCA design, bidders submit all-or-nothing, mutually exclusive package bids on the combinations of licences that they are interested in winning. In other words, each bid is either won or lost as a whole, and each bidder can win no more than one of its package bids. These package bids will be referred to as "standard package bids."

The CCA format was proposed for the 2500 MHz auction because it utilizes package bids, eliminating the risk that bidders would win some but not all of the licences needed for their business case, known as exposure risk. This auction format reduces complexity for bidders by allowing them to bid on the packages of licences that they want on an all-or-nothing basis, rather than trying to put together a package comprised of individual licences. The CCA format makes it easier for bidders to move to substitute licences in response to price changes, given that — unlike the SMRA auction format — it does not require the identification of a "standing high bidder" to be held responsible for individual licences at the end of each round. This is particularly important for the 2500 MHz auction, which makes licences available in 61 service areas across Canada, with the level of competition and number of available licences possibly varying with each service area. Furthermore, the CCA format reduces opportunities for anti-competitive behaviour during the auction.

Concerns that regional bidders will not be able to win licences: Spectrum aggregation limits have been implemented in order to facilitate at least four licensees in each service area. Based on the current mix of licensees in Canada, this will provide opportunities to both regional and national carriers in each service area. The objective of the auction design is to facilitate an efficient assignment of licences, where licences are assigned to those who value them the most and thus are most likely to deploy them and offer services. The CCA format is effective in this regard as it permits bidders to submit bids up to their valuation and to have full confidence that they will not be stranded with only winning some of the licences that they need. Winning bids are determined by the highest value combination of package bids with each bidder winning at most one of its package bids.

Return to the SMRA auction format: The SMRA auction format is familiar to stakeholders, as it has been used in five previous spectrum auctions in Canada. However, in an SMRA auction, a bidder seeking multiple licences could be subject to exposure risk. This could lead to complicated bidding strategies, particularly for a bidder with a large package of licences, and could potentially result in a less efficient outcome.

Eliminating or restricting bidding in the supplementary round: The supplementary round is a fundamental part of the CCA format. In each clock round, bidders are limited to bidding on a single package at set prices. However, as there may be many packages that a bidder is interested in and eligible to bid on, the supplementary round gives bidders the opportunity to place their best and final bids on those packages at prices reflecting their valuations. Supplementary bids are critical to ensuring that licences are allocated to the bidders that value them the most and to ensuring that winning bidders pay an amount that is sufficient to ensure that no other bidder or group of bidders was willing to pay more for the licences.

Restricting what bids can be won: The proposal that the winning combination of packages should "satisfy a constraint that every bidder has to win a package that includes at least its final clock package" would provide bidders with greater certainty, as they would know what they would win at a minimum. However, such a constraint could result in a less efficient outcome where there would be other bidders willing to pay more for the licence (s) than the winning bidder. The restriction could also create incentives and opportunities for anti-competitive behaviour, as otherwise bidders could submit bids for licences that they are not interested in for the sole purpose of increasing prices for others, with little or no risk to themselves.

Concerns regarding format complexity: Some bidders may be unfamiliar with the CCA format; however, their concerns about the format's complexity should be addressed through increased training, including early access to a winner and price determination tool and mock auctions, which will provide qualified bidders the opportunity to familiarize themselves with the auction software. In addition, bidders will have an opportunity to submit clarification questions to Industry Canada.

Concerns regarding complexity of winner and price determination: In a CCA, the winning bidders, licences won and prices to be paid are determined by the combination of packages that yields the highest value. Given the number of possible combinations of packages that might be present, this calculation is performed by auction software (the solver). This process may be unfamiliar to potential bidders as it was not used in previous Canadian spectrum auctions; however, a similar process will be used in the Canadian 700 MHz auction.

In order to provide transparency and increase familiarity with the process for winner and price determination in the CCA, Industry Canada has provided explanations for the winner and price determination processes (see Annex D) and will publish details of the algorithm that will be used to determine winning bidders and prices to be paid. Industry Canada is also planning to release bidding information after the conclusion of the auction.

Decision

In consideration of the above, Industry Canada will use the CCA format for the 2500 MHz auction. Additional training, including early access to the winner and price determination tool and mock auctions, will be provided as set out in Section 10 — Bidder Training and Support. Further details on the CCA format are provided in Annex D.

4.1.1 Categories of Licences

Generic licences are blocks of spectrum that are similar enough and of comparable value, such that they can be offered in a single category. A category can include a single licence or a group of generic licences for each service area. The set of licences in the same category and service area is referred to as a product.

Industry Canada sought comments on two proposed categories of licences for the 2500 MHz auction: paired and unpaired. For the paired category, Industry Canada proposed to treat the following licences as generic in the service areas of the respective Regions:

  • Region A (43 service areas): blocks C/C' to G/G' (five paired generic licences);
  • Region B (16 service areas): blocks E/E' to G/G' (three paired generic licences); and
  • Region C (two service areas): blocks A/A', B/B' and E/E' to G/G' (five paired generic licences).

There is one unpaired block either H or I, available in each service area of Region A and Region C. The unpaired blocks are not available in Region B.

Summary of Comments

Bell, Rogers, TELUS, WIND and Xplornet supported the proposed categories of generic licences; however, Rogers suggested that it would be more appropriate to auction the unpaired TDD blocks as separate 10 MHz blocks, rather than as 20 MHz blocks, in order to facilitate the return of spectrum and to make this spectrum available in the auction. The recommendation to divide the TDD blocks was supported by Bell, but rejected by TELUS.

MTS Allstream did not agree with the categorization of generic blocks, particularly for the licences in Manitoba (Region C). Instead, they suggested that each block in Region C should be considered unique, given the presence of 120 grandfathered users throughout the band in each service area and the potential costs for winning bidders in Region C to coordinate with the existing users within each block in each service area.

Discussion

The use of generic licences enhances the possibilities for substitution and reduces the number of combinations on which bids may be placed, simplifying the bidding process for bidders. This is particularly important for the 2500 MHz auction, where the use of generic licences reduces the number of products from 318 (services areas x licences = 43 x 6 + 16 x 3 + 2 x 6) to 106 (service areas x products = 43 x 2 + 16 x 1 + 2 x 2).

The proposed generic licences were determined based on the anticipated substitutability of the blocks, and took into consideration the frequency location in the band, the block size and possible technology and interference constraints. It is anticipated that the user equipment ecosystem will be the same for all paired blocks in the 2500 MHz band. Therefore, the paired blocks in any given service area are expected to be similar in value and can be grouped into a single product. Bidders will be able to express their preferences for specific blocks during the assignment stage.

Dividing the unpaired blocks (H or I) into two separate blocks: Decisions with respect to block size were announced in SMSE-002-12, Policy and Technical Framework: Mobile Broadband Services (MBS) – 700 MHz Band, Broadband Radio Service (BRS) – 2500 MHz Band. No new information has been presented that would warrant a change.

Concerns about generic licences in Region C (Manitoba): All of the licences available in Region C (Manitoba) are currently subject to the operations of grandfathered Multipoint Communications Systems licensees, who may continue to operate indefinitely with protection from harmful interference from BRS users. However, winning bidders have various options to mitigate potential interference, including providing incentives for existing licensees to make adjustments to the equipment used by grandfathered stations or to vacate the spectrum. Furthermore, bidders would be able to express their values for specific blocks within a product during the assignment stage.

Decision

Based on the above, the categories of licences will be as proposed. Table 3 illustrates the categories and the available licences for each of the 61 service areas. The paired category includes five generic licence blocks in Region A and Region C service areas, as well as three generic licence blocks in Region B service areas, whereas the unpaired category includes one licence block in Region A and Region C service areas. The licences available in the auction may be subject to change following the deadline for the return of existing licences in the 2500 MHz band (60 calendar days after the publication of this Framework).

Table 3 — Expected categories of licences in each service area
Paired Unpaired Products
  A/A' B/B' C/C' D/D' E/E' F/F' G/G' H I  
Note: Licences available for auction are indicated by an "X." All information in this Framework (including examples provided in the Annexes) is based on the current availability of licences, which may be subject to change.
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

4.1.2 Activity Rule — Clock Rounds

Industry Canada sought comments on the proposal to use an activity rule for the clock rounds that is a combination of an eligibility-based activity rule and a revealed preference activity rule. The revealed preference component allows a bidder to bid on a package that exceeds its current eligibility, provided that it has become relatively less expensive than packages that the bidder has bid on in all previous eligibility-reducing rounds.

Summary of Comments

Bell, TELUS and WIND supported the proposed activity rule for the clock rounds.

Rogers expressed concerns that the proposed activity rule for the clock rounds is unduly restrictive, facilitates vexatious bidding and is inconsistent with how the activity rule is applied in the supplementary round. Both Public Mobile and Rogers proposed simplifying the revealed preference rule, such that a bid on a package that exceeds a bidder's current eligibility should only have to satisfy revealed preference with respect to the last round that the bidder had sufficient eligibility to bid on that package, rather than all previous eligibility-reducing rounds.

Bell, MTS Allstream, Quebecor, TELUS and Xplornet opposed Rogers and Public Mobile's proposal to modify the clock round activity rule. Xplornet stated its concern that adopting this particular proposal would provide large bidders with even more flexibility to place large combinatorial bids that would likely trump the bids of smaller regional service providers and new entrants.

Public Mobile also commented that the eligibility point component of the activity rule may distort bidding behaviour by encouraging bidders to bid on packages with relatively more eligibility points, rather than their most preferred package, in order to maintain a higher level of eligibility for later rounds.

Discussion

The revealed preference / eligibility point hybrid activity rule for clock rounds of the 2500 MHz auction was proposed to provide bidders with the motivation and flexibility to always bid on their most preferred package, improving price and allocation discovery. Using only an eligibility-based activity rule in the clock rounds would prevent a bidder from placing bids on its most preferred package if that package exceeds its eligibility.

A bidder is always able to place bids that are consistent with its eligibility points. However, the revealed preference component of the activity rule affords bidders extra flexibility by allowing them to bid on a larger preferred package that has become relatively less expensive, providing a means for bidders to adjust their bid in response to information received in previous clock rounds.

Reducing the number of revealed preference constraints: There is a trade-off involved when setting the activity rules. On the one hand, many constraints help to promote truthful bidding which leads to price discovery; on the other hand, fewer constraints allow bidders greater flexibility to revise bids in response to price and demand information. The proposed hybrid activity rule strikes a balance; it provides bidders with enough flexibility to revise their bids in a way that is consistent with their underlying values, while discouraging them from placing bids that could undermine price discovery.

Bidding on larger packages to maintain eligibility: In a CCA, all bids are binding and there is therefore risk associated with bidding on unwanted licences in order to maintain more eligibility points since a bidder could ultimately win the package containing the unwanted licences. Moreover, the revealed preference component of the activity rule mitigates the incentive for bidders to place bids on larger packages to maintain more eligibility points. Bidders do not need to maintain relatively more eligibility points to bid on a preferred package, as they are permitted to exceed their eligibility points when it is consistent with their preferences.

Decision

Industry Canada will use the revealed preference / eligibility point hybrid activity rule for the clock rounds.

Further information on the activity rule for the clock rounds can be found in Section 8 of Annex D. As well, a detailed example of the activity rule is included in Annex E and an algebraic description of the revealed preference component of the activity rule is included in Annex F.

4.1.3 Activity Rule — Supplementary Round

Industry Canada sought comments on its proposal to use an activity rule in the supplementary round that is based on revealed preference limits with respect to the bids submitted in the clock rounds. The rule would require that all of a bidder's supplementary bids satisfy revealed preference with respect to the final clock round. In addition, each supplementary bid would also have to satisfy revealed preference with respect to each eligibility-reducing round, beginning with the last clock round in which the bidder was eligible to bid on that package.

Two exceptions were proposed: (1) bids on the final clock package could be an unlimited amount; and (2) bids on a package comprised of the final clock package plus any or all licences provisionally unallocated in the final clock round would be required to satisfy revealed preference with respect to the final clock round only.

The revealed preference limit with respect to the final clock round provides an opportunity for bidders to guarantee winning their final clock round packages.

Summary of Comments

Bell, TELUS and WIND supported the proposed activity rule for the supplementary round.

SaskTel proposed that in order to guarantee winning one's final clock package, a bidder should only have to increase the bid amount of its final clock package by the value of the unallocated licences in service areas where it bid in the final clock round. Xplornet supported this proposal.

Rogers expressed concern that the revealed preference constraint with respect to the final clock round would allow bidders to bid on packages of licences they could not win, solely for the purpose of increasing prices for winning bidders; adding that vexatious bidding could distort competition. Quebecor refuted Rogers' position, arguing that the risk of vexatious bids is exaggerated, as no bidder would ever have to pay more than its bid amount.

Rogers and Public Mobile both suggested that the revealed preference constraint should be applied with respect to only the last round in which the bidder was eligible to bid on the given package. This proposal was opposed by Eastlink, MTS Allstream, Quebecor, TELUS and Xplornet, who argued that the revealed preference limit should not be weakened in any way as doing so would result in greater uncertainty for bidders. Quebecor and TELUS added that weaker revealed preference constraints could allow bidders to behave opportunistically, with TELUS stating that the rule proposed in the consultation already provides bidders with sufficient bidding flexibility. Quebecor, along with Eastlink, also argued that the activity rule for supplementary bids should be strengthened to improve the predictability of the auction outcome.

Eastlink, Quebecor, SaskTel and Xplornet indicated their concern that only large bidders would have the financial capacity needed to increase their bids in the supplementary round. In addition, they argued that only larger bidders would have the financial resources available to guarantee winning their final clock package and that even if a smaller bidder were able to submit the required bid increase for the guarantee, this amount would be far less restrictive for a large national bidder given that the increment would be the same for all bidders.

Rogers also commented that it does not support the two exceptions to the proposed supplementary round activity rule and recommended that the revealed preference constraints be applied to all packages, including the final clock package, when it exceeds the bidder's eligibility in the final clock round. This recommendation was supported by Public Mobile but opposed by Bell.

Discussion

The revealed preference limit activity rule in the supplementary round was proposed to motivate truthful bidding throughout the auction, promoting greater price discovery in the clock rounds and greater certainty regarding the auction outcome. This occurs because a bidder's supplementary bids are constrained by its bids in eligibility-reducing clock rounds as well as the final clock round; moreover bidders will not know whether a given round will be the final clock round when placing their bids. In addition, the revealed preference constraint with respect to the final clock round reduces the likelihood that the results of the final clock round will be overturned.

Although the proposed activity rule has several advantages, the high degree of predictability between the final clock allocation and the outcome following the supplementary round could have unintended consequences for bidder incentives in the supplementary round, which could potentially result in a less efficient outcome. On one hand, bidders could have an incentive to place risk-free supplementary bids that have no chance of winning and that serve only to increase the payments of their competitors. On the other hand, because of the strong predictability, bidders may decide that they have no compelling need to submit supplementary bids, which could result in a less efficient outcome.

Consideration of alternative activity rules: During the development of the Licensing Framework for Mobile Broadband Services (MBS) — 700 MHz Band, Industry Canada considered options to address the unintended consequences of the proposed activity rule in the supplementary round, while preserving the strong incentives for truthful bidding throughout the allocation stage. The options considered included the modifications proposed by Rogers and Public Mobile (detailed in paragraph 81 above). The decision was made to adopt an alternative option that combines the activity rule proposed in the consultation with a modification to withhold aggregate demand information from the final clock round until the end of the auction. This rule is expected to provide bidders with strong incentives for truthful bidding during the clock rounds, while reducing a bidder's ability to place risk-free supplementary bids that have no chance of winning and serve only to increase the payments of winning bidders. As a result of this change, bidders will not have the information necessary to determine the amount needed to guarantee winning their final clock packages.

Concerns that the activity rule favours larger bidders: Industry Canada acknowledges the concerns expressed that the bid increment that a bidder could be required to make in the supplementary round to guarantee winning its final clock package could be less restrictive for a larger bidder than for a smaller bidder and has considered other options for the activity rule in the supplementary round. The modification to withhold the final clock round aggregate demand information until the end of the auction is expected to alleviate these concerns, since bidders will not have the information necessary to determine the amount needed to guarantee winning their final clock package.

