Canada Gazette Notice NoCanada Gazette Notice No. DGSO-004-12
Consultation on a Licensing Framework for Broadband Radio Service
(BRS) — 2500 MHz Band
Reply Comments of
17 December, 2012
Contents
Executive Summary
...................................................................................................................................
3 Bidder Participation Rules
..................................................................................................................
3 Auction Format and Rules – Supplementary Round
............................................................................
5 Proposed Conditions of Licence
..........................................................................................................
6
4. Auction Format and Rules
...................................................................................................................
7 5. Bidder Participation – Affiliated and Associated Entities
...................................................................
8
5-1(a) and (c) -- Definition of Associated
Entities...............................................................................
9 5-1(d), (e) and (f) – Bidder Participation Rules
................................................................................
11 5-1(b) Auction Integrity and Transparency
.......................................................................................
13 5.2 Prohibition of Collusion
............................................................................................................
14
6. Conditions of Licence for Spectrum licences to be auctioned in
the 2500 MHz Band ..................... 16 6-2 CoL re Spectrum
Aggregation Limits
..........................................................................................
16 6-3 CoL re Licence Transferability and Divisibility
.........................................................................
17
8. Auction Process
...................................................................................................................................
18 8.1 Application to Participate
..........................................................................................................
18 8.4 Pre-Auction Deposits
.................................................................................................................
19 8.5 Bid-Payments and Forfeiture Penalties
.....................................................................................
19
APPENDIX “A” – REVISED SUMMARY OF RECOMMENDATIONS
............................................ 20
Data & Audio-Visual Enterprises Wireless Inc. 17 December 2012
Canada Gazette Notice No. DGSO-004-12 Page 3 of 25
EXECUTIVE SUMMARY
i. In Consultation on a Licensing Framework for Broadband Radio
Service (BRS) – 2500 MHz
Band1 (hereinafter “2500 MHz Licensing Consultation”), the
Department seeks comments on proposed
specific measures to implement the policy and technical decisions
announced in the preceding Policy and
Technical Framework: Mobile Broadband Services (MBS) – 700 MHz
Band, Broadband Radio Service
(BRS) – 2500 MHz Band (hereinafter “700 MHz and 2500 MHz Policy and
Technical Framework”).2
ii. Data & Audio-Visual Enterprises Wireless Inc., dba
Mobilicity (hereinafter “Mobilicity”)
generally supports the Department’s proposed licensing framework
for the 2500 MHz auction but has
significant concerns about several discrete aspects of the
framework, as outlined below and discussed in
further detail in the within Reply Comments.
BIDDER PARTICIPATION RULES
iii. Mobilicity was in full support of the Minister of Industry’s
policy decision in the 700 MHz and
2500 MHz Policy and Technical Framework3
iv. However, as in the 700 MHz consultation, Industry Canada has
proposed dramatic changes to the
bidder participation rules. Taken together, the proposed changes to
the Associated Entity and anti-collusion
rules not only allow bidders to cooperate regarding the auction,
available spectrum, bid strategy, network
sharing, or the post auction market, but to do so while operating
under separate caps.
to adopt a “dual-cap” aggregation limit in the 700 MHz band
and a 40 MHz aggregation limit in all areas (except the Yukon, the
Northwest Territories and Nunavut) in
the 2500 MHz band.
v. Mobilicity does not support the proposal that carriers,
particularly large wireless carriers that
share network facilities and services
1 Canada Gazette notice no. DGSO-004-12 (October 2012).
, would have separate caps. Mobilicity was surprised to see in the
700
MHz Licensing Consultation and now, in the 2500 MHz Licensing
Consultation, the Department’s proposal
to exempt carriers, including large wireless carriers, from the
application of the spectrum aggregation limits
set for the 700 MHz band and 2500 MHz band, respectively. The
effect of such an exemption would be to
incent or enable the large wireless carriers to accumulate even
more mobile wireless spectrum than they
already hold in abundance.
2 Canada Gazette Notice No. SMSE-002-12 (March 2012). 3 Canada
Gazette Notice No. SMSE-002-12 (March 2012).
Data & Audio-Visual Enterprises Wireless Inc. 17 December 2012
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vi. The Department’s proposal to permit Associated Entities to
acquire spectrum under separate caps
undermines incentives for efficient spectrum sharing arrangements,
such as urban/rural splits and broader
geographic splits. It will contribute nothing towards the
Government’s objective of ensuring that all
Canadians have access to at least four wireless carriers. In order
to be meaningful, Mobilicity assumes that
the Government intended all Canadians to have access to four
independently operated wireless networks. If
implemented, the Department’s proposal will, in all likelihood,
only lead to further concentration of unused
spectrum holdings in the hands of the entrenched, national, large
wireless carriers.
vii. Proposals such as those of the Bell Companies, to dilute the
bidder participation rules to exclude
tacit or unwritten arrangements and to exclude significant joint
equipment purchase agreements should be
rebuffed as self-serving attempts to rewrite the rules to exempt
actual or contemplated associations.
viii. Given the total absence of competitive market forces in the
provision of roaming and antenna
tower and site sharing, and the fact that the spectrum aggregation
limits established in the 700 MHz and
2500 MHz Policy and Technical Framework, are the only
pro-competitive feature of the Department’s
licensing frameworks for these spectrum bands, Mobilicity
reiterates that the bidder participation rules
should be strengthened to
(a) capture all agreements, arrangements or understandings that
pertain to the acquisition and
use of the spectrum to be auctioned (700 MHz or 2500 MHz), the
joint buildout and
preferential use of mobile wireless network facilities and services
(including roaming,
resale, antenna tower and equipment purchases) or the post-auction
market structure
(including marketing, and branding or assignment of roles and
responsibilities along
territorial lines);
(b) provide for a process whereby Disclosure Filings4
(c) provide for a public process for the review of Disclosure
Filings and determination of
Associations;
must be made by potential participants in
the auction at least four (4) months prior to the deadline for
applications to participate in the
auction and that the Department’s decision on qualified, Associated
and Affiliated Entities
be published at least three (3) months prior to the deadline for
making the pre-auction
financial deposits;
4 This is the terminology that Mobilicity uses to refer to the
disclosures referred to at paragraph 90 of the 2500 MHz
Licensing
Consultation.
