Through the release of this paper, Industry Canada is hereby initiating a consultation on a licensing framework for spectrum licences that remained unassigned from the licensing processes for Mobile Broadband Services (MBS) and Advanced Wireless Services (AWS) in the 700 MHz and AWS- 3 bands.
Subsequent to the individual licensing frameworks related to the spectrum bands outlined below, Industry Canada is now seeking comments on licensing considerations related to auction format, rules and process, as well as on conditions of licence for residual spectrum licences in the following bands:
- 777-782 MHz/746-751 MHz (700 MHz)
- one licence in the Yukon, the Northwest Territories and Nunavut;
- 1755-1780/2155-2180 MHz (AWS-3)
- three licences in the areas of Saskatchewan, Manitoba and Yukon, the Northwest Territories and Nunavut.
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 residual spectrum licences in the above- mentioned bands, Industry Canada will be guided by the objectives stated in section 7 of the Telecommunications Act, the policy objective stated in the Spectrum Policy Framework for Canada (SPFC) 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, Policy and Technical Framework: Mobile Broadband Services (MBS) — 700 MHz Band, Broadband Radio Service (BRS) — 2500 MHz Band, 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 will also be guided by the general approaches and processes outlined in the Framework for Spectrum Auctions in Canada (FSAC).
In accordance with the FSAC, any licences that remain unassigned at the conclusion of an auction, including licences that were forfeited, may be offered in a subsequent auction process at a date specified by Industry Canada.
Notifications of interest for specific unassigned spectrum licences in various bands have been received. Industry Canada is proposing to make the following licences available through a residual auction process in August 2015. A Proposed Table of Key Dates is available on the Department’s website. Although some spectrum licences remain unassigned in other bands, these will be offered through a subsequent residual auction process at a date to be determined.
The auction of spectrum licences for MBS in the 700 MHz band was held in January 2014, in accordance to with the Licensing Framework for Mobile Broadband Services (MBS) — 700 MHz Band (hereinafter referred to as the 700 MHz Framework). At the conclusion of the auction, one licence remained unassigned (depicted in Figure 1 below, shown in blue, and as shown in Table 1, the paired block C1 in the Upper 700 MHz band in Tier 2 service area 2-14 (Yukon, Northwest Territories and Nunavut) was not assigned during that auction).
- Transmission directions are based on 3GPP LTE standards
- “Band 13” is a 3GPP LTE band class defined for Upper blocks C1 and C2.
|Tier||Service Area Name||Population||Frequency||Block C1 (10 MHz)|
|2-14||Yukon, Northwest Territories & Nunavut||107,215||777–782 MHz/746–751 MHz||5 + 5 MHz|
The auction of spectrum licences for Advanced Wireless Services (AWS-3) in the bands 1755-1780 MHz and 2155-2180 MHz was held in March 2015, in accordance with the Technical, Policy and Licensing Framework for Advanced Wireless Services in the Bands 1755- 1780 MHz and 2155-2180 MHz (AWS-3) (hereinafter referred to as the AWS-3 Framework). At the conclusion of the auction, three licences remained unassigned: block GHI in service areas 2-14 (Yukon, Northwest Territories and Nunavut), 2-10 (Manitoba) and 2-11 (Saskatchewan).
The band plan shown in Figure 2 and the frequencies outlined in Table 2 identify the block of spectrum that remained unassigned in the three service areas outlined above.
The following paired frequency block is available in three licence areas:
|Tier||Service Area Name||Population||Frequency||Block GHI (30 MHz)|
|2-10||Manitoba||1,206,968||1755-1770 MHz/2155-2170 MHz||15 + 15 MHz|
|2-11||Saskatchewan||1,029,812||1755-1770 MHz/2155-2170 MHz||15 + 15 MHz|
|2-14||Yukon, Northwest Territories & Nunavut||107,215||1755-1770 MHz/2155-2170 MHz||15 + 15 MHz|
Industry Canada proposes that the following new technical and policy decisions be established for the available licences in the bands referred to in the previous section and made available through this licensing process. Except as outlined below, Industry Canada proposes that the technical and policy decisions be consistent with those in the respective technical and licensing frameworks, namely the Policy and Technical Framework: Mobile Broadband Services (MBS) — 700 MHz Band, Broadband Radio Service (BRS) — 2500 MHz Band published in March 2012, the 700 MHz Framework published in March 2013, and the AWS-3 Framework published in December 2014.
Licences in the 700 MHz and AWS-3 bands were auctioned using Tier 2 service areas (a total of 14 service areas). These included block C1 in the 700 MHz band and block GHI in the AWS-3 band. Tier 2-14 covers the areas of Yukon, the Northwest Territories and Nunavut as a single service area.