Concerns about the proposed exception for a bidder's final clock package (Exception 1 in the proposal): The intent of the exception for a bidder's final clock package is to make the process for submitting supplementary bids more intuitive while still encouraging truthful bidding throughout the auction. During the clock rounds, bidders express their preferences for different packages at prices announced by Industry Canada. The exception for the final clock package allows the bidder to submit a bid on its final clock package based on its own valuation, thereby allowing it to place supplementary bids on other packages based on its own valuations as well.

Concerns about the proposed exception for a bidder's final clock package plus unallocated licences (Exception 2 in the proposal): The proposed exception that the final clock package plus unallocated licences only needs to satisfy revealed preference with respect to the final clock round was intended to provide greater flexibility to bidders. However, this proposed exception would no longer be practical with the alternative option considered above, as bidders would not know with certainty which licences are unallocated.

Decision

Based on the above considerations, Industry Canada has decided to use an activity rule that requires that all standard supplementary bids satisfy revealed preference with respect to the final clock round and with respect to all clock rounds where the bidder reduced its eligibility points, beginning with the last clock round in which the bidder was eligible to bid on the package. The only exception is that the supplementary bid for the bidder's final clock package can be of an unlimited amount, unless the final clock package contains no licences (known as the zero package). This exception also applies where a bidder's final clock package exceeds its eligibility in the final clock round due to the revealed preference activity rule. In addition, aggregate demand information from the final clock round will be withheld from bidders.

This is the same activity rule that will be used for the supplementary round of the 700 MHz auction. Further information on the activity rule for the supplementary round can be found in Annex D. As well, a detailed example of the activity rule is included in Annex E and an algebraic description of the revealed preference activity rule is included in Annex F.

4.1.4 Number of Supplementary Bids

Industry Canada indicated that 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. While this was not a proposal, Industry Canada did receive comments on the number of supplementary bids.

Summary of Comments

Rogers submitted that, given the use of Tier 3 and Tier 4 service areas, "the number of packages on which bidders can conceivably bid is astronomical." They argued that the allowable number of supplementary bids does not provide a sufficient number of bids to adequately express the tradeoffs between different combinations of service areas, and indicated that the number of allowable bids could easily be increased to 2,000 supplementary bids (provided there is a maximum of 7 bidders participating in the auction). TELUS also indicated that they would support an increase to the number of bids allowed in the supplementary round.

Both Mobilicity and MTS Allstream opposed Rogers' proposal to increase the limit on the number of bids allowed in the supplementary round, stating that the unfairness to smaller or regional carriers would be amplified by this proposal.

Discussion

In the supplementary round, bidders have the opportunity to submit new package bids or to revise bids for packages made during the clock rounds. Only bids for new packages will count toward the limit on the number of standard package bids allowed in the supplementary round. Clock round bids, whether revised in the supplementary round or not, will not count toward this limit.

Depending on the number of qualified bidders, it may be possible to increase the allowable number of supplementary bids.

Given the number of products available in the auction (106 auction products in 61 service areas), bidders may have to consider a significant number of packages when selecting which packages to submit as supplementary bids. Even with a large number of allowable standard supplementary bids, some bidders may find it difficult to express all of their preferences, which could reduce the efficiency of the auction outcome.

To facilitate bidding on many more packages, Industry Canada is providing bidders with another way to submit supplementary bids, known as OR bidding. OR bidding provides bidders with the opportunity to express their preferences, using individual bids on additional licences, without having to specifically identify each of the packages they are interested in. The use of OR bidding in combination with standard package bidding will provide bidders with greater flexibility and is expected to lead to a more efficient auction outcome. Further details on OR bidding are provided in Annex D, section 10.

Decision

The limit on the number of different packages for which a bidder will be allowed to place standard supplementary bids will be announced after the bidder qualification has occurred but will be no lower than 500 different packages.

In the supplementary round, bidders will be able to use OR bidding to submit bids on packages they are interested in. Further information about OR bidding and the associated activity rules are provided in Annex D.

4.1.5 Assignment Stage

Industry Canada sought comments on the proposal to run product-by-product assignment rounds in descending order of the populations of the associated service areas. In addition, 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 (Region A, B or C), the service areas form a contiguous geographic area, and the winners, and the number of licences they have won, are sufficiently similar across the service areas, according to predefined criteria.

Industry Canada also sought suggestions on alternative methods of conducting the assignment stage, including suggestions for ways to minimize the number of rounds in the assignment stage.

The assignment stage will only be used to determine the specific assignments within the paired category of licences. In the service areas where unpaired licences are available (service areas in Regions A and C), there will only be one licence available for auction and there will be no need for an assignment round.

Summary of Comments

Bell, WIND, Quebecor and Rogers supported the proposal to run product-by-product assignment rounds in descending order of the population of the associated service area(s). Bell, Eastlink and Rogers requested further clarification on the assignment round and on the criteria that would be used to determine whether results of the allocation stage are sufficiently similar to be grouped into a single assignment round.

TELUS did not support the proposed structure of the assignment stage, expressing concern that the proposed sequencing of the assignment rounds would introduce exposure risk for bidders trying to obtain contiguous licences across geographic areas.

TELUS proposed multiple alternatives for the assignment stage, including using a single assignment round for each category of licences, similar to the assignment stage in the 700 MHz auction, or grouping products into multiple assignment rounds based on geographic and population considerations. Rogers proposed a similar alternative structure for the assignment stage, based on larger, Tier 2 geographic considerations. Both Bell and Quebecor supported the proposal by Rogers.

Although supportive of the categories of licences, TELUS also proposed eliminating the generic licences altogether in favour of specific blocks in order to eliminate the need for the assignment stage. This proposal was supported by MTS Allstream.

Discussion

The assignment stage consists of a sequence of rounds in which winning bidders have the opportunity to submit incremental bid amounts to express their preferences for specific frequency assignments within a product and, where possible, across service areas.

The proposed structure of the assignment stage is designed to allow each bidder to know the specific frequencies it has won in the most populated service areas prior to participating in subsequent assignment rounds. This structure would require at most one assignment round for the paired licences in each service area (one round per service area), resulting in up to 61 rounds. Additional rounds may be required if existing licences in the 2500 MHz band are returned to Industry Canada.

Under the proposal, one or more products could be combined into a single assignment round when the products are in the same Region. Products must be in the same Region to be combined since the licences available differ in the service areas of each Region. Furthermore, two or more products could be considered sufficiently similar to be combined if the winners and the number of licences that they have won in these areas are identical or if a single winner in a given service area is replaced by a different winner (or a licence is unallocated) in the other service area(s).

Winning bidders are not required to place bids in the assignment stage as the number of licences they have won has already been determined. However, a bidder is not guaranteed to win the same block(s) across multiple service areas and risks winning different specific licences in each service area. Submitting assignment bids may mitigate this risk.

Exposure risk in the assignment stage: The CCA format eliminates exposure risk since it prevents the possibility that a bidder will win some but not all of the licences needed for its business plan. However, under the proposed structure of the assignment stage, while bidders would be guaranteed contiguous frequencies in a product, they would not be guaranteed the same specific frequencies across multiple service areas (see Section 4.1.5).

The proposed structure of the assignment stage provides the flexibility to assign multiple products within a single assignment round, in a manner that reduces the number of assignment rounds, simplifies bidding in the assignment stage and facilitates the acquisition of identical blocks across multiple service areas. While the products may be combined according to geographic areas, such as provinces and/or Tier 2 service areas, the exact configuration of combined products would be determined upon the completion of the allocation stage. A description and an example of how products could be combined can be found in Section 15 of Annex D.

Alternative structures for the assignment stage: Given the large number of products in the 2500 MHz auction, conducting a single assignment round for many products (grouped either by Tier 2, province, Region or block) during which bidders express their assignment preferences for each product, could be more complex for bidders, could lead to strategic disadvantages for smaller bidders and may not be computationally feasible in many cases. While it may be possible to group two or three products into a single assignment round in order to allow bidders to express their preferences in each product, doing so would not provide an advantage over combining the products into a single assignment round as it would not ensure that bidders would win the same blocks across all service areas being assigned in that round.

Auctioning specific licences rather than generic licences: As mentioned in Section 4.1.1, the use of generic licences reduces the number of combinations that bidders need to consider when placing their bids and enhances substitutability, thereby simplifying the bidding process. Given the number of licences being auctioned (318 licences in total), auctioning specific blocks would increase the complexity of the auction.

Decision

Based on the above considerations, Industry Canada will conduct product-by-product assignment rounds, in descending order of the population of the service areas.

Subject to the contiguity rules outlined in Section 4.1.6, multiple products will be combined into a single assignment round when the products are in the same Region, the products form a contiguous geographic area, and the winners and the number of licences they have won are the same. As well, multiple products may also be combined into a single assignment round when the products are in the same Region, and the winners and the number of licences they have won are sufficiently similar, whether or not the service areas form a contiguous geographic area.

Industry Canada will provide winning bidders with information regarding products that have been combined into a single assignment round following the conclusion of the allocation stage and before the first assignment round.

4.1.6 Contiguity of Licences

Recognizing that using contiguous spectrum is generally more efficient, and thus preferable to fragmented spectrum, Industry Canada proposed that winners of multiple licences would receive contiguous licences within a given product, with the opportunity to express their preference for specific frequencies in the assignment stage of the auction.

Similarly, Industry Canada proposed that if more than one licence within a product remains unallocated at the end of the allocation stage, the unallocated licences would be retained by Industry Canada as a contiguous block. However, Industry Canada also proposed to let the bidding in the assignment stage determine which specific blocks would be retained, rather than to specify the exact blocks that would be retained as unallocated.

Summary of Comments

Bell, Rogers, TELUS and Xplornet supported the guarantee of contiguity for winners of multiple licences within a product. Bell and Rogers added that this guarantee of contiguity should be extended to also include existing holdings within the band. This proposal was opposed by Quebecor and TELUS. Quebecor suggested that this is merely a "nice to have" type of suggestion, and that efficiency within auctioned allocations should take precedence over "cross efficiencies with existing spectrum holdings." TELUS further added that guaranteeing contiguity to existing holdings should be a low priority.

Xplornet supported the proposal to retain unallocated licences as contiguous blocks, while Bell stated that they support this proposal, provided that Industry Canada does not specify which blocks would be retained.

TELUS opposed the proposal to retain unallocated blocks as contiguous, stating that this should be an extremely low priority for Industry Canada since doing so could have an adverse effect on a winning bidder's ability to obtain contiguous licences across service areas. Rogers shared TELUS' concern and added that this proposal should be relaxed where it would prevent bidders from obtaining contiguous blocks across service areas. However, Rogers added that while contiguity within and across service areas are both important, priority should be given to contiguity within a service area.

Discussion

Additional guarantees of contiguity: With the growing importance of spectrum for daily uses there is an increasing demand for its availability. As part of its policy objective, Industry Canada seeks to facilitate the efficient use of this scarce public resource, which includes assigning licences as contiguous when it is possible to do so.

Retaining unallocated licences within a product as contiguous: Retaining unallocated licences as a contiguous block recognizes that contiguity would also be valuable to potential future users of the licences. While this proposal could prevent some bidders from obtaining the same frequency assignment across multiple service areas, it is Industry Canada's understanding that, as noted by Rogers, it is preferable to receive contiguous blocks of spectrum within a service area compared to across service areas. Furthermore, it is expected that the user equipment will likely be able to operate in multiple frequency blocks within the 2500 MHz band.

Decision

In order to encourage the efficient use of spectrum, priority will be given to ensuring that licences within a product are assigned as contiguous whenever possible. The contiguity of assigned licences within a product will be determined as follows:

  1. A bidder that wins more than one licence in the same product in the auction will be assigned these licences as a contiguous block;
  2. A bidder that wins one or more licences in a product where it has an existing licence will have its new licence assigned as contiguous to its existing licence, provided it is feasible to do so after ensuring the first contiguity rule;
  3. Finally, licences that remain unallocated within a product will be retained by Industry Canada as contiguous blocks, provided it is feasible to do so after ensuring the first and second contiguity rules.

Note that these contiguity rules may affect the specific frequency options that are available to bidders in the assignment stage and may prevent bidders from obtaining the same frequency options across service areas. It is also possible that the application of these contiguity rules would prevent Industry Canada from combining some products into a single assignment round.

4.1.7 Pricing Rules

Industry Canada sought comments on the proposal to use a second-price rule to determine the price that winning bidders would be required to pay. 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.

More specifically, Industry Canada proposed to apply bidder-optimal core prices and to use a "nearest Vickrey" approach to determine second prices. In some cases, the second price (Vickrey price) may not be high enough to ensure that there is no alternative bidder or group of bidders prepared to pay more for the licences in question, and so an additional payment above Vickrey prices is required. In the event that such a payment is required, Industry Canada proposed to weight the additional payment in proportion to the winning package sizes, evaluated at the opening bid prices.

Summary of Comments

Bell, Public Mobile, Rogers, TELUS, WIND and Xplornet supported the proposal to use a second-price rule. However, Bell, Public Mobile, Rogers and TELUS did not support how the additional payment would be weighted.

Public Mobile and TELUS suggested that payments should be weighted according to the final bid prices and not based on opening bid amounts.

Bell and Rogers proposed that any additional payment should be split equally among bidders rather than weighted based on package size. Rogers argued that the proposed weighting is not equitable for bidders and that it provides a bidder with a larger package of licences with greater incentive to shade its bids in order to reduce its share of the increase in price due to weighting, which would cause prices to increase disproportionately for bidders with smaller packages of licences. MTS Allstream opposed this proposal.

Mobilicity expressed concern that the second-price rule could create the incentive for bidders to place bids solely to raise prices for winning bidders and that this could lead to price instability in cases where different bidders pay different prices for similar spectrum.

Discussion

A second-price rule was proposed because it promotes a more efficient outcome by increasing the incentive for bidders to bid in a way that is consistent with how they truly value the licences. Bidders, knowing that they will only be required to pay the amount determined by the second-price rule, should have a greater incentive to bid truthfully during the entire auction. This promotes a more efficient auction outcome.

Weighting the additional payments based on the size of the winning package of licences was proposed to ensure that each bidder's share of the additional payment is proportional to the size of its package of licences.

Alternative approaches to weighting prices: Different approaches for weighting the additional payment based on the winning package sizes should give the same or a similar result; however, different approaches may impact the incentive to bid truthfully during the auction. Since opening bid prices are predetermined by Industry Canada, a bidder would only be able to adjust its share of the additional payment by taking the risk that it might lose its preferred package. It is not evident that bidders would be willing to take this risk for an uncertain reduction in their share of the additional payment. Weighting the additional payment using opening bid prices is not expected to influence bidding behaviour.

Splitting additional payments equally: Splitting additional payments equally, as proposed by Bell and Rogers, would favour bidders with large packages of licences, as the additional payment would represent a smaller amount relative to their package size. Moreover, it is unlikely that weighting the additional payment based on the sizes of the winning packages would result in bid shading, given that it would be difficult to predict the combination of packages that would necessitate additional payments, identify the bidders that would be affected and/or to determine the amount of the additional payment required.

Concerns regarding the second-price rule: The second-price rule is used to encourage bidders to bid up to their true valuations during the auction. Given that all bids submitted during the auction are binding, any bidder that places a bid on unwanted licences solely to increase the payments of competitors would risk winning that package of unwanted licences. Withholding the aggregate demand information from the final clock round further increases this risk by creating greater uncertainty about how supplementary bids could affect the final allocation.

Decision

In consideration of the above, Industry Canada will implement the pricing rules as proposed, including bidder-optimal core prices and the use of the "nearest Vickrey" approach to determine prices to be paid. In the event that an additional payment above Vickrey prices is required for base prices, the calculation of the additional payment to be paid by each bidder will be weighted based on the relative size of its winning package of licences, evaluated at opening bid prices. If an additional payment above Vickrey prices is required for assignment prices, the calculation of additional payment to be paid by each bidder will be weighted based on the relative size of the package that the bidder is being assigned in the given assignment round. Further information on the pricing rule is provided in Annex G.

