Responses to Clarification Questions on the Technical, Policy and Licensing Framework for Spectrum in the 600 MHz Band

June 2018

Additional questions added
October 25, 2018: Q3.4, Q3.5, and Q3.6

The following are responses to clarification questions received subsequent to the release of SLPB-002-18, Technical, Policy and Licensing Framework for Spectrum in the 600 MHz Band (hereinafter referred to as the Framework).

Questions may have been rephrased, and in some cases, similar questions have been consolidated.

This document may be updated from time to time, as additional questions arise. Interested parties are encouraged to regularly check the Auction of Spectrum Licences in the 600 MHz Band webpage for updates.

Clarification questions and responses have been grouped under the following themes:

  1. Auction format
  2. Auction process
  3. Pro-competitive measures
  4. Deployment requirements and over-the-air television broadcasting
  5. Bidder training and support

1. Auction format

Question 1.1: Will ISED provide a mathematical formulation for winner and price determination in the 600 MHz auction?

Response 1.1: ISED will provide a mathematical formulation for winner and price determination in the 600 MHz auction prior to the application deadline.

Question 1.2: What information will be provided to bidders a. before the start of the assignment stage; and b. after each assignment round?

Response 1.2: Before the start of the assignment stage each bidder will be informed of its own winning package, along with the base price that it will pay for its package. Following the end of each assignment round, each participating bidder will be notified of the specific licences that it has won in that round, and the assignment price to be paid for those licences.

ISED will not provide bidders with information about the frequency assignments of other bidders. This information policy is consistent with ISED’s decision to use anonymous bidding for all stages of the auction including the assignment stage.

Question 1.3: Will the price of the open product in a service area increase in the following scenario?

  1. The price of the set-aside product is less than the price of the open product by an amount which is less than the current price increment of X% for the set-aside product; and
  2. The demand for the set-aside product in this service area is 5 blocks, and the demand for the open product is 2 blocks.

Response 1.3: In this scenario, because there is excess demand for the set-aside product in this service area, and because the price of the set-aside product is lower than the price of the open product, the price of the set-aside product will increase by X%, and the price of the open product in this service area will increase by an amount that makes it equal to the price of the set-aside product. The price of the open product will never be set below the price of the set-aside product. In the next round, if the demand for the set-aside product and the open product in this area remain the same, there will be no further price increases for any product in this service area.

Note that scenario (a) can only occur if the price increment percentage changes during the auction.  If ISED uses the same price increment of X% throughout the auction and the price of the set-aside product is less than the price of the open product, then the difference between the two prices will be greater than or equal to X% of the price of the set-aside product.

Question 1.4: What are the differences in the applications of the General Axiom of Revealed Preference (GARP)-based activity rules in the clock and supplementary rounds?

Response 1.4: In the clock rounds, under the GARP-based activity rules, a bidder is allowed to submit a bid for package Q that exceeds its current eligibility if all of its bids—starting with the last round in which the bidder had sufficient eligibility for package Q and ending in the current round with a bid for package Q—are consistent with the bidder's implied set of valuations. In other words, all bids starting with the last round in which the bidder had sufficient eligibility for package Q and ending in the current round with a bid for package Q must satisfy the GARP-based activity rules. This set of bids could include bids that are larger in eligibility than package Q.

There are two differences in application of the GARP-based activity rules in the supplementary round in comparison to the clock rounds. First, a different set of rounds is considered with respect to package Q submitted in the supplementary round. Supplementary bid for package Q must satisfy revealed preference with respect to the final clock round and all rounds (if any) in which the bidder bids for packages of a smaller size than package Q. The second difference between the supplementary round and the clock rounds is that in the supplementary round, the revealed preference rule is applied one pair at a time rather than to the entire set of bids.

Question 1.5: What price increments will ISED use in 600 MHz auction?

Response 1.5: Price increments will be in the range of 1-20% of prices in the previous clock round, rounded upward to the nearest thousand dollars. During the auction, ISED reserves the right to adjust the amount of round-to-round price increases within this range to facilitate the progress of an efficient and timely auction.   