While Tier 2 service areas enable the provision of mobile services to large areas of the country and allow a licensee to offer wide-area coverage, smaller tier areas could facilitate entry by smaller service providers.
Specifically for the North, Industry Canada is proposing to auction the remaining block C1 in the 700 MHz band and the block GHI in the AWS-3 band, using Tier 4 service areas, which would result in separate licences for Yukon, the Northwest Territories and Nunavut. No changes are being proposed to the tier levels for the licences available in Saskatchewan and Manitoba; they would remain as Tier 2 licences.
In the March 2015 auction of spectrum licences in the AWS-3 band, Industry Canada used a band plan that is similar to the one currently being used in the United States; however, three paired blocks of 5 + 5 MHz (G, H and I), were combined into one paired block of 15 + 15 MHz (i.e. GHI), whereas paired block J (10 + 10 MHz) was subdivided into two paired blocks of 5 + 5 MHz (i.e. J1 and J2).
The combination of GHI into one paired block allowed licensees to benefit from increased throughput and/or capacity available through larger block sizes. However, Industry Canada is proposing to disaggregate block GHI into three paired blocks of 5 + 5 MHz for this residual auction, as shown in Figure 3. Disaggregating the blocks would still align with the U.S. band plan and would allow more than one bidder to access the spectrum, while permitting the aggregation of blocks by bidders.
Given this proposal, the number of AWS-3 licences available in this auction process would increase to 15 licences in total, as shown in Table 3.
Given the proposals in sections 4.1 and 4.2 above, it is proposed that a total of 18 licences be made available through this licensing process. Table 3 below outlines the list of available licences.
|Block||Tier||Service Area Name||Population||Frequency|
|C1||4-170||Yukon||33,854||777–782 MHz/746–751 MHz|
|C1||4-171||Nunavut||31,906||777–782 MHz/746–751 MHz|
|C1||4-172||Northwest Territories||41,455||777–782 MHz/746–751 MHz|
|G||4-172||Northwest Territories||41,455||1755-1760/2155-2160 MHz|
|H||4-172||Northwest Territories||41,455||1760-1765/2160-2165 MHz|
|I||4-172||Northwest Territories||41,455||1765-1770/2165-2170 MHz|
P1 — Industry Canada is seeking comments on its proposals to:
- license the northern 700 MHz and AWS-3 licences on a Tier 4 basis; and
- disaggregate block GHI into three separate blocks of 5 + 5 MHz each for all of the AWS-3 spectrum licences being offered through this auction process (Saskatchewan, Manitoba and the North).
In the AWS-3 auction, Industry Canada allowed open bidding (no competitive measures) on 20 MHz of spectrum (blocks J1/J2). It also set aside a block of 30 MHz (block GHI) for new entrants that were actively providing commercial mobile wireless services in the related Tier 2 service area. This decision was to support new entrants in improving their networks, which would allow them to continue to contribute to a competitive wireless sector.
The auction resulted in 11 of the 14 licences that were set-aside being assigned to three operating new entrants. Three of the 14 service areas auctioned were unassigned at the conclusion of the auction, as no bidders qualified to bid on the set aside spectrum in these licence areas. Industry Canada is proposing to eliminate the set-aside measure so that these remaining licences would be open to all bidders.
During the 700 MHz auction process, there was some bidding activity on block C1 in the licence area 2-14, although the licence remained unassigned at the conclusion of the process. It is proposed that the spectrum caps that applied in the licensing process for the 700 MHz band continue to apply as outlined below:
“The licensee must comply with the spectrum aggregation limits as follows:
- A limit of two paired spectrum blocks in the 700 MHz band within blocks A, B, C, C1 and C2 is applicable to all licensees.
- A limit of one paired spectrum block within blocks B, C, C1 and C2 is applicable to all licensees which are large wireless service providers. Large wireless service providers are defined as companies with 10% or more of the national wireless subscriber market share, or 20% or more of the wireless subscriber market share in the province of the relevant licence area. The determination of subscriber market share will be based on the 2012 CRTC Communications Monitoring Report.
These spectrum aggregation limits 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 limits 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 700 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 these spectrum aggregation limits. 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.”
P2 — Industry Canada is seeking comments on its proposals to:
- eliminate the competitive measure which set aside block GHI for operating new entrants for all of the AWS-3 licences available in this process; and
- maintain the spectrum caps on the 700 MHz licences.
The deployment requirements associated to the northern licences (Tier 2-14) for the AWS-3 band were set at 30% of the licence area population to be covered within eight years of licence issuance. This licence area covered all of Yukon, the Northwest Territories and Nunavut.