4.1.8 Reserve Bidder

In the consultation paper, a "reserve bidder" approach was proposed to calculate the winning bidders and the base prices to be paid wherein Industry Canada would act as though it were a bidder in the auction, placing a bid on every licence at the opening bid price. This approach would ensure that the incremental amount bid for an additional licence was at least the opening bid price for that licence.

Summary of Comments

Bell, Public Mobile, Rogers and TELUS disagreed with the proposed use of the reserve bidder approach. These respondents argued that the proposal may lead to unsold licences and to bidders paying more than necessary to win the licence(s).

Discussion

The opening bid price for each licence is the minimum amount that Industry Canada will accept for a given licence. The approach proposed by Industry Canada, known as the reserve bidder approach, puts this concept into practice in a CCA by requiring that the incremental amount that a bidder bids on an additional licence must be at least the opening bid price for that licence.

An alternative approach used in some CCAs, known as the "bounds only" approach, only requires that bidders bid at least the sum of the opening bid prices for all licences included in the package. If a bidder places a bid on a package at a price that is higher than the sum of the opening bid prices for these licences, the bidder could potentially add licences to its package without having to increase the total amount bid.

The reserve bidder approach does not favour one particular type of bidder. The bounds only approach implicitly favours bidders with a large package of licences, since bidding above the opening bid price on more licences could make it easier to include additional licences in a package without having to increase the amount bid.

Decision

In consideration of the above, Industry Canada will use the reserve bidder approach, as proposed.

4.1.9 Information Disclosure to Bidders During the Auction

Industry Canada sought comments on the proposal to use anonymous bidding during the clock rounds, revealing to each bidder only its own bid information from the previous round and its eligibility for the next round. All bidders would be informed of the aggregate demand for each product from the previous round as well as the price of each product for the next round.

Industry Canada proposed that all bidders be informed of the number of winning bidders and the total number of licences allocated at the end of the allocation stage. Each bidder would also be informed of its own winning package, along with the base price to be paid.

Industry Canada proposed that participating bidders be notified of the specific licences that they have won and the assignment price to be paid at the end of each assignment round.

Summary of Comments

Public Mobile, Rogers, WIND and Xplornet supported the use of anonymous bidding during the clock rounds, while TELUS indicated that they do not oppose the use of anonymous bidding.

Bell opposed anonymous bidding, arguing that greater information disclosure would promote the efficient assignment of licences since bidders would be able to make more informed bids and would be able to identify combinations that enhance the overall value of the package. MTS Allstream, Public Mobile, Rogers and Xplornet opposed Bell's suggestion to increase the amount of information disclosed during the auction.

Rogers and TELUS proposed that Industry Canada release full information about winning bids and bidders after the conclusion of the supplementary round, in order to facilitate effective bidding in the assignment stage. They added that individual bidders should be told their own price outcomes but that this information should not be shared with other bidders at this stage. Xplornet opposed Rogers' proposal to release full information after the supplementary round.

Discussion

Publication of bidder names and current bids following each round: The proposal by Bell not to use anonymous bidding could result in bidders focusing on the bidding behaviour of other individual bidders, rather than on their own valuations, in relation to the price and demand information. It would also increase the potential for gaming and anti-competitive behaviour, complicating the bidding process for bidders and possibly leading to a less efficient outcome. For these reasons, auctions around the world in recent years have featured anonymous bidding, regardless of the format used.

Information released at the end of the allocation stage: Revealing information about the winning bidders and the packages they have won at the end of the allocation stage (and prior to the assignment stage), as proposed by Rogers and TELUS, could lead to anti-competitive behaviour, such as predatory bidding, in the assignment stage.

Decision

Industry Canada will use anonymous bidding during the clock rounds. Following every clock round, each bidder will be provided its own bid information from the previous round and its eligibility for the next round. In addition, all 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. As indicated in Section 4.1.3, information concerning the aggregate demand from the final clock round will be withheld until the end of the auction.

At the end of the allocation stage, after the results have been verified by a third party, each bidder will be informed of its own winning package, along with the base price to be paid for that package.

Following the end of each assignment round, after the results have been verified by a third party, participating bidders will be notified of the specific licences that they have won and the assignment price to be paid.

At the end of the auction, winning bidders will be notified of the specific licences that they have won and the final prices to be paid (the sum of the base price and assignment price(s)).

4.1.10 Public Information Disclosure

Industry Canada proposed that information on the aggregate demand for each product and the price for each product be made available on its website at the end of each clock round. Industry Canada also proposed that the identities of the winning bidders, their winning packages and the prices to be paid, along with all bidding information, be published following the conclusion of the auction.

Summary of Comments

No comments were received on the proposal to publish information on the prices and aggregate demand in each clock round on Industry Canada's Spectrum Management and Telecommunications website.

Bell, Rogers, TELUS, WIND and Xplornet supported full disclosure of all bids following the auction.

Public Mobile expressed concern that disclosing all bidding information following the end of the auction would reveal sensitive information about valuations and bidding strategies and proposed instead that only winning bidders, the packages won and the prices to be paid should be released following the conclusion of the auction. Quebecor supported this position in its reply comments, stating that a more moderate approach that better protects bidders' strategic information is needed.

Discussion

Given the use of second pricing, anonymous bidding and the limited information provided to bidders during the auction, releasing the proposed information publicly during the auction could provide misleading information about the progress of the auction or the outcome.

Although publishing the results and all bidding information at the end of the auction could result in the disclosure of information that some companies may consider commercially sensitive, this concern is outweighed by the public interest. Full information disclosure allows all interested parties to verify and replicate the results of the auction, facilitating greater transparency of the auction results.

Decision

No information will be released publicly while the auction is underway.

Industry Canada will make the following information publicly available after the conclusion of the auction:

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

4.2 Opening Bids

Industry Canada sought comments on the proposed opening bid prices, which 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 2500 MHz opening bid prices took into account recent market transactions for spectrum licences in Canada, recent prices paid for 2500 MHz spectrum licences assigned in international auctions and the technology ecosystem.

Four price levels were proposed based on Statistics Canada's 33 defined census metropolitan areas (CMAs) and their populations.Footnote 20 For service areas that provide coverage to a CMA and have a population of greater than 2 million, a rate of $0.14/MHz/population (pop) was applied; for those service areas with a population of between 1 million and 2 million, a rate of $0.10/MHz/pop was applied; and for those service areas with a population of 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. The proposed opening bid prices are for spectrum blocks of 20 MHz, and are the same prices for paired and unpaired spectrum within a given service area.

Summary of Comments

Bell, Quebecor and Wind supported the proposed opening bids.

Public Mobile and TELUS, supported by Eastlink and Xplornet, suggested that the opening bid prices were too high, citing lower prices observed in auctions held internationally for similar spectrum. In particular, Public Mobile argued that the proposed opening bid prices could unfairly exclude smaller carriers, while TELUS indicated that, at the very least, lower prices would improve price discovery during the auction.

MTS Allstream argued that opening bid prices should be lowered in Region C (Manitoba), citing the potential management costs necessary to accommodate the presence of users with grandfathered licences.

Rogers stated that the proposed opening bids were set too low and should be increased to near market value in order to mitigate the impact of the spectrum caps, which according to Rogers, artificially limit competition and thus restrict the final price of the spectrum.

Discussion

The determination of the proposed opening bid prices took into consideration recent transactions for 2500 MHz spectrum licences in the Canadian wireless market. The Canadian AWS auction results were used to determine relative prices in each service area. These prices were benchmarked both against reserve prices and final prices of international 2500 MHz auctions. The proposed prices are lower than the average secondary market price for similar spectrum and are in the range of prices in international auctions for 2500 and 2600 MHz spectrum.

General recommendations for lower opening bids: The proposed opening bid prices are supported by recent domestic and international market transactions. Consequently, bidders are not expected to be discouraged from participating in the auction or from bidding for particular licences and there remains opportunity for price discovery in the auction.

Lower opening bid prices for Manitoba licences: All of the licences available in Region C (Manitoba) are currently subject to the operations of grandfathered MCS licences, which may continue to operate indefinitely with protection from harmful interference from BRS users. Although it is difficult to determine how these grandfathered operations would affect the value of Region C licences, a review of secondary market transactions for the 2500 MHz band that included licences in Manitoba, suggests that opening bids for Manitoba licences have been set appropriately.

Increasing opening bids to reflect market value: The objective of the auction is to provide an efficient allocation of the spectrum through a competitive process, with a fair return to Canadians for its use. The proposed opening bid prices were determined using a market based approach and are considered to be high enough to ensure that Canadians receive a fair return for the use of the spectrum.

Decision

Having considered the comments received, Industry Canada has decided that the opening bid prices should be as proposed, as they are considered to reflect a conservative estimate of the market value of the spectrum in each service area, and are set high enough so that Canadians will receive a fair return for the use of the spectrum but not so high as to discourage participation in the auction.

The opening bid prices for the 2500 MHz auction are listed in Table 4. The total amount of the opening bid prices for all spectrum blocks is $251,853,000.

Table 4 — Opening Bid Prices for 20 MHz of Spectrum by Service Area
Service Area # Service Area Name $/MHz/pop Opening Bid ($)
Note: 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 21
3-01Newfoundland and Labrador0.065665,000
3-02Prince Edward Island0.051143,000
3-03Mainland Nova Scotia0.0651,017,000
3-04Cape Breton0.051137,000
3-05Southern New Brunswick0.065223,000
3-06Western New Brunswick0.051221,000
3-07Eastern New Brunswick0.065466,000
3-08Bas du fleuve / Gaspésie0.051300,000
3-09Québec0.12,009,000
3-10Chicoutimi-Jonquière0.065476,000
3-11Eastern Townships0.065703,000
3-12Trois-Rivières0.0651,048,000
3-13Montréal0.1411,773,000
3-14Upper Outaouais0.051126,000
3-15Ottawa / Outaouais0.12,883,000
3-16Pembroke0.051116,000
3-17Abitibi 0.051194,000
3-18Cornwall0.05168,000
3-19Brockville0.05185,000
3-20Kingston0.065227,000
3-21Belleville0.051199,000
3-22Cobourg0.05164,000
3-23Peterborough0.065267,000
3-24Huntsville0.05180,000
3-25Toronto0.1418,606,000
3-26Barrie0.065871,000
3-27Guelph / Kitchener0.065900,000
3-28Listowel / Goderich / Stratford0.051137,000
3-29Niagara-St. Catharines0.065476,000
3-30London / Woodstock / St. Thomas0.0651,077,000
3-31Chatham0.051103,000
3-32Windsor / Leamington0.065504,000
3-33Strathroy0.051174,000
3-34North Bay0.051129,000
3-35Sault Ste. Marie0.051135,000
3-36Sudbury0.065229,000
3-37Kirkland Lake0.051117,000
3-38Thunder Bay0.065289,000
3-39Winnipeg0.12,064,000
3-40Brandon 0.051178,000
3-41Regina 0.065474,000
3-42Moose Jaw 0.051102,000
3-43Saskatoon 0.065728,000
3-44Edmonton0.12,930,000
3-45Medicine Hat / Brooks0.051194,000
3-46Lethbridge0.051180,000
3-47Calgary 0.12,780,000
3-48Red Deer0.051244,000
3-49Grande Prairie0.051189,000
3-50Kootenays0.051137,000
3-51Okanagan / Columbia0.065537,000
3-52Vancouver 0.147,517,000
3-53Victoria 0.065558,000
3-54Nanaimo 0.051190,000
3-55Courtenay0.051117,000
3-56Thompson / Cariboo 0.051183,000
3-57Prince George0.051191,000
3-58Dawson Creek 0.05167,000
4-170Yukon0.05134,000
4-171Nunavut0.05132,000
4-172Northwest Territories0.05142,000
Total for a national licence$66,905,000
Total for all blocks$251,853,000

4.3 Eligibility Points

Each licence has been assigned a specific number of eligibility points. These points are used both in the determination of pre-auction financial deposits and in the activity rules applied during the auction, influencing the bids that bidders can submit. A bidder's initial eligibility is based on its pre-auction financial deposit and defines an upper limit on the number of licences for which the bidder can bid. Subsequent levels of eligibility are based on bids in prior clock rounds.

Industry Canada sought comments on the proposed eligibility points for the licences available in the 2500 MHz auction, which were based on the population in each service area as well as on the relative value of the spectrum.

It was proposed that one eligibility point be assigned per 50,000 in population count in a service area, rounded to the nearest 50,000, for each 20 MHz block of spectrum, and that these points then be adjusted to reflect the relative value of the spectrum licences, as indicated by the opening bid prices.

Summary of Comments

Bell, Quebecor, Rogers, TELUS and WIND all supported the eligibility points as proposed in the consultation.

Public Mobile proposed a standardized structure for eligibility points based solely on the population of the service area. In particular, Public Mobile proposed that population categories be used to assign the eligibility points for different groups of service areas. They also argued that reducing or removing the differentiation between service areas would simplify eligibility points, improve flexibility to substitute between licences and discourage the incentive to bid for packages with many eligibility points in order to maintain flexibility later in the auction, rather than bidding on the most optimal package.

Discussion

The proposed opening bid prices for the 2500 MHz auction are based on an estimate of the population count in each service area as well as on the relative market values for the spectrum. Giving consideration to the relative value of the spectrum in the determination of the eligibility points both supports substitution between licences that are similar in value and enhances price discovery. The proposed eligibility points reflect this approach and are based on the population per service area as well as on the relative value of spectrum, as expressed in the opening bids.

Assigning eligibility points based solely on population: When service areas are assigned eligibility points that are disproportionate to their relative values, there is greater incentive for bidders to adopt a bidding strategy known as parking, where bidders place bids on licences that they are not interested in simply to maintain more eligibility points for later in the auction. Adjusting eligibility points according to the relative values of the licences recognizes that the value of spectrum is not equal across all areas, and more accurately reflects the substitutability of the licences, thereby mitigating the incentive for parking, improving price discovery and promoting a more efficient auction outcome.

Furthermore, as mentioned in Section 4.1.2, the revealed preference activity rule allows bidders to bid on a package of licences that exceeds their current eligibility, provided that the package has become relatively less expensive. As a result, there is less reason for a bidder to maintain excess eligibility points in order to maintain bidding flexibility in later rounds.

Decision

Industry Canada has decided to adopt the eligibility points as proposed. The eligibility points for the 2500 MHz auction are listed in Table 5 (shown below). There are 1,320 eligibility points associated with a 20 MHz national licence, which is comprised of 61 service areas.

Table 5 — Eligibility Points for 20 MHz of Spectrum by Service Area
Service Area # Service Area Name Population* Eligibility Points
* Based on Statistics Canada's 2011 Census
(http://www12.statcan.gc.ca/census-recensement/index-eng.cfm)

Note: 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 22
3-01Newfoundland and Labrador514,64113
3-02Prince Edward Island140,2043
3-03Mainland Nova Scotia786,56720
3-04Cape Breton135,0753
3-05Southern New Brunswick172,3744
3-06Western New Brunswick217,1524
3-07Eastern New Brunswick360,4169
3-08Bas du fleuve / Gaspésie295,5196
3-09Québec1,004,61440
3-10Chicoutimi-Jonquière368,2619
3-11Eastern Townships543,76214
3-12Trois-Rivières810,60921
3-13Montréal4,204,654232
3-14Upper Outaouais124,0112
3-15Ottawa / Outaouais1,441,71857
3-16Pembroke114,1352
3-17Abitibi190,6054
3-18Cornwall67,2071
3-19Brockville84,0682
3-20Kingston175,8014
3-21Belleville196,0214
3-22Cobourg62,6101
3-23Peterborough206,2505
3-24Huntsville78,7902
3-25Toronto6,645,088366
3-26Barrie673,89817
3-27Guelph / Kitchener696,13618
3-28Listowel / Goderich / Stratford134,3843
3-29Niagara-St. Catharines368,1199
3-30London / Woodstock / St. Thomas832,87021
3-31Chatham100,9512
3-32Windsor / Leamington389,72910
3-33Strathroy170,8013
3-34North Bay126,7113
3-35Sault Ste. Marie132,3093
3-36Sudbury177,0045
3-37Kirkland Lake114,9422
3-38Thunder Bay223,8096
3-39Winnipeg1,032,18741
3-40Brandon 174,7813
3-41Regina 366,4139
3-42Moose Jaw100,2922
3-43Saskatoon563,10714
3-44Edmonton1,465,38658
3-45Medicine Hat / Brooks190,9304
3-46Lethbridge 177,3034
3-47Calgary1,390,20655
3-48Red Deer240,3435
3-49Grande Prairie185,9984
3-50Kootenays134,3513
3-51Okanagan / Columbia415,21411
3-52Vancouver2,684,495148
3-53Victoria 431,52011
3-54Nanaimo 186,3964
3-55Courtenay114,6582
3-56Thompson / Cariboo 179,9494
3-57Prince George 187,8024
3-58Dawson Creek 65,5531
4-170Yukon33,5841
4-171Nunavut31,9061
4-172Northwest Territories41,4551
Total for a national licence1,320

5. Bidder Participation

5.1 Affiliated Entities

In its consultation, Industry Canada proposed that the definition of affiliated entities remain essentially as it was for the AWS auction.

