OTTAWA – Spectrum set asides, eligibility to purchase set-aside spectrum, and the band plan remain the primary sticking points for Canada’s wireless service providers in reply comments to Industry Canada’s consultation on the AWS-3 spectrum auction framework.
The country’s large wireless operators have panned many aspects of the department’s proposed approach to the AWS-3 auction. A 30 MHz set-aside that includes spectrum contiguous to previously auctioned AWS-1 spectrum gives new entrants a considerable leg up, they argue. Not only do they believe that the set aside is the wrong approach, they think if the department does indeed set aside a portion of the band, it should be the upper part, not the lower as is currently contemplated.
Telus Corp. described the set aside as a gift of 60% of the AWS-3 spectrum and that when factored in with all the other commercial mobile radio service (CMRS) spectrum it amounts to a total of 26% of all spectrum. In other words, wireless operators which have 5% of Canada’s mobile customers control, or will soon control, more than a quarter of all mobile spectrum.
Bell Canada, Rogers Communications and Telus all agree that the set aside is simply the federal government conferring a subsidy, and a very large one at that, on the new entrants.
“In this regard, our comments noted that in the likely scenario where set-aside licences are sold at the proposed opening bid price and the market value of those licences is equivalent to the average price paid by the incumbents in the recent 700 MHz auction ($2.99 per MHz-pop), then the implied subsidy to the new entrants is approximately $2.7 billion,” Bell wrote in its October 2 reply comments.
“The implied subsidy to the new entrants is approximately $2.7 billion.” – Bell Canada
The Big Three also argued that setting aside such a large portion of the airwaves up for sale will harm them since they, too, need more spectrum because they have much bigger customers bases.
“Incumbents require more spectrum than new entrants because they have many more customers and their customers are heavier users of capacity-hungry mobile broadband services compared to the new entrants’ customers,” said Rogers.
Not surprisingly, new entrants firmly believe that set asides work and will provide them the opportunity to sustainably operate their business. Wind Mobile said the spectrum set aside “will ensure that new entrants have access to vital spectrum that will allow them to provide next generation wireless service to their customers, meet growing consumer demand, and introduce more sustained competition in the wireless market.”
Moving the set aside spectrum to upper part of the AWS 3 band would also serve to harm new entrants, argued Wind. The company said doing so would limit new entrants’ ability to launch LTE services because a handset market is still developing for that upper portion of the band whereas the lower parts of the band already have a well developed device ecosystem.
The concept of separating rural and urban spectrum into separate licences in the set-aside bands was also raised in comments and replies. Bell suggested this would be a good approach, noting however that only the urban spectrum be in the set aside because this is what new entrants are most interested in.
Wind responded that Bell’s approach would run counter to key policy objectives for the auction which are to bring affordable, next-generation services to rural Canadians.
“Carving licences into urban and rural areas will impede network roll-outs along major transportation corridors, thus permanently fragmenting and limiting the utility of the set-aside spectrum.” – Wind Mobile
“Carving licences into urban and rural areas will impede network roll-outs along major transportation corridors, thus permanently fragmenting and limiting the utility of the set-aside spectrum,” added Wind. “But most importantly, from a policy perspective, Bell’s proposal is guaranteed to deny to rural residents the full extent of the potential benefits of competition.”
Eligibility to bid on set aside spectrum was a point of contention among regional and new entrant companies. EastLink, Niagara Networks and the Public Interest Advocacy Centre want changes to the eligibility criteria while MTS and SaskTel agree with Industry Canada’s proposed approach.
MTS told the department that it needs to make sure spectrum purchased becomes spectrum used.
“Allowing participants without existing facilities to participate within the set-aside would lead to more speculative activity rather than allocate spectrum to those that are serious about providing competition in the wireless market,” the company said.
Niagara Networks, on the other hand, argued that Industry Canada may be missing an opportunity to promote more competition in the wireless sector by limiting bidder eligibility to those that are already operating. The proposed auction format only serves to allocate licences to bidders at the lowest price not enhance competition at the retail level, it added.
SaskTel took eligibility a little further by arguing that it should be extended to non-set aside spectrum as well. It pointed to Shaw Communications and Wind, who own spectrum in Saskatchewan but have yet to deploy it.
“By expanding the requirement to all AWS-3 spectrum, the problem of spectrum hoarding by operators without networks in the licence area can be eliminated,” said the provincial Crown corp.
Industry Canada has proposed to hold a sealed-bid, second-price auction in March 2015.