Industry Canada is proposing to set the deployment requirement levels for each of the AWS-3 northern licences at 20% by year 8, (as opposed to 30%), which would be consistent with other northern licences (e.g. the 2300 MHz and 2500 MHz bands)
In the AWS-3 Framework, Industry Canada recognized the possibility of a delay in the development and availability of a suitable equipment ecosystem for the AWS-3 band in Canada. In view of this possibility, it adopted an eight-year deployment requirement, instead of the five-year requirement proposed in its consultation. However, since the publication of the Framework, the Federal Communications Commission (FCC) in the United States has successfully auctioned its spectrum in the AWS-3 band. It is the Department’s view that the significant investments made by the U.S carriers to acquire this spectrum, along with the deployment requirements imposed by the FCC, may expedite the development of an equipment ecosystem in this band.
For these reasons, Industry Canada is proposing to maintain the deployment levels for the AWS-3 licences available in Saskatchewan and Manitoba, but to reduce the timelines to reach these deployment levels from eight years to five years. As bidding for these licences will be open to all, it is expected that the carriers that are interested in this spectrum will already have significant infrastructure in these licence areas, and would be capable of deploying as soon as an equipment ecosystem becomes available in this band.
The deployment requirements for the 700 MHz band were set at 20% of the Tier 2 licence area within 10 years of the initial licence issuance for the northern licence covering all of Yukon, the Northwest Territories and Nunavut. Industry Canada is proposing to maintain the 20% requirement, but at the Tier 4 level, consistent with other northern licences.
P3 — Industry Canada is seeking comments on its proposals to:
- reduce the deployment requirements for the AWS-3 licences in the North to 20% of the Tier 4 service areas;
- reduce the timelines to reach the deployment levels in Saskatchewan and Manitoba from eight years to five years;
- apply the current 20% deployment levels for the 700 MHz licence to each of the Tier 4 licence areas.
Industry Canada proposes that the conditions of licence that currently apply to the licensed 700 MHz and AWS-3 bands be maintained, with the exception of the changes proposed in Section 4 above.
The conditions of licence that would apply to the 700 MHz band being auctioned in this licensing process are outlined in Annex A. The conditions of licence that would apply to the AWS-3 band licences being auctioned in this licensing process are outlined in Annex B.
It should be noted that the 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 (see paragraph 5(1)(b) of the Radiocommunication Act). The Minister may do so for reasons including furtherance of the policy objectives related to the band. Such action would normally only be undertaken after consultation.
For further information on the technical considerations that apply to the 700 MHz band, refer to SMSE-002-12, Policy and Technical Framework: Mobile Broadband Services (MBS) — 700 MHz Band, Broadband Radio Service (BRS) — 2500 MHz Band.
For information on the International Coordination, Incumbent Transition Plan and Other Technical considerations related to the AWS-3 band, refer to Technical, Policy and Licensing Framework for Advanced Wireless Services in the Bands 1755-1780 MHz and 2155-2180 MHz (AWS- 3), available on Industry Canada’s website.
The auction format should be simple, fair and transparent for bidders and lead to an efficient assignment of spectrum. In the selection of an auction format and related rules, consideration is given to the characteristics of the spectrum being auctioned, for example, the quantity and size of the blocks, as well as the similarities and complementarities that may exist among the blocks.
Industry Canada used the simultaneous multiple round ascending (SMRA) auction format in its first auction in 1999 and in four of its nine subsequent spectrum auctions.
In the 700 MHz auction held in January 2014 and the 2500 MHz auction, which began on April 14, 2015, Industry Canada selected 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.
Both the SMRA and CCA formats have typically been used in auctions where there were multiple blocks, multiple licence areas available and stakeholders may need to consider different combinations of each when bidding.
Industry Canada has used sealed-bid auctions to make spectrum available when there are few blocks available in a limited number of geographic areas. A sealed-bid auction format was recently used for the AWS-3 auction which was held in March 2015.
When proposing an auction format, Industry Canada must consider the benefits of an auction format versus the complexity of and time required to run the auction. Although both CCA and SMRA formats provide stakeholders with the benefit of price discovery through the multiple rounds, these formats are more complex and time consuming for stakeholders. Given the proposal to offer a limited number of licences in this auction process, Industry Canada is proposing to use a sealed-bid auction format.
To make this spectrum available in a timely manner and given the proposal for the simplified auction format, Industry Canada is proposing that the auction for residual licences in the 700 MHz and the AWS-3 bands take place on August 25, 2015. A more detailed proposed timeline is outlined in the Proposed Table of Key Dates, available on Industry Canada’s website.
