TV stations will be moving
OTTAWA – As expected, 30 MHz of an available 70 MHz of new wireless spectrum to be auctioned off next year will be set aside for smaller, regional companies and possible new entrants in an attempt to push additional competition in the Canadian wireless market.
Wednesday evening, just as the federal government shut down for a two week Easter Break, the Ministry of Innovation, Science and Economic Development Canada released the much anticipated framework for the auction of 600 MHz spectrum, a band prized for its ability to both travel long distances and penetrate buildings.
“Auctioning 600 MHz spectrum will encourage competition, support new and emerging technologies, and enable Canadians to benefit from high-quality services at a better price,” reads the handout quote attributed to ISED Minister Navdeep Bains. That remains to be seen, of course, but the federal government stuck to its plan of setting aside 43% of the spectrum being auctioned exclusively for the likes of Freedom Mobile, Eastlink, Vidéotron, Xplornet, ICE Wireless and other small mobile companies – or newcomers (so long as they are already providing some sort of telecom services at the time of application). Essentially, none of Rogers, Bell or Telus can touch that 30 MHz, while those smaller companies remain free to bid on all 70 MHz on offer.
In the 2008 AWS auction (which brought in $4.2 billion), 40% of the spectrum was set aside for new entrants, while in the 2015 AWS-3 auction ($2.1 billion), 60% was unavailable to the big three to bid on.
Seven paired blocks of 5+5 MHz (uplink+downlink) are being made available for auction across the country this time from 617 MHz to 698 MHz which, as promised, harmonizes it with the U.S. band plan. When tallying the minimum bids of all of the spectrum being auctioned in all regions, the minimum the feds expect from the auction is $1.54 billion.
While there were many differences of opinion among the companies which contributed to the record of the process which informed ISED’s decision today, the ministry erred on the side of giving a bit of a leg up to the smaller, regional wireless carriers or any network operator thinking of becoming one.
The framework, however, does treat the far north a bit differently by separating the three territories so spectrum there can be bid on individually in each of the Yukon, NWT and Nunavut. “ISED recognizes the unique situation that exists in the North, given the low population density and the high cost of building a network,” reads the framework.
The framework also clarified “that licensing on a Tier 4 basis would also have the effect of excluding some entities that currently operate in one or two of these areas from obtaining set-aside spectrum across the entire North. Therefore, the eligibility criteria will be revised so that entities that would be eligible to bid on the set-aside spectrum if the northern licences were auctioned at a Tier 2 level will be deemed eligible to bid for licences in all Tier 4 licence areas in the territories. This revision will effectively allow eligible entities operating in any of the territories to bid on the set aside spectrum in any or all of the territories.”
For the rest of the country, the auction framework will see the spectrum auctioned in 13 Tier 2 areas. “ISED will not be using small tier sizes for licensing the 600 MHz band as a tool for facilitating entry by smaller service providers. Other measures, namely the spectrum set-aside and the deployment conditions, combined with a licensee’s ability to make use of subordinate licensing arrangements, are intended to support smaller service providers in their efforts to access spectrum,” reads the framework.
“Today’s decision will drive a more dynamic, competitive wireless market in Canada.” – Brad Shaw, CEO, Shaw Communications
As in prior auctions, any set aside spectrum purchased under those conditions is not allowed to be sold to Rogers, Bell or Telus for a period of five years and license terms are 20-years long.
Licenses will also have graduated deployment requirements in each region, ensuring that spectrum bought is deployed in a reasonable time frame. For example, the spectrum must be deployed to 70% of Toronto’s population within 10 years of being granted a license for the area. Other regions have different requirements. For example, 40% of PEI’s population has to be covered by then and 35% of Moose Jaw’s.
As for the over-the-air television broadcasters who may be in the 600 MHz band being repurposed for mobile use? They will have to move when asked. Urban stations will have a year to transition elsewhere after they are notified while those TV broadcasters outside cities will be given two years. The framework made no mention of any funding being made available for such a switch, which is in contrast to how the Americans ran their auction, where TV stations were encouraged to switch in an incentive auction where broadcasters could give up their slots for cash, essentially (however, it was far more complicated than that – and less successful than hoped).
The March 2019 600 MHz auction will be another combinatorial clock auction (CCA), this time using the using the Generalized Axiom of Revealed Preference (GARP) based activity rule. (Ed note: We don’t really know what that means, but if you want to see the math on how it’s going to work, go to page 81 in the framework itself.)
Since the framework came out so late on Wednesday, only Shaw Communications (Freedom’s owner) has so far responded publicly. While it originally advocated for 40 MHz being set aside, the company pronounced itself pleased with the outcome.
“The 600 MHz policy framework affirms the government’s commitment to true competition and the long-term benefits it will bring to all Canadians,” said Brad Shaw, CEO, in its press release. “Today’s decision will drive a more dynamic, competitive wireless market in Canada.”
“The 600 MHz spectrum auction is an important step towards correcting the significant imbalance in lower frequency spectrum holdings between the big three incumbents—Bell, Rogers and Telus—and new competitors. Over 90 per cent of available low-band spectrum in Canada is currently in the hands of the Big Three, which reflects a concentration of market power that includes over 90 per cent of all Canadian wireless subscribers,” added the company’s release.
Applications are due December 4th. Bidding will begin March 12th and the auction is expected to last for a month.