Summary of Comments

None of the respondents to this issue suggested changes to this definition.

Discussion

Upon review of the proposed wording, Industry Canada noted that changes could be made to clarify the definition without changing the substance. Specifically, reference to a "person" could be removed and the remaining text simplified.

Decision

Based on the above, the definition of affiliated entities will be modified as follows:

An entity will be deemed to be affiliated with a bidder if it controls the bidder, is controlled by the bidder, or is controlled by any other entity that controls the bidder. "Control" means the ongoing power or ability, whether exercised or not, to determine or decide the strategic decision-making activities of an entity, or to manage or run its day-to-day operations.

The participation rules with regard to affiliated entities will remain unchanged. Therefore, only one member of an affiliate relationship will be permitted to become a qualified bidder in the auction or the affiliated entities may apply to participate jointly as a single bidder. Affiliated entities must decide prior to the application deadline which entity will apply to participate in the auction. All affiliations must be disclosed at the time of the application.

5.1.1 Presumption of Affiliate Status

If a person owns, directly or indirectly, at least 20% of the entity's voting shares (or where the entity is not a corporation, at least 20% of the beneficial ownership in such entity), Industry Canada will generally presume that the person can exercise a degree of control over the entity to establish a relation of affiliation. The ability to exercise control may also be demonstrated by other evidence. Under this rule, Industry Canada may, at any time, ask a prospective bidder for information in order to satisfy any question of affiliation.

Applicants may provide information to Industry Canada to rebut the presumption of affiliate status. On or prior to the application deadline date, applicants must notify Industry Canada in writing if they are rebutting the presumption and must file material that will enable Industry Canada to review the question and make that determination. It is the responsibility of the applicant to file the appropriate material. Such material may include copies of the relevant corporate documentation relating to both entities; a description of their relationship; copies of any agreements and arrangements between the entities and affidavits or declarations, signed by officers from the two entities, dealing with the control as outlined in the definition of "affiliate" in paragraph 190 of the Framework.

Upon receipt of this material, Industry Canada will either make a ruling based on the materials submitted or ask the applicant for further information (and provide a timeline within which to do so).

Should the entities fail to provide the relevant information in a timely fashion in order to allow Industry Canada to complete its determination, the Department may make a ruling on eligibility, based on the above, that the entities in question are affiliated.

5.2 Associated Entities

In support of the stated policy objectives of competition and investment, Industry Canada proposed changes to the definition and treatment of associated entities in its consultation. The spectrum and network efficiencies that can be achieved through various forms of associations and arrangements may help to address the high demand for capacity by customers and the high cost of network deployment.

5.2.1 Definition of Associated Entities

Comments were sought on the following proposed definition of associated entities:

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.

Summary of Comments

Many respondents, including Bell, MTS Allstream, SaskTel, TELUS and WIND, generally supported the proposed definition, with some requesting clarification on the scope.

Bell proposed that only relationships that are legally binding and that would give rise to legal redress in the event of a breach be considered as associated.

Bell, WIND and Xplornet supported the proposal that typical roaming and tower sharing agreements, as well as backhaul agreements, should not cause entities to be deemed associated entities.

Discussion

The suggestion by Bell to only include legally binding agreements could simplify and clarify the process, but is not considered adequate since agreements could be clearly set out, lacking only the final, legally binding signatures. Therefore, informal agreements — whether verbal or in writing — should also be captured by the definition.

In response to comments regarding the types of arrangements that should be included or disclosed, Industry Canada confirms that under the proposed definition, entities are only deemed to be associated with respect to arrangements that relate to the acquisition or use of spectrum in the 2500 MHz band. For example, significant joint equipment purchase agreements and joint backhaul networks would not be captured under the definition unless they relate to the 2500 MHz spectrum.

Typical roaming agreements: In response to other clarification questions on what constitutes a typical roaming agreement, Industry Canada notes that roaming services can be provided through a variety of technical and contractual arrangements between the carriers of the home and the host networks. Before a subscriber can complete a call or data session, the subscriber must be authenticated. Under a typical roaming agreement, the host network identifies the subscriber's home network by means of the subscriber's mobile identity credentials, verifies that a roaming agreement exists with that carrier, and queries the home network to verify that the subscriber's account is current (in some instances, to also obtain information about the subscriber, such as preferred service features). By contrast, agreements with respect to more integrated networks (i.e. where such subscriber authentication, and even the service provision, can be done directly from the core elements of the home network, such as a Multi-Operator Core Network (MOCN)) would not be considered a typical roaming agreement. Bidders that enter into such an agreement with respect to use of the 2500 MHz spectrum would therefore be captured under the definition of associated entities.

Decision

In consideration of the above, associated entities will be defined as proposed:

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, tower sharing, and backhaul agreements would not cause entities to be deemed associated.

5.2.2 Eligibility to Participate Separately in the Auction

Given the above definition, Industry Canada proposed that depending on the nature of the association, associated entities could be permitted to apply to Industry Canada to participate in the auction separately. Along with their application, applicants would be required to submit a narrative description of the nature of the association, which would be assessed to determine whether permitting both entities to participate separately would negatively affect the integrity of the auction process.

Summary of Comments

Many respondents, including Bell, Quebecor, TELUS, WIND, SaskTel and Xplornet, generally supported the proposal that associated entities be permitted to bid separately with some suggested modifications or clarifications.

Eastlink, Public Mobile and Rogers did not support associated entities bidding separately. Public Mobile expressed concerns with regard to the impact of this proposal on competition and choice. Rogers also raised concerns that the proposed changes could threaten the integrity of the auction. Mobilicity did not support this proposal applying to large wireless providers.

Quebecor asked Industry Canada to clarify that the rules accommodate, in a non discriminatory manner, potential associations that could be formed between national carriers, between regional carriers, and between national and regional carriers.

Discussion

In previous auctions, parties that were deemed to be affiliated or associated entities as a result of arrangements relating to the spectrum being auctioned were only permitted to participate in the auction as a single bidder. The intent of this restriction was to preclude a real or perceived cooperation between bidders who may not compete in the auction process and may have an advantage over other bidders. In the consultation, Industry Canada proposed that, similar to the 700 MHz auction, associated entities could participate in the auction separately as long as this would not have an adverse impact on the integrity of the auction.

In response to concerns regarding competition and choice, Industry Canada is aware that, in some cases, carriers have entered into spectrum sharing arrangements for technical and business reasons.

In response to Quebecor's request for clarification that the rules apply in a non discriminatory manner, it should be noted that the proposed rules allowed regional carriers which are associated with carriers that plan to operate in different licence areas, to apply to participate in the auction separately without having to request that the aggregation limits apply separately as long as they comply with the anti-collusion rules. Furthermore, the proposed rules would also allow carriers to form a bidding consortium and to participate in the auction as a single bidder if they wish to coordinate their bids. In such a case, the aggregation limits would apply jointly in each licence area.

It is Industry Canada's view that real or perceived cooperation between associated entities prior to and during the auction could put auction integrity at risk. As a result, Industry Canada will permit separate participation by associated entities, but will preclude actions that could provide an unfair advantage through rules that prohibit collusion (i.e. discussions prior to and during the auction will be highly restricted). All auction participants must comply with the information disclosure rules and the anti-collusion rules set out in this Framework. It should be noted that the rules regarding prohibition of collusion, as set out in Section 5.4, differ from the rules proposed in the consultation and are more consistent with the collusion rules applied in previous auctions. These rules, together with the anonymous bidding rule outlined in Section 4.1.8 of this Framework, will serve to support and maintain auction integrity.

Decision

Based on the above considerations, Industry Canada is of the view that allowing associated entities to bid separately would not have an adverse impact on the integrity of the auction provided that auction participants comply with the information disclosure and anti collusion rules as set out below (Section 5.3 — Auction Integrity and Transparency and Section 5.4 — Prohibition of Collusion). Associated entities may apply to participate in the 2500 MHz auction separately. Industry Canada will review the applications, narratives and supporting documentation, including responses to potential requests for additional information, in order to ensure that the published narratives provide the appropriate level of disclosure and transparency to all bidders.

5.2.3 Eligibility to have the spectrum aggregation limits apply separately

Industry Canada also proposed that associated entities could request that the spectrum aggregation limits apply individually as long as parties intend to compete separately in the applicable licence area(s) and continue to function as competitors to a level satisfactory to Industry Canada. Proposed assessment criteria included "the degree to which the entities would offer branded services, pricing and device selection that are unique from each other." Comments were sought on the proposed approach and assessment criteria.

The consultation also provided details on the application of the spectrum aggregation limit for associated entities. The proposed condition of licence on "Spectrum Aggregation Limits" stated that:

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

Summary of Comments

Individual aggregation limits: Bell, MTS Allstream, Quebecor, TELUS, SaskTel and WIND largely favoured allowing spectrum sharing agreements with the aggregation limits applied individually, as well as the proposed assessment criteria.

Rogers, Eastlink, Mobilicity and Public Mobile opposed the policy change, citing concerns about spectrum aggregation. Some respondents suggested alternatives. For example, Xplornet proposed various aggregation limits for incumbents and non-incumbents.

Rogers raised some concerns that the proposed policy would negatively affect some entities with inter-carrier relationships in a small subset of a licence area. TELUS disagreed with Rogers on this point.

Criteria to consider in determining whether entities are competing: Bell, WIND and Xplornet agreed with the proposed criteria. Mobilicity considered the criteria to be insufficient.

Discussion

One of the major concerns identified was the potential that companies would attempt to use spectrum sharing agreements in a manner that would reduce overall competition in the marketplace.

Currently, spectrum sharing arrangements are permitted in any spectrum band, as long as the licensees — individually and jointly — continue to comply with the rules that are in place, including any relevant spectrum aggregation limits and set-asides. Spectrum sharing arrangements support network and spectrum efficiencies, potentially resulting in better network speeds and coverage for Canadians.

Any use of spectrum by an operator must be authorized under the Radiocommunication Act; therefore, operators who wish to put a spectrum sharing agreement into effect must seek a subordinate licence before operating any of their equipment on another licensee's spectrum.

All transfer requests (which include requests for a subordinate licence) will be subject to review, against criteria discussed in the Framework Relating to Transfers, Divisions, and Subordinate Licensing of Spectrum Licences for Commercial Mobile SpectrumFootnote 23 and set out in CPC-2-1-23Licensing Procedure for Spectrum Licences for Terrestrial Services, as amended from time to time.

However, one concern with respect to spectrum sharing is that it could result in associated entities not providing wireless services. In order to address this risk, Industry Canada proposed in its consultation that if associated entities wish to have the spectrum aggregation limits apply separately, they must submit details of their arrangements for review and decision by Industry Canada.

Another concern is that spectrum sharing agreements could have negative implications for competition in the overall market. Under the Competition Act, the Competition Bureau may review any agreements between competitors that could result in preventing or lessening competition substantially in a market.

Decision

Based on the above considerations, associated entities participating in this licensing process are permitted to request that the spectrum aggregation limits apply individually, prior to or post auction. To obtain approval, entities will be required to demonstrate to Industry Canada's satisfaction that they intend to separately and actively provide services in the applicable licence area, for at least the duration of the spectrum aggregation limits.

Where licensees establish an agreement to share spectrum such that another entity has control over the use of the spectrum, as defined in Section 6.2 – Spectrum Aggregation Limits and Section 6.3 – Licence Transferability, Divisibility and Subordinate Licensing of this Framework, Industry Canada will conduct reviews to determine if the associated entities intend to, and continue to, make use of the 2500 MHz spectrum to actively and independently provide services in the applicable licence area. The onus will be on the associated entities to demonstrate to Industry Canada that this is the case.

Industry Canada's review will not extend to an overall assessment of the effects of the agreement between associated entities on competition in the marketplace.

Assessment factors: Industry Canada will consider a broad range of criteria in order to determine the associated entities' intent and actions to actively and independently provide wireless services. Assessment criteria may include, but will not be limited to:

  • The companies' intent and actions to provide services (coverage) in the area in which the sharing occurs;
  • The level of investment, including in distribution, marketing and customer service, in order to acquire and serve customers; and
  • The companies' demonstration of separate presences in the marketplace.

Documentation: Associated entities will be invited to provide all relevant documentation to Industry Canada in regard to the above-noted assessment factors. These may include, but will not be limited to:

  • All agreements relating to the transfer of, use of and access to the 2500 MHz spectrum;
  • Business plans for the area in which the agreement(s) will provide access to spectrum; and
  • Business and financial results, including investments and customer acquisition.

Industry Canada may request additional documentation to complete its assessment and may require that documents be certified by an officer of the company.

For additional information on the application of the spectrum aggregation limits for associated entities, refer to the condition of licence entitled "Spectrum Aggregation Limits" in Section 6.2 of this document.

Industry Canada notes that requests to have the spectrum aggregation limits apply separately may be submitted at any time up to and including the final application deadline (refer to Section 8.2 — Submissions). However, parties may approach Industry Canada at any time for guidance or for a predetermination as to how their arrangement or proposed arrangement would create an association under these rules. Any guidance or predetermination will not constitute a binding decision; however, potential applicants will benefit from an early opportunity to approach Industry Canada with their proposed arrangements. Associated entities that become licensees may also be subject to further reviews post-auction, in order to demonstrate to Industry Canada's satisfaction that they actively and independently provide services in the applicable licence area and that they remain eligible to have the spectrum aggregation limits apply separately. All transfer requests (which include requests for a subordinate licence) will be subject to review, as set out in Client Procedures Circular CPC-2-1-23 — Licensing Procedure for Spectrum Licences for Terrestrial Services, as amended from time to time. (The spectrum aggregation limit condition of licence is outlined in Section 6.2 of this paper.)

Regardless of any approval by Industry Canada, associated entities are reminded that the provisions of the Competition Act apply independently of, and in addition to, the policy.

5.3 Auction Integrity and Transparency (Information Disclosure Pre-auction)

In order to maintain the integrity of the auction while allowing associated entities to bid separately, the consultation proposed that, prior to the auction, bidders would be required to disclose all associations with other bidders through a narrative describing the key elements and the nature of their association. The submitted narrative would be made available to other bidders and to the public on Industry Canada's Spectrum Management and Telecommunications website prior to the auction. It was also proposed that communications between associated bidders not be permitted during the auction process.

Summary of Comments

Many respondents, including Bell, WIND, SaskTel and Xplornet, expressed concerns about the proposed public disclosure of information regarding the nature of the associations. Concerns included the potential negative impacts on companies' strategies and potential influence on competitors' bidding behaviour in the event that commercially sensitive information was disclosed.

Mobilicity suggested that the documentation regarding associations be subject to a public comment process.

Discussion

Transparency is critical in order to ensure auction integrity. The availability of information related to the associations will provide other bidders with the opportunity to assess both the level of competition to be expected during the auction, and the potential post-auction scenarios, thus increasing their ability to assess the value of the spectrum and to develop bidding strategies.

Industry Canada considers that, in this instance, it is necessary to disclose information on the nature of the association in order to preserve auction integrity. However, the need to protect commercially sensitive information is also recognized. In order to balance these two considerations, only the narrative will be released publicly and a public comment process will not be undertaken. Associated entities may participate in the auction separately if they submit a narrative to Industry Canada for public release, and the Department determines that it provides sufficient information for other bidders to understand the nature of the relationship. For example, the narrative must disclose the parties to the arrangement, whether discussions are preliminary or whether a formal agreement is in place and the subject of the arrangement (i.e. joint backhaul network, etc.)

