Archivé — Commentaires de Rogers Cantel Inc. - DGTP-017-98

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November 30, 1998

Michael Helm
Director General
Telecommunications Policy Branch
300 Slater St., 16th Floor
Ottawa, Ontario

Dear Mr. Helm;

Subject: DGTP-017-98 - Receipt of an Application for Temporary Relief of the Application of the Spectrum Cap

Rogers Cantel Inc. is pleased to submit the attached comments in response to the issues raised in the above-noted Gazette Notice.

Yours truly,

Dawn Hunt
Vice-President
Government and Intercarrier Relations
Rogers Cantel Inc.

Rogers Cantel Inc. submits the following comments in response to the Gazette Notice DGTP-017-98: Receipt of an Application for Temporary Relief of the Application of the Spectrum Cap filed by Clearnet Communications Inc.

Introduction

Rogers Cantel Inc. ("Cantel") is in receipt of Clearnet Communications Inc.'s ("Clearnet") application for temporary relief from the 40 MHz spectrum aggregation limit ("spectrum cap"). This application was filed with the Department on October 22, 1998 in response to Gazette Notice DGTP-015-98 released October 24, 1998.

Cantel has a number of serious concerns about giving special accommodation to Clearnet prior to completing the larger review of the applicability of the current spectrum cap. Furthermore, the Department has been quite clear in their mandate to foster the deployment of digital 1.9 PCS service in all five regions of Canada. Granting Clearnet additional spectrum for their Mike system in the Greater Toronto Area (GTA) will not result in the deployment of digital 1.9 PCS service to unserved areas of Canada but rather encourage Clearnet to invest further in their Mike PCS system in the Toronto area.

Cantel opposes granting Clearnet temporary relief of the 40 MHz high mobility spectrum cap at this time. Granting Clearnet temporary relief of this spectrum cap raises issues regarding fairness, equal treatment of PCS licensees, and competitive equity. Further, Clearnet is able to implement a number of technical solutions as an alternative to relying on additional spectrum to meet their capacity requirements.

Competitive Advantage

Clearnet has requested temporary relief from the application of the 40 MHz spectrum aggregation limit in order to secure additional spectrum to support the expansion of their Mike system. Clearnet's marketing for their Mike system clearly targets cellular/PCS market consumers. Their new Mike ads market their new Motorola i1000 as a "Fully digital PCS phone"1. Clearnet is directly competing with all other PCS carriers in the industry using 30 MHz of their 1.9 PCS system, and 10 MHz of their Mike system. These two services combined provide Clearnet with 40 MHz for the provision of PCS services.

Clearnet's request for additional spectrum to solve their perceived capacity problems is designed to maximize their spectrum holdings in order to avoid the costs involved in increasing system capacity. These are costs that have been incurred by the other 800 MHz cellular and PCS licensees. In effect, Clearnet is requesting that they and only they be provided with a distinct and unfair advantage in an environment characterized by multiple service providers, high capital requirements and decreasing end user pricing.

Spectrum scarcity is a problem fared by all cellular and PCS carriers. Other carriers in the industry have met their capacity needs by employing techniques which improve overall efficiency in the network. For example, Cantel has spent hundreds of millions of dollars on cell splitting to increase call carrying capacity over the last 24 months in Toronto alone. Additionally, Cantel has deployed pioneering digital technology at 800 MHz and 1.9 GHz, to further increase network capacity, all without cost advantages and benefits of additional spectrum.

Requiring wireless companies, such as Cantel, to invest heavily in technological enhancements to increase efficiency, while not requiring competitors such as Clearnet to make similar investments is unfair and gives Clearnet a regulated competitive advantage. Investors will look favorably on a company which can minimize their costs and increase their spectrum holdings. Clearnet will translate their lower cost structure into lower end use r pricing. Further, approving Clearnet's application gives the incorrect signal that Clearnet has exhausted their current 40 MHz of allotted spectrum which is simply not the case. Much of Clearnet's 1.9 GHz spectrum remains unused.

Technical Alternatives

With respect to Clearnet's immediate need for additional spectrum, all players in the industry are well aware of the constraints and the implications of the spectrum cap. Cantel is surprised that Clearnet has not implemented measures to ensure that sufficient capacity is available to meet the demand for their Mike service. Options available to them are tighter re-use patterns, sectorization, cell splitting and dual or tri-mode phones. These are options the cellular licensees had to develop at a considerable cost, and adopt in order to meet capacity requirements in order to expand their system.