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(d) amend the anti-collusion rules such that any discussions
pertaining to the acquisition and use
of the spectrum to be auctioned, the joint buildout and
preferential use of mobile wireless
network facilities and services, and the post auction market
structure are prohibited, prior to,
during and post-auction, except and unless disclosed to the
Department; and
(e) prohibit Associated and Affiliated entities from bidding on or
acquiring spectrum in excess
of a single cap.
ix. Mobilicity is strongly opposed to permitting Associated
Entities to bid on and acquire spectrum
in excess of a single spectrum cap in any given licensed area.
However, Mobilicity has considered
comments pointing out the public benefits of permitting cooperation
between parties who wish to
collectively or jointly provide service in urban/rural areas, or by
dividing up territories along East/West or
North/South lines. These are compelling arguments. There is no
prejudice if Associated Entities are
permitted to bid separately in the auction to acquire packages
along agreed upon lines, as long as both parties
to the association are not permitted to acquire spectrum in excess
of a single cap in any given geographic
area.
x. As a result, Mobilicity clarifies that it believes that the
policy objective of encouraging network
sharing and cooperation can be achieved without harming the policy
objective of promoting new entry if
Associated Entities are permitted to participate separately in the
auction, as long as the Associated Entities in
question are restricted to bidding on and acquiring spectrum under
a single spectrum aggregation limit.
AUCTION FORMAT AND RULES – SUPPLEMENTARY ROUND
xi. There is an overwhelming consensus among new entrant
participants (parties who have not yet
entered the mobile wireless market or having entered, collectively
account for less than 10 per cent of
revenues in that market), that the proposed 2500 MHz auction format
and rules (like the 700 MHz auction
format and rules) are inherently biased in favour of the entrenched
incumbent national carriers. This is
particularly apparent in the Supplementary Round, in which the
Department’s proposed auction rules
provide that preference will be given to the “highest value
package.”
xii. While practically all new entrant participants voiced serious
reservations about the potential for
large wireless carriers (Rogers, the Bell Companies and Telus), as
defined in the 700 and 2500 MHz Policy
and Technical Framework, to “trump” the bids of regional or new
entrant bidders, Mobilicity has not seen
any comments that addressed the concerns. Mobilicity notes with
interest that Xplornet proposed that the
Department should extend the instant 2500 Licensing Consultation to
hold at least two mock auctions
Data & Audio-Visual Enterprises Wireless Inc. 17 December 2012
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(featuring mock Supplementary Rounds), to permit parties to comment
based on the learning that could be
gleaned from a mock auction exercise. However, Mobilicity is not
convinced that anything can be done to
“improve” the Supplementary Round in order to alleviate the
detrimental effects of this round on smaller or
regional players.
xiii. As a result, Mobilicity reiterates its recommendations and
those of the vast majority of new
entrant players, that there should be no Supplementary Round if all
spectrum is allocated in the final clock
round. In other words, the Supplementary Round should only be held
if there is unallocated spectrum after
the final clock round.
PROPOSED CONDITIONS OF LICENCE
xiv. Most parties had few comments on the Department’s proposed
conditions of licence, most of
which were uncontroversial.
xv. All parties were in agreement with the CWTA’s opposition to (i)
the requirement to make all
“interconnected radio systems” intercept-capable and (ii) the
requirement to contribute to the research and
development condition of licence. Mobilicity concurs.
xvi. Of the remaining comments, Mobilicity strongly opposes the
Bell Companies’ proposal that
bidders be required to post a Letter of Credit equal to the value
of bids submitted on the previous day. This
requirement would be prohibitive for smaller, regional players that
do not possess the asset base that the
large wireless carriers enjoy as a result of over 100 years of
incumbency in the provision of telephone
services and/or 30 years’ head start in the mobile wireless market.
The Bell Companies’ proposals appear to
be designed to hamper competition and should be soundly
rejected.
xvii. On the contrary, the Mobilicity reiterates its proposal that
new entrants be permitted to pay
winning bid amounts in instalments over a five-year period.
xviii. For convenience, Mobilicity’s recommendations in relation to
the proposals contained in the
2500 MHz Licensing Consultation, as amended in these Reply
Comments, are summarised at Appendix “A”.
xix. In addition, the numbering in the headings used in the
remainder of these Reply Comments
correspond to the numbering of headings and proposals used by the
Department in the 2500 MHz Licensing
Consultation document.
Data & Audio-Visual Enterprises Wireless Inc. 17 December 2012
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4. AUCTION FORMAT AND RULES
1. As noted by Mobilicity in its June 25, 2012, comments on the 700
MHz Licensing Consultation,
mitigating exposure risk and incentivising truthful bidding
(through the Second-Price rule, the use of
eligibility points and revealed preferences rules) are laudable
objectives. If these benefits can be
secured through the CCA format, the added cost and complexity of
the CCA is justified.
2. Most parties5
3. In particular, new entrant participants cited the likelihood
that the Supplementary Round would,
“result[] in outcomes that bear little resemblance to the clock
round outcome.”
agreed, by and large, with the Department’s proposal to use the CCA
auction format in
the 2500 MHz auction with discrete modifications. The main feature
of the proposed auction format
that is problematic is the Supplementary Round and the potential
for strategic bidding in the
Supplementary Round to obliterate the benefits of truthfulness in
the earlier clock rounds.
6 Eastlink submitted
that the rules favouring the “highest value package” made it a
virtual certainty that bidders for larger
packages would prevail in the Supplementary Round over the bids of
smaller, regional bidders.7
Xplornet cited the inherent disadvantage that new entrant
participants faced because of the large
number of licences in the 2500 MHz auction (318), the heightened
possibility of large combinatorial
bids in the clock rounds, and hence the large wireless carriers’
superior ability to make higher
supplementary bids.8
4. Due to the Second-Price Rule in the Supplementary Round, bidders
have a strategic opportunity to
place bids in order to raise the “second price” other bidders pay.