Decision

Based on the above considerations, associated entities wishing to participate in the 2500 MHz auction separately are required to disclose the names of associated entities within their application and to provide a narrative describing all key elements as well as the nature of the association in relation to the acquisition of the spectrum licences being auctioned and the post auction relationships of the said entities. The relevant entities may be asked to provide copies of related agreements. Confidential and commercially sensitive information regarding agreements between associated entities will not be disclosed by Industry Canada. However, the narrative will be made available on Industry Canada's website prior to the auction.

5.4 Prohibition of Collusion

In the consultation, Industry Canada sought comments on the rules regarding prohibition of collusion 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.

Summary of Comments

Rogers argued that Industry Canada should restrict the ability of associated entities to coordinate their bidding not just during, but in advance of the auction. Rogers expressed concern that the ability of bidders to form arrangements, even before the application date, provides them with an extraordinary advantage over independent bidders. Rogers also proposed that the application form declaration require bidders to clearly state that they have made no arrangements whatsoever prior to filing. Xplornet noted the need to establish rules prohibiting collusion leading up to and during the auction to prevent any sharing of information.

Quebecor proposed that associated entities be permitted to discuss bidding strategies prior to and during the auction in order to realize the full benefits of the association, providing they participate as a single bidder. In its reply comments, TELUS supported Quebecor's proposal. Quebecor also agrees that spectrum aggregation limits would apply separately where associated entities can demonstrate that they intend to compete in the retail marketplace. Xplornet was of the view that Industry Canada should require bidders to bid jointly as associated entities. Xplornet proposed that if bidding separately, there can be no sharing of information prior to or during the auction.

Mobilicity contended that associated and affiliated entities should be permitted to undertake discussions prior to and during the auction period, however opposed the proposal that associated entities be permitted to have the spectrum aggregation limits applied separately.

Other respondents, including Bell TELUS and WIND, generally expressed support for the option proposed in the consultation paper.

Discussion

Anti-collusion rules prohibit communications between bidders in order to prevent an unfair advantage for one or more bidders as a result of information sharing.

Under the proposal, associated bidders would have been able to share bidding strategies prior to the application date. Stakeholders suggested that this could provide a significant advantage in information and valuation over other bidders.

Based on the above concerns and consistent with the approach taken in the 700 MHz auction, Industry Canada has determined that such an advantage could threaten the integrity of the auction. As a result, communications will be more restricted than they were initially proposed. Under the anti-collusion rules, any discussion between separate bidders prior to the auction that would provide insights into bidding strategies, including reference to preferred blocks, technologies or valuations, will be precluded. Conversely, two or more carriers forming a bidding consortium and participating in the auction as a single bidder would not be precluded from such discussions. Entities that bid together in the auction (e.g. as a consortium) will be bound by a single spectrum cap.

Although restricting discussions both prior to and during the auction process means that bidders would lose the full advantage of forming associations prior to the auction, it is necessary in order to maintain auction integrity. Furthermore, bidders can avail themselves of the full advantage of forming associations after the auction.

Decision

In consideration of the above, the rules on prohibition of collusion will apply as follows:

All applicants, including affiliated and associated entities, are prohibited from cooperating, collaborating, discussing or negotiating agreements with competitors, relating to the licences being auctioned or relating to the post-auction market structure, including frequency selection, bidding strategy and post-auction market strategy, until after the public announcement of provisional licence winners by Industry Canada.

Prospective bidders will note that the auction application forms contain 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 or its affiliates, which could potentially be a bidder in this auction based on its qualifications, abilities or experience.

Prospective bidders should note that the definition of "affiliate" for the purposes of this licensing process (defined by reference to "control in fact") differs from "affiliate" for the purposes of the Competition Act. The provisions of the Competition Act apply independently of, and in addition to, the policies contained in this Framework.

5.4.1 Communication During the Auction Process

In order to preserve the integrity of the auction process, any communications from an applicant, its affiliates, associates or beneficial owners or their representatives that discloses or comments on bidding strategies, including but not limited to the intent of bidding and post-auction market structures, shall be considered contrary to this Framework and may result in disqualification and/or forfeiture penalties. Statements that indicate national or particular licence areas of interest will generally be found to be in contravention of the rules on prohibition of collusion. This will include communications with or via the media. This prohibition of communication applies until the public announcement of provisional licence winners by Industry Canada.

Prior to the auction, an applicant who wishes to participate separately in the licensing process may approach another potential bidder to discuss a joint infrastructure build, a joint equipment purchasing agreement or a potential spectrum sharing agreement under the circumstances outlined in the following two paragraphs:

Once a consortium has been established and if the entities within that consortium have had communications that contravene the anti-collusion rules, these entities would no longer be eligible to participate separately in the auction. The same entities would therefore no longer be deemed competitors for the purpose of the auction, and discussions regarding issues such as bidding strategies could then take place. Should the consortium be dissolved prior to the auction, only one of the entities would be eligible to participate in the auction, and all parties would continue to be subject to the prohibition of collusion rules. The same restrictions apply to entities that have had unsuccessful discussions regarding the formation of a consortium to bid as a single bidder.

Where communications that fall within the definition of associated entities have taken place, the nature of the association must be disclosed. Entities applying to participate separately are required to make a declaration that they have 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 competitor will or will not bid. In the case where discussions that contravene the prohibition of collusion rules have occurred, the entities would only be permitted to participate in the auction as one single bidder, or only one of the entities could participate.

5.4.2 Discussion Regarding Beneficial Ownership

Information regarding the beneficial ownership of each applicant will be made publicly available so that all bidders have knowledge of the identity of other bidders. Any discussions involving two bidders or any of their affiliates or associates regarding an addition or a significant change of beneficial ownership of a bidder, from the receipt deadline for applications until the public announcement of provisional licence winners by Industry Canada, would fall into the area of prohibited discussions and would be considered contrary to the auction rules.

However, an applicant may discuss changes in beneficial ownership with parties who are completely unrelated to other applicants, as long as:

  • Any change to the beneficial ownership of the applicant that provides a new party with a beneficial interest or which significantly alters the beneficial ownership structure is effected at least 10 days before the commencement of bidding; and
  • The applicant informs the Minister of Industry immediately in writing of any change in beneficial ownership, which will be reflected in its published qualified bidder information on Industry Canada's Spectrum Management and Telecommunications website.

Bidders must cease all such negotiations at least 10 days before the commencement of bidding until the public announcement of provisional licence winners by Industry Canada.

5.4.3 Discussions on Tower Sharing

The prohibition of communication includes discussions about tower and site sharing with respect to the licences that are the subject of this auction until the receipt deadline for payment of winning bids. Discussions concerning new arrangements or the expansion of existing sharing arrangements that relate to spectrum outside of the 2500 MHz auction process are not prohibited.

5.4.4 Communication with Local Exchange Carriers

The prohibition of communication includes discussions regarding interconnection services with a local exchange carrier (LEC) that is a qualified bidder (or one of its affiliates/associates) in this auction, where the services relate to spectrum in the 2500 MHz band.

5.4.5 Consulting Services, Legal and Regulatory Advice

Separate bidders may not receive consulting advice from the same auction consulting company. Separate bidders may receive legal and regulatory advice from the same law firm provided that the law firm complies with the conflict of interest and confidential information requirements of the applicable law society and that the applicants otherwise comply with the provisions set forth in this document.


6. Conditions of Licence for Spectrum in the 2500 MHz Band

The conditions outlined in this section will apply to all licences issued following the auction process described in this paper. Section 7 will discuss the conditions of licence for existing 2500 MHz BRS licences.

It should be noted that the licences are subject to the relevant provisions in the Radiocommunication Act and the Radiocommunication Regulations, as amended from time to time. For example, the Minister continues to have the power to amend the terms and conditions of spectrum licences (Section 5(1)(b) of the Radiocommunication Act). The Minister may do so for reasons including furtherance of the policy objectives set out in Section 7 of the Telecommunications Act and the policy objectives related to this band as set out in SMSE-002-12 Policy and Technical Framework: Mobile Broadband Services (MBS) — 700 MHz Band, Broadband Radio Service (BRS) — 2500 MHz Band. Such action would normally only be undertaken after consultation.

Licensees must be fully aware of their obligations with respect to licence terms and conditions. Industry Canada will monitor compliance and take any necessary action to ensure compliance and to enforce the provisions of the Radiocommunication Act and the Radiocommunication Regulations.

6.1 Licence Term

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

Summary of Comments

The majority of respondents that commented on this issue — including Bell, Eastlink, MTS Allstream, Mobilicity, Rogers, SaskTel, TELUS, WIND and Xplornet,—supported the proposed 20-year licence term.

Drs. Taylor and Middleton from Ryerson University disagreed with the proposed term. Their concern was that the current rate of development in wireless technology is too fast and unpredictable to commit Canadian frequencies for such an extended period of time. Drs. Taylor and Middleton also commented that a 20-year term runs contrary to the sole remaining policy objective of the Spectrum Policy Framework for Canada: "To maximize the economic and social benefits that Canadians derive from the use of the radio frequency spectrum resource."Footnote 24

Discussion

The revised Framework for Spectrum Auctions in Canada, published in March 2011, states that Industry Canada is adopting a flexible approach in determining licence terms (up to 20 years) based on the specific spectrum being offered.

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.

Concerning the expected spectrum usage for the economic and social benefits of Canadians, Industry Canada notes that the benefits of the increased certainty mentioned above will encourage further investment in networks that provide services to Canadians.

The 2500 MHz band will 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 developments in technology or changes to another use that is incompatible with mobile broadband.

Decision

In light of the above, auctioned spectrum licences in the 2500 MHz band will have a licence term of 20 years. The 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.

The process for issuing licences after this term and any issues relating to renewal, including the terms and conditions of the new licence, will be determined by the Minister of Industry following a public consultation.

6.2 Spectrum Aggregation Limits

Competitive measures with regard to the 2500 MHz band were announced in SMSE-002-12 Policy and Technical Framework: Mobile Broadband Services (MBS) — 700 MHz Band, Broadband Radio Service (BRS) — 2500 MHz Band. Industry Canada sought comments on the proposed wording of the condition of licence related to the spectrum aggregation limit 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.

Summary of Comments

Mobilicity, SaskTel, MTS Allstream, SSI and WIND agreed with the proposed wording. TELUS proposed some minor modifications to the wording in order to improve clarity.

Discussion

TELUS proposed edits to the wording of the condition of licence regarding changes to a licensee's ownership and control structure. Industry Canada agrees that the proposed changes would provide additional clarity to the condition of licence without changing its meaning. The wording of the condition was also modified to preclude any agreements that would result in the licensee having a right or interest in spectrum in excess of the spectrum aggregation limit for as long as the limit is in place.

Decision

Based on the considerations stated above, the wording for the 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 will continue for five years from the date of licence issuance. 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 of a licensee or any other agreement that has the effect of granting a right or interest in a 2500 MHz licence 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 the spectrum aggregation limit. Such a request must be made in advance for any proposed transactions within its knowledge. 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.

As noted in Section 5.2.3, associated entities requesting that the spectrum aggregation limit be applied individually rather than jointly must demonstrate to the satisfaction of Industry Canada that they will be actively and independently providing services to customers in the applicable service area for at least the duration of the spectrum aggregation limit.

Where licensees establish an agreement to share spectrum such that another entity has control over the use of the spectrum, a subordinate licence is required. This requirement applies to all spectrum sharing arrangements, whether the arrangement is established post-auction or was established and disclosed prior to the auction. Generally, a subordinate licence will count towards the spectrum aggregation limit in a service area. However, for the 2500 MHz spectrum auctioned through this licensing process, 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 actively and independently providing services to customers in the applicable service area, as discussed in Section 6.3.

6.3 Licence Transferability, Divisibility and Subordinate Licensing

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 Industry Canada's approval and subject to the conditions stated on the licence and other applicable regulatory requirements.

In its consultation, Industry Canada proposed 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.

Summary of Comments

Bell, Rogers, SaskTel and Xplornet generally supported the proposed wording.

TELUS proposed changes to the title and the text of the condition of licence in order to provide clarity. Bell disagreed with TELUS' suggestion to change the title to include "and Subordinate Licensing." However, it supported TELUS' suggested changes to the text.

Mobilicity requested that rules pertaining to transfer or divisibility of the 2500 MHz spectrum not impede the ability of the AWS new entrants to transfer or divide any 2500 MHz spectrum at the same time as they transfer their AWS spectrum, should such a transfer be part of a single transaction.

WIND proposed amendments to ensure that rollout conditions do not form part of the evaluation of the transfer request if the target date for the rollout has not yet arrived.

MTS Allstream and Mobilicity argued that subordinate licence agreements within the first five years should count towards a licensee's spectrum aggregation limits whereas Xplornet supported the proposal as long as the Department does not permit 2500 MHz spectrum transfers to non-arm's length parties at preferred rates for the purposes and effect of avoiding the spectrum aggregation limits.

Additional comments were received which were outside of the scope of the consultation, as they dealt with issues that extend beyond the 2500 MHz band or proposed changes to decisions already announced in SMSE-002-12 Policy and Technical Framework: Mobile Broadband Services (MBS) — 700 MHz Band, Broadband Radio Service (BRS) — 2500 MHz Band.Footnote 25

Discussion

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 generally not permitted where they will result in a licensee exceeding the spectrum aggregation limit. In addition, all transfer requests will be subject to review, in accordance with CPC-2-1-23, Licensing Procedure for Spectrum Licences for Terrestrial Services, as amended from time to time, in order to mitigate against undue spectrum concentration.

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 spectrum. For further information on these requirements, refer to CPC-2-1-23, Licensing Procedure for Spectrum Licences for Terrestrial Services, as amended from time to time.

Industry Canada also proposed in its consultation that subordinate licences may not count towards the licensee's spectrum 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.

Industry Canada recently reviewed its policies and procedures surrounding the issue of licence transfers. This is discussed in detail in the DGSO-003-13, Framework Relating to Transfers, Divisions and Subordinate Licensing of Spectrum Licences for Commercial Mobile Spectrum.Footnote 26 Following the release of that framework, Industry Canada released a revised version of CPC-2-1-23, Licensing Procedure for Spectrum Licences for Terrestrial Services, and an amended condition of licence (applicable in commercial mobile services bands) which took immediate effect with regard to existing BRS licences. This decision supersedes the condition of licence proposed in the 2500 MHz consultation paper.

Decision

In consideration of the above, the condition of licence on transferability and divisibility will apply as follows:

This licence is transferable in whole or in part (divisibility), in both bandwidth and geographic dimensions, subject to Industry Canada's approval. A subordinate licence may also be issued in regard to this licence, subject to Industry Canada's approval.

The licensee must make the transfer request in writing to Industry Canada. The transfer request will be treated as set out in Client Procedures Circular CPC-2-1-23, Licensing Procedure for Spectrum Licences for Terrestrial Services, as amended from time to time.

The licensee must apply in writing to Industry Canada for approval prior to implementing any deemed transfer, which will be treated as set out in CPC-2-1-23. The implementation of a deemed transfer without the prior approval of Industry Canada will be considered a breach of this condition of licence.

Should the licensee enter into any agreement that provides for a prospective transfer with another holder of a licence for commercial mobile spectrum (including any affiliate, agent or representative of the other licence holder), it must apply in writing to Industry Canada for review of the prospective transfer within 15 days of entering into the agreement, which will be treated as set out in CPC-2-1-23. Should Industry Canada issue a decision indicating that the prospective transfer is not approved; it will be a breach of this condition of licence for a licensee to remain in an agreement that provides for the prospective transfer for a period of more than 90 days from the date of the decision.

In all cases, the licensee must follow the procedures as outlined in CPC-2-1-23.

The terms "affiliate"; "agreement"; "deemed transfer"; "licence"; "prospective transfer"; "subordinate licence"; and "transfer request" have the meaning ascribed to them in CPC-2-1-23.

