700 MHz spectrum should be used for rural deployment, regional providers say

Regional carriers are calling on Industry Canada to ensure they have access to their fair share of the 700 MHz spectrum to help introduce competition in rural areas. “The auction of the 700 MHz spectrum is the last chance that the Department will have to introduce competition and, in some cases, any service at all to rural areas,” Bragg Communications Inc., which operates as EastLink, wrote the department. Industry Canada's consultation on a policy for the 700 MHz auction has both large and small players up in arms as the band is considered “beachfront” spectrum suited to the deployment of LTE services. But the band is also also appealing to rural service providers due to its propagation characteristics. The 700 MHz frequency can travel further than higher frequencies, so that it would be less expensive to deploy in rural areas and translate to more competitive rates. In a recent report on the auction, consulting firm the Seaboard Group said it would cost providers up to four times more to build a rural network using personal communication services (PCS) or advanced wireless services (AWS) spectrum than using 700 MHz or 800 MHz spectrum. MTS Allstream Inc., SaskTel, EastLink, and Shaw Communications Inc. have all told the department in separate submissions that there is unfulfilled demand for mobile services in rural areas. “The goal of improving rural access should be placed well above those of generating new one time revenues for the Federal government or promoting the expansion of new cellular service providers, who are unlikely to enter the rural environment,” SaskTel wrote. SaskTel said buyers should be required to use rural spectrum within five years, and be required to serve 90 per cent of the population. SaskTel also noted that it's important that regional incumbent carriers have access to 700 MHz spectrum. The issue is that new entrants and other carriers will look to incumbents like SaskTel for roaming agreements, which will put a heavier burden on their resources. According to the CRTC's 2010 Communications Monitoring Report, 99 per cent of Canadians are served by a wireless network and 96 per cent are served by an advanced wireless network. But statistics also show that Bell Canada, Telus Corp. and Rogers Communications Inc. had a virtual monopoly on the wireless subscriber market in 2009 in B.C., Alberta, New Brunswick, P.E.I., Nova Scotia and Newfoundland, where other carriers controlled zero per cent of the market. Other carriers have one per cent of the market in Ontario, two per cent in Quebec and five per cent in the North. The situation is different in Saskatchewan and Manitoba, where carriers other than “the Big Three”—Bell, Telus, and Rogers—control 76 per cent and 55 per cent of the market, respectively. Following Industry Canada’s advanced wireless auction in 2008, several new players entered the mobile market, but most of the competition has been limited to urban centres. One of the new wireless entrants that deployed outside large urban centres is Quebecor Media Inc. (QMI), whose subsidiary Videotron Ltd. has deployed services across the Quebec market. The company plans to deploy new services in Saguenay in April and Gatineau in late May. Quebecor recommended to the government that carriers holding 800 MHz spectrum be limited to buying one block in areas where it operates, while others be limited to two blocks per area. “Rural Canadians will benefit the most from QMI’s proposal, as equitable access to high propagation spectrum below 1 GHz will encourage more operators to expand their coverage into rural and remote areas,” the company said. Quebecor also suggested a requirement to roll out services within five years. Shaw said it supports rollout obligations and rebates on auction fees to bidders that deploy HSPA+ or LTE systems in certain remote, high-cost and underserved areas. But wireless incumbents Rogers and Bell told the department they also need access to the 700 MHz spectrum to deploy LTE services, and are advocating for looser rules. Bell wrote in its submission that it plans to rollout a national LTE network that would include rural areas, but added that this could only be done with access to the spectrum. “If spectrum set-asides or spectrum caps are imposed, national LTE roll-outs are at risk which implies that rural areas will be left behind,” Bell wrote. “Bell Mobility's position is that it is extremely important not to have any mandated commitments or restrictions regarding service deployments in rural and remote areas that remain unserved and/or underserved.” Rogers advanced a similar position. “The 700 MHz spectrum band is the only band in which LTE can be economically and ubiquitously implemented outside large urban centres at a cost that Rogers would be prepared to bear,” the company wrote. Although Rogers does not support caps and set-asides, it suggested rollout requirements to ensure spectrum is not limited to major markets. Rogers also recommended that the department use a subordinate licence system to encourage spectrum sharing between carriers and local players. “Despite Rogers’ size and resources, Rogers simply can not deploy in every location. However, some carriers, mostly with local connections and access to government funding, have put together exciting business plans that can cost effectively deploy and deliver wireless services in some rural parts of Canada,” the company wrote. But Axia NetMedia Corp., which participated in the creation of the Alberta SuperNet, wrote in its submission that regional service providers cannot afford to compete in an auction against urban players. The company said that national carriers buying up most of the spectrum would exclude regional and local players from competing in rural markets, which would ultimately lead to less competition and fewer options for consumers. Axia recommended that up to 100 per cent of the available spectrum in rural areas be set-aside to bidders that commit to reaching the largest portion of rural users. But under the company's proposal, rural "bidders" wouldn't pay for the spectrum. The winning bidder would be selected based on the per cent of rural customers it would reach, the average bandwidth available per rural customer, and the cost of the service. Ian Munro, an independent telecom consultant, said by phone that the debate between carriers raises the question of whether mobile wireless should be considered a universal basic service. Munro said that if the answer to this question is yes, a subsidization policy would provide more benefits than applying spectrum caps and set-asides on the upcoming auction. “I think a much better approach would be to come up with some sort of subsidization regime which says that, for any operator that extends into area X, we're going to give you a subsidy of Y cents per subscriber, or something like that,” he said. Munro said the approach would have the advantage of being competitively neutral for all players. kfournier@thewirereport.ca

700 MHz spectrum should be used for rural deployment, regional providers say

News | March 10, 2011

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