P4 — Industry Canada is seeking comments on its proposal to use the sealed bid auction format for the auction of residual licences in the 700 MHz and AWS-3 bands and on the timelines proposed in the Proposed Table of Key Dates.
Given the proposal to divide block GHI in the AWS-3 band into three separate blocks (G, H and I), Industry Canada proposes to allow package bidding for those blocks within each service area. This is consistent with the recently held AWS-3 auction, in which package bidding was allowed on the open blocks of spectrum.
Package bidding would allow bidders to express their value for a combination of the blocks in addition to their value for the individual blocks, providing bidders with the flexibility to bid for all the combinations that they would be interested in winning. If bidders were only able to bid on G, H and I individually, there would be an exposure risk for bidders trying to acquire some combination of the licences. Package bidding would reduce this risk.
Industry Canada is proposing that bidders have the following six bidding options in each service area where blocks G, H and I are available: G, H, I, GH, HI and GHI. GI is not a proposed option, as it could result in a bidder winning non-contiguous spectrum, which may be considered less efficient and therefore less desirable.
The winning bid(s) in each service area would be calculated by determining the combination of bids that generates the highest sum; the bids in this combination would be the winning bids. Similar to the AWS-3 auction, bidders would only be able to win one of their bids in each service area. As a result, bidders interested in individual licences and/or some combination thereof would have to bid for all of the options, in each service area that they would be interested in winning. Further information on the determination of provisional licence winners can be found in Section 8.9.
Industry Canada is not, however, making package bidding available across licence areas. Therefore, there is no proposal for package bidding with respect to the 700 MHz licences, as there is only one block available in each of the three licence areas.
P5 — For the AWS-3 licences, Industry Canada is seeking comments on its proposal to allow package bidding for blocks G, H and I within each service area, with the exception of packages containing the blocks G and I as a combination.
Two common pricing rule options to calculate the prices to be paid by winning bidders are a first-price rule and a second-price rule. A first-price rule requires winning bidders to pay the full amount of their winning bid. Conversely, 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. With a second-price rule, the highest bidder is awarded the licence, but is required to pay an amount equal to the second highest bid on the licence or should there only be one bidder for a particular licence, the opening bid amount.
Under a first-price rule, the bidder has a strong incentive to bid less than its true value, which can lead to inefficient outcomes. A second-price rule promotes a more efficient outcome by increasing the incentive for bidders to bid their true value. Bidders, knowing that they will only be required to pay the minimum amount necessary to win their licence or package, will have the incentive to bid truthfully during the entire auction. As such, Industry Canada is proposing that the second-price rule be used for the auction of residual licences.
Given the proposal to divide the block GHI in the AWS-3 band into three separate blocks (G, H and I) and to allow package bidding for those licences within a service area, the price(s) for those blocks could depend on package bids and/or bids for the individual licences.
With package bidding, in some cases, the second 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. To address this, Industry Canada is proposing to require an additional payment above the second price to ensure that the winning bidder(s) pay an amount that is sufficient to ensure that no other bidder or group of bidders is prepared to pay more for the licence(s) in question. More specifically, Industry Canada is proposing to apply bidder-optimal core prices and to use the “nearest Vickrey” approach (see Annex E). This approach was selected as the mechanism to determine prices for the recent 700 MHz and AWS-3 auctions, and for the ongoing 2500 MHz auction.
P6 — Industry Canada is seeking comments on its proposal to use a second-price rule, including bidder-optimal core prices and use of the “nearest Vickery” approach, for the auction of residual licences in the 700 MHz and AWS-3 bands.
Opening bids are the prices for the spectrum licences at the start of the auction, and the minimum amount that will be accepted for each licence.
700 MHz Licence(s)
In the recent 700 MHz auction (held in 2014), the determination of the opening bid prices took into account the results of past Canadian auctions and reflected the relative value of the licences in the different service areas. As a minimum accepted price, the existing Cellular and Personal Communications Services (PCS) bands’ annual fees, adjusted to account for a licence term of 20 years using a 14% discount rate,Footnote 1 were used. The opening bid prices were rounded to the nearest thousand dollars.
With respect to the unassigned licence from this process, block C1 in service area 2-14 – Yukon, the Northwest Territories and Nunavut, the opening bid was based on the minimum accepted price level of $0.265/MHz/population, for an amount of $284,000.
Given the proposal to divide this licence into three separate tier areas, the opening bids would be adjusted to reflect the smaller licence areas.
