ISED approves smaller, tier 5 spectrum licence areas

The federal government will create over 600 smaller spectrum licensing areas across the country, which will theoretically give smaller players easier entry into the wireless market -- possibly including Cogeco Inc. Before Tuesday’s decision announcing the new tier 5 areas, ISED sold spectrum by four service areas: the first is a single national area covering the entire country; the second has 14 provincial and large regional service areas across the nation; the third covered 59 smaller regional service areas; and the fourth had 172 localized service areas based on adjacent groupings of Statistics Canada’s 1996 census subdivisions (CS). But those areas were still too large for some players to financially compete in spectrum auctions with established players who have the resources to bid on bigger plots. Small telecoms, including those represented by groups like the British Columbia Broadband Association, the Canadian Communication Systems Alliance (CCSA) and CanWISP, have pushed for smaller area sizes at auctions that they can afford. Tuesday’s decision to create 654 smaller spectrum licensing areas across the country could help new entrants with that problem, including a complaint that some larger tier 4 areas had both high-density urban areas bundled with less dense neighbouring rural areas. The decision came at the tail-end of a consultation on the issue launched late last year. ISED said the new service areas reflect current and future use cases, including the emergence of 5G, internet of things applications and continued demand for wireless broadband where fixed lines, such as fibre, cannot reach. It also said certain use cases and business models could be “even more localized in nature,” hence why smaller service areas would work. The decision could rectify the reason Cogeco ended up not participating in the 600 MHz auction. The Montreal-based telecom, which does not have a wireless business, has stated many times before that it would consider entering the wireless market if the conditions were right. Bidding on bigger areas was not a favourable condition. The cable company put the issue bleakly in a submission to the panel studying the nation’s communications laws, when it said the government missed an opportunity to impose smaller service areas for auctions. The 600 MHz auction was, it said, the last spectrum auction of its kind in the foreseeable future. It drew on the criticisms of the country’s auditor general, which focused on the size of geographic areas, deployment conditions, and unused spectrum in underserved areas. In an email praising Tuesday’s decision, Marie Ginette LePage, Cogeco’s new vice-president of wireless solutions and innovation, said: “Yesterday’s decision by ISED is a step in the right direction as it will allow the purchase of spectrum on a more cost-effective basis. “Many of the recommendations we and our partners suggested were taken into consideration by ISED in their decision,” added LePage, who was put in her job last month. LePage reiterated that if the “right regulatory conditions, spectrum licensing policies and balanced approach like our proposed HMNO model” are in play, “Cogeco could enter the Canadian wireless market.” In a submission to the CRTC’s wireless review, Cogeco recommended the hybrid mobile network operator (HMNO) model as an alternative to the mobile virtual network operator (MVNO) model. It essentially stipulates that companies with broadband facilities should be allowed wholesale access to parts of incumbent wireless networks on the condition the renter continue to invest in their own infrastructure. LePage said the HMNO model is the “best way to foster investments and increased competition in the wireless market.” The CRTC is seriously looking into the alternative. In fact, it has asked those who are engaged in the wireless review to comment on Cogeco’s model in extensive questioning ahead of the review’s hearing in January 2020. So far, the federal government has put into force a new policy directive to the CRTC that forces it to view its decisions in light of competition and affordability. It had already sent back to the CRTC its decision that did not mandate access by MVNOs, which forced the regulator to walk back its previous position on the model. Now, the government has effectively broken down a barrier that forced Cogeco to withdraw from an important auction for wireless spectrum. “We believe Canadians want to see more competition and better service in the wireless marketplace and this regulatory change might encourage new regional operators to enter this market,” LePage said. The new tier 5 licensing areas are designed around principles including geographic differences, demand, and technological and competitive neutrality, meaning the areas would not unfairly advantage one party or technology. The department initially proposed two options for how to draw up the new service areas: either by municipal area or population size. The first option would have defined the new tier based on Statistics Canada’s 2016 census subdivisions, but would set a minimum size because some divisions are smaller than 1 km sq. The benefit of that would be separating rural regions from major urban centres to help ensure access to service for remote communities, it said. The second option proposed four categories of areas divided by population: large areas with over 100,000 people, medium between 30,000 and 99,999, small consisting of between 2,000 and 29,999, and a final category with a population of under 2,000. Tuesday’s decision includes a “hybrid” model incorporating geographic areas -- metropolitan areas, urban areas (with medium and large population centres), rural and remote areas -- and population sizes. But it said it will prioritize, above all other design principles, the geographic differences that separate urban and rural areas to ensure smaller players are not left out of larger blocks of spectrum that include both those kinds of areas. For rural areas, the department has targeted for tier 5 areas a population range of 10,000, with a variance of plus or minus 3,000. Areas with a population of 7,000 or above become their own tier 5 area; those below that threshold would be amalgamated together to reach the 10,000 population target with the same variance. In total, 511 rural tier 5 areas have been created. In remote areas, 43 tier 5 areas are created from 10 tier 4 areas with the lowest population density (less than 0.2 people per square kilometres). Those were drawn from census areas with the lowest populations, defined as between 400 and 700 people. The three territorial capitals are separated into their own tier 5 areas. The three largest metropolitan areas -- in greater Toronto, Montreal and Vancouver -- have been subdivided into 30 tier 5 areas. Urban areas, those with medium and large population centres north of 30,000 people, will have 70 tier 5 areas The remaining principles ISED will follow for the new areas include minimizing interference, factoring population growth using 5 km “buffer” zones, and ensuring that tier 5 “islands” are not created -- a result of two of those areas being inside of each other -- which can cause areas to go underserved. — With reporting by Ahmad Hathout at ahathout@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

ISED approves smaller, tier 5 spectrum licence areas

News | July 24, 2019

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ISED approves smaller, tier 5 spectrum licence areas

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