As was seen in the Swiss and
Austrian CCA auctions,
9
5 The only exceptions appear to be Eastlink and SaskTel. Both
opposed the CCA format because of its ingrained preference
for
the “highest value package” inevitably placed regional providers at
a significant disadvantage. Eastlink and SaskTel argued that the
Department should adopt an SMRA format for the 700 MHz and 2500 MHz
auction.
the Second-Price Rule can create disparities between what different
bidders
6 MTS Allstream, paragraph 7. Note: All references throughout the
footnotes are to the parties’ 19 November 2012 Comments except as
otherwise noted.
7 Eastlink, paragraphs 18-20. 8 Xplornet, paragraphs 15-20, viz.,
paragraphs 16 and 18. 9 See Mobilicity, paragraph 12. For
convenience, the specific examples from the Austrian and Swiss CCA
auctions are
reproduced again here. The “Austrian 2.6GHz spectrum auction
results show some consistency with previous auctions but the
picture is still confusing,” The Coleago Blog, September 23, 2010,
available at:
http://coleago.wordpress.com/2010/09/23/austrian-2-6ghz-spectrum-auction-results-show-some-consistency-with-previous-
auctions-but-the-picture-is-still-confusing/ (last visited June 20,
2012). See also “New mobile telephony frequencies for Orange,
Sunrise and Swisscom,” Swiss Federal Office of Communications,
February 23, 2012, available at:
http://www.bakom.admin.ch/themen/frequenzen/03569/index.html?lang=en#sprungmarke3_44"_blank
(last visited June 22, 2012).
Data & Audio-Visual Enterprises Wireless Inc. 17 December 2012
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pay for similar licences. Beyond issues of fairness, integrity and
confidence in the auction process,
significant disparities in final auction prices can put different
bidders on an unequal cost footing.
5. Mobilicity maintains that the Supplementary Round should be
reserved for spectrum that remains
unassigned after the clock rounds. The Supplementary Round is
almost guaranteed to disenfranchise
smaller or regional new entrant carriers. Mobilicity does not
believe that this is consistent with the
Government’s objective of promoting competition in the market. The
proposed bias in favour of the
“highest value package” in the Supplementary Round favours the
incumbents, who already have
large caches of high-capacity spectrum over 2000 MHz.
6. The unfairness to smaller or regional carriers will amplify
exponentially if the Department were to
adopt Rogers’ recommendations to extend the limit of supplementary
bids to 2,000 bids.10
7. As a result, all carriers (except the Big Three and Globalive)
submitted that a Supplementary Round
should not be held if all spectrum is allocated in the final clock
round. Mobilicity urges the
Department to make this small, but important change to its proposed
CCA auction format.
Indeed,
one can infer that Rogers’ request to extend the bid limit is
because it sees an advantage that it can
exploit in the Supplementary Round.
5. BIDDER PARTICIPATION – AFFILIATED AND ASSOCIATED ENTITIES
8. In the 2500 MHz Licensing Consultation, the Department has
sought public comment among other
things, on:
(b) bidder participation rules;
13
10 Rogers, paragraphs 53-56, viz., para. 56.
11 2500 MHz Licensing Consultation, Proposals 5-1(a) and 5-1(c) and
paragraph 88. 12 2500 MHz Licensing Consultation, Proposals 5-1(d)
and 5-1(e) and 5-1(f). 13 2500 MHz Licensing Consultation,
Proposals 5-1(b). 14 2500 MHz Licensing Consultation, Proposals
5-2.
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5-1(A) AND (C) -- DEFINITION OF ASSOCIATED ENTITIES
9. The Department has sought comment on its proposed definition of
Associated Entities, as follows:
Any entities that enter into any partnerships, joint ventures,
agreements to merge, consortia or any arrangements, agreements or
understandings of any kind, either explicit or implicit, relating
to the acquisition or use of any spectrum in the 2500 MHz band will
be treated as Associated Entities. Typical roaming and tower
sharing agreements would not cause entities to be deemed
associated.
10. Mobilicity fundamentally agrees with the Department, as did
most other parties, that the definition
should broadly capture both written agreements as well as unwritten
agreements, arrangements or
understandings of any kind. This is entirely appropriate given that
the objective of the Associated
Entities rules is to preserve the integrity of the auction
process.
11. In Mobilicity’s view, the indicia of an association for
purposes of the upcoming auctions of mobile
wireless spectrum are threefold. The relevant indicia are
arrangements, agreements or
understandings of any kind:
(a) relating to the acquisition and use of the spectrum being
auctioned (700 MHz or 2500
MHz);
(b) relating to joint buildout and preferential use of mobile
wireless network facilities and
services,15
(c) relating to the post-auction market structure, including in
relation to marketing, and
branding or assignment of roles and responsibilities along
territorial lines.
including preferential arrangements relating to roaming, resale,
antenna tower
and equipment purchases; and
12. Mobilicity agrees that standard-form roaming agreements would
not normally be caught by the
definition of an association. However, for purposes of performing
an assessment of association,
roaming arrangements should be disclosed and filed with the
Department in advance of the 2500
MHz auction (and if such arrangements are entered into after the
auction, they should be filed with
the Department post-auction – see Mobilicity’s recommendations re
Prohibition of Collusion and
Licence Transferability and Divisibility). To wit, the Bell
Companies describe the current
arrangement between Bell Mobility and Telus as a “joint build
arrangement” but the Department
15 Mobilicity’s proposal here is echoed by Xplornet, which proposes
that “exclusive” spectrum sharing arrangements be included
in the criteria for agreements giving rise to associations. See
Xplornet, paragraph 30. However, Mobilicity does not agree that
such arrangements need be exclusive in order to be seen as prima
facie giving rise to an association.
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should not lose sight of the fact that at its inception, the
arrangement was initially described as a
preferential roaming arrangement.16
13. Mobilicity strongly opposes the Bell Companies’ proposal that
only “legally binding and
enforceable relationship[s] of the sort that would give rise to
legal redress before the Canadian
courts in the event of a breach,” should be considered to give rise
to an association.