Bids at or above the proposed opening bid prices will ensure that Canadians obtain a fair return for the use of this spectrum and that, at a minimum, the revenue received will be comparable to the returns currently being received for similar spectrum resources.
|Tier||Service Area Name||Population||$/MHz/pop||Opening bid ($)
(20-year licence, 10 MHz)
In the recent AWS-3 auction, the opening bids were similar to those set for the 2500 MHz auction given that the AWS-3 and 2500 MHz bands are comparable. In particular, they both have similar propagation characteristics and are commercial mobile frequency bands.
With respect to the remaining available licences, it is proposed that the opening bid prices remain as they were in the previous auction. However, given the proposals to break up the 30 MHz block into three separate blocks of 10 MHz each and to divide the northern licence into three separate areas, the opening bids will be adjusted to reflect the smaller block size and smaller licence areas as outlined in Table 5 below:
|Tier||Service Area Name||Population||$/MHz/pop||Opening bid ($)
(20-year licence, 10 MHz)
P7 — Industry Canada is seeking comments on the proposed opening bids as presented in tables 4 and 5.
In order to maintain auction integrity, as in past auctions, Industry Canada proposes that there be rules relating to the participation of affiliated and associated entities in order to ensure that each bidder is an independent bidder. As was the case in recent auctions, it is proposed that affiliated entities not be allowed to participate separately in the auction. It is also proposed that associated entities only be allowed to participate separately if following a review of their application, Industry Canada is satisfied that their participation would not have an adverse impact on auction integrity. As in previous auctions, applicants will be required to publicly disclose information about their beneficial ownership, affiliations and associations.
Definition of Affiliated Entities: It is proposed that the definition of affiliated entities remain as it was for recent auctions, 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.
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. Applicants must notify the Department 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” above.
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.
Eligibility to participate in the auction: It is proposed that only one member of an affiliate relationship 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.
Proposed Definition of Associated Entities: As a basis for participating in the auction of residual licences, Industry Canada proposes that associated entities be defined as follows:
Any entities that enter into any partnerships, joint ventures, agreements to merge, consortia or any arrangements, agreements or understandings of any kind, either explicit or implicit, relating to the acquisition or use of any of the spectrum licences in the 700 MHz band or the AWS-3 band being auctioned in this process will be treated as Associated Entities. Typical roaming and tower sharing agreements would not cause entities to be deemed associated.
Depending on the nature of the association, it may not preclude the ability of the entities to participate separately in the auction or to have the 700 MHz spectrum caps applied individually.
Eligibility to participate separately in the auction: In the past, associated entities were not permitted to participate in an auction separately. It is now proposed that associated entities could be permitted to apply to Industry Canada to participate in the auction separately. The submitted narrative (as proposed in Section 7.4 below) would be assessed to determine whether permitting both entities to participate separately would negatively impact the integrity of the auction process. The auction integrity would be best assured by the transparent disclosure of the relationships between bidders participating in the auction. Industry Canada may request additional documents. Any information considered by the applicant to be confidential should be properly marked as such. If Industry Canada deems it necessary to disclose any information marked as confidential, the applicant would be consulted prior to release.
Eligibility to have caps apply to associated entities separately: It is proposed that in addition to the above, associated entities could request that the spectrum caps apply individually. To obtain this approval, entities would be required to demonstrate that they intend to compete separately in the applicable licence area and continue to function as competitors to a level satisfactory to Industry Canada. In making this determination, Industry Canada would consider all relevant factors. Depending on the nature of the agreement, documentation may be required that sets out the details of the association, including copies of all arrangements or agreements, for example agreements related to network architecture and spectrum use and documents related to corporate decision making, marketing and customer information, sales and financing. Assessment criteria may include, but would not be limited to, consideration of the degree to which the entities would offer branded services, pricing and device selection that are unique from the other. For additional information on the application of the spectrum cap for associated entities, refer to the condition of licence entitled “Spectrum Aggregation Limits” in Annex A of this document.
It should be noted that agreements between associated entities may have an impact on obligations to serve rural areas (see Annex A).
Bidders are reminded that the provisions of the Competition Act apply independently of, and in addition to, the proposed policy.
Associated entities wishing to participate in the auction separately would be required to submit their application at least 10 days in advance of the final application deadline to participate in the auction. This would provide Industry Canada the additional time required to make an assessment of the association and provide a decision on the associated entities’ ability to participate in the auction separately, and have the cap apply individually, if so requested. Should the request be denied, the associated entities would be required to select which member entity will apply to participate in the auction.
Applicants should note that all entities participating in the auction will be subject to the same prohibition of collusion rules, as stated in Section 7.3 – Prohibition of Collusion.
