Industry Canada launches spectrum auction framework consultation

The creation of a new tier for licensing, allowing spectrum auctions for orbital slots and sticking with 10-year licence terms are key aspects of a new consultation on Industry Canada’s new spectrum policy framework. Released April 8, the consultation is also looking at such matters as the ongoing requirement for spectrum licensees to spend 2% of gross revenue of R&D and imposing spectrum fees based on the market value of the bandwidth, among others. In deciding to maintain the status quo on 10-year licence terms for auction spectrum, Industry Canada is rejecting calls from the 2006 Telecommunications Policy Review Panel (TPRP) and a more recent report on spectrum user rights. The latter supported recommendations from the TPRP for an overhaul to Canada’s spectrum management program by moving it to an independent agency and giving the new regulator the ability to implement a property-rights regime for spectrum management. Industry Canada also plans to stick with 10-year licence terms, saying it needs to keep licence terms fixed so that it can consult with licensees in case changes need to be made to the spectrum. The department cites as an example the need to reallocate spectrum from one service to another. New licence tier Barrett Xplore Inc., an ISP offering service in rural parts of the country, was one of the first companies to raise the issue of a new tier of licences. In response to Industry Canada’s Advanced Wireless Services (AWS) spectrum auction consultation, the company warned that large companies could squeeze out rural competitors because their licences include both urban and surrounding rural areas. Barrett argued that rural and urban parts to a licence should be separated, giving services only interested in the rural market a better chance of securing spectrum. “A thoughtful and differentiated approach to awarding spectrum has great potential to encourage new and sustainable competitive entry as well as accelerating deployment of service over a much shorter period of time than generally anticipated,” Barrett told the department at the time. “In an auction process, rural broadband providers are severely discouraged from, and disadvantaged in bidding for these licences.” Industry Canada says the idea has potential merit, but also drawbacks. “Some believe that this would provide an opportunity to reduce the digital divide in Canada by allowing companies interested in serving only smaller rural areas to bid on licences that do not include urban markets….Further reducing the size of the licence areas may facilitate access to spectrum for rural service providers,” reads the consultation. ‘The Department notes, however, that a move to even smaller licence areas would make frequency coordination more complex at the border of adjacent service areas.” Auction of orbital slots Industry Canada first decided against the use of auctions to licence satellite resources in the early part of this decade. At the time, the department said there had yet to be a successful orbital slot auction and pointed to the failed MCI Worldcom auction when it paid US$600 million for a position on the arc. The department has changed its mind though and previously signaled its intent to consult on “a new licensing regime (and an appropriate licensing fee) to authorize the use of spectrum on board Canadian fixed and broadcasting satellites and Canadian earth stations.” Auctions may be appropriate, says Industry Canada, for certain types of satellite services such as fixed and broadcasting service where there is sufficient competition. Industry Canada also says auctioning satellite resources may lighten the regulatory load for operators who have to coordinate filings with the International Telecommunication Union. “With many countries filing at different times for use of the same spectrum at or near the same orbital positions, it is possible that Canada would only achieve priority for access to spectrum at a given orbital position well into the seven-year period, perhaps leaving less time than required to award the orbital position and for the licensee to then build and launch a satellite,” reads the consultation. “In an auction, prospective bidders would need to factor this into their determination of the value of the licensing opportunity being offered.” R&D commitment up for discussion The department has also signaled its intent to consider eliminating the 2% R&D commitment condition for spectrum licence holders. Industry Canada raised the issue in its recently announced consultation on spectrum licence renewals for cellular and PCS spectrum. Wireless carriers have argued for years that the requirement should be eliminated. In a recent interview with Report on Wireless, Rogers Communications senior VP of regulatory affairs Ken Engelhart said the R&D commitment is no longer needed. "The carriers are not really the people in the ecosystem that do the R&D. The R&D is really done by the equipment manufacturers so I don’t think a 2% R&D requirement on carriers really makes sense," he said last month. And now it seems the department is listening. "Today, the wireless industry is thriving and is a strong performer in terms of R&D spending, with more than a billion dollars invested since the first licences were issued. Furthermore, it is noted that R&D expenditures are more often undertaken by manufacturers and, as a result, many service providers partner with manufacturers to fulfill their R&D commitments," reads the consultation. Comments are due by June 15 with reply comments to be submitted by July 15.

Industry Canada launches spectrum auction framework consultation

News | April 13, 2009

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