Industry Canada made a number of major telecommunications announcements on March 14, 2012 releasing the policy framework for the auctioning of spectrum in the prized 700 and 2500 MHz bands. At the same time, the Minister of Industry announced the elimination of the foreign ownership restrictions for telecommunications carriers that have less than a 10% share of the total Canadian telecommunications market. These decisions followed extensive public consultations. Industry Canada also announced changes to its Roaming and Antenna Tower Sharing policies to support competition in the wireless sector. Many of the details of these new policies will only be finalized after subsequent public consultations.
700 and 2500 MHz Spectrum Auctions
Industry Canada chose not to set aside a block of spectrum for new entrants or smaller operators, on which the three incumbent carriers—Rogers, Bell and TELUS—could not bid. Rather it will apply spectrum caps in the upcoming auctions that will enable four or more service providers in each of 14 designated regions to obtain spectrum in both the 700 MHz and the 2500 MHz bands. In the case of the 700 MHz spectrum, a limit on prime spectrum will be imposed on incumbents, which, like a set-aside, will in effect reserve at least one block of prime spectrum for new entrants and regional providers (since the three incumbents cannot collectively acquire more than three of the four blocks being auctioned). Unlike a set-aside, the measures will not require Industry Canada to identify specific blocks of spectrum for new entrants, allowing companies to bid according to their business plans. The 700 MHz auction will take place in the first half of 2013, to be followed by the 2500 MHz auction within a year.
Industry Canada will require companies having access to two or more blocks of paired spectrum in the 700 MHz band, through auction licences or through spectrum sharing, to cover 90 percent of the population of their current high-speed population coverage within five years and 97 percent within seven years of licensing. These obligations on spectrum licensees are intended to support the deployment of advanced services to rural Canadians in a timely fashion. In addition, general roll-out requirements will be applied to both the 700 and the 2500 MHz bands, as in previous auctions. These require between 20 and 50 percent population coverage, depending on the region, within 10 years.
Public safety agencies have an increasing need for access to mobile broadband applications and have unique requirements for reliable coverage in underground areas and within buildings. Industry Canada is therefore designating a block of spectrum in the 700 MHz band for public safety broadband use. This follows a similar designation in the U.S. and will allow for cross-border interoperability between public safety agencies. Industry Canada also consulted on the possible designation of an additional block for public safety broadband use. A decision on this block will be made following a review of the recent U.S. decision on the matter, and a further consultation with interested Canadian players.
Industry Canada will initiate separate consultations well in advance of the auctions on the licensing frameworks to be used for these spectrum auctions. Such aspects as auction design and opening bids, conditions of licence generally and revisions to the rules defining associated entities will be considered.
Relaxation of Foreign Ownership Limits
The government will amend the Telecommunications Act to exempt telecommunications carriers with less than 10 percent of total Canadian telecommunications market revenue from foreign investment restrictions in that Act. This change goes beyond the wireless sector to capture all telecommunications carriers. We expect legislation to be tabled soon which presumably will clarify the definition of the market on which the key definition is based. Companies that enter the market below the 10% market share level will be permitted to subsequently grow their market shares, other than by way of merger or acquisitions, without losing their exemption. Current restrictions on foreign ownership under the Broadcasting Act would remain in place for all companies operating broadcasting distribution undertakings (i.e. cable television and DTH). As is the case with any direct foreign investment, the net benefit to Canada test and other provisions of the Investment Canada Act will continue to apply to foreign investments in the telecommunications sector.
Roaming policies and Antenna tower sharing
In 2008, as part of the government's policies to encourage competition in the wireless sector, Industry Canada required all carriers to offer roaming on their networks. These requirements applied to both in-territory and out-of-territory roaming for new entrants, and just out-of-territory roaming by incumbent carriers. The existing measures included expiry dates for all forms of mandatory roaming except out-of-territory roaming. In order to support competition and continued access to roaming for customers of new entrants, Industry Canada intends to improve and extend these mandatory roaming policies through the following steps:
- extending roaming provisions indefinitely and expanding them to all carriers; and
- shortening the timelines for initiation of arbitration and the arbitration process between companies negotiating roaming agreements who fail to reach agreement on terms and rates.
Industry Canada also mandated antenna tower and site sharing in 2008 to reduce the proliferation of antenna towers, and to facilitate the entry of new competitors into the wireless market. To build on that initiative, Industry Canada is proposing changes to improve the current tower sharing policies including:
- requiring carriers to make available basic information on all towers to improve transparency and expedite the sharing process; and
- shortening the timelines for initiation of arbitration and the arbitration process.
Industry Canada will consult with all affected parties on the proposed changes to roaming and tower sharing policies.
These announcements by Industry Canada are of considerable importance to the wireless industry in Canada and more generally to the telecommunications market as a whole. The proposed changes to the foreign ownership restrictions will open the Canadian market to entry by foreign wireless and wireline carriers, who have historically been precluded from owning their own transmission networks in Canada or acquiring wireless spectrum.
As indicated above, many of the details remain to be worked out in several follow-up consultations and legislation amending the ownership restrictions has yet to be introduced. We will be closely following these developments and will issue further bulletins as appropriate. Should you have any questions, our team of communications regulatory lawyers are listed below.
Below are links to relevant documents:
Policy and Technical Framework: Mobile Broadband
Services (MBS) — 700 MHz, Broadband Radio Service (BRS)
— 2500 MHz Band
Proposed Revisions to the Frameworks for Mandatory Roaming and Antenna Tower and Site Sharing
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