14. If the Bell Companies’ proposed amendment to the definition of
Associated Entities were adopted,
coupled with the Department’s proposed anti-collusion rule, which
merely restricts discussions
between the deadline for applications to participate in the auction
and the deadline for the final
payment on high bids, parties would be free to discuss, tacitly
agree and even enter into contingent
memoranda of understanding, without being required to disclose such
arrangements to the
Department. They would also be free to participate separately in
the auction under individual
spectrum caps.
15. It would be ludicrous for two parties who have entered into a
tacit, unwritten arrangement to acquire
(bid on) spectrum along territorial lines, and to grant to each
other preferential access to network
facilities, services, equipment or other infrastructure and to have
such an arrangement not fall into
the definition of Associated Entities. This would totally undermine
the principal measure adopted
by the Department in this auction in order to ensure that Canadians
each have access to at least four
competitive wireless carriers.
16. Mobilicity is also opposed to the Bell Companies’ proposal that
agreements, including written
agreements, pertaining to joint equipment purchases should not be
included in the definition of
Associated Entities. This proposed amendment by the Bell Companies
of the definition of
Associated Entities appears designed to favour the Bell Companies
and Telus and their self-
described “joint build arrangement.” Such joint build arrangements
likely involve tower site
sharing, preferential roaming and backhaul arrangements as well as
arrangements with respect to the
acquisition of equipment.
17. A large proportion of such joint build arrangements are usable
across different spectrum bands –
obviously, neither the Bell Companies nor Telus will be building a
brand new antenna tower
network or backhaul network for each of the 700 MHz and 2500 MHz
spectrum bands. As Rogers
16 See Mobilicity’s 25 June 2012 comments on the 700 MHz Licensing
Consultation,
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puts it, “economics and technology will ensure it is extended into
the 2500 band.”17
18. To be clear, Mobilicity does not object to the type of joint
build arrangement that Bell Companies
and Telus have entered into. To the contrary, these types of
arrangements should not be
discouraged. However, what must be avoided at all costs is a
situation where parties that have
entered or are contemplating entering into such arrangements bid on
and acquire spectrum in excess
of a single cap.
build arrangements are, therefore, highly relevant to whether an
association exists for purposes of
the spectrum to be auctioned.
19. Applying the foregoing definition of Associated Entities will
ensure that there will be four (4)
competitive, independently operated networks in Canada, as opposed
to three (3) or less.
5-1(D), (E) AND (F) – BIDDER PARTICIPATION RULES
20. As in the 700 MHz consultation, Industry Canada has proposed
dramatic changes to the bidder
participation rules. Taken together, the proposed changes to the
Associated Entity and collusion
rules not only allow bidders to cooperate regarding the auction,
available spectrum, bid strategy,
network sharing, or the post auction market, but to do so while
operating under separate caps.
21. Mobilicity notes the concerns regarding the proposed changes
voiced by other participants.
22. Rogers states that, “any bidder who has privileged knowledge of
what another bidder is likely to do
has a greater ability to make inferences from the information
provided each round. This is a
fundamental unfairness that results from any arrangement or
understanding between bidders about
bid strategy, even if there is no communication between those
bidders each round.”18
23. Companies involved in joint ventures should be considered
Associated Entities for the purpose of
the 2500 MHz auction.
19 Public Mobile states that Bell and Telus are associated and must
operate
under a single cap.20
24. On the other hand, several participants noted the benefits of
sharing spectrum. Xplornet stated that it
wanted the freedom to develop partnerships with other service
providers in order to serve rural
17 Rogers, paragraph 100. 18 Rogers, paragraph 98. 19 BCBA,
paragraph 9. 20 Public Mobile, paragraph 29.
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areas.21 Rogers states that the rules should enable urban and rural
carriers to share spectrum in order
to meet the needs of their respective markets.22
25. On a related note, Rogers noted that, “[s]ome inter-carrier
relationships may include exclusive
territories that are a small subset of a licence tier. It would be
prejudicial to force two carriers to bid
as a single bidder under a single cap where there is only a small
portion of the licence area where
they do not compete. It unduly harms both carriers’ ability to
deliver service and compete outside
the exclusive area. This in turn will reduce competition. Under
these circumstances, carriers should
be entitled to bid as normal as long as the exclusive portion
constitutes less than 50% of the
population of the entire licence tier.”
23
26. In Mobilicity’s respectful view, it is entirely inconsistent
with the Government’s objective of
bolstering competition and ensuring the availability of at least
four competitive alternatives for every
Canadian consumer for the Department to provide for discretionary
exemptions from spectrum
aggregation limits and bidder participation rules for large
wireless carriers that have or may form
Associations. In essence, what the Department proposes to give with
one hand, it appears to want to
take away with the other. The Government’s policy objectives will
not be achieved if large wireless
providers can do indirectly, through Associations, what they cannot
do directly, namely, bid on and
win more than 40 MHz of 2500 MHz spectrum.
Mobilicity disagrees with this recommendation and suggests
that regional associations should be subject to a single regional
cap. Two carriers that share a
network in Saskatchewan for example, should be subject to the same
single cap. Failing to do so
will almost guarantee that the regional carrier and its associated
partner will be able to acquire
spectrum in excess of their needs.
27. However, Mobilicity has considered comments pointing out the
public benefits of parties who may
wish to cooperate to collectively or jointly provide service in
urban/rural areas, or by dividing up
territories along East/West or North/South lines. For example,
Xplornet proposes that Associated
Entities may participate in the auction separately, and may have
the spectrum caps applied
individually.24
21 Xplornet, paragraph 29.
22 Rogers, paragraph 103. 23 Rogers, paragraph 102. 24 Where all
members of an association are large wireless providers, Xplornet
proposes that while these parties may participate in
the auction separately, they may only bid on and acquire spectrum
subject to a single spectrum aggregation limit. See Xplornet,
paragraph 38.
