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Most Read: Contributor Canada, October 2021
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Canada's Advanced Wireless Services (AWS) Spectrum Auction commenced on May 27, 2008, with twenty-seven qualified bidders participating.1 The bidders include Bell Mobility, Bragg Communications, Quebecor/Vidéotron, Rogers Communications, Shaw, Telus and MTS Allstream.

The first phase of the AWS Auction was the application process, in which applicants were required to complete application forms and to submit letters of credit as security against their auction participation. The second phase will be the auction itself. On completion of the multiple-round process, the AWS Auction will proceed to the final phase, which includes Industry Canada's assessment of eligibility and ownership information submitted by provisional licence winners — and, on completion of that review and determination of eligibility, the issuance of spectrum licences.

The procedures and other main features of the AWS Auction are set out in the Industry Canada publication, Licensing Framework for the Auction for Spectrum Licences for Advanced Wireless Services and Other Spectrum in the 2 GHz Range, released December 22, 2007 (the Licensing Framework).2 Under the Licensing Framework, 90 MHz of AWS spectrum is to be auctioned in six paired frequency blocks (three of 20 MHz; three of 10 MHz), consistent with the frequency block assignments adopted by the FCC.

Importantly, and controversially, three of the paired frequency blocks are reserved for new-entrant applicants, while the other three paired blocks are open to all bidders. In the AWS Auction, Industry Canada has also adopted the practice of dividing the country into "Tier 2" and "Tier 3" service areas, resulting in a total of 292 geographic service areas to be put up for auction.

The frequency blocks to be auctioned are set out in the following table.

Frequency Block

Frequency Pairing

Amount

A

1710-1720 MHz / 2110-2120 MHz

2x10 MHz

B*

1720-1730 MHz / 2120-2130 MHz

2x10 MHz

C*

1730-1735 MHz / 2130-2135 MHz

2x5 MHz

D*

1735-1740 MHz / 2135-2140 MHz

2x5 MHz

E

1740-1745 MHz / 2140-2145 MHz

2x5 MHz

F

1745-1755 MHz / 2145-2155 MHz

2x10 MHz

*Blocks B, C and D are set aside for new entrants.

In addition to the AWS spectrum, the auction includes two other spectrum blocks: one is a 10 MHz paired block at 1.9 GHz (a potentially valuable block in the band occupied by PCS licensees); the second, an unpaired 5 MHz block at 1670 MHz.

The Licensing Framework sets out a number of other significant features to be adopted in the AWS Auction:

  • mandatory digital roaming for cellular, PCS and AWS licensees outside their licensed territory for at least ten years;

  • mandatory roaming for new entrants inside their licensed territory for five years, with the possibility of extension for another five years where roll-out commitments are met; and

  • mandatory sharing of antenna towers and tower sites (with limited exceptions based on technical or national security requirements), and the prohibition of site-access agreements that exclude access by other operators.

Further, although it is anticipated that roaming and site-sharing agreements will be commercially negotiated, the conditions of licence that give effect to these obligations require parties to submit matters for binding arbitration where not agreed within 90 days.

Applicants participating in the AWS Auction must comply with the eligibility criteria defined by the Radiocommunication Regulations.3 To be issued a spectrum licence as a radiocommunication carrier, the potential licensee must comply on an ongoing basis with the Canadian ownership and control requirements of the Regulations.

In the case of a corporation, assessment of the eligibility criteria will require a review of the following elements of the applicant's corporate structure.

  • Is the applicant incorporated or continued under the laws of Canada or a province?

  • Are no less than 80% of the members of the board of directors of the corporation individual Canadians?

  • Are no less than 80% of voting shares beneficially owned by Canadians?

Given the importance of ownership and control determinations, Industry Canada has provided guidance on its interpretation and application of these requirements including in its Client Procedures Circular "Canadian Ownership and Control."4 Application of the requirements in any particular circumstances can be a complex matter, including consideration of circumstances under which a non-Canadian can be found to have "control in fact" over the relevant entity.

The spectrum set-aside and other features of the AWS Auction suggest that it will result in at least one new digital cellular competitor entering the market. Such entry can be expected to have a significant impact on the dynamics of the wireless services market in Canada.

Significant issues have also been raised regarding the structure of spectrum management and regulation in Canada – most importantly, the merits of a single, integrated model of sector regulation. At present, ongoing regulation of telecommunications carriers and broadcasting distribution undertakings is the mandate of the Canadian Radio-television and Telecommunications Commission (CRTC). Industry Canada has authority over spectrum licensing and telecommunications equipment certification. There is continuing consideration of the merits of folding Industry Canada's telecommunications regulatory functions into those of the CRTC. These issues remain outstanding and are likely to shape the spectrum management debate in Canada for some time to come.

Footnotes

1. The list of qualified bidders and information about their beneficial ownership is available at http://strategis.ic.gc.ca/epic/site/smt-gst.nsf/en/sf08902e.html.

2. Available at http://www.ic.gc.ca/epic/site/smt-gst.nsf/en/sf08854e.html.

3. P.C. 1996-1679, November 5, 1996.

4. C.P.C. 2-0-15, Issue 2, August 2007.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

AUTHOR(S)
Stephen Rawson
McCarthy Tétrault LLP
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