Subordinate licences will generally count towards the subordinate licensee's spectrum aggregation limit unless the primary licensee and the subordinate licensee demonstrate to the satisfaction of Industry Canada that they will be separately and actively providing services to customers in the applicable licence area. Where approval for a subordinate licence that would otherwise exceed the spectrum aggregation limit is granted, licensees must implement their plans to the satisfaction of Industry Canada for at least the duration of the aggregation limits that are in place. Any modifications to these plans must be submitted to Industry Canada for approval.

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 criteria to be considered in determining whether the companies intend to actively and independently provide services to customers in the applicable licence area are included in Section 5.2.3, Eligibility to have the spectrum aggregation limits apply separately, of this Framework. The ongoing requirement to compete for at least the duration of the spectrum aggregation limits will become a condition of licence specific to the licensees involved.

In addition, all transfer requests will be subject to review, based on CPC-2-1-23, Licensing Procedure for Spectrum Licences for Terrestrial Services. The review will take into consideration decisions released in the Framework Relating to Transfers, Divisions and Subordinate Licensing of Spectrum Licences for Commercial Mobile Spectrum.Footnote 27

These requirements are subject to revision and amendment for reasons including furtherance of the policy objectives related to the 2500 MHz band. Agreements regarding licence transfers are also subject to the provisions of the Competition Act.Footnote 28

6.4 Eligibility

As stated in the consultation, spectrum licences generally contain an eligibility condition of licence that reads 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 which would have a material effect on its eligibility. Such notification must be made in advance for any proposed transaction within its knowledge.

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

Summary of Comments

All respondents that commented on this issue agreed with the proposed wording.

Discussion

On June 29, 2012, the Telecommunications Act was amended to lift foreign investment restrictions for telecommunications companies with annual revenues from the provision of telecommunications services in Canada that represent less than 10% of the total annual revenues from such services in Canada, as determined by the Canadian Radio-television and Telecommunications Commission (CRTC).Footnote 29 The total annual revenue from the provision of telecommunications services in Canada is published annually by the CRTC in its Communications Monitoring Report. Industry Canada will review Client Procedures Circular CPC-2-0-15, Canadian Ownership and Control, to clarify the effects on spectrum licence holders operating under the Radiocommunication Act and Radiocommunication Regulations.

Decision

In consideration of the above, and noting that the text could be further simplified with no impact on licensees, the condition of licence will be stated as follows:

The 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. Where information is required related to reviewing eligibility, licensees should refer to Client Procedures Circular CPC-2-0-15, Canadian Ownership and Control, as amended from time to time.

6.5 Treatment of Existing Spectrum Users

For information regarding existing licensees in the 2500 MHz band, see Section 3.4 of this document. In the consultation, Industry Canada proposed the following wording for the condition of licence on the treatment of existing spectrum users.

The licensee must comply with all displacement and/or transition policies set out in SMSE-005-11, 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.

Summary of Comments

All respondents who commented on this issue, with the exception of the Kativik Regional Government, agreed with the proposed wording.

In their submission, the Kativik Regional Government expressed concern that they could be displaced prior to the end of their obligation, under the Broadband Canada: Connecting Rural Canadians program, to provide broadband Internet services to these communities until the end of 2016.

Discussion

The Kativik Regional Government has been operating through an agreement with Inukshuk. The partner's in Inukshuk, Bell and Rogers, will continue to have access to a total of 65 MHz of BRS spectrum in the Kativik region.

In the Consultation on a Licensing Framework for Broadband Radio Service (BRS) — 2500 MHz Band document, the proposed wording referred to SMSE-005-11 but should have referred to both SMSE-005-11 and DGSO-001-10. Both documents have been referenced in the condition of licence, shown below.

Decision

In consideration of the above, the condition of licence will be stated as follows:

The licensee must comply with all displacement and/or transition policies set out in SMSE-005-11, 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 DGSO-001-10, Decisions on the Transition to Broadband Radio Service (BRS) in the Band 2500-2690 MHz and Consultation on Changes Related to the Band Plan.

6.6 Radio Station Installations

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

Summary of Comments

All respondents who commented on this issue agreed with the proposed wording for the condition of licence.

Decision

In accordance with the above, the condition of licence will be stated as follows:

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

6.7 Provision of Technical Information

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

Summary of Comments

All respondents who commented on this issue agreed with the proposed wording for the condition of licence.

Decision

In consideration of the above, the condition of licence will be stated 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 in the request. 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.

6.8 Compliance with Legislation, Regulation and Other Obligations

Industry Canada sought comments on the proposed wording for the condition of licence related to the compliance with legislation, regulation and other obligations.

The proposed wording was 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 these bands, as amended from time to time.

Summary of Comments

All respondents who commented on this issue agreed with the proposed wording.

Discussion

Licensees are required to abide by the requirements set out for use of the radio frequency spectrum in general and for the specific frequency band being licensed. These requirements are fundamental, and in some cases, they are legislative requirements.

Upon further review of this condition of licence, Industry Canada is of the view that removing the reference to the International Telecommunication Union's (ITU) Radio Regulations from the proposed wording would clarify the text. Although conformity with respect to the ITU's Radio Regulations and related international agreements continues to apply to Canada, the relevant requirements for licensees are included in the Canadian Table of Frequency Allocations and Canada's Radiocommunication Regulations, as well as Industry Canada policies and conditions of licence.

Decision

In consideration of the above, the condition of licence will be stated as follows:

The licensee is subject to, and must comply with, the Radiocommunication Act and the Radiocommunication Regulations, as amended from time to time. 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. The licence is issued on condition that all representations made in relation to obtaining this licence are all true and complete in every respect.

6.9 Technical Considerations, and International and Domestic Coordination

Industry Canada sought comments on the proposed wording for the condition of licence related to the technical considerations and international and domestic coordination.

Summary of Comments

All respondents who commented on this issue agreed with the proposed wording for the condition of licence.

Discussion

Industry Canada will work with the Radio Advisory Board of Canada to revise and develop the 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 comply with obligations arising from applicable international coordination agreements and arrangements between Canada, the United States and other foreign administrations.

Decision

In consideration of the above, the condition of licence will be stated as follows:

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 between Canada and 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 through the appropriate SRSP to furnish all necessary technical data for each relevant site.

6.10 Lawful Intercept

Industry Canada sought comments on the proposed wording of the condition of licence related to lawful intercept requirements. The proposed condition included changes to bring the wording in line with current technologies, namely by updating references to "circuit-switched voice telephony" technology.

The proposed wording read as follows:

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

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

Summary of Comments

All respondents who commented on this issue disagreed with the proposed changes. Many respondents referred to, and agreed with, comments submitted by the CWTA, which noted that replacing "circuit-switched telephony systems" with "interconnected radio-based transmission facility for compensation" would open up additional services such as Internet, cable and broadcasting to interception requirements. The CWTA also noted that such changes would be more appropriately made through federal legislation or through pending revisions to the Solicitor General's standards as proposed by Public Safety Canada.

Discussion

The condition of licence on lawful intercept was first introduced in 1996 for Personal Communications Services (PCS) spectrum licences. Since then, this condition has been applied to most spectrum licences where the licensee was a radiocommunication carrier, as this is the only class of licensee that carries public traffic to and from the public networks (telephone and Internet).

The rationale for removing the reference to a specific technology was to ensure that the requirement would remain meaningful in a Long Term Evolution (LTE) network environment, which uses packet-switched based technology instead of circuit-switched technology. The intent was not to expand the requirement to additional services.

Given the above, Industry Canada notes that removing the reference to "circuit-switched" while maintaining the reference to "voice telephony systems" would serve the original intent while effectively maintaining the scope of the condition, similar to that of other services (namely the requirement to intercept voice communications).

Furthermore, the term "radiocommunication carrier" is being replaced with "telecommunication common carrier" to ensure consistency with the Telecommunications Act and related regulations, noting that both terms have similar definitions.

Decision

In consideration of the above, the condition of licence will be stated as follows:

The licensee operating as telecommunication common carrier using the spectrum for 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 of time. 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.

6.11 Research and Development

Industry Canada sought comments on the proposed wording of the condition of licence related to research and development (R&D).

Comments

Bell, the CWTA, WIND, MTS Allstream, Public Mobile, Quebecor, Rogers, SaskTel, TELUS, and Xplornet opposed this condition and requested that it be eliminated.

Rogers proposed that, if the condition were to be maintained, licensees should be provided with an alternative option of investing an equivalent amount in the expansion of their networks in non-urban areas. In its reply comments, Bell supported Rogers proposal.

The Kativik Regional Government noted that the blanket requirement to invest in research and development places a disproportionate burden on operators in high cost areas.

Discussion

The decision with regard to the condition of licence on research and development which applies to spectrum licences in various bands will be announced through a separate decision paper. Therefore, until such a time as a decision is released, the R&D condition of licence will apply to spectrum licences in the 2500 MHz band, as proposed in the consultation, but may be amended during the licence term.

Decision

In consideration of the above, the condition of licence will be stated 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).

6.12 General Deployment Requirement

In SMSE-002-12, Industry Canada announced that a general deployment requirement will apply to licensees in the 2500 MHz band. Through the current consultation, comments were sought on the details of this requirement, including the proposed population coverage of between 10% and 50%, depending on the specific licence area and the proposed 10-year time frame by which the requirement must be met.

Summary of Comments

Agreement: Bell, Rogers, SaskTel and WIND all agreed with the proposed condition.

Requests for shorter time frames: TELUS commented that the proposed requirements were not ambitious enough and could result in a lack of balance between the build/roam incentives. TELUS proposed that that the time frames for fulfilling the requirements be accelerated from ten to five years. MTS Allstream and Xplornet also supported an accelerated deployment time frame of five years.

Disagreement with proposed levels: The Kativik Regional Government noted that providers could satisfy deployment requirements in service area 3-17 without serving any part of Nunavik. They did not propose a change to the deployment levels, but suggested changes to the licence areas.

Compliance measures: TELUS proposed two additional clauses in the instance of failure to meet the requirement: (a) that any licensee seeking in-territory roaming should be required to subordinate its 2500 MHz licence, and (b) that any licensee failing to meet the requirements, including marketing the service, should be forced to sell the spectrum on the secondary market or return it to Industry Canada.

Discussion

Objective: The objective of this general deployment requirement is to ensure that the 2500 MHz spectrum, a highly valued public resource, is deployed in a timely manner.

Proposed levels and compliance measures: 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. Prior to the AWS auction, the deployment requirement was to 50% of the population in each 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. In its consultation, Industry Canada proposed that the AWS levels be used as deployment requirements for the 2500 MHz licences and that licensees be required to reach these levels within 10 years of the licence issuance. This would allow market forces to determine the best pace of deployment while providing an opportunity to intervene if the spectrum were left unused for an extended period of time. The issue of service areas was addressed in the previous consultation, and a decision has already been made.

Impact of shorter time frames: Industry Canada notes that reducing the timeline to meet the requirement is not expected to have any impact on incumbent licensees, as they likely have infrastructure in place and the financial capacity to meet a general deployment requirement. However, a five-year deployment requirement is similar to the timelines by which licensees holding AWS spectrum are required to fulfill the AWS general deployment requirements. This would be particularly burdensome for those licensees that are required to deploy new tower and backhaul infrastructure to meet their AWS requirements. Reducing the timeline would likely have an even greater impact on any new carriers acquiring 2500 MHz spectrum as they may not have any infrastructure in place.

Upon further review of the condition of licence, and in consideration of the policy objectives stated in SMSE-002-12, Industry Canada has further clarified that the objectives are to help to ensure that spectrum is deployed in a timely manner for the benefit of Canadians living in each service area. The following sentence will therefore be added to the proposed condition of licence: "When the spectrum is put to use, it shall be used to provide services predominantly to Canadians within the service area."

Decision

In consideration of the above, the condition of licence will be stated as follows:

Licensees will be required to demonstrate to the Minister of Industry that this spectrum has been put to use, as specified in Table 6 of this Framework, within 10 years of the initial issuance of the licence. When the spectrum is put to use, it shall be used to provide services predominantly to Canadians within the service area.

Where the 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. Deployment by a subordinate licensee will count towards the requirement of the primary licensee.

Table 6 — General Deployment Requirements
Tier 3 Service Area Name Minimum Population Coverage*
* Based on most recent census information available at the time of assessment
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%
3-43 Saskatoon 40%
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%

6.13 Mandatory Antenna Tower and Site Sharing

Industry Canada sought input from stakeholders on the implementation of changes proposed to the mandatory antenna tower and site sharing conditions of licence through a separate process announced through Canada Gazette notice DGSO-001-12, Proposed Revisions to the Frameworks for Mandatory Roaming and Antenna Tower and Site Sharing.Footnote 30

The subsequent Revised Frameworks for Mandatory Roaming and Antenna Tower and Site Sharing, announced in March 2013 through Canada Gazette notice DGSO-001-13, sets out the modifications to 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 and CPC-2-0-18, Industry Canada's Arbitration Rules and Procedures.

Summary of Comments

None of the respondents who commented on this issue proposed any changes to the wording of this condition of licence.

Some respondents also took the opportunity to reference their comments submitted through DGSO-001-12. These comments were outside the scope of this consultation.

Discussion

The related decisions were announced in DGSO-001-13, Revised Frameworks for Mandatory Roaming and Antenna Tower and Site Sharing, along with the incorporation of text from GL-06, Guidelines for Compliance with the Conditions of Licence Relating to Antenna Tower and Site Sharing and to Prohibit Exclusive Site Arrangements and from the Responses to Questions for Clarification on the AWS Policy and Licensing Frameworks. The decisions are reflected in Issue 2 of CPC-2-0-17 and Issue 2 of CPC-2-0-18. GL-06 has been rescinded with the publication of Issue 2 of this CPC-2-0-17.

Decision

In consideration of the above, the condition of licence will be stated as follows:

The licensee 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.

6.14 Mandatory Roaming

Industry Canada sought comments from stakeholders on the implementation of changes proposed to the mandatory roaming condition of licence via a separate process announced through Canada Gazette notice DGSO-001-12.Footnote 31

The subsequent Revised Frameworks for Mandatory Roaming and Antenna Tower and Site Sharing, announced in March 2013 through Canada Gazette DGSO-001-13, sets out the modifications to 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 and CPC-2-0-18, Industry Canada's Arbitration Rules and Procedures.

Summary of Comments

None of the respondents who commented on this issue proposed any changes to the wording of this condition of licence.

Some respondents also took the opportunity to reference their comments submitted through DGSO-001-12. These comments were outside the scope of this consultation.

Discussion

The related decisions, including the applicability of the mandatory roaming condition to the 2500 MHz band, were announced in DGSO-001-13.

Decision

In consideration of the above, the condition of licence will be stated 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.

6.15 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.

Industry Canada sought comments of the proposed wording of the condition of licence 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

Summary of Comments

Rogers, WIND, SaskTel and Xplornet agreed with the proposed wording. MTS Allstream also supported the wording with the exception of the R&D requirement.

Bell argued that the annual report should be streamlined to reduce the administrative burden on licensees and the Department. Bell also raised concerns regarding the 120-day limit for filing the annual report and requested that the company be allowed to continue its long-standing practice of filing within 180 days of its fiscal year-end. TELUS supported Bell's proposal that the condition of licence allow for annual reports to be filed within 180 days of the licensee's fiscal year-end.

Bell and TELUS disagreed with the requirement to break down their deployment reports by licence. Bell recommended that licensees be able to address the licensee's total operating area, whereas TELUS recommended that the deployment level for "each licence area" be changed to "the most rolled up tier level that an operator holds," with Industry Canada reserving the right to ask for more detail. TELUS noted that overall usage across a larger geographical area demonstrates a more complete picture of how the spectrum is being used.

Discussion

The purpose of the annual report is to provide basic information on spectrum use and existing company reports. This provides valuable information without requiring extensive report generation by licensees.

To date, the 120 day time limit after the licensee's fiscal year-end to submit its annual report has been sufficient for the majority of licensees reporting in other bands. Therefore, Industry Canada does not consider that an extension to 180 days is necessary. Where a licensee is unable to submit its annual report within this time frame, it may request an approval for an extension.

Industry Canada also reiterates the importance of reporting on deployment at an individual licence level in the assessment of compliance with any deployment requirements associated with the licences in various bands. This level of detail has been the standard to which all auction licences have been held in the past.