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28. As a result, Mobilicity clarifies that it believes that the
policy objective of encouraging network
sharing and cooperation can be achieved without harming the policy
objective of promoting new
entry if Associated Entities are nonetheless permitted to
participate separately in the auction, as long
as the Associated Entities in question are restricted to bidding on
and acquiring spectrum under a
single spectrum aggregation limit.
29. Mobilicity has amended its recommendation at Proposal 5-1(f) to
clarify that Mobilicity is not
opposed to Associated Entities participating separately in the
auction. It remains opposed to
Associated Entities bidding on and acquiring spectrum in excess of
the 40 MHz spectrum
aggregation limit:
Mobilicity does not support the Department’s proposal that
Associated Entities be permitted have the spectrum aggregation
limits applied separately.
5-1(B) AUCTION INTEGRITY AND TRANSPARENCY
30. Mobilicity fully supported the Department's proposal at
paragraphs 90-92 of the 2500 MHz
Licensing Consultation that applicants must disclose in writing, as
part of their applications, the
names of Affiliated and Associated Entities. In addition, it is
proposed that each applicant must also
submit a narrative, “describing all key elements and the nature of
the affiliation or association in
relation to the acquisition of the spectrum licences being
auctioned and the post-auction
relationships of said entities (collectively, the “Disclosure
Filings”). The Department further
proposes that the “narratives” would be made publicly available on
the Industry Canada website
prior to the auction.25
31. Mobilicity proposed a number of measures to bolster the
integrity and transparency of the
Department’s bidder participation rules:
(a) moving up the deadline for the filing of the Disclosure Filings
to at least four (4) months
prior to the deadline for applications to participate in the
auction;
(b) clarifying that all agreements, arrangements or understandings
that may give rise to an
association should be disclosed as part of the Disclosure
Filings;
25 2500 MHz Licensing Consultation, paragraph 92.
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(c) providing for a public process for the review of Disclosure
Filings and the determination of
Associations;
(d) requiring that the Disclosure Filings be accompanies by an
Affidavit of an officer of each
company certifying the completeness of the disclosure and that the
company will not
cooperate, collaborate, discuss, negotiate or enter into
agreements, arrangements,
understandings under the end of the bidding process; and
(e) providing for a full refund of financial deposits, should an
applicant decide to withdraw
from the auction, upon publication of the Department’s decision on
qualified bidders.
32. Mobilicity notes that Rogers’ proposals to enhance the
transparency and integrity of the bidder
participation rules and auction process were quite similar to
Mobilicity in that Rogers also promoted
a public process and requested changes to the timing of the filing
of Disclosure Filings well in
advance of the auction application date (Rogers’ 90 days v.
Mobilicity’s 120 days v. Department’s
30 days).
33. The main issue that separates Mobilicity from Rogers (and
Globalive and Videotron) in relation to
the auction transparency and integrity rules, is these parties’
proposals that the Department provide
for the possibility of a confidential advance ruling. Mobilicity
opposes the inclusion of this
mechanism. First, it will add unduly to the administrative burden
on the Department to incorporate
an advance confidential ruling process. Second, from an
administrative fairness viewpoint, the
Department has no institutional independence from the Minister. As
such, it will be difficult for the
Minister to complete an independent review of whether two entities
are associated for purposes of
the auction if the same staff have already given an advance ruling
that the entities were or were not
associated.
34. Should the Department overrule the parties’ deep-seated
concerns regarding the discretion to exempt
Associated Entities from the spectrum aggregation limits, there is
an even greater need for
transparency and measures to bolster auction integrity.
5.2 PROHIBITION OF COLLUSION
35. In the 2500 MHz Licensing Consultation, the Department proposed
a model, which in broad strokes
could be described as envisaging a strong definition of Associated
Entities, no limits to discussions
and arrangements prior to the auction, and no discussions of any
kind under the anti-collusion rules
Data & Audio-Visual Enterprises Wireless Inc. 17 December 2012
Canada Gazette Notice No. DGSO-004-12 Page 15 of 25
during the auction, even amongst Associated Entities and Associated
Entities permitted to
participate in the auction separately under the Department’s
proposed discretion to grant exemptions
from the Associated Entities rules.
36. The foregoing is quite consistent with the Bell Companies’ and
Telus’ preferred model, as disclosed
in these parties’ initial comments. Telus and the Bell Companies
clearly prefer a weak anti-
collusion rule that would only preclude discussion during the
auction period, thereby allowing
unlimited, undisclosed discussions both immediately prior to and
following the auction period.
Under these large wireless providers’ construct, Associated
Entities would not be able to discuss
strategy or outcomes during the auction period. However, with a
“weak” anti-collusion rule, nothing
will have been lost, since bidding strategy will have been arranged
in advance and network
deployment and spectrum sharing arrangements will be solidified
post-auction.
37. In its first round comments, Mobilicity expressed strong
support for the retention of an anti-
collusion rule, but made a number of recommendations to bolster its
effectiveness:
(a) first, Mobilicity proposed that the application of the
anti-collusion rule during the auction
period26 be extended to include discussions of any kind relating to
the 2500 MHz auction
prior to the auction period.27 Rogers supported this reversion back
to the anti-collusion rule
in place during the AWS auction;28
(b) second, Mobilicity requested that the Department clarify that
the anti-collusion rules do not
apply to Associated and Affiliated entities.
29
(c) finally, Mobilicity proposed that in the post-auction period,
all arrangements with respect to
use of the 2500 MHz spectrum will have to be submitted to the
Department for approval.
This is to dissuade and deter parties from concealing the existence
of or discussions to enter
into these kinds of agreements or arrangements prior to the
auction, only to ink such
It is a fiction to pretend that parties that have
discussed bidding strategies, or the parties’ roles and
responsibilities in terms of network
deployment and spectrum utilisation post-auction, are true
“competitors”; and
26 At paragraphs 99 to 102 of the 2500 MHz Licensing Consultation,
the Department proposes to prohibit discussions etc. of any
kind, “from the date of application until the deadline for final
payment on winning bids … with any competitors regarding the
licences being auctioned, bids, or bidding strategies in the
auction, or the post-auction market structure.”
