Archived — Frequently Asked Questions: Personal Communications Services
These frequently asked questions are for general information only.
To view the official clarification questions and answers as well as any written amendments or supplements to the auction rules and policies (PDF Format, 165 KB, 75 pages).
1. What is PCS?
PCS stands for Personal Communications Services and is basically a digital wireless phone. PCS phones are often considered as the second generation of wireless phones, with analog cellular phones being considered as the first generation. Most wireless phones today can operate on the digital PCS networks, as well as on the cellular networks. They also operate in different portions of the radio frequency spectrum. Analog cellular services operate at 800 MHz and digital PCS services are offered in both the 800 MHz and 2 GHz portions of the radio spectrum.
2. Why is Industry Canada initiating a licensing process for additional PCS spectrum?
The department is making this spectrum available in order to facilitate the expansion and enhancement of existing PCS, and to set the stage for the introduction of new advanced mobile services such as third-generation PCS (3G PCS). Third-generation PCS offers the promise of high-speed Internet access to mobile devices such as a wireless phones, pagers, or Personal Data Assistants (PDA). Predictions are that by the year 2005, over half of all Internet users will be accessing it through a wireless device. The high data rate capability of 3G will allow for a wide range of multimedia services, including Internet applications and video-oriented services. By proceeding now with a licensing process, we will allow timely access to the spectrum required by companies wishing to take the first step to introducing 3G services to Canadians and will stimulate innovation in the dynamic wireless environment.
3. Who will be eligible to participate in this licensing process?
Consistent with our policy to foster competitive telecommunications markets, all entities are eligible to participate in this auction. Our open entry policy will foster competition, provide an opportunity for existing companies to get additional spectrum and open up opportunities for new entrants with viable business plans.
4. Why is Industry Canada going to use an auction to assign this spectrum?
The department strongly believes that the demand for this spectrum will exceed the available supply and that the reliance on market forces to select licensees is in the public interest. Therefore, the department has decided to use an auction, similar to the one that was successfully used for broadband wireless spectrum in 1999. Auctions offer a number of advantages over the other options that are available to governments to assign access to the radio spectrum: their ability to promote economically efficient use of spectrum, their openness and objectivity as an assignment mechanism, their procedural efficiency, and their ability to return appropriate compensation to Canadian taxpayers for the use of a public resource.
5. How much money does Industry Canada expect to generate from this auction?
The department will not be making any estimates concerning potential revenue generated from auctions. The government's objective in conducting auctions is not to raise revenue, but rather to award licences fairly, efficiently and effectively so as to ensure that the Canadian public derives the maximum possible benefit from the spectrum resource.
6. Will auctions mean higher prices for consumers?
No. Prices for consumer services will be set according to supply and demand in the consumer services marketplace. If one firm raises its prices, consumers will switch to a competitor. Firms will base their bids upon, among other things, the prices at which they will be able to sell their services to consumers. Auction bids thus depend on consumer prices; consumer prices do not depend on auction bids.
7. What spectrum will Industry Canada be auctioning?
The department will be auctioning PCS blocks 'C' and 'E', which are in the band 1850-1990 MHz. This frequency band is commonly referred to as the 2 GHz frequency band. The 'C' block consists of 30 MHz of spectrum and for the purposes of this auction, it will be subdivided into 3 blocks of 10 MHz. The 'E' block consists of 10 MHz and will be auctioned as it currently exists.
8. Will the department set aside spectrum for new entrants?
The department found no compelling arguments demonstrating that spectrum set aside for new entrants would significantly advance new service offerings and expansion of digital service. Thus, the department will not set aside spectrum for which only new entrants can apply. However, new entrants are eligible to bid for all spectrum blocks available through this licensing process.
9. What measures has the department taken to ensure that one company doesn't buy all the spectrum?
To ensure that existing and potential licensees will continue to operate in a competitive marketplace, the department has placed a limit on the amount of PCS or similar spectrum that any one entity or its affiliates can hold. This spectrum aggregation limit, commonly referred to as a spectrum cap, is set at 55 MHz and consists of frequency assignments for PCS at 2 GHz, cellular radiotelephony, and similar public high-mobility radiotelephony services in the 800 MHz range such as Enhanced Specialized Mobile Radio Services (ESMR).
10. Will these frequency blocks align with those in the US?
The current PCS spectrum structure consists of six symmetrically paired blocks in the frequency range 1850-1990 MHz. This structure, adopted in 1995, has been the basis for licensing PCS systems both in Canada and the United States.
The spectrum available in this licensing process includes the 'C' and 'E' block licences. The 'C' block, which is currently a 15+15 of paired spectrum block in the bands 1895-1910 MHz and 1975-1990 MHz for a total of 30 MHz, will be divided into subblocks C1/C1', C2/C2' and C3/C3', each a 5+5 paired spectrum block. The 'E' block will remain a 5+5 MHz of paired spectrum at 1885-1890 MHz and 1965-1970MHz for a total of 10 MHz.
On June 7, 2000, the Federal Communications Commission (FCC) in the US released text of a "further notice of proposed rulemaking" for the re-auction of some of 'C' block licences. One of the proposals put forward is that the 30 MHz 'C' block be broken up into three 10 MHz blocks. If adopted, the FCC proposal would ensure that revised 'C' block spectrum aligns in both countries.
