Usual fault lines emerging ahead of 3.5 GHz auction

A cap on the amount of 3.5 GHz spectrum any one company can hold in the upcoming auction is not, on its own, “sufficient” for smaller rural-based wireless internet service providers to compete, according to the trade group CanWISP. For rural providers, CanWISP says, the Department of Innovation, Science, and Economic Development (ISED) needs to also put in place smaller license service areas, as well as set-asides of spectrum for smaller operators. The recommendations came in consultation comments submitted to ISED back in September and released this week as part of the department’s consultation process on the 3500 MHz auction, scheduled for sometime in 2020. “The set-aside provision is a proper way to protect the new entrants and encourage the small players to obtain secure spectrum at a reasonable price,” the CanWISP submission reads. “The application of the set-aside will enable the small players, especially members to expand their service into the underserved areas.” Rogers Communications Inc., on the other hand, strongly objected to the notion of set-asides in their submission, saying that the government should instead prioritize the creation of 3500 MHz as a national entity. “Set-asides are unnecessary and counterproductive given the Department’s stated competition objectives. Set-asides will only fragment the the 3500 MHz spectrum for no competitive benefit for Canadians and deny consumers the full benefit of new 5G services; they should not be adopted in any configuration,” the Rogers submission -- also from September -- reads. The Tier 5 licensing areas, which were approved by the department in July and will create some 600 new spectrum sites across the country, are meant to give smaller wireless players a chance to purchase spectrum and compete for customers. Instead of set asides and the smaller licencing areas, Rogers says, a spectrum cap of 60 MHz (and 80 MHZ for joint network holders) is “sufficient to provide access to regional mobile operators and rural fixed providers without the negative competition impacts and auction distortions that spectrum set-asides would produce.” The 80 MHz cap for joint network holders -- BCE Inc. and Telus Corp. specifically -- would prevent the companies from colluding, Rogers’ submission indicated. “Bell and Telus’ bidding behaviour, even uncoordinated, overwhelmingly shows patterns of attempting to circumvent aggregation and competition rules by bidding individually at auction and then immediately combining their spectrum following the auction,” the Rogers submission reads, and also calls on ISED to create “a single authoritative set of rules improve the efficiency and integrity of the auction.” In the consultation document, ISED said that it thought “allowing associated entities that are competitors in the market to bid separately would not have an adverse impact on the integrity of the auction provided that auction participants comply with the information disclosure and anti-collusion rules.” Rogers was the big spender in the 600 MHz spectrum auction last spring, shelling out some $1.7 billion, while Telus spent $931 million and Bell sat it out. Telus, for its part, said in its submission that the dearth of spectrum bands available would put Canada behind other countries in the race to launch 5G networks. “The 3500 MHz band in Canada is only a ‘starter kit’ for 5G providing in the order of 30-50 MHz per operator (depending on the market), compared to the 80-200 MHz per operator that has been already allocated for 5G in other advanced markets such as South Korea, Japan, China, Germany, Italy and others with which Canada benchmarks itself,” Telus wrote in the submission, while also arguing that set-aside policy would in effect increase prices, contrary to ISED’s policy objectives. The set-aside policy in the 600 MHz auction, Telus wrote in its submission, drove prices upward, and will ultimately lead to higher consumer prices. “ and Videotron had a direct effect on driving up the price of open spectrum in the West and fell back to their protected set-asides to end the auction,” Telus wrote. “These high spectrum costs will have to eventually be recouped from Canadian consumers (running contrary to the Government’s ‘affordability’ agenda).” Shaw wrote in its submission that a spectrum-cap only auction, without any set-asides, would see regional players like themselves elbowed out of the market for 5G. “If we are shut out of the initial deployment of 5G, we will lose irreparable ground to the wireless incumbents,” and went on to say that incumbent arguments that a set-aside would delay or harm the development of 5G in Canada are insincere. “These arguments should be seen for what they are – an argument for the status quo, for an auction that merely tracks current market share and an argument to extend their dominance for the next 40 years,” Shaw wrote. When the government announced that it would claw back strips of the 3500 MHz band based on proportional holdings from telecom companies back in June, analysts said the policy struck the right balance. In its consultation document on the 3500 MHz auction, the department wrote that “ISED is of the view that the ability to bid on set-aside spectrum should be limited to a particular sub-set of service providers that are best positioned to compete in either the commercial mobile services market or as rural wireless Internet service providers.” In November, a Liberal party source said that a Liberal government would impose spectrum set-asides, though wasn’t able to specify if the government wanted to impose set-asides in every future auction. — With reporting by Michael Lee-Murphy at mleemurphy@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Usual fault lines emerging ahead of 3.5 GHz auction

News | December 5, 2019

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Usual fault lines emerging ahead of 3.5 GHz auction

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