Question 1.6: Will set-aside-eligible bidders be informed only of the aggregate demand and price for set-aside products, and will set-aside-ineligible bidders be informed only of the aggregate demand and price for open products?

Response 1.6: All bidders will be informed of the aggregate demand for each service area from the previous round and the price of the product on which they are eligible to bid for the next round.

Specifically, a set-aside-eligible bidder and a set-aside-ineligible bidder in the same service area will both be informed of the aggregate demand for this service area (i.e. the sum of the aggregate demands for the set-aside and open products in this service area). The bidders will not be informed of the aggregate demand for the set-aside product separately from the aggregate demand for the open product.

The set-aside-eligible bidder in a service area will be informed of the price of the set-aside product in this service area but not of the price of the open product in this service area.

Similarly, the set-aside-ineligible bidder in a service area will be informed of the price of the open product in this service area but not of the price of the set-aside product in this service area.

For example, suppose that clock Round X is not the final clock round. Let us assume that the aggregate demand for the set-aside product in service area Y in Round X is 4 blocks and the aggregate demand for the open product in service area Y in Round X is 6 blocks. So the aggregate demand for service area Y is equal to 10 (4+6). Also suppose that the price of the set-aside product in area Y for round X+1 is $400,000 and the price of the open product is $650,000. If Bidder A is eligible to bid on the set-aside spectrum in area Y, this bidder will be informed of the aggregate demand for service area Y (10 blocks) and the price of the set-aside product for round X+1 ($400,000). If Bidder B is eligible to bid on the open spectrum in area Y, this bidder will be informed of the aggregate demand for service area Y (10 blocks) and the price of the open product for round X+1 ($650,000). No other information will be released in Round X with regard to service area Y to bidders A and B.

Question 1.7: Is it possible for the price of the set-aside product to increase even when the aggregate demand for a service area (the sum of the aggregate demands for the set-aside and open products in this service area) is not greater than 7 blocks?

Response 1.7: The price of the set-aside product in a service area will increase from the previous round if the aggregate demand for the set-aside product exceeds three and the price of the set-aside product is less than the price of the open product. This price increase for the set-aside product will take place even if the aggregate demand for this service area is not greater than seven.

Question 1.8: What are the conditions for clock rounds to end?

Response 1.8: The bidding in clock rounds stops and the auction proceeds to the supplementary round if, for each service area, the following three conditions are satisfied:

  • The aggregate demand for the service area (that is, the sum of the aggregate demands for the set-aside and open products in this service area) is at most seven;
  • The aggregate demand for the open product is at most four; and
  • Either the aggregate demand for the set-aside product is at most three, or, the aggregate demand for the set-aside product is greater than three and the price of the set-aside product is equal to the price of the open product.

2. Auction process

Question 2.1: Are all of the rules pertaining to the 600 MHz auction set out in the current Framework?

Response 2.1: The auction rules are contained in the Technical, Policy and Licensing Framework for Spectrum in the 600 MHz Band. Any additional policies or rules that are related to the auction are referenced in the Framework. Responses contained in this current document will be considered as clarification of the policies and where required, as amendments or supplements to the rules set out in the Framework. ISED may also amend or supplement the auction rules and procedures contained in the Framework. Any such amendment or supplement will be published on ISED’s website and will be sent to all qualified bidders. Qualified bidders will receive further details through an information session and mock auctions.  Qualified bidders will also receive specific instructions in a bidder information document and in a user manual for the auction bidding system.

Question 2.2: Can ISED clarify what the expression “Prior to the auction” means in the context described at paragraph 177 of the Framework: Is it the deadline for submission of applications (December 4, 2018) or the auction start date (March 12, 2019)? Furthermore, is it possible for a single bidder to modify its application in favour of a consortium after the application deadline date, but before the auction start date, and vice versa?