P8 — Industry Canada is seeking comments on its proposed rules regarding Affiliated and Associated Entities, which would apply to applicants and bidders in the upcoming auction of residual spectrum licences in the 700 MHz and AWS-3 bands.
As in previous auctions, in order to ensure the integrity of the bidding process, all applicants are prohibited from cooperating, collaborating, discussing or negotiating agreements with other bidders regarding the licences being auctioned or the post-auction market structure. Any such discussions occurring at any time prior to the public announcement of provisional licence winners by Industry Canada are prohibited.
In order to maintain the integrity of the auction, bidders are prohibited from signalling either publicly or privately, their bidding intentions or planned post-auction market structure related to the spectrum licences being auctioned, while the auction is ongoing. This would include comments or any communication with or via the media. An example would be making a public announcement regarding which licences the company intends to bid on or its rollout intentions.
Given that Industry Canada is proposing to allow the participation of some associated entities as separate bidders in this auction process, the prohibition of collusion rules are proposed as follows:
- 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.
P9 — Industry Canada is seeking comments on the rules prohibiting collusion, which would apply to bidders in the upcoming auction of residual spectrum licences in the 700 MHz and AWS-3 bands.
In order to ensure auction integrity and transparency, all entities wishing to participate in the auction process will be required to disclose in writing, as part of their application, the names of affiliated and associated entities. It is proposed that a narrative also be submitted, describing all key elements and the nature of the affiliation or association in relation to the acquisition of the spectrum licences being auctioned and, the post-auction relationships of the said entities. It is proposed that this include arrangements with another potential bidder that relate in any way to the future use of the 700 MHz and AWS-3 spectrum being auctioned in this process directly or indirectly.
Some examples of arrangements that would require disclosure include, but are not limited to, agreements to establish a joint network using spectrum licences acquired by each of the entities and agreements with respect to a joint backhaul network. It is also proposed that agreements such as significant joint equipment purchases be disclosed. Typical roaming and tower sharing agreements and other agreements, such as the purchase of backhaul capacity, would not cause entities to be deemed associated entities and hence need not be disclosed.
The submitted narrative would be made available to other bidders and to the public on Industry Canada’s website prior to the auction in order to ensure transparency of the licensing process.
The following section outlines the proposed general process for submitting an application to participate in the residual auction of 700 MHz and AWS-3 spectrum, as well as the general requirements and rules that apply prior to, during and post-auction.
To participate in an auction, all applicants must submit a completed application form, along with a financial deposit, details of the applicant’s beneficial ownership, information on any affiliations and associations as discussed in Section 7 of this document, and other corporate documentation as required. Industry Canada will publish the list of applicants on its website soon thereafter.
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 auction of residual licences 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 applicants, their beneficial ownership information and the narrative on any associated entity relationships will be made available on Industry Canada’s Spectrum Management and Telecommunications website, 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.
Entities are encouraged to approach Industry Canada at least two weeks prior to the application date if seeking guidance or a predetermination as to whether their arrangement or proposed arrangement would be considered to give rise to a finding of association.
In order to enhance the integrity of the auction, the Department will require that all bidders submit a pre-auction financial deposit with their application to participate in the auction.
Each participating bidder will be required to submit a financial deposit equal to the opening bid of the licence(s) on which it intends to bid. These amounts will be kept confidential.
Financial deposit(s) will be returned to any applicant not found to be a qualified bidder, any applicant that provides written notification to the Department of its withdrawal from the process prior to the auction’s commencement, and any bidder that fails to win a licence during the auction.
The application forms, the associated documents (as per the instructions on the application forms) and the total pre-auction financial deposit are to be physically delivered to the Manager, Auction Operations, by the date specified. Industry Canada, under exceptional circumstances, may decide to accept additional documentation after the deadline, but prior to publication of the list of applicants. Applications that are received without a deposit will be rejected.
Upon receipt of the application and the associated documentation, Industry Canada will send a notification to the applicant, advising that the application materials have been received. This notice will in no way mean that the application materials or the deposit have been approved.
The financial deposit 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, will be 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 letter of credit, certified cheque, bank draft, money order or wire transfer. Each letter of credit must comply with the conditions laid out herein concerning letters of credit. No letter of credit shall have any conditions requiring Industry Canada to draw on the letters in any particular order of priority, or requiring any letter to be drawn upon completely before drawing upon any other letter. 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 longer) 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 wishes for any reason to amend any of the forms that it has submitted and/or its financial deposit, it may submit one or more amended forms and/or financial deposit with an accompanying letter explaining that the enclosed form(s) and/or financial deposit 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.