27 Mobilicity, paragraph 46. 28 Rogers, paragraph 110. 29
Mobilicity, paragraphs 48-51.
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arrangements in the post auction period. This significant
“loophole” to the policy should be
closed.
38. In essence, Mobilicity’s model could be summarised as follows:
a strong definition of Associated
Entities; complete freedom between Associated Entities to discuss
and enter into express or tacit
arrangements prior to the auction as long as any such arrangements
are disclosed to the Department
and subjected to public scrutiny; complete freedom between
Associated Entities during the auction
period to discuss bidding strategy and any other matter that is the
subject of arrangements already
disclosed to the Department and to other bidders; and a strong
anti-collusion rule prohibiting
discussions of any kind either prior to or during the auction,
except as disclosed to the Department.
39. Rather than pretend that parties that have formed associations
have not and will not continue to “talk
to each other”, Mobilicity proposes that Associated Entities be
permitted to do so, subject to full
disclosure of their association to other bidders and to the
Department. This model, in conjunction
with a strict application of the spectrum aggregation limit, such
that Associated Entities are not
permitted to bid on or acquire spectrum in any given area in excess
of a single cap, ensures a
transparent and fair auction.
40. Mobilicity submits that the foregoing “full disclosure” model
is more realistic and serves the public
interest in preserving auction integrity and transparency by
guarding against circumvention of the
anti-collusion rule and spectrum aggregation limits.
6. CONDITIONS OF LICENCE FOR SPECTRUM LICENCES TO BE AUCTIONED IN
THE 2500 MHZ BAND
41. In relation to the proposed conditions of licence regarding the
Department’s mandatory roaming and
antenna tower and site sharing condition of licence, Mobilicity
believes that regulation of the rates,
terms and conditions of roaming and tower and site sharing is
essential. Mobilicity repeats and
relies on its comments in response to DGSO-001-12 and
SMSE-002-12.
42. Mobilicity’s reply comments regarding the conditions of licence
proposed by the Department are as
discussed below.
43. Absent spectrum set-asides, spectrum aggregation limits are
essential to ensuring new entry and
sustained competition. New entrants, much more than entrenched
national players, need scarce
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spectrum. While Mobilicity advocated for further measures in the
proceeding leading up to SMSE-
002-12, it fully supports the imposition of a spectrum aggregation
limit in the 2500 MHz band. It
opposes proposals to permit large wireless carriers to derogate
from the spectrum aggregation limits
in both the 700 MHz and 2500 MHz mobile wireless spectrum
bands.
44. Mobilicity notes that a number of parties proposed to vary the
wording of the Department’s
condition of licence with respect to spectrum aggregation
limits.
45. Eastlink submitted that the spectrum aggregation limits should
remain in place for ten (10) years
rather than merely five (5) years in order to reduce speculative
bidding by parties intent of flipping
the licences after five years.
46. Rogers made a number of proposals to allow it to bid and obtain
spectrum over the 40 MHz cap.
These appear to be designed to “limit Bell and Telus’ network
advantage” while giving Rogers a leg
up on all other new entrants. In Mobilicity’s view, there is no
principled basis to amend the
spectrum aggregation limit condition of licence in favour of one
bidder.
6-3 COL RE LICENCE TRANSFERABILITY AND DIVISIBILITY
47. As discussed above in Mobilicity’s comments on the
anti-collusion rule, parties should be required
to apply to the Department where they enter into any agreement or
arrangement with respect to the
acquisition or use of the 2500 MHz spectrum within five years (5)
from the close of the auction.
48. Where such applications would have the effect of putting one or
more parties over their spectrum
aggregation limits, consistent with Mobilicity’s submissions above,
Mobilicity submits that such
applications should not be approved by the Department, contrary to
what is proposed at paragraphs
113 and 115-119 of the 2500 MHz Licensing Consultation.
49. Mobilicity understands that subject to the spectrum aggregation
limits for the 2500 MHz spectrum
band and to ongoing compliance with the Conditions of Licence,
there would be no restrictions on
requests by new entrants or other parties from applying for
transfer or division of any 2500 MHz
spectrum licences that they hold and that as currently proposed,
there would be no impediment to the
AWS new entrants transferring or dividing their 2500 MHz spectrum
holdings at the same time as
their AWS spectrum. Specifically, Mobilicity reiterates its request
that any new rules pertaining to
transfer or divisibility of the 2500 MHz spectrum not impede the
ability of the AWS new entrants
Data & Audio-Visual Enterprises Wireless Inc. 17 December 2012
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to transfer or divide any 2500 MHz spectrum at the same time as
they transfer their AWS
spectrum, should such transfer be part of a single
transaction.
8. AUCTION PROCESS
8.1 APPLICATION TO PARTICIPATE
50. The Department foresees the possibility of the transfer and/or
return of existing spectrum licence
holdings in the 2500 MHz spectrum band prior to the start of the
auction. It has established a
deadline of 4 October 2013, for the return of existing spectrum
licence holdings by Inukshuk and the
other existing spectrum licence holders and has indicated that it
will set a deadline for licence
transfers in the licensing framework decision resulting from this
consultation.
51. A number of parties made recommendations regarding the auction
process:
(a) Mobilicity recommended that “if an existing spectrum licence
holder intends to rid itself of
existing spectrum holdings, then in Mobilicity’s view, such
spectrum should simply be
returned to Industry Canada, to be allocated in accordance with
consistent rules”;30
(b) Rogers recommended that where licensees planned on returning
existing licences to
Industry Canada, “they be required to do so at least 90 days before
the auction application
date.” This would allow other bidders to understand who holds the
existing licences and
how many licences the other bidders may bid upon in sufficient time
to develop their
bidding strategy;
31
(c) Rogers also requested that the Department clarify that any
returned spectrum will be
added to the available auction licences.
32
52. Mobilicity reiterates its recommendations. It also adopts
Rogers’ recommendations with the
following modification. The return of spectrum must be done by the
deadline for submission of
Disclosure Filings.