Response 2.2: The reference “Prior to the auction” in paragraph 177, refers to the application deadline (December 4, 2018 per the Table of Key Dates). After the application deadline, an applicant may not modify its application or pre-auction deposit; however it may withdraw its application materials and have its financial deposit returned without penalty.

Furthermore, as stated in paragraph 178 of the Framework, should a 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. In this case, ISED would allow a modification to the application to reflect this change, up to 10 days in advance of the auction start date. However, bidders cannot modify their applications in favour of forming a consortium after the application deadline date.

Question 2.3: Can ISED provide clarification on the prohibition of collusion and other communication rules?

Response 2.3: All prospective 600 MHz auction applicants are reminded of the importance ISED places on maintaining the integrity of the upcoming 600 MHz auction.

ISED’s Technical, Policy and Licensing Framework for Spectrum in the 600 MHz Band addresses the prohibition of collusion and other communication rules during the auction process. The rules state that: “…any communication 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.”

As in past auctions, applicants will be required to certify that they understand and are in compliance with the rules. This includes a certification that they have not made statements regarding bidding strategies, service areas of interest or post-auction market structures for example, in public meetings or through media.

All applicants, including affiliated and associated entities, are prohibited from cooperating, collaborating, discussing or negotiating agreements with competitors in relation to the licences being auctioned or to the post auction market structure, including, for example, frequency selection, bidding strategy and post auction market strategy, until after ISED's public announcement of the provisional licence winners.

This rule is set out in order to preserve the integrity of the auction process. The rule is such that any prohibited communications occurring at any time prior to ISED's public announcement of the provisional licence winners are prohibited. All such communications, including those prior to the publication of the Framework, would have to be disclosed.

All prospective auction applicants should carefully consider any communications regarding participation in the auction.

Question 2.4: As part of the publication of the list of qualified bidders, will ISED disclose the specific service areas in which each bidder is deemed set-aside-eligible?

Response 2.4: A list of all qualified bidders, along with information related to their beneficial ownership, affiliates, and associated entities, will be made public via ISED’s website in accordance with the timelines stated in the Table of Key Dates. The number of eligibility points, financial deposit amounts and eligibility status, including set-aside eligibility, will not be published.  These rules, along with the principles of anonymous bidding discussed in section 7.1.2 of the Framework, have been adopted to encourage bidders to focus on their own valuations and reduce the potential for anti-competitive behaviour.

Question 2.5: Paragraph 70 of the Technical, Policy and Licensing Framework for Spectrum in the 600 MHz Band refers to SMSE-018-17, Consultation on the Technical and Policy Framework for White Space Devices and SMSE-019-17, Consultation on the Technical, Policy and Licensing Framework for Wireless Microphones. These decisions have not yet been released by ISED.  When the decisions are released, will ISED allow parties to submit additional 600 MHz auction clarification questions related to those frameworks?

Response 2.5: There will not be another formal clarification question process as part of the 600 MHz auction, however interested parties may send additional questions to:

Innovation, Science and Economic Development Canada
Manager, Auction Operations
Spectrum Licensing Policy Branch
235 Queen Street
Ottawa, Ontario K1A 0H5
613-957-8106 or 343-291-1400
Email: ic.spectrumauctions-encheresduspectre.ic@canada.ca

3. Pro-competitive measures

Question 3.1: If a set-aside-eligible bidder in a given service area enters into any partnership with a set-aside-ineligible entity that is either (a) a Canadian non-national carrier, or (b) a non-Canadian carrier, for the same service area, would such a consortium qualify to bid as a set-aside-eligible bidder in that service area?

Response 3.1: Eligibility to bid on set-aside spectrum will be limited to those registered with the Canadian Radio-television and Telecommunications Commission (CRTC) as facilities-based providers, that are not national incumbent service providers, as defined in the Framework, and that are actively providing commercial telecommunications services to the general public in the relevant Tier 2 service area of interest, effective as of the application date to participate in the 600 MHz auction.