Upon receipt of an amended form(s) and/or financial deposit, Industry Canada will send a notification to the applicant that the amended form (s) and/or deposit have been received. The notification will state the amount of the new deposit that has been submitted. Where the financial deposit is 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 deposit is in a form other than an irrevocable standby letter of credit, any partial reimbursement of the financial deposit may take several weeks.
A list of all applicants will be made public via Industry Canada’s Spectrum Management and Telecommunications website. The publication of this list in no way means that these applicants have been approved as qualified bidders.
Industry Canada will review the application forms (and any associated documents) and the accompanying financial deposit after the closing date for the submission of applications. In this initial review, the Department will identify any errors in the application forms or financial deposit. 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 by the application 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 deposit, and will request any additional information related to affiliated or associated entities if required. A copy of the original applications may be returned to the applicant with a brief statement outlining any discrepancies and/or omissions, 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, 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, may be returned to the applicant, outlining the deficiencies, along with the applicant’s deposit.
Those applicants that have submitted acceptable application materials, including the accompanying financial deposit, will receive a confirmation letter confirming that they are considered a qualified bidder.
A list of all qualified bidders, along with information related to their beneficial ownership, affiliates and associated entities will be made public via Industry Canada’s website. Qualified bidders will be sent all information and directions required to submit their bids, including an auction bid form.
Applicants wishing to withdraw their application materials and have their financial deposits returned may do so, without prejudice, by sending a written request to the Manager, Auction Operations, on or before the business day preceding the receipt deadline for sealed bids.
Only the Auction Authorized Representative of the bidding company may notify the Manager, Auction Operations, of any material changes in the information submitted in the application documents. Written notification must be sent by the Auction Authorized Representative within five business days of such changes.
The Auction Authorized Representative is the individual that is nominated by the applicant to receive all documentation pertaining to the licensing process for spectrum licences in the 700 MHz and AWS-3 bands.
A completed auction bid form, which includes the bid amount for each licence, or combination of licences for which the bidder is placing a bid, must be placed in a separate, sealed envelope, with only the bidder’s name, complete mailing address, email address, and the name of this licensing process clearly identified on the front of the envelope, and physically delivered to the Manager, Auction Operations, by the receipt deadline for sealed bids. The amount of each bid must reflect the amount that the bidder is willing to pay for the associated licence(s). All bids must be in dollars only, not cents. No bids will be accepted after 12:00 p.m., noon, EDT, on the receipt deadline for sealed bids. Following the auction, the Department will publish, on its website, a list of all bids received.
The sealed envelopes will be opened and examined by departmental officials following the receipt deadline for sealed bids. To be considered valid, a bid must be equal to or greater than the opening bid price; the previously submitted deposit must be equal to or greater than the amount of the opening bid price of the licence being bid upon; the bid form must be completed correctly and legibly; and the bid must be submitted by a qualified bidder. Note that, in all instances where there is no second bid, the opening bid prices noted in Section 6 will be considered the second highest bid (see Annex D for bidding examples).
Where a bid is placed on a licence on which the bidder is not eligible to bid, that bid will be ignored.
Bids for the 700 MHz blocks, will be made per licence; the winning bid will be the highest for each licence.
For the AWS-3 blocks, bids can be made for the individual licences and/or some combination of the available licences within each service area. The winning bids for the AWS-3 blocks in each service area would be calculated by determining the combination of bids that generates the highest sum; the bids in this combination would be the winning bids. In each service area, bidders are able to win, at most, one of the bids they placed on the AWS-3 blocks. For example, a bidder that places bids for each of the individuals blocks but not for any packages would only be able to win one of the blocks.
A reserve bid at the opening bid price will be included in the determination of provisional winning bidders and the prices to be paid for each 700 MHz and AWS-3 block, where available, within a given service area. In this process, it is as if Industry Canada is a bidder in the auction, placing a bid on all licences at the opening bid price. For the AWS-3 blocks, including a reserve bid for all three licences ensures that the incremental value that a bidder would be prepared to pay for an additional licence is at least the opening bid price of that licence. The three reserve bids for the AWS-3 blocks within a service area will not be treated as a package, but rather as having been placed by different bidders. Therefore, in all instances where there is no second bid, the opening bid prices noted in Section 6.4 will be considered the second highest bid (see Annex D for bidding examples)
To mitigate the possibility of a tie, bidders are encouraged not to bid in round figures. In the event of a tie, bidders involved in the tie will be requested to enter a second bid in an attempt to break the tie. If required, the Department will provide tied bidders the details of the procedure to submit further bids to break the tie. Should there be a second tie, bidders will be requested to enter a third bid in an attempt to break the tie. This procedure will be repeated until there is no tie.
