Incumbents vie for larger piece of 2500 MHz spectrum

Canada’s incumbent telecom providers are arguing over how much spectrum on the 2500 MHz band Bell Canada and Rogers Communications Inc. should retain before the rest is put up for auction, according to documents filed with the Industry Canada. “What you see is there’s a war going on where are trying to pull the covers to their side of the bed and get even more of the spectrum, and Telus , is pulling it in the other direction,” Dennis Béland, Quebecor’s senior director of regulatory affairs for telecom, told The Wire Report. On June 4, Industry Canada announced a consultation on how to allocate frequencies for the 2500 to 2690 MHz band. Industry Canada has set March 23, 2011 as the transition deadline for the band. An auction for the freed up spectrum is expected in 2011. In its consultation document, the government suggested the band, currently used for fixed wireless systems, be rearranged to accommodate broadband radio service. In submissions to the consultation filed in September, companies agreed the band should be divided into three sections: two bands designated for mobile communications, broken up by a third band for LTE and WiMax. But while industry players agree on how the band should be utilized, replies filed in this month reveal the players disagree on how companies now utilizing the band should reorganize their spectrum. Instead of discontinuing use of the band in preparation for the transition, Industry Canada suggested players using the band could update their licences in exchange for returning approximately one third of their original spectrum holdings. In April, Rogers and Bell acquired a portion of the band, through their Inukshuk Wireless partnership, to provide wireless broadband service with speeds up to 3 Mbps in 45 cities and 200 rural markets. In its September submission to the consultation, Inukshuk said it was “concerned” with Industry Canada’s proposed mapping of the band, and suggested it be given two 60 MHz portions. But in an Oct. 8 reply, Telus disagreed with Inukshuk’s proposal, saying it would give the company 120 MHz of the 140 MHz of spectrum available for mobile use. “We submit it would also be an unjustified transfer of wealth from taxpayers to two of Canada’s largest corporate entities,” Telus wrote. Telus also took issue with the amount of spectrum the new division would leave open for new entrants to the band. In 2006, Industry Canada’s policy for the band suggested that 66 MHz be set aside in an auction for new entrants. Under the new policy, 60 MHz could be set aside instead. In order to increase that number, Telus is suggesting that players currently using the band receive two blocks of 30 MHz of spectrum. Michael Hennessy, Telus’ senior vice-president of regulatory affairs, said in an interview that Inukshuk is attempting to retain the maximum amount of spectrum possible. “There’s no justification for the government giving even more spectrum than they are entitled to under the policy,” he said. “The idea that they should be allowed to keep that much—and short-change taxpayers as a result of that because there is less spectrum in the band to auction—is just not acceptable … It undermines people that made business strategies based on the promise of an auction under those terms.” MTS Allstream also told the commission that it opposes Inukshuk’s proposal. “Inukshuk’s proposal, which is essentially to permit incumbent licences, i.e., namely Inukshuk, to retain all of their licensed spectrum is completely inconsistent with the department’s goal of fostering competition,” MTS wrote. But in its reply, Inukshuk told the commission Telus’ proposal is “self-serving.” “Telus ignores the fact that it has passed on every opportunity that it had to acquire spectrum in the band, and that incumbents such as Inukshuk have made substantial investments and taken significant risks to develop the band,” Inukshuk wrote. Inukshuk also took issue with a proposal from Quebecor Media Inc. to set up a plan to reorganize spectrum holdings in the band 12 months before the auction. “Clearly, prospective bidders will not require the use of auctioned spectrum until: i) they have been licensed by the Department; and ii) they have bona fide plans to utilize their licensed spectrum in a given geographic area,” Inukshuk wrote. But Béland said the first step in preparing for the auction is identifying how much of the band will be sold and in which pieces. “We need to know what we’re buying well in advance of the start of bidding, and at that stage, nobody has moved yet,” he said. “What we’re looking for is a context where the day after the auction is over, the person who bought spectrum can do with it what he wants, and the person who is still holding some pre-existing spectrum can do with it what he wants.” Adrian Foster, a spectrum expert and partner with McLean Foster and Co., said in an interview that holding the auction before all the details are finalized could affect the price the spectrum draws. “Before you start doing the auctions, you want to make sure you have a band plan that is certain, so that people who are bidding in the auction know exactly what they are getting. What you don’t want to do is start bidding for spectrum and then spend the next two years trying to sort out the ,” he said. “It’s hard to imagine how you’d want to have an auction without any of these things being clarified. It would create too much uncertainty and in that case the prices are going to fall.” Béland said Quebecor believes the transfer of the spectrum should be completed the day the bidding starts. But Robert Hersche, SaskTel’s director of regulatory affairs, said in an interview that the company cannot complete the transition by the 2011 deadline. SaskTel now uses the 2500 MHz band to offer wireless broadband Internet service to thousands of customers in rural Saskatchewan. “It might take up to three years to complete the transition,” he said. “It’s very large truck rolls. We’ve got to get them out there changing all the equipment. All those kinds of things, you can’t do that by March 2011, mostly because you’re not going to do all of that in January in Saskatchewan.” kfournier@thewirereport.ca

Incumbents vie for larger piece of 2500 MHz spectrum

News | 10/15/2010 9:52 pm EDT

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