In the scenario where a set-aside-eligible bidder for a given service area enters into a partnership or consortium with a set-aside-ineligible entity, either a Canadian non-national carrier or a non-Canadian carrier, the partnership would be qualified to bid as a single set-aside-eligible bidder for that given service area.

In the case where the entities participating jointly include a set-aside-eligible bidder for a given service area and a national incumbent service provider, the partnership would not be eligible to bid on the set-aside for the given service area.

Question 3.2: Regarding the eligibility criteria to bid on set-aside spectrum, do satellite relay distribution and direct-to-home satellite services qualify as commercial telecommunications services being provided to the general public?

Response 3.2: As stated in the Framework, to be eligible to bid on set-aside spectrum, the applicant must meet all three of the following criteria as of the application date to participate in the auction:

  • Be registered with the Canadian Radio-television and Telecommunications Commission (CRTC) as facilities-based provider;
  • Be actively providing commercial telecommunications services to the general public; and
  • Not be a national incumbent service provider.

The term ’general public’ would include retail residential and retail business customers, in the relevant Tier 2 service area of interest.

In the Framework, ISED defines ‘telecommunications’ as “…the emission, transmission or reception of intelligence by any wire, cable, radio, optical or other electromagnetic system, or by any similar technical system.” Under this definition, satellite relay distribution and direct-to-home satellite services would qualify as telecommunications services.  To qualify as commercial telecommunications services being provided to the general public, an entity would need to demonstrate that it is providing telecommunications services to the general public for compensation.

Question 3.3: Does the prohibition of the transfer of set-aside eligible spectrum to set-aside-ineligible bidders within the first five years of the licence term apply in the situation where the transfer merely results in a swap of spectrum frequencies and there is no change in spectrum concentration?

Response 3.3: As detailed in section 4.3 of the Framework, transfers will not be permitted where they will result in a set-aside-ineligible entity obtaining a set-aside spectrum licence for the first five years of the licence term. After the first five years, set-aside spectrum licences will be treated like all other commercial mobile spectrum licences and may be transferred in accordance with the provisions of section 5.6 of CPC-2-1-23, Licensing Procedures for Spectrum Licences for Terrestrial Services.

However, in recognition of the principles of efficient use of spectrum, after the announcement of the provisional licence winners, ISED may permit a spectrum swap (i.e. an exchange of equal 600 MHz frequency blocks) between a set-aside-eligible entity and a set-aside-ineligible entity, subject to the provisions of section 5.6 of CPC-2-1-23, within the first five years of the licence term. This is an exception to the five year prohibition and would only be permitted after a specific application for permission, which must be made prior to or at the same time as the application for transfer under CPC-2-1-23. ISED will amend Decision-D14 of the Framework accordingly.   

ISED notes that the other exception to the transfer restriction relates to subordinate licensing in support of an agreement to share spectrum as outlined in section 9.2 of the Framework.

Question 3.4: Can ISED provide clarification on the set-aside-eligibility rules regarding affiliates and partnerships?

Response 3.4: A bidder may be eligible to qualify as a set-aside-eligible bidder based on the eligibility of its affiliated entities or on the eligibility of the partners who control the bidder where the bidder is a partnership.

As long as the bidder itself is not affiliated with or controlled by a national incumbent service provider, and where one or more affiliates or controlling partners of the bidder is registered on the CRTC facilities-based list, that bidder may be qualified as set-aside-eligible to bid in all licence areas where an affiliate or controlling partner is actively providing commercial telecommunications services to the general public in the relevant Tier 2 service area, as set out in section 4.2 of the Framework.

All applicants must disclose their affiliates and, where applicable, any controlling partners of the applicant in its application form. Applicants who wish to be considered as set-aside-eligible bidders will have to indicate and explain for each licence area, if they are directly eligible or through which affiliate or controlling partner they are eligible.

Question 3.5: If various entities form a bidding consortium to participate in the auction, how will ISED treat this consortium regarding set-aside-eligibility and how will it issue licences?

