Set-asides, caps at issue in upcoming auction of unsold spectrum

Large wireless carriers are arguing for the elimination of set-asides and spectrum caps in the upcoming auction of unsold AWS-3 and 700 MHz spectrum, while smaller competitors say those measures should be kept in place. The government is set to auction off unsold portions of 700 MHz and AWS-3 spectrum this August. Companies will bid on one licence in the North, which went unsold in the 700 MHz auction last year, and on three licences that remained unallocated after the AWS-3 auction in March this year, in the North, Manitoba and Saskatchewan. Reply comments were posted on Industry Canada’s website Friday. BCE Inc. argued in its initial comments that it is “now time for Industry Canada to return to a light-handed regulatory approach which has a greater reliance on market forces,” since new entrants “have now secured both low-band (700 MHz) and higher-band spectrum (AWS-1, AWS-3 and 2500 MHz).” The company said that all bidders should be able to bid on the G, H and I blocks of AWS-3 spectrum, while caps should be removed for the 700 MHz spectrum. Rogers Communications Inc. also supported the removal of the set-aside for the AWS-3 spectrum in its initial comments, arguing that having “market forces determine the outcome of spectrum licensing ensures those companies that value the spectrum the most will be able to acquire it and put the spectrum to its highest use.” In its reply comments, it said that it shares others’ concerns about the potential for all the AWS-3 spectrum in Manitoba or Saskatchewan to be controlled by one company. Roger said if Industry Canada decides on using caps in the auction, “it should be limited to addressing previous unintended consequences. Thus caps should be designed specifically to avoid an outcome whereby a single bidder (or network) acquires all or the majority of spectrum in the 700 MHz and AWS-3 bands in any of Saskatchewan, Manitoba, Yukon, Nunavut, or the Territories.” Telus Corp. argued that 700 MHz caps should be lifted in the North. “The competitive measure in the northern licences in the 700 MHz auction in 2014 did not result in the licensing of the spectrum and now it should go to the highest bidder,” it said in its comments. Rural Internet provider SSi Micro Ltd. took issue with the big three’s arguments in its reply comments, writing that it's not surprising that “Bell, Telus and Rogers each support the removal of any competitive measures for this upcoming allocation process. Any reduction in competitive protections will only serve to further entrench the collective market power of the large wireless service providers.” It said that during the recent 2500 MHz auction, Bell and Telus had bought all the spectrum available in the North. SSi also argued that “the purchase of spectrum at an inflated price, and then have it lie fallow, is simply a means to an end in an attempt to thwart competition,” but that smaller carriers “seek to put spectrum to use.” In its initial comments, SSi argued that large wireless providers “must be excluded from any allocation process for the residual spectrum licences in the 700 MHz and AWS-3 Bands, and the allocation approach implemented by the Department must encourage smaller and regional carriers to acquire the residual spectrum cost effectively.” It also said that for small and regional carriers, the opening bid prices for 700 MHz spectrum are too high, and that smaller carriers “are simply unable to compete in any bidding war with the larger wireless service providers.” Ice Wireless, a subsidiary of Iristel Inc., said in its initial submission that caps on 700 MHz spectrum should be kept in place, but going forward, there should be a limit of one paired block per licensee for the A, B, C, C1 and C2 blocks. “This policy will promote competition in the North through new entry rather than allowing incumbent licensees in this band to aggregate and potentially squat on new spectrum, thereby creating an artificial barrier to entry,” it said. It also argued, like SSi, that the opening bids for the 700 MHz spectrum are too high. In its reply comments, Bell responded that neither Ice Wireless not SSi had “provided compelling justification” for lowering the prices, while Rogers said that “pricing spectrum well below its true market value, while the Department proposes to retain caps on the far north 700 MHz licences, may result in its acquisition by companies that are not incented to put the spectrum to its highest use.” This would not benefit taxpayers or potential customers, Rogers said, and would “also provide an unfair and unjustified benefit to potential new licensees over those who participated and won licences in the original 700 MHz auction in 2014.” Saskatchewan Telecommunications Holding Corp. said that Industry Canada should, “at the very least,” cap the amount of AWS-3 spectrum any carrier can obtain to 20 MHz. It said this is “especially important in Saskatchewan” because only two carriers have built wireless networks in the province, and SaskTel bears “the network costs of carrying most of the traffic due to Industry Canada’s Mandatory Roaming rules.” It said it is “very concerned that given the current outline of the rules governing the AWS-3 auction, there is a distinct possibility that all 50 MHz of AWS-3 spectrum in Saskatchewan will be bought by one party. The possibility that one company, which owns no infrastructure in Saskatchewan but runs on SaskTel’s infrastructure, would obtain all 50 MHz of this valuable resource would not be in the best interests of the residents of Saskatchewan.” In the AWS-3 auction, Telus bought two blocks of spectrum in the province. SaskTel’s recommendation for a 20 MHz cap on AWS-3 spectrum was backed up by Eastlink, which said in its reply comments that it supports the cap, since it “would be consistent with the policy framework established for the band by allowing regional service providers to acquire needed high-capacity spectrum to provide competitive wireless data speeds over the long-term.” Eastlink also supported caps on 700 MHz spectrum, stating that would “ensure that small regional service providers who are interested in purchasing the spectrum, but are unable to outbid the large incumbent service providers, are able to acquire 700 MHz spectrum.” CLARIFICATION: The initial story included only the comments Rogers made in its initial submission to Industry Canada. It has been updated with comments from its reply document. — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Shruti Shekar at sshekar@thewirereport.ca

Set-asides, caps at issue in upcoming auction of unsold spectrum

News | June 22, 2015

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Set-asides, caps at issue in upcoming auction of unsold spectrum

News | June 22, 2015

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