Decision

Given the above considerations, the condition of licence on annual reporting requirement will apply as proposed. Requirements may change over the course of the 20-year licence term. Accordingly, reporting requirements in relation to this condition of licence may be amended from time to time following the issuance of a notice to all licensees in advance of the relevant fiscal year end.

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 as set out in these conditions of licence. Industry Canada may request an audited statement of research and development expenditures with an accompanying auditor's report at its discretion;
  • supporting financial statements where licensees are claiming an exemption based on an annual gross revenue of less than $5 million;
  • a copy of any existing corporate annual report for the licensee's fiscal year with respect to the authorization; and
  • other information related to the licence as specified in any notice updating the reporting requirements as issued by Industry Canada.

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. Confidential information provided will be treated in accordance with subsection 20(1) of the Access to Information Act.

Reports are to be submitted to Industry Canada at the following address:

Industry Canada
c/o Manager, Emerging Networks (JETN, 15th Floor)
Spectrum Management Operations Branch
Industry Canada
235 Queen Street
Ottawa, Ontario K1A 0H5

Where a licensee holds multiple licences, spectrum implementation reports should be broken down by licence area. This information, including the extent of implementation and spectrum usage, is important for reasons such as the analysis of each licensee's individual performance against its conditions of licence, monitoring the effectiveness of these conditions in meeting the policy objectives of the band, and Industry Canada's intention that the spectrum be deployed in a timely manner for the benefit of Canadians.

6.16 Amendments

The following condition of licence will also apply:

The Minister of Industry retains the discretion to amend these terms and conditions of licence at any time.


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

In Section 6 of DGRB-005-09, Consultation on Transition to Broadband Radio Service (BRS) in the Band 2500-2690 MHz,Footnote 32 Industry Canada stated that all conditions of licence and authorizations (i.e. MCS, BRS and MDS broadcasting certificates) would be subject to change following the consultation on the policy and licensing framework in order to allow for licence conditions to be aligned and consistent with future licences issued in this frequency band. Therefore, in the consultation paper, Industry Canada proposed that, effective as of the auction closing date, certain conditions of licence for existing 2500 MHz BRS licences be updated to harmonize with the conditions of licence of auctioned licences.

In its consultation, Industry Canada proposed that six conditions of licence for existing 2500 MHz BRS licensees be updated in order to harmonize them with those being auctioned:

  • Treatment of existing users;
  • Spectrum aggregation limits;
  • Licence transferability and divisibility;
  • Eligibility;
  • Technical considerations and international and domestic coordination; and
  • Lawful intercept.

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 publication, 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 33

Decisions regarding research and development as well as regarding learning plans will be addressed in a separate decision paper.

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.

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.

Summary of Comments

Generally, respondents reiterated their comments presented for the conditions of auctioned licences. However, there were some exceptions specific to updating existing BRS licences.

The majority of respondents who commented on the conditions for existing licences supported updating the conditions of licence, indicating that conditions should be consistent. Rogers, MTS Allstream, WIND and Xplornet supported the updates. Bell and SaskTel agreed with updating the conditions, with the exception of lawful intercept.

TELUS contended that the spectrum aggregation limits will apply to existing licensees for a shorter period as their five-year clock starts at the end of the auction versus auctioned licences, which may only be issued six to nine months following the auction. TELUS proposed having the aggregation limit apply to existing BRS licensees for five years following the "first auction licence issuance" in order to level the playing field.

TELUS suggested that deployment requirements should apply to existing BRS licences based on their issue date of March 31, 2011.

Discussion

Respondent comments that reiterated comments made regarding conditions for auctioned licences were considered in Section 6 of this Framework.

Of the six updated conditions, the spectrum aggregation limit condition is the only condition with wording that differs between existing licences and licences to be auctioned. The consultation paper proposed that the spectrum aggregation limit apply to existing BRS licensees for a period of five years following the auction closing date. TELUS suggested that the aggregation limit apply to existing BRS licensees for five years following the "first auction licence issuance."

The approach proposed in the consultation paper was designed to synchronize existing and auctioned licences. In the past, ownership and control reviews often resulted in significant time lag between auction close and licence issuance. With the changes to foreign investment restrictions, licence issuance will likely be shortly after the final payments are received, thus minimizing the difference in timing.

The March 2012 Policy and Technical Framework Mobile Broadband Services (MBS) — 700 MHz band Broadband Radio Service (BRS) — 2500 MHz Band included several measures to promote competition in the 2500 MHz band. These included a spectrum aggregation limit of 40 MHz, with the exception of licensees in the Yukon, Northwest Territories, and Nunavut, and in the restricted bands at 2570-2575 MHz and 2615-2620 MHz. Decision C2-4 noted that "in areas where an existing licensee already has holdings in excess of the spectrum cap set out in Decision C2-1, the licensee will not be required to relinquish any such holdings in order to meet the limit of the spectrum cap. However, such licensees will not be eligible to bid for additional licences in the auction process or otherwise obtain additional licences in licence areas where the cap has been exceeded." In cases where a licensee's existing holdings exceeded the spectrum aggregation limit and they divested licences to fall below that limit, the 40 MHz limit would apply.

In addition, all transfer requests will be subject to review against criteria discussed in detail in the Framework Relating to Transfers, Divisions, and Subordinate Licensing of Spectrum Licences for Commercial Mobile Spectrum and set out in CPC-2-1-23Licensing Procedure for Spectrum Licences for Terrestrial Services, as amended from time to time. Therefore, the level of spectrum holdings of any given licensee will be a factor considered with respect to a request to transfer or divide a licence or grant a subordinate licence even after the five-year period of the spectrum aggregation limit.

Concerning deployment requirements for the existing BRS licences, Industry Canada noted that 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 34

Decision

Based on the above considerations, wording for the six conditions of licence listed in paragraph 362 above, will be updated to harmonize with conditions for licences to be auctioned. Refer to Section 6 of this Framework for wording relating to each of the conditions.

The wording for the spectrum aggregation limit condition of licence for existing 2500 MHz licences will be updated to reflect an effective date of 2500 MHz auction closing, and the inclusion of text to reflect Decision C2-4 of the Policy and Technical Framework: Mobile Broadband Services (MBS) – 700 MHz Band, Broadband Radio Service (BRS) – 2500 MHz Band, which permits incumbents to retain licences in excess of the 40 MHz aggregation limit but does not allow them to acquire licences in excess of that limit. It will be stated 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 (the North), where there is no limit.

In areas where existing 2500 MHz BRS licensees have spectrum licence holdings in excess of the spectrum aggregation limit in the 2500 MHz band, the licensee is not required to divest any such holdings in order to meet the aggregation limit. However, such a licensee is not eligible to obtain additional licences in licence areas where the aggregation limit has been met or exceeded. Should the licensee divest licences to below the spectrum aggregation limit, the limit would then apply.

The spectrum aggregation limit will continue for five years following the close of the 2500 MHz auction. 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 of a licensee or any other agreement that has the effect of granting a right or interest in a 2500 MHz licence 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 the spectrum aggregation limit. Such a request must be made in advance for any proposed transactions within its knowledge. 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.

As noted in Section 5.2.3, associated entities requesting that the spectrum aggregation limit be applied individually rather than jointly must demonstrate to the satisfaction of Industry Canada that they will be separately and actively providing services to customers in the applicable service area for at least the duration of the spectrum aggregation limit.

Where licensees establish an agreement to share spectrum such that another entity has control over the use of the spectrum, a subordinate licence is required. This requirement applies to all spectrum sharing arrangements, whether the arrangement is established post-auction or was established and disclosed prior to the auction. Generally, a subordinate licence will count towards the spectrum aggregation limit in a service area. However, for the 2500 MHz spectrum auctioned through this licensing process, 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 separately and actively providing services to customers in the applicable service area, as discussed in Section 6.3.

8. Auction Process

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.

The schedule for the auction process (Table of Key Dates) is available on Industry Canada's Spectrum Management and Telecommunications website at http://www.ic.gc.ca/eic/site/smt-gst.nsf/eng/sf10745.html. Items and time frames included in the schedule may be updated from time to time. Interested parties are advised to check the website regularly for any updates to the schedule of events.

8.1 Application to Participate

To participate in an auction, all applicants must submit the completed application forms, along with the financial deposits, details of the applicant's beneficial ownership, information on any affiliations and associations as discussed in Section 5 of this Framework and other documentation as required by the date specified in the Table of Key Dates. Industry Canada will publish the list of applicants on its website soon thereafter.

The application forms for participation will be available on request by sending an email to: ic.spectrumauctions-encheresduspectre.ic@canada.ca. Additional documentation may be required in support of the application forms.

In addition to this Framework, the policies, rules and definitions associated with this licensing process are set out in the following documents:

  • SMSE-002-12, Policy and Technical Framework: Mobile Broadband Services (MBS) – 700 MHz Band, Broadband Radio Service (BRS) – 2500 MHz Band;
  • Framework for Spectrum Auctions in Canada;
  • 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;
  • DGSO-001-10, Decisions on the Transition to Broadband Radio Service (BRS) in the Band 2500-2690 MHz and Consultation on Changes Related to the Band Plan; and
  • Any amendment or supplement that may be issued by Industry Canada.

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 to otherwise obtain additional licences in licence areas where the aggregation limit has been met or exceeded.

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). All transfer requests will be subject to review, based on CPC-2-1-23, Licensing Procedure for Spectrum Licences for Terrestrial Services. The review will take into consideration decisions released in DGSO-003-13, Framework Relating to Transfers, Divisions, and Subordinate Licensing of Spectrum Licences for Commercial Mobile Spectrum and will normally be completed within 12 weeks depending on the complexity of the review. Therefore, all licence transfer applications must be filed at least 12 weeks prior to the deadline for receipt of applications to participate in the auction (see Table of Key Dates) if the results are to be factored into the licensee's eligibility for participating in the auction.

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 up to 60 calendar days after the publication of this Framework. In the event that Industry Canada decides to offer the returned licences as part of the 2500 MHz auction process, an addendum to the Framework will be published in order to inform prospective participants of any additional licence offerings (SMSE-002-12, Decision C2-6).

Licensees should also familiarize themselves with CPC-2-1-23, Licensing Procedure for Spectrum Licences for Terrestrial Services, and the other Client Procedures Circulars mentioned in the conditions of licence.

8.2 Submissions

To participate in the auction, all applicants must submit the completed application formsFootnote 35 and financial deposits. In the interest of providing Industry Canada and other bidders with adequate information on the identity of all bidders, applicants are required to fully disclose the beneficial ownership for every entity that owns, directly or indirectly, 10% or more of the applicant's voting shares, non-voting shares, partnership interests, or any other beneficial interests, as the case may be. Associated entities wishing to participate separately in the 2500 MHz auction are required to disclose the names of their associated entities within their application and to provide narratives describing all key elements and the nature of the association in relation to the acquisition of the spectrum licences being auctioned and the post-auction relationships of the said entities. A list of the applicants, their beneficial ownership information and the narratives on any associated entity relationships will be made available on Industry Canada's Spectrum Management and Telecommunications website at http://www.ic.gc.ca/spectrum prior to the auction, so that all bidders have knowledge of the identity of the other bidders. Applicants are not permitted to change their beneficial ownership within 10 days preceding the start of the auction.

The consultation proposed that associated entities be required to submit their application in advance of the final application deadline; however, Industry Canada has determined that such applications may be submitted any time up to and including the final application deadline. Furthermore, entities are encouraged to approach Industry Canada at least two weeks prior to the application date if seeking guidance or a pre-determination as to whether their arrangement or proposed arrangement would be considered to give rise to a finding of association under this Framework. Any guidance or predetermination will not constitute a binding decision; however, potential applicants will benefit from an early opportunity to approach Industry Canada with their proposed arrangements.

8.3 Pre-auction Financial Deposits

In order to maintain the integrity of the auction, Industry Canada requires that all bidders submit a pre-auction financial deposit with their application.

In its consultation, Industry Canada proposed to determine the value of the pre auction financial deposit based on the licences for 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 it was proposed that the financial deposit be equal to $50,000 per eligibility point.

Summary of Comments

Bell, Quebecor, Rogers, TELUS and WIND supported the proposed financial deposits.

Bell proposed a daily financial guarantee equal to 100% of the value of a bidder's previous day's last package bid, stating that this would enhance meaningful bidding, discourage gaming and promote the overall integrity of the auction. In its reply comments, Xplornet opposed Bell's proposal, viewing it as onerous and putting pressure on smaller carriers with fewer resources. TELUS proposed that deposits be subject to a weekly top-up process.

Discussion

A requirement for daily or weekly top-up financial deposits would result in an additional administrative burden and it is noted that, to date, no provisional winner in an Industry Canada spectrum auction has defaulted on its payment.

Based on the above considerations, Industry Canada is of the view that requiring daily or weekly financial deposits is not warranted at this time. However, as in past auctions, Industry Canada will retain the right to request additional deposits during the auction if bids ascend to such a level that the initial financial deposits are considered insufficient.

Decision

Pre-auction financial deposits will be equal to $50,000 per eligibility point. Eligibility points associated with each licence are listed in Table 5 of this Framework. As part of its application, a bidder will be required to submit 5% of its total pre-auction financial deposit. The remaining 95% of its pre auction financial deposit will be due at a later date, as specified in the Table of Key Dates. The deposits are to be made in the form described in Section 8.4.

An individual bidder requesting to be eligible to bid on the equivalent of one national paired block will be required to submit deposits covering 1,320 points, which will 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.

Consistent with previous auctions, Industry Canada reserves the right to request additional financial deposits during the auction. This will be determined by considering factors such as the bid value on a package of licences and the bidding activity. The additional financial deposit will be based on a percentage, not exceeding 50%, of the value of the bidder's package bid for licences in a specified round. Bidders will be provided three full business days to submit their additional financial deposits to Industry Canada. The deposits are to be in the form described in Section 8.4.

8.4 Process to Submit the Applications and Financial Deposits

The application forms, the associated documents (as per the instructions provided on the application forms), and 5% of the total pre-auction financial deposit are to be physically delivered to the Manager, Auction Operations (address provided in Section 14 of this Framework), by the date specified in the Table of Key Dates. Industry Canada reserves the right, under exceptional circumstances, to accept additional documentation after the initial deadline, but prior to publication of the list of applicants. Applications that are received without a deposit for 5% of the total financial pre-auction deposit will be rejected. The remaining 95% of the total pre-auction financial deposit is to be physically delivered as stated above, by the date specified in the Table of Key Dates. Applicants that fail to submit this deposit by the deadline will not be qualified to participate in the auction.

Upon receipt of the application and the associated documentation, Industry Canada will send notification to the applicant that the application materials have been received. This notice will not be an indication that the application materials or the deposits have been approved.

The financial deposits must be in the form of a certified cheque, bank draft, money order, wire transfer, or an irrevocable standby letter of credit, payable to the Receiver General for Canada, drawn on a financial institution that is a member of the Canadian Payments Association. The elements required in a letter of credit, as well as a sample letter of credit acceptable to Industry Canada, are provided as part of the application forms. Multiple letters of credit (or other forms of payment) from one or more financial institutions will be permitted within reason. Industry Canada will treat the financial deposit for an applicant as being the sum of the amounts of each accepted deposit. Each financial deposit must comply with the conditions laid out herein. Financial deposits shall not have any conditions requiring the Receiver General for Canada to draw upon payments in any particular order of priority, or requiring any deposit to be drawn upon completely before drawing upon any other deposit. In the event that a qualified bidder does not become a provisional licence winner, the financial deposits that were submitted in the form of a letter of credit will be returned. Refunds to deposits submitted in the form of a certified cheque, bank draft, money order or wire transfer will likely take longer (perhaps several weeks) than a refund submitted by way of a letter of credit, as a cheque from the Receiver General for Canada will need to be processed.

If, prior to the application deadline, an applicant would like to amend any of the forms that it has submitted and/or its financial deposits, it may submit one or more amended forms and/or financial deposits with an accompanying letter explaining that the enclosed form(s) and/or financial deposits are to replace the one(s) previously submitted. Any such amendments are to be physically delivered to the Manager, Auction Operations, by the receipt deadline for applications to participate in the auction. An applicant may decrease, but may not increase, its eligibility and applicable financial deposit until the receipt deadline for the remaining portion (95%) of the full financial deposit.