30 Mobilicity, paragraph 83. 31 Rogers, paragraph 156. 32 Rogers,
paragraph 157.
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8.4 PRE-AUCTION DEPOSITS
53. In its first round comments, Mobilicity stressed that the
Department should ensure adequate lag time
between the Department’s determinations of applications by
Associated Entities to participate in the
auction separately (assuming that this exemption power is
maintained in the Licensing Framework
decision).
54. Mobilicity strongly opposes the Bell Companies’ proposal that
bidders be required to post a Letter
of Credit equal to the value of bids submitted on the previous day.
This requirement would be
prohibitive for smaller, regional players that do not possess the
asset base that the large wireless
carriers enjoy as a result of over 100 years of incumbency in the
provision of telephone services
and/or 30 years’ head start in the mobile wireless market. The Bell
Companies’ proposals appear to
be designed to hamper competition and should be soundly
rejected.
55. On the contrary, the Mobilicity reiterates its proposal that
new entrants be permitted to pay winning
bid amounts in instalments over a five-year period.
8.5 BID-PAYMENTS AND FORFEITURE PENALTIES
56. The Department proposes that provisional licence winners pay 20
percent of their respective
winning bids within ten (10) business days of the close of the
auction and to require the remaining
80 percent within thirty business days.33
57. Mobilicity reiterates its request that new entrant provisional
licence winners be permitted to make
bid payments through instalment payments, payable in six (6)
instalments over a period of five (5)
years.
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APPENDIX “A” – REVISED
SUMMARY OF RECOMMENDATIONS
4-1 AUCTION FORMAT
4-1 Industry Canada is seeking comments on its proposal to use the
CCA format, as well as the general attributes outlined
above…:
(c) … and the revealed preference limit in the supplementary round;
and
(d) the use of a second-price rule;
The Supplementary Round should be limited to licences that are
unallocated at the end of the clock round.
5. BIDDER PARTICIPATION – AFFILIATED AND ASSOCIATED ENTITIES
5-1 (A) AND (C) – DEFINITION OF ASSOCIATED ENTITY
5-1 Industry Canada is seeking comments on its proposed changes to
the definition and rules related to associated entities.
Specifically, comments are sought on:
(a) the types of agreements that should be captured under the
definition of associated entities; …
(c) the provision that typical roaming and tower sharing be
specifically excluded from the revised definition of associated
entities and whether other types of agreements such as the purchase
of backhaul capacity should be deemed excluded;
Without limiting the generality of the foregoing definition of
Associated Entities, agreements captured in the definition of
Associated Entities include partnerships, joint ventures,
agreements to merge, consortia or any arrangements, agreements or
understandings of any kind, either explicit or implicit:
(a) relating to the acquisition or use of any spectrum in the 2500
MHz band
(b) relating to the acquisition or options to acquire an ownership
interest in any bidder in the
auction of spectrum in the 2500 MHz band or any licensee of
spectrum in the 2500 MHz
band, whether via the auction itself or post-auction;
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(c) relating to the sharing, acquisition of or options to share or
acquire rights in the spectrum
in the 2500 MHz band, whether via the auction itself or
post-auction;
(d) relating to the amounts to be bid, bidding strategies or the
particular licence(s) on which
the parties to the agreement will or will not bid;
(e) relating to access or sharing or options to access or share a
party’s network in relation to
any of the mobile wireless spectrum bands (850 MHz, PCS, AWS and
BRS), whether pre-
or post-auction;
(f) relating to the branding and marketing of services using any of
the mobile wireless
spectrum bands; and
(g) relating to the post-auction structure of the market for mobile
wireless services market.
In addition to the types of agreements particularized above as,
“relating to the acquisition or use of any spectrum in the 2500 MHz
band”, parties are required to disclose to Industry Canada any
agreements relating to roaming and resale in any of the mobile
wireless spectrum bands (900 MHz, PCS, AWS and BRS).
The test for association should include whether entities give to
each other a significant preference in terms of wholesale access in
any of the mobile wireless spectrum bands.
5-1 (D) AND (E) – BIDDER PARTICIPATION RULES
5-1 Industry Canada is seeking comments on its proposed changes to
the definition and rules related to associated entities.
Specifically, comments are sought on: (d) the proposal that
entities that are deemed associated entities may apply to be
treated as separate
entities for participation in the auction; (e) the proposal that
associated entities may request to have the spectrum aggregation
limit apply to them
separately, based on an analysis of their association and of
whether they intend to compete in the same licence service
area;
Mobile wireless carriers that share or intend to share the same
network facilities should share the same cap.
If the Department intends to reserve to itself discretion to exempt
parties that share or intend to share the same network facilities
or are otherwise “Associated” from the spectrum aggregation rules,
large wireless service providers and their Affiliates should be
precluded from applying for such exemptions.
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Furthermore, unless Bell and Rogers dissolve their partnership and
return all of the Inukshuk 2500 MHz holdings, Bell and Rogers and
any Associates or Affiliates thereof should not be permitted to
participate in the auction separately nor should they be permitted
to acquire, collectively, in excess of 40 MHz of 2500 MHz
spectrum.
5-1 (B) AUCTION INTEGRITY AND TRANSPARENCY
5-1 Industry Canada is seeking comments on its proposed changes to
the definition and rules related to associated entities.
