BIDDING IS SET TO GET underway in Canada’s much anticipated 600 MHz spectrum auction. The 12 qualified bidders are Bell Mobility, Bragg Communications, Freedom Mobile, Iris Technologies, Novus Entertainment, Rogers Communications, Saskatchewan Telecommunications, SSi Micro – Consortium, TBayTel, TELUS Communications, Vidéotron and Xplornet Communications.
The 600 MHz band is designated for flexible use for mobile, fixed and broadcasting services. Canada has adopted the same band plan as the U.S., which began to auction off that band more than two years ago. The low-band spectrum is ideally suited for offering mobile services and it is one of the frequency bands designated internationally for the deployment of 5G services. Some advantages of low-frequency spectrum are that it offers coverage over long distances, and penetration into buildings and through obstructions.
The spectrum up for auction includes seven paired blocks of 5-plus-5 MHz, totalling 70 MHz, in 16 geographic regions (service areas) across the country. The technical name for the auction format is combinatorial clock auction (CCA), a format that is similar to the format used by the Department during the 700 MHz and 2500 MHz auctions. The CCA format allows bidding on packages of licences across the country, rather than bidding on individual licences. The idea with this format is to eliminate the risk that bidders win some, but not all, of the licences they require for their business case (typically to ensure continuous coverage across service areas).
The auction winners will receive 20-year licences, with a high expectation of licence renewal following the initial 20 years. Licensees will be required to demonstrate to the Minister that the 600 MHz spectrum has been put to use in accordance with the timetable in the Department’s auction framework. The Department will review licensees’ compliance with their deployment conditions at years 5, 10 and 20. Should a licensee fail to comply, the Department can invoke enforcement measures including administrative monetary penalties and revoking licences.
ISED has implemented a spectrum set-aside for this auction, too. The set-aside is intended to support competition by ensuring a minimum amount of spectrum is reserved for a sub-set of the qualified bidders. For the 600 MHz auction, a total of 30 MHz spectrum is set aside for eligible bidders. Eligibility to bid on the set-aside spectrum is limited to bidders registered with the CRTC as facilities-based providers, which are not national incumbent service providers (so not Rogers, Bell or Telus), and which are actively providing commercial telecommunications services to the general public in the relevant service area of interest. The set-aside spectrum will be auctioned as three separate paired blocks of 5-plus-5 MHz.
The U.S. completed its 600 MHz auction in 2017, raising nearly US$20 billion. Some of the winning operators have already begun their build-out of 600 MHz spectrum.
While nobody can predict how high the bidding will reach in Canada, it will likely be in the low billions of dollars. The opening bids mandated for the 600 MHz auction total over $1.5 billion for all spectrum blocks. In 2014, the government raised over $5.2 billion in the 700 MHz auction. Just over $2.1 billion was raised in 2015 when the AWS-3 frequency bands were licensed.
However, two recent regulatory developments are likely causing the telco auction war rooms to reflect on their bidding strategies. As we have reported recently, the likelihood of seeing mandated mobile virtual network operators (MVNOs, or third party resellers) has increased greatly with the CRTC’s announced review of mobile wireless services.
Add to this the Liberal government’s proposed policy directive to the CRTC which focuses on competition, affordability, consumer interests and innovation and both of these developments may cause bidders to re-consider how much they want to invest in additional spectrum to offer facilities-based services. Whether these developments will dampen the overall auction results, remains to be seen. (Ed note: We’d ask carriers about that question but we know we'd get no response since the auction rules make it very clear talking about the auction is strictly verboten, on penalty of being kicked out of the auction.)
ISED will not be releasing information about the auction while it is underway. An announcement and publication of provisional licence winners is expected within five days following cessation of bidding. The end date for the auction is unknown.