Upon receipt of an amended form(s) and/or financial deposits, Industry Canada will send a notification to the applicant that the amended form(s) and/or deposits have been received. The notification will state the amount of the new deposits that have been submitted. Where the financial deposits are in the form of an irrevocable standby letter of credit, the initial irrevocable standby letter of credit will also be returned to the applicant where applicable. Where the financial deposits are in a form other than an irrevocable standby letter of credit, any partial reimbursement of the initial financial deposits may take several weeks.

A list of all applicants will be made public via Industry Canada's Spectrum Management and Telecommunications website at http://www.ic.gc.ca/spectrum. The publication of this list does not mean that these applicants have been approved as qualified bidders.

8.5 Bidder Qualification

Industry Canada will begin to review the application forms (and any associated documents) and the accompanying financial deposit(s) after the closing date for the submission of applications. In this initial review, Industry Canada will identify any errors in the application forms or financial deposits. It will also determine whether any additional information related to any affiliate or associated entity of the applicant, is required. Applications that are received without a deposit for 5% of the full financial pre-auction deposit by the application deadline, or without a deposit for the remaining 95% of the full financial deposit by its deadline, will be rejected.

Following the initial review period, Industry Canada will provide applicants with an opportunity to correct any errors or inconsistencies in their application or financial deposits, and will request any additional information related to the affiliates or associated entities, where applicable. The original applications may be returned to the applicant with a brief statement outlining any discrepancy(ies) and/or omission(s), or requesting additional information. The applicant will be invited, in writing, to resubmit the corrected form and/or the additional information and to physically deliver this to the Manager, Auction Operations, at the address provided in Section 14, by the date specified in the written statement.

Applicants that do not comply with this request will have their application to participate in the auction rejected. Applications that are rejected — including those for which an opportunity has been provided to correct errors or inconsistencies identified by Industry Canada but are still found to be deficient — will be returned to the applicant, outlining the deficiencies, and will include the applicant's deposits.

Applicants that have submitted acceptable application materials, including the accompanying initial financial deposit of 5% of the total pre-auction deposit, will be informed that they have provisionally qualified to participate in the auction. Provisionally qualified applicants will be considered fully qualified, once the remaining 95% of the full pre-auction financial deposit has been received by Industry Canada, by the stated deadline. Financial deposits may not be applied to the initial payment, unless the financial deposit was sufficient to cover both the initial and the final payments. Qualified bidders will receive additional information related to their participation in the auction through separate mail-outs at a later date. This information will include, among other items, a bidder information document, a user manual and the schedule for the information session and mock auctions.

A list of all provisionally qualified bidders, along with information related to their beneficial ownership, affiliates, and associated entities will be made public via Industry Canada's website in accordance with the timelines stated in the Table of Key Dates. Should any of the provisionally qualified bidders fail to provide the remaining portion of the full pre-auction financial deposit by the stated deadline, their application will be rejected and the list of qualified bidders will be amended accordingly. The number of eligibility points and the financial deposit amounts will not be published prior to the auction.

8.6 Withdrawal of Application Forms

Applicants wishing to withdraw their application materials and have their financial deposits returned may do so, without penalty, by sending a written request to the Manager, Auction Operations, at the address provided in Section 14. This request is to be physically delivered prior to 12:00 noon (EST) on the business day preceding the opening of the auction.

8.7 Change of Information

An Auction Authorized Representative is an individual authorized by the company, for the 2500 MHz auction, to sign, to submit information and to make any changes on behalf of the applicant. Only the Auction Authorized RepresentativeFootnote 36 of the bidding company may notify the Manager, Auction Operations, of any material changes in the information submitted in the application documents. This includes any changes to the names and contact information of qualified bidders and designated bidders. Written notification must be sent by the Auction Authorized Representative to the address provided in Section 14 within five business days of any such changes.

8.8 Backup Procedures

Bidders are strongly advised to prepare contingency plans and backup facilities and locations, including multiple means of accessing the Internet, in the event of technical difficulties at their primary bidding locations. In previous SMRA auctions, Industry Canada had made provisions for eligibility rule waivers to be used in the case where a bidder was unable to submit its bid during a given round (for example, due to technical difficulties). Such waivers are not suitable in the context of a CCA format and its related activity rules. In response to the consultation, Rogers suggested the use of extension rights as an alternative to waivers. The extension rights would allow bidders to unilaterally extend the length of a bidding round. In their reply comments, Bell, Public Mobile and TELUS supported this proposal. Industry Canada will not be granting extension rights to licensees, due to the possibility that such rights could add numerous delays to the auction. The final detailed provisions concerning backup procedures will be made available to qualified bidders prior to the start of the auction. However, Industry Canada reserves the right to extend the length of a round, or to alter the bidding schedule, in the event of being notified that a bidder(s) is experiencing technical difficulties at its primary and backup bidding locations, which prevents the bidder(s) from submitting a bid.

In the application forms, applicants must designate up to three individuals who will have the authority to place bids on their behalf. Each designated bidder will receive individual codes to participate in the auction. Having more than one individual designated as a bidder will strengthen backup contingency plans for applicants in the case of unforeseen problems. Industry Canada cannot guarantee any specific turnaround time for changes or additions submitted after the application date.

As a last resort, provisions will be made for Industry Canada staff to submit bids on a bidder's behalf. This is intended to serve as a limited backup facility for bidders who experience technical difficulties that prevent them from accessing the auction system. Only the individuals listed as designated bidders will be able to use this option. Details of these provisions will be provided to qualified bidders prior to the start of the auction.


9. Post-auction Process

9.1 Bidder Payment

Within 10 business days following the announcement of provisional winners, each provisional licence winner will be required to submit 20% of its final payment.

The remaining portion, 80% of the final payment, will be due within 30 business days of the announcement of the provisional licence winners. Failure by the winning bidder to make these final payments in a timely fashion will result in the licence not being issued, and the bidder will be subject to the applicable forfeiture penalty (see Section 9.2Forfeiture Penalties). These final payments will be non refundable. If the licence winner fails to make these payments within the specified period, then the provisional winner's irrevocable standby letter of credit will be drawn upon.

All payments must be made by certified cheque, bank draft, or wire transfer, payable to the Receiver General for Canada, drawn on a financial institution that is a member of the Canadian Payments Association.

These payments for the initial 20-year term are in lieu of any fees that will be fixed for radio authorization under the Radiocommunication Act or any other Act. Footnote 37

9.2 Forfeiture Penalties

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 stated in Section 6.4 of this Framework 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 licence payments and the eventual revenue from payments or fees for the licence(s), if the eventual revenues are lower than the forfeited licence(s) payment(s) — to be determined by a subsequent licensing process. This is referred to as the forfeiture penalty.

Until such time as the forfeited licence(s) is reassigned and the amount of the forfeiture penalty is established, the licensee will be subject to an interim proxy penalty, which will be the full amount bid for the licence(s) forfeited.

In the event of licence forfeiture, the bidder's financial deposit will be drawn upon for the full amount of the interim proxy penalty. If the interim proxy penalty is greater than the full amount of the bidder's financial deposit combined with any partial payment, or if a deposit in the form of a letter of credit has been returned before the forfeiture, then the difference will be owing and payable to the Receiver General for Canada.

A bidder that forfeits on a licence, or any of that bidder's affiliates and associated entities, may not be eligible to bid on it in any subsequent licensing process.

9.3 Eligibility Documentation

Bidders that are declared provisional licence winners will be required to submit two copies of documentation related to their compliance with the condition of licence regarding eligibility in accordance with Section 6.4Eligibility. Documentation must be submitted by the provisional winners within 10 business days of being notified that they are the provisional licence winners. For further information, refer to CPC-2-0-15, Canadian Ownership and Control, as amended from time to time.

Industry Canada will review these documents expeditiously. The Department will then notify each provisional licence winner regarding its compliance with the eligibility requirements. In the event that a provisional licence winner does not, in the opinion of Industry Canada, comply with the eligibility requirements, Industry Canada will provide the provisional licence winner with an opportunity to make changes in order to become compliant.

At any point in time, Industry Canada may formally notify a provisional winner that outstanding documents must be provided within 60 days. This would normally transpire only if a significant period of time has passed since the close of the auction. If the provisional winner fails to comply within 60 days following a formal notification by Industry Canada, the provisional winner may be deemed ineligible to hold a licence. In such a case, licences will not be issued and the provisional winner would also be subject to the interim proxy penalties outlined in Section 9.2.

9.4 Issuance of Licences

Industry Canada will issue spectrum licences to provisional winners upon completion of the following: (1) payment of the sum of their bids and the sum of their penalties, if any; and (2) a determination by Industry Canada that the eligibility requirements have been met. If a Canadian ownership and control review is required, such a determination may take several months to complete depending on the complexity of the provisional winners' ownership and control structures and the responsiveness of the winners in providing any required additional documentation.


10. Bidder Training and Support

The consultation noted that qualified bidders would receive the necessary information to participate in the auction several weeks prior to the start of the auction, and proposed that a mock auction be held one week prior to the start of the auction in order to allow qualified bidders to better familiarize themselves with the bidding process.

Summary of Comments

Software Considerations and Mock Auctions: Many respondents, including Rogers, Bell, MTS Allstream, Public Mobile and TELUS, requested access to the winner and price determination tool (also known as the solver) well in advance of the auction,(e.g. three months prior). They stated that, without access to the solver, bidders cannot verify if the auction process works adequately or audit their own auction simulations.

Some respondents also requested additional tools and information, such as a user manual for the auction system, a detailed guide for uploading and editing supplementary bids, data file formats for the round results, and screenshots of the auction software.

There was a general consensus that multiple mock auctions would be required for bidders to become familiar with the auction software. Bell was of the view that the mock auctions should be held at least three weeks prior to the start of the auction.

Auction Schedule: TELUS requested that a detailed schedule of the auction process be released as soon as possible.

Discussion

Software Considerations and Mock Auctions: Industry Canada notes that providing earlier access to a stand-alone winner and price determination tool would allow more time for bidders to become familiar with the software and to prepare for their participation in the auction. It should be noted that rules and formulas used by the winner and price determination tool will be made available on Industry Canada's Spectrum Management and Telecommunications website; however, the related software is not yet available.

The winner and price determination tool is a web-based application. The tool will validate the file structure of the data uploaded by qualified bidders, but it will not validate bids to ensure that they meet any of the auction rule restrictions (e.g. revealed preference limits). Qualified bidders will be able to upload entire auction scenarios (i.e. many packages of licences by different bidders). The tool will determine the winning packages and prices to be paid by the bidders according to the algorithms to be published by Industry Canada.

The specification of the file format for uploading bids to the winner and price determination tool will be released in the mail-out packages to qualified bidders (see the Table of Key Dates).

In previous auctions, a mock auction was usually conducted one week prior to the start of the auction. Given the new CCA format and software, Industry Canada considers that conducting additional mock auctions would be beneficial for bidders. The mock auction(s) will include both the allocation and the assignment stages. Specifically, each mock auction will include some clock rounds, a supplementary round and assignment rounds. It is expected that the mock auctions will use the same service areas, licences and eligibility points as the actual auction. The intent of the mock auctions is to assist bidders in becoming familiar with the software functionalities. These mock auctions are not indicative of actual market scenarios and bidding strategies. Overall round results from the mock auctions will not be released; however, bidders will be able to view their own individual results and aggregate demand for all rounds, with the exception of the final clock round.

The auction software will only accept valid bids in all stages of the auction. Invalid bids will produce a warning message and will not be accepted by the auction system. Industry Canada will provide qualified bidders with a bidder information document and a bidder user manual containing screenshots of the auction software, along with detailed bidding instructions, software requirements and the data definitions of the round results files.

Information Sessions: Industry Canada conducted a CCA information session in May 2012, and plans to host an information session for qualified bidders prior to the mock auctions. The information session will address the auction process, the policies that affect bidding activity (e.g. spectrum aggregation limits) and the functionality of the software.

Decision

Approximately two months prior to the start of the auction, bidder information documents and the bidder user manual will be sent to qualified bidders. These documents will contain the schedule for the information session and the mock auctions, as well as screenshots of the software and the data definitions of the round results files.

Approximately two months prior to the auction, qualified bidders will be provided with access to the winner and price determination tool for the allocation stage on a website hosted by Industry Canada. Qualified bidders will be advised when it becomes available.

One information session and up to three mock auctions will be conducted prior to the auction. Each mock auction will last one to two days and will begin approximately six weeks prior to the auction. The final schedule for the mock auctions will be included in the bidder information document.

The full schedule for the auction process is included in the Table of Key Dates on Industry Canada's Spectrum Management and Telecommunications website at http://www.ic.gc.ca/spectrum.


11. Post-auction Licensing Process for Unassigned Licences

Industry Canada will make unassigned licences available for licensing through an alternative process, which could include a subsequent auction at a later date. 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 be considered necessary.


12. Licence Renewal Process

Industry Canada sought comments on its proposed licence renewal process.

Summary of Comments

Rogers, WIND and SaskTel agreed with the renewal process as proposed by Industry Canada.

MTS Allstream suggested that the renewal process begin five years prior to the end of the licence term, whereas TELUS suggested that a separate public consultation be conducted at the earliest opportunity with respect to annual licence fees for mobile spectrum.

Bell commented that licensees should have a "high expectation of renewal" not only in the initial licence term, but in all subsequent licence terms.

Discussion

Industry Canada considers that a public consultation on licence renewal is better conducted towards the end of the licence term, as this results in a more accurate assessment of factors such as the licensees' compliance with the conditions of licence, the general environment (e.g. use of the band by other licensees and international developments), and the demand for spectrum from other parties.

As noted in the FSAC, spectrum licences have a high expectation of renewal under certain circumstances. An assessment of the circumstances affecting renewal is best undertaken as part of the consultation on the licence renewal process.

Decision

Based on the above considerations, the licence renewal process will apply as proposed:

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

As part of the licence renewal process, the Minister of Industry retains the power to fix the new terms and conditions of spectrum licences and to amend these during the new term of the licence and 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.

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.


13. Clarification Process — Amendments and Supplements

Industry Canada may also amend or supplement the auction rules and procedures contained in this Framework. Any such amendment or supplement will be published on Industry Canada's website and will be sent to all qualified bidders.

For a limited period of time, Industry Canada will accept written questions seeking clarification of the rules and policies set out in this Framework. Written questions asking for clarification of rules or policies will be accepted until the deadline specified in the Table of Key Dates. Every effort will be made to post the questions received, along with Industry Canada's written responses, in the shortest time frame possible, depending on the volume of the questions received. Questions that are of a similar nature and subject matter may be grouped and summarized. Questions regarding bidding procedures or the functionality of the software will be addressed during the information session and in mail-out packages intended for qualified bidders, and will not be included in this clarification process unless they are deemed to be critical information for potential bidders at this point in time. These answers will be considered as clarification of the policies set out in SMSE-002-12, Policy and Technical Framework: Mobile Broadband Services (MBS) — 700 MHz Band, Broadband Radio Service (BRS) — 2500 MHz Band, and as amendments or supplements to the rules set out in this Framework.

Questions should be submitted in electronic format (Microsoft Word or Adobe PDF) to the following e-mail address: ic.spectrumauctions-encheresduspectre.ic@canada.ca.

Written questions should be addressed to Industry Canada, c/o Manager, Auction Operations (JETN, Room 1763-C), Spectrum Licensing Policy Branch, Industry Canada, 235 Queen Street, Ottawa, Ontario K1A 0H5.

All questions should cite the Canada Gazette, Part I, the publication date, the title and the notice reference number (SLPB-001-14). Questions and responses will be posted on Industry Canada's Spectrum Management and Telecommunications website at http://www.ic.gc.ca/spectrum.


14. Obtaining Copies

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.

For further information concerning the process outlined in this Framework or related matters, contact:

Industry Canada
c/o Manager, Auction Operations (JETN, Room 1763-C)
Spectrum Licensing Policy Branch
Industry Canada
235 Queen Street
Ottawa, Ontario
K1A 0H5
Telephone: 613-957-8106
Fax: 613- 949-7667
E-mail: ic.spectrumauctions-encheresduspectre.ic@canada.ca

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