Specifically, comments are sought on: (b) the amount of information
to be disclosed to the public prior to the auction;
In order to provide for a meaningful right of public comment on
bidder qualifications:
(a) the Department should require parties to disclose the names of
affiliated and associated
entities and the narratives referred to at paragraph 90 of the 2500
MHZ Licensing
Consultation (the “Disclosure Filings”) at least four (4) months
prior to the deadline for
applications to participate in the auction;
(b) in the Disclosure Filings required to be filed at least four
(4) months prior to the deadline
for applications to participate in the auction, prospective
applicants must disclose not only
the names of affiliated and associated entities and a description
of those agreements,
arrangements and understandings that the prospective applicant
considers gives rise to an
Association or Affiliation, but also a description of all
partnerships, joint ventures,
agreements to merge, consortia or any arrangements, agreements or
understandings of
any kind, either explicit or implicit:
(i) relating to the acquisition or use of any spectrum in the 2500
MHz band;
(ii) relating to access or sharing or options to access or share a
party’s network in
relation to any of the mobile wireless spectrum bands (850 MHz,
PCS, AWS and
BRS), whether pre- or post-auction;
(iii) relating to the branding and marketing of services using any
of the mobile
wireless spectrum bands; and
(iv) relating to the post-auction structure of the market for
mobile wireless services;
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(c) the Disclosure Filings will be made public. In addition and
subject to any public rights of
access to information, parties must file with the Department copies
of relevant
agreements, arrangements or understandings as referred to
above;
(d) the Department will provide for a public process for review of
the Disclosure Filings;
(e) the Department will require that applications be accompanied by
an Affidavit provided by
an officer of the company stating that (i) there are no other
arrangements, agreements or
understandings of any kind, either explicit or implicit, relating
to the acquisition or use of
any spectrum in the 2500 MHz band or to the post-auction structure
of the market for
mobile wireless services and (ii) the applicant will not cooperate,
collaborate, discuss,
negotiate or enter into agreements, arrangements or understandings
with any parties
other than its declared Affiliates and Associated Entities
regarding the licences being
auctioned, bids or bidding strategies in the auction, or the
post-auction structure of the
market for mobile wireless services, or signalling its bidding
intentions, either publicly or
privately, until the end of the bidding process;
(f) the list of qualified bidders, the Associated and Affiliated
bidders, and those that will be
permitted to participate separately notwithstanding their
Association will be published at
least three (3) months prior to the deadline for making the
pre-auction financial deposits
by at least three (3) months; or
(g) in the alternative, the financial deposits should be refundable
upon publication of the
Department’s decision on qualified bidders, including those
qualified bidders that are
Associated Entities that may participate separately and have the
spectrum aggregation
limits applied separately.
5-1 (F) CRITERIA FOR EXEMPTION OF ASSOCIATED ENTITIES FROM JOINT
APPLICATION OF SPECTRUM CAPS
5-1 Industry Canada is seeking comments on its proposed changes to
the definition and rules related to associated entities.
Specifically, comments are sought on: (f) the criteria to be
considered in determining whether the entities are competing;
Mobilicity does not support the Department’s proposal that
Associated Entities be permitted to participate in the auction and
have the spectrum aggregation limits applied separately.
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5-2 PROHIBITION OF COLLUSION
5-2 Industry Canada is seeking comments on the rules prohibiting
collusion that would apply to bidders in the 2500 MHz
auction.
The anti-collusion rules be modified as follows:
(a) from the deadline for the Disclosure Filings to the date for
final payment on winning
bids, parties are prohibited from cooperating, collaborating,
discussing, negotiating or
entering into arrangements, agreements or understandings of any
kind, either explicit or
implicit, relating to the acquisition or use of any spectrum in the
2500 MHz band or to the
post-auction structure of the market for mobile wireless
services;
(b) parties are also prohibited from signalling their bidding
intentions, either publicly or
privately, from the Disclosure Filings deadline until the end of
the bidding process;
(c) as an exception to the foregoing, pre-auction discussions and
discussions during the
auction period are permitted between Associated and Affiliated
Entities or if fully
disclosed to the Department;
(d) all pre-auction discussions shall be deemed to give rise to an
Association, unless the
parties in question provide proof positive that in fact no
understandings of any kind
relating to the spectrum being auctioned or the post-auction
structure of the market for
mobile wireless services have been reached;
(e) applicants may be disqualified during the auction or may be
stripped of licences won or
may be subject to monetary penalties should parties act in breach
of the bidder
participation and anti-collusion rules; and
(f) licensees that enter into any agreement etc. with respect to
the acquisition or use of the
2500 MHz spectrum within five (5) years of the conclusion of the
auction must submit
such agreements etc. to the Department for approval. In deciding
such applications, the
Department should give due consideration to the time elapsed
between the close of the
auction and conclusion of the agreement or arrangement pertaining
to use of the 2500
MHz spectrum, and reasons, as applicable justifying non-disclosure
of the agreement or
arrangement prior to the auction.
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6. CONDITIONS OF LICENCE FOR SPECTRUM LICENCES TO BE AUCTIONED IN
THE 2500 MHZ BAND
6-3 Industry Canada is seeking comments on the proposed wording of
the condition of licence related to transferability and
divisibility.
Any new rules pertaining to transfer or divisibility of the 2500
MHz spectrum should not impede the ability of the AWS new entrants
to transfer or divide any 2500 MHz spectrum at the same time as
they transfer their AWS spectrum, should such transfer be part of a
single transaction.
8. AUCTION PROCESS
8.5 BID-PAYMENTS AND FORFEITURE PENALTIES
Where licensees planned on returning existing licences to Industry
Canada, the return of spectrum must be done by the deadline for
submission of Disclosure Filings. Any returned spectrum will be
added to the available auction licences.
New entrant provisional licence winners are permitted to make their
bid payment through instalment payments, payable in six (6)
instalments over a period of five (5) years.
*** END OF DOCUMENT ***
Proposed Conditions of Licence
5. Bidder Participation – Affiliated and Associated Entities
5-1(a) and (c) -- Definition of Associated Entities
5-1(d), (e) and (f) – Bidder Participation Rules
5-1(b) Auction Integrity and Transparency
5.2 Prohibition of Collusion
6. Conditions of Licence for Spectrum licences to be auctioned in
the 2500 MHz Band
6-2 CoL re Spectrum Aggregation Limits
6-3 CoL re Licence Transferability and Divisibility
8. Auction Process
APPENDIX “A” – UREVISEDU SUMMARY OF RECOMMENDATIONS
4-1 Auction format
5-1 (d) and (e) – Bidder Participation Rules
5-1 (b) Auction Integrity and Transparency
5-1 (f) Criteria for Exemption of Associated Entities from joint
application of Spectrum Caps
8.1 Application to Participate