Smaller 2500 MHz licences to benefit rural providers, Industry Canada says

Industry Canada will auction off 2500 MHz spectrum licences in April 2015 using smaller “Tier 3” licence areas that will allow smaller service providers to access more wireless airwaves in rural locations, Industry Minister James Moore said. “This spectrum is ideal for delivering fast, reliable service on the latest smartphones and tablets and for enhancing Internet service for Canadians, especially those Canadians living in rural areas,” Moore said Friday at a press conference in Vancouver. “Smaller geographic licence areas will give Internet service providers in rural areas a greater chance of acquiring spectrum and to use it to offer new and improved services and wireless broadband services to both homes and to businesses.” Industry Canada said in 2011 that it would auction off available 2500 MHz spectrum to wireless service providers, which will use the airwaves to improve their mobile broadband services. In March 2012, the department said that auction would be held about a year after its 700 MHz spectrum auction, which is scheduled to start Tuesday, and that many of the same rules would apply to both auctions. Moore said Friday that the 2500 MHz auction will start on April 14, 2015, and that companies that want to take part in the sale must register with the department by Nov. 27. He noted that there would be some differences in the rules governing the two auctions, including the 2500 MHz band’s smaller geographical licence sizes — which allow the department to dole out licences for individual cities and counties instead of one or two larger licences per province — and more lenient aggregation limits that restrict all auction participants to a total of 40 MHz of spectrum in the 2500 MHz band in most licence areas. Under the 700 MHz spectrum auction’s rules, large service providers are limited to a single, 10 MHz block of “prime” spectrum in each of the 14 larger, “Tier 2” licence areas across the country, while smaller providers are allowed to acquire up to two of the four prime blocks in each region. “The smaller licences do create the opportunity for rural providers to come in and provide service,” Adrian Foster, a spectrum expert and partner with McLean Foster and Co., said in a telephone interview Friday. “There’s going to be areas that the big guys aren’t necessarily interested in if they have enough spectrum already.” Foster said smaller providers that only operate in rural areas can’t justify spending the money required to purchase geographically larger licences, which often include major urban centres and which are more valuable to larger service providers who can capitalize on those more profitable urban areas. “If you’re a rural provider, you’re not creating a national network,” he noted. “You just want to be able to provide access to people.” John Maduri, chief executive of rural fixed-wireless Internet provider Xplornet Communications Inc., said in March 2012 that larger licences areas, which force rural providers to purchase spectrum in urban areas, were slowing the rollout of rural Internet services in many parts of the country. “This prices many rural broadband providers out of the spectrum market and slows expansion of broadband to rural Canadians,” Maduri said of the larger service tiers. C.J. Prudham, Xplornet’s chief legal officer, said Friday that the company was reviewing the newly released auction rules, and was not yet prepared to comment on them. Stéfanie Power, a spokeswoman for Industry Canada, said the 2500 MHz auction rules will use the smaller licence tiers to help rural Internet providers like Xplornet secure the spectrum they need to expand their services. “In addition to providing an opportunity for mobile wireless providers to acquire this spectrum for increased capacity to Canadians' smartphones and tablets, using the smaller Tier 3 licence areas provides an increased opportunity for Internet service providers in rural areas to participate in the auction,” Power said in an emailed statement Friday. “In turn, this may increase their ability to offer new or improved services, such as broadband, to homes and businesses.” The 2500 MHz band contains 190 MHz of spectrum in each licence area, though some of that spectrum is already held by wireless providers and won't be available in the auction. Canaccord Genuity analyst Dvai Ghose said in a research note Friday that incumbent carriers BCE Inc. and Rogers Communications Inc. are not expected to take part in the auction because they already hold more than 40 MHz of 2500 MHz licences through their jointly owned Inukshuk Wireless Partnership, which is dedicated to rolling out a national, wireless broadband network. Ghose noted that Industry Canada gave companies the opportunity to return their current 2500 MHz licences to the department if they wanted to take part in the auction, though it did not require them to do so. He predicted that other wireless carriers would each be able to acquire 40 MHz of spectrum in the auction in the licence areas they are most interested in. “Telus seems well positioned to buy 40 MHz across the country and regional carriers like Videotron , MTS , etc. seem well positioned to buy 40 MHz in their incumbent regions and even outside their incumbent regions,” Ghose said, noting that up to 125 MHz of spectrum will be available in each region of the country. Industry Canada “wants non-incumbent wireless operators to also own significant spectrum positions in this band,” he added, pointing to the band’s 40 MHz spectrum cap as evidence. In the auction rules released Friday, the department said licences for spectrum in the band will last for an initial period of 20 years. It said any requests to transfer those licences to another company would be subject to the new spectrum transfer rules the department released in June. The department added that providers that secure 2500 MHz licences will be required to use that spectrum within ten years to serve between 10 and 50 per cent of a licence area’s population, at a minimum, or will risk losing their licence. Moore reiterated that point during the press conference Friday. “If companies fail to use spectrum, they will lose that spectrum,” he said. — With reporting by Nicholas Kyonka at nkyonka@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca. --- CORRECTION: An earlier version of this story incorrectly stated the number of Tier 2 licence areas.

Smaller 2500 MHz licences to benefit rural providers, Industry Canada says

News | January 10, 2014

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Smaller 2500 MHz licences to benefit rural providers, Industry Canada says

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