11. What are the main steps of this licensing process?
The main steps include:
- Public Consultation Released, (December 17, 1999)
- Comments and Reply Comments Received, (March 2000)
- Release of Final Policy Paper and Auctions Rules - Expected, (June 28, 2000)
- Pre-auction Information Session(s), (July 17 - Aug 2, 2000)
- Clarification Questions and Amendments and Supplements, (Mid August)
- Deadline for Applications to Participate in Auction, (November 14, 2000)
- Mock Auction for Qualified Bidders Early, (January 2001)
Further information regarding the auction schedule is available on the department's web site at: http://www.ic.gc.ca/SSG/h_sf02076.html.
12. What type of licence will be granted?
Spectrum licences will be granted. These are defined in the Radiocommunication Act as authorizations "in respect of the utilization of specified radio frequencies within a defined geographic area." Licences will not be issued for the radio apparatus.
13. What will be the length of the licence term?
The department proposes that the auctioned licences have a ten-year term with a high expectation of renewal. The intention is to renew auctioned licences for subsequent ten-year terms unless a breach of licence condition occurs, a fundamental re-allocation of spectrum to a new service is required (e.g. a change in the international allocation), or an overriding policy need arises (e.g. a spectrum re-allocation to address a national security issue).
14. Can auction winners sell their licences to a third party?
Yes. Winners will be able to sell their licences to a third party, either in whole or in part. The third party will be subject to the eligibility restrictions and conditions of licence existing at the time of the transfer.
15. What type of auction will be used?
A simultaneous multiple-round auction process will be used. This means that multiple licences are open for bidding at the same time and bidding remains open on all licences as long as acceptable bids are placed on any of the licences. Bidding occurs in a sequence of rounds. The results of each round are announced to the bidders prior to the start of the next round. The auction will be conducted over the Internet, using the latest in Public Key Infrastructure (PKI) encryption and digital signatures to ensure the integrity of the bids.
16. Will there be a reserve price?
No. Reserve prices are the minimum amounts the department would accept for a licence and are established in accordance with the principle that all spectrum users should make a contribution toward the costs of spectrum management. The department believes that the spectrum being offered in this auction has a significant value and is confident that the revenues generated will cover the relevant spectrum management costs and provide fair compensation to the Canadian public for the use of their spectrum resource. Therefore, for this auction, the department has decided instead to have opening bids.
17. What is an opening bid?
In order to "kick-start" the auction and avoid unnecessary delays in ultimately assigning licences, the department has established minimum opening bids. These opening bids are conceptually linked to the revenue generated by licences for similar spectrum in the 800 MHz cellular and 2 GHz PCS bands. The department has calculated an estimate of the total amount of licence fees that the 'C' and 'E' blocks would provide over the licence term if they were licensed by traditional means. The opening bids are based on the population of the service area. The department has adopted a three-tier schedule which varies the opening bid depending on the absolute number of people in a service area.
For example, the opening bid for a 10 MHz licence in the Yukon, NWT and Nunavut, which has a population of approximately 100,000, would be $20,000. The opening bid for the same 10 MHz licence in Newfoundland would be $300,000. Finally, the opening bid for the same 10 MHz licence in the areas which encompass larger metropolitan cities would be significantly higher (Southern Ontario which includes Toronto - $9,600,000; Southern Quebec which includes Montréal - $6,000,000; and British Columbia which includes Vancouver - $4,800,000).
18. Will successful bidders pay for their licences in a lump-sum payment or in instalment payments?
PThe department proposes that winning bidders be required to pay for their licences up front. Successful bidders will be required to pay 20 percent of their winning bids within 10 business days of the auction's close and the remaining 80 percent within 30 business days of the auction's close.
19. What happens if a winning bidder cannot pay for a licence?
After the conclusion of the auction, any bidder who has submitted the high bid on a licence but fails to comply with the specified payment schedule will forfeit their right to the licence. A re-auction will take place and, if the re-auction price is lower than the forfeited bid, the bidder will be required to pay a penalty. This penalty will correspond to the difference between the forfeited bid and the eventual selling price. Furthermore, an additional 3 percent of the original forfeited bid will be charged.
20. Will the licence fees of PCS incumbents be recalibrated on the basis of the results from this auction?
No. The licence fees of the incumbent PCS operators will not be recalibrated on the basis of the results from this auction.
21. Other administrations have encountered some problems with spectrum auctions. How will the department address these problems in Canada?
While most auctions conducted in other countries have been successful a few problems have nonetheless been encountered.
Based on expert advice and continued analysis of auctioning around the world, Industry Canada is confident that it has found effective solutions to these problems:
- bid withdrawal problems can be alleviated by implementing a withdrawal penalty;
- defaults can be avoided by requiring bids to be paid in lump-sum amounts; and
- bid signalling and erroneous bid submission problems have been addressed through simple auction design modifications.
22. What types of similar public high-mobility radiotelephony services are captured as part of the spectrum cap?
Public high-mobility radiotelephony services employ advanced radio equipment and utilize an aggregation of frequency assignments or specifically allotted spectrum. Such services provide network capabilities including wide-area coverage and hand-off, and may approach or exceed the capabilities of a conventional cellular network. A service using Enhanced Specialized Mobile Radio (ESMR) technology would be an example of a similar public high-mobility radiotelephony service.
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