Response 3.5: In the scenario where a number of entities, none of which are national incumbent service providers, are members of a bidding consortium for the purpose of participating in the auction, the bidding consortium may be qualified to bid as a set-aside-eligible bidder in all service areas where any of the members of the consortium are eligible to be a set-aside-eligible bidder. In the application forms, the consortium should indicate and explain through which member it is set-aside-eligible in each licence area. Where the consortium is a winning bidder, the consortium may direct ISED to issue a licence to any member of the consortium that is eligible to hold a licence in the given licence area. For instance, where two members of a consortium are set-aside-eligible in a particular licence area, ISED may issue a licence to either, at the direction of the auction authorized representative. Correspondingly, ISED would not issue a set-aside licence to a member of the consortium who is not set-aside-eligible in the relevant licence area.

Question 3.6: What happens if changes to a licensee affect its set-aside eligibility?

Response 3.6: It is the responsibility of all set-aside licensees to maintain their set-aside eligibility for the first five years of the licence term. To be eligible to hold set-aside spectrum during this period, the licensee must demonstrate how it meets the criteria set out in section 4.2 of the Framework. ISED is clarifying that rule by revising the condition of licence related to eligibility in Annex B of the Framework. The condition will now read:

2. Eligibility

The licensee must comply on an ongoing basis with the applicable eligibility criteria in subsection 9(1) of the Radiocommunication Regulations and, where applicable, with the eligibility criteria for set-aside licences as defined under the Technical, Policy and Licensing Framework for Spectrum in the 600 MHZ Band (the Framework). The licensee must notify the Minister of any change that would have a material effect on either type of eligibility. Such notification must be made in advance for any proposed transactions within its knowledge.

4. Deployment requirements and over-the-air television broadcasting

Question 4.1: Will ISED take into consideration the digital television (DTV) transition when evaluating deployment requirements?

Response 4.1: The deployment requirements will be evaluated as set out in the Framework. It is the responsibility of the mobile licensee to meet all conditions of licence, including deployment requirements and for the licensee to notify ISED of mobile deployment plans. The 600 MHz licences will be issued using Tier 2 service areas, which cover a large geography, mostly based on provincial borders. The related deployment requirements are based on a percentage of the population in that full tier. In addition, the final phase of transition for incumbents is scheduled to conclude no later than January 2022, which is approximately three years from the start of the auction.

For information regarding the DTV Transition, interested parties are encouraged to refer to Broadcasting Procedures and Rules 11 (BPR-11) — Broadcasting Television Application Procedures During the 600 MHz Transition and the Digital Television (DTV) Transition Schedule.

Question 4.2: Of the stations currently operating in the 600 MHz band that are listed in annex A of the Digital Television (DTV) Transition Schedule, can ISED clarify which have already received displacement notifications from ISED and which stations are currently permitted to continue operation until notified?

Response 4.2: ISED has issued displacement notifications to incumbents that are operating stations in the 600 MHz band that were identified in the schedule for phases 3 to 10 in Annex A of the Digital Television (DTV) Transition Schedule. Other TV stations in the 600 MHz band are subject to displacement notifications as per section 7.4 of Broadcasting Procedures and Rules 11 (BPR-11) — Broadcasting Television Application Procedures During the 600 MHz Transition.

Question 4.3: Will ISED issue notifications to additional stations (beyond those identified as impairing mobile deployment in the United States) before the 600 MHz auction, and if so, to which stations?

Response 4.3: ISED is not planning to issue additional displacement notifications before the 600 MHz auction. 

5. Bidder training and support

Question 5.1: Will ISED provide additional information on the bidding schedule?

Response 5.1: ISED will provide a detailed bidding schedule to qualified bidders prior to the start of the auction.

Question 5.2: Can ISED provide more information regarding the mock auctions?

Response 5.2: 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.

Up to three mock auctions per qualified bidder will be scheduled in the February to early March 2019 timeline.

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