On November 28, 2007, Industry Minister Jim Prentice announced the policy framework for the auction in May 2008 of AWS spectrum in the 1.7/2.1 gigahertz (GHz) bands. A stated objective of the framework is to encourage new entry and foster more competition in the Canadian mobile wireless market.
The AWS auction design was hotly debated during much of 2007. On the one hand, potential new entrants sought spectrum set-asides and other measures to encourage new entry. On the other hand, the incumbent national mobile wireless operators and many other commentators argued that potential new entrants did not deserve any special treatment, and that all AWS spectrum should be auctioned to the highest bidder.
Minister Prentice has now settled that debate. Citing the goal of encouraging greater competition and further innovation, as well as lowering prices, improving service and providing more choices for consumers, the Minister has decided to set aside 40 megahertz (MHz) of bandwidth for new entrants while leaving 65 MHz available for all contenders to bid for. His decision follows a public consultation on how best to conduct the auction process for the available spectrum.
Under the policy framework, 90 MHz of AWS spectrum will be auctioned in six paired frequency blocks (three of 20 MHz bandwidth; three of 10 MHz), mirroring the block assignments in the US. Three of the blocks will be reserved for new entrants (one of 20 MHz; two of 10 MHz), while the other three will be open to all bidders. Blocks will be auctioned by geographic service area. Depending on the frequency block, the country will be divided into either 14 or 59 service areas for bidding and licensing purposes. In addition to the AWS spectrum, the upcoming auction will encompass two other spectrum blocks: One, a 10 MHz paired block at 1.9 GHz, is a potentially valuable block located in the band occupied by Personal Communications Services (PCS) licensees. The other is an unpaired 5 MHz block at 1670 MHz.
The policy framework also calls for:
Mandatory digital roaming service for cellular, PCS and AWS licensees outside of their licensed territory for at least 10 years. (Roaming is the ability of a customer of one service provider to access the wireless service of another service provider.)
Mandatory roaming service for new entrants inside their licensed territory for five years, with a possible extension in limited circumstances.
Mandatory sharing of antenna towers and sites (with exceptions based on technical limits or national security concerns), and the prohibition of most exclusive site arrangements. The new rules will apply to virtually all tower operators, including broadcasters.
Roaming and tower/site sharing arrangements are intended to be commercially negotiated by the parties involved. Impasses will be settled by binding commercial arbitration.
The auction announcement does not propose any changes to the Canadian ownership and control rules applicable to mobile wireless service providers. Although the continued appropriateness of these rules is being considered by the Competition Policy Review Panel recently appointed by the federal government, the panel’s report will not be issued until after the auction is completed. Accordingly, auction participants intending to involve non-Canadians investors will need to take these complex rules into account as part of their auction preparation.
Details of the auction rules, and a more comprehensive timetable of events and deadlines, will be published in the next few weeks. Applications from bidders will be due in March 2008. The auction will begin on May 27, 2008.
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