Following the determination of the provisional licence winners, the Department will publish, on its website, a list of all bids received, the name of the provisional licence winner(s) and the licence(s), if any, that did not receive bids. The Department will also notify the provisional winning bidder(s) and inform them of payment requirements.
The auction will be considered closed upon publication of the provisional winning bidder(s).
Within 10 business days following the publication of provisional licence 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 8.11 — Forfeiture 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 bid payments for the initial 20-year term are in lieu of any fees fixed for the radio authorization under the Radiocommunication Act or any other Act.
Following the conclusion of the auction, winning bidders that fail to comply with the specified payment schedule or fail to come into compliance with the eligibility requirements of the Radiocommunication Regulations, will be considered disqualified and will forfeit their ability to obtain licences through this process. Furthermore, non-compliant bidders will be subject to a forfeiture penalty in the amount of the difference between the forfeited bid and the ultimate price of the licence – to be determined by a subsequent licensing process.
In the event of licence forfeiture, the bidder’s irrevocable standby letter of credit will be drawn upon for the full amount of the interim proxy forfeiture penalty, which will be the full amount bid for the licence(s) forfeited. If the interim proxy forfeiture penalty is greater than the full amount of the bidder’s irrevocable standby letter of credit, combined with any partial payment, or if the letter of credit has been returned or has expired, then the difference will be owing and payable to the Receiver General for Canada.
A winning bidder that forfeits on a licence (or any of that bidder’s affiliated and associated entities) will not be eligible to bid on any subsequent licensing process for this band.
In addition to forfeiture penalties that will be set out in the framework to be developed as a result of this Consultation, the Applicant and/or its representatives may be subject to administrative monetary penalties under the Radiocommunication Act if the auction rules set out in the Framework are breached.
P10 — Industry Canada is seeking comments on the proposed auction process for the auction of residual licences in the 700 MHz and AWS-3 bands.
Industry Canada will consider making unassigned licences available for licensing through an alternative process, which could include a subsequent auction at a later date following the close of the initial auction. The timing and form of such a process will depend on the demand for the available licences. Industry Canada may conduct a public consultation should it consider it necessary.
Following the end of the initial licence term, the licensee will have a high expectation that a new licence will be issued for a subsequent term through a renewal process unless a breach of licence condition has occurred, a fundamental reallocation of spectrum to a new service is required, or an overriding policy need arises.
As part of the licence renewal process, the Minister of Industry retains the power to fix and amend the terms and conditions of spectrum licences during the term of the licence and at the end of the term in accordance with subsection 5(1) of the Radiocommunication Act. As noted in the FSAC, licence fees that reflect some measure of market value will apply to licences issued through a renewal process. Accordingly, the renewal process will serve to determine whether new licences will be issued, the terms and conditions that will apply to the new licences and the applicable licence fees.
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, 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.
It is proposed that the renewal process include a public consultation process that would commence approximately two years prior to the end of the licence term.
P11 — Industry Canada is seeking comments on the proposed renewal process for spectrum licences in the 700 MHz and AWS-3 bands.
As done in previous auctions, following a decision on the questions raised in this consultation paper, Industry Canada will accept written questions soliciting clarification of the rules and policies set out in the decision paper. Written questions and Industry Canada’s responses will be made public on Industry Canada’s website.
Respondents are requested to provide their comments in electronic format (Microsoft Word or Adobe PDF) to the following e-mail address: email@example.com.
In addition, respondents are asked to specify question numbers for ease of referencing and to provide supporting rationale for each response.
Written submissions should be addressed to the Senior Director, Spectrum Licensing and Policy Branch, Industry Canada, 235 Queen Street (6th floor, East Tower), Ottawa, Ontario K1A OH5. All submissions should cite the Canada Gazette, Part I, the publication date, the title and the notice reference number (SLPB-002-15). Parties should submit their comments no later than May 25, 2015, to ensure consideration. Soon after the close of the comment period, all comments received will be posted on Industry Canada’s Spectrum Management and Telecommunications website at www.ic.gc.ca/spectrum.
Industry Canada will also provide interested parties with the opportunity to reply to comments from other parties. Reply comments will be accepted until June 12, 2015.
All comments and reply comments will be published, so those making submissions are asked not to provide confidential or private information in their submissions.
Following the initial comment period, Industry Canada may, at its discretion, request additional information if needed to clarify significant positions or new proposals. In such a case, the reply comment deadline may be extended.
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 document or related matters, contact:
c/o Senior Director, Spectrum Licensing and Policy Branch
235 Queen Street (6th floor, East Tower)
Ottawa, Ontario K1A OH5