Incumbents say AWS-3 set-aside unnecessary, bad for taxpayers

In newly released documents Rogers Communications Inc., Telus Corp. and BCE Inc. all criticize the set-aside for new entrants in the upcoming AWS-3 auction, with Bell is asking the government to delay part of the auction for at least a year. In their responses posted online Sept. 4 to the government’s consultation document on the upcoming AWS-3 auction, both Rogers and Telus criticized at length the government’s plans to set aside 30 MHz of the 50 MHz on auction for smaller carriers operating existing mobile networks. “Established telecommunications companies such as Quebecor Inc. and Vimpelcom do not require subsidized access to AWS-3 spectrum,” Rogers said in its response, noting that the government’s recent caps on wholesale roaming prices have made it easier for newer players. “The windfall which the department has proposed for successful bidders of set-aside spectrum, and the corresponding forgone benefit for the Canadian taxpayers, will be enormous.” Rogers, which said in the response it owns the most spectrum of any Canadian wireless company, argued that the auction’s opening bids, which amount to $65 million for the open 20 MHz block and nearly $97.5 million for the 30 MHz set-aside block, need to be increased. The company said the opening bids equate to around 10 cents per MHz per person, which it said “falls far short” of the average of around $1.55 per MHz per person for the spectrum sold in the 2008 AWS auction. In areas where only a single bidder is eligible for the set-aside spectrum, Rogers said, the department should set the opening bid “a level that will reflect the true market value of the spectrum.” Telus said an auction under the current AWS-3 rules amounts to a massive discount for the smaller carriers, calling the set-aside “market distorting” and “unfair.” “The AWS-3 proposals, as we delineate, deprive taxpayers of fair compensation for AWS-3 set aside spectrum,” the company said in its filing. Telus said that a lack of spectrum is not what is holding back the smaller carriers. It said that "if there was a business case for this new network technology, Wind and the investment community would have acquired the complementary yet distressed AWS-1 assets of Mobilicity to address this need and/or would have participated in the MBS auction earlier this year.” Telus, which said in its filing that it is “the original new entrant,” said that its own relatively meagre spectrum holdings mean it will be the most affected by the set-aside in the AWS-3 auction. “Industry Canada proposes to restrict availability of 60 per cent of AWS-3 spectrum by giving it to operating entrants who serve five per cent of Canadians,” Telus said. “Do they need it? No, as we show. Could they use it? Sure. Will that hurt the national ? Primarily TELUS, due its spectrum deficit — a legacy of being the original new entrant.” Telus said the band plan for the AWS-3 auction should be changed so that the set-aside portion should is 20 MHz, rather than 30 MHz, of the 50 MHz on the block. “Restricting access to 20 MHz of AWS-3 spectrum is much less disruptive to the industry as a whole,” the company said, adding that the smaller set-aside would still be more than enough to meet the future bandwidth needs of the smaller carriers. “Providing only 20 MHz of unrestricted AWS-3 spectrum is unwarranted … unprecedented and potentially industry damaging.” Bell briefly noted its opposition to the set-aside in principle, while noting the “potential reduction in auction proceeds and the large implied subsidy that the new entrants will receive as a result of this measure.” In its response, Bell said the subsidy would amount to $2.7 billion if the average price for AWS-3 blocks is equivalent to what was paid in the 700 MHz auction earlier this year. In its filing, Wind Mobile said it supported the government’s set-aside plan for the AWS-3 auction, which it said will “help to ensure that AWS-3 spectrum is made available in a manner that maximizes the economic and social benefits for Canadians.” “By providing all wireless service providers with a genuine opportunity to access additional wireless spectrum, the proposal will permit both new entrants and to offer next-generation wireless services to more Canadians and facilitate sustained competition in the Canadian wireless market,” the company said. Wind asked the government to ensure that the set-aside spectrum is only available to smaller carriers that meet the criteria. “Wind urges the department to consider strong protective measures that would prevent from indirectly gaining access to set-aside spectrum,” the company said. The government should insist that carriers meet a “high and meaningful threshold” when it comes to the definition of operating new entrants, Wind said, in order to avoid loopholes such as one of the larger carriers signing a network-sharing agreement with a small operator in order to circumvent the set-aside. The government has not set a date for the AWS-3 auction beyond saying the results will be known before the 2500 MHz spectrum auction scheduled for April 2015. Following a speech in Ottawa on Monday, Industry Minister James Moore told reporters the timeline for the auction would be released “soon.” The incumbent carriers also other problems with the AWS-3 auction rules beyond the set-aside for smaller players. In its filing, Bell called for the government to delay the non-set-aside portion of the auction for one or two years. “This would enable national and regional incumbents to focus capital resources in the near term on the planned deployment of network upgrades as well as more rapid deployment, including in rural and remote areas, of the 700 MHz spectrum acquired earlier this year,” the company said. “This would also accommodate the incumbents' participation in the long planned 2500 MHz spectrum auction scheduled to take place within one month of the just recently proposed AWS-3 auction.” Rogers took issue with the cooperation between Telus and Bell, which share network and spectrum with one another. “Rogers believes that the proposed rules prohibiting collusion should be strengthened and clarified in order to prevent the ongoing coordination between Bell and TELUS,” the company said. Despite having the most spectrum of any single company, Rogers said that competing against the combined forces of Bell and Telus is unfair. “Unless this is addressed by the Department through tighter anti-collusion rules, this fixed arrangement and ongoing coordination between Bell and TELUS will jeopardize the integrity of the upcoming AWS-3 and 2500 MHz auctions and will place other bidders at a disadvantage,” the company said. Bell and Telus did not immediately respond to requests for comments on Rogers' points about their cooperation. Moore said the department will look closely at the comments it received from the companies. “We're assessing the ideas that have come in, some of them very thoughtful, very helpful,” he said. “We did not go into it with any prejudice or assumptions about what the policy would be going out.” He added that, like the 700 MHz spectrum sold earlier this year, AWS-3 would have build-out requirements that compel companies to “use it or lose it.” “We want to make sure that spectrum is being deployed in the marketplace to the benefit of Canadian consumers, both in terms of choice, quality of service and competitive pricing, ultimately,” he said. — With reporting by Peter Henderson at phenderson@thewirereport.caand editing by Derek Abma at dabma@thewirereport.ca

Incumbents say AWS-3 set-aside unnecessary, bad for taxpayers

News | September 15, 2014

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