For example, in 1997, Cantel invested $200 million on cell splitting nationally. In the GTA alone, Cantel invested $106 million. Had Cantel been given the choice of acquiring additional spectrum to meet their capacity requirements rather than having to meet the capacity requirements through deployment of technical enhancements, Cantel's cost would have been $36 million for the GTA and $68 million nationally.

Due to the above noted investments made by Cantel to optimize spectrum efficiencies, in excess of 800,0002 subscribers can be supported on Cantel's system with the use of 10 MHz of spectrum. Clearnet is currently only serving approximately 87,743 Mike subscribers with their allotted 10 MHz IDEN system.

Clearnet could also implement the same half-rate coder that they use for push-to-talk on the Mike system for their digital cellular calls which they currently operate with a full-rate coder. This would more than double that portion of their network capacity currently occupied by digital interconnect calls. If their usage is similar to Nextel's, then 95% of the traffic consists of digital cellular Public Switched Telephone Network interconnected calls and single-party to single-party 2-way calls, while only 5% consists of push-to-talk group calling and dispatch functions. Voice quality on their proprietary half-rate coder is adequate for an enhanced dispatch service. More than doubling their capacity in the same spectrum with minimal capital investment seems to be a viable alternative to demanding more spectrum.

Approval of Clearnet's application will send a strong signal to the wireless telecommunications industry that the development of innovating technical solutions to conserve spectrum is to be discouraged.

Policy Issues

The Department has asked that comments be provided in response to DGTP-017-98, Application for Temporary Relief of the Application of the Spectrum Cap by November 30, 1998. The Department has also requested that comments be filed with the Department in response to DGTP-015-98, Review of the Spectrum Cap Applied to Providers of Personal Communications Services by January 22, 1999.

Addressing the issue of the temporary relief prior to considering the broader policy matter of the continued appropriateness of the existing spectrum cap will effectively pre-determine the outcome of that proceeding.

Cantel notes that the Department, in the face of strong opposition, went to great lengths to implement the spectrum cap in order to safeguard against anti-competitive behaviour and to provide a greater opportunity for competition in the cellular/PCS market. The spectrum cap has proven to be an effective policy tool to achieve these objectives, clearly shown by the continued success and growth of the smaller players, and the lower prices and greater consumer choice in today's intensely competitive market. Therefore, the assessment of the usefulness of this policy tool must not be treated lightly, given that many of the safeguards in place to prevent anti-competitive behaviour have been removed with the release of the CRTC Decision 98-4, Joint Marketing and Bundling. Respondents should be granted the allotted time to carefully consider the potential impact of the removal or modification of the spectrum cap prior to any deviation of this policy.

Conclusion

Cantel is strongly opposed to granting Clearnet temporary relief of the 40 MHz high mobility spectrum cap at this time. It is Cantel's position that Clearnet should be required to respect the same spectrum aggregation polices, as all other cellular and PCS companies. Clearnet should implement technical improvements to increase system capacity instead of seeking preferential regulatory treatment as a solution.

Granting Clearnet temporary relief of the spectrum cap allows them to increase spectrum holdings instead of incurring associated with technical solutions to meet capacity requirements. These are costs that other carriers are required to incur. This will provide Clearnet with an unfair cost advantage in an intensely competitive marketplace. This advantage is manifested in two different ways. First Clearnet is able to provide lower end user pricing, as they obtain cost advantages and second, they are able to elevate or raise the perceived value of the company in the marketplace. Clearnet may be trying to increase the perceived value of the Mike PCS service, in order to sell the business.

Regardless of the intent, Cantel submits it is inappropriate to grant a competitive advantage of this nature to one service provider. To do so creates arbitrary and artificial regulatory rules to benefit one carrier, and works against the Department's objectives of managing spectrum efficiency.

Fairness and equal regulatory treatment is essential in a competitive environment. To allow Clearnet certain privileges in order to avoid technical solutions previously imposed on others by the Department will grant Clearnet an unwarranted regulatory competitive advantage at the expense of other carriers in an intensely competitive market.


Footnotes

1 Please refer to the attached Mike ad from the National Post.
2 12.5 mErlangs per subscriber is the busy houre usage assumption.

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