2500 MHz auction debate heats up as players argue over block sizes

Incumbents and smaller players disagree about the size of 2500 MHz spectrum blocks for auction, a key point that one industry expert says could determine the market’s evolution. Among the points of contention revealed in the companies’ reply comments for Industry Canada's consultation for the auction are the size of the blocks, or channels, to be purchased in the 2500-2690 MHz band. Industry Canada is consulting on an auction policy for the band The deadline for final reply comments passed in May. Smaller companies like Public Mobile Inc., MTS Allstream and Xplornet Inc. have told the department they want larger blocks of at least 10+10 MHz for the paired portion of the band and blocks of at least 10 MHz for the unpaired portion, but incumbents are calling for smaller paried blocks of 5+5MHz and five or 10 MHz for the unpaired. The department says in its band plan that it will auction the 2540-2570 MHz and 2660-2690 MHz portions of the band as paired spectrum and the 2595-2620 MHz portion as unpaired. It intends to sell the spectrum in units of five, 10 and 15 MHz. Adrian Foster, a spectrum expert and partner with McLean Foster and Co., said determining the size and amount of paired and unpaired blocks can shape the market. Paired blocks (known as frequency division duplexing) transmit simultaneously over two channels, requiring an uplink and downlink and occupying spectrum at the low and latter ends, Foster said. It is superior for voice transmission. But the more efficient unpaired blocks (time division duplexing) only require one channel and are better for data and mobile applications. “It really does matter how much spectrum you’re allocating to FDD and the channel size. Depending on how you structure your auction, you can really have a significant impact on how the market will evolve,” Foster said in an interview. “If you get it wrong, you’re either promoting too much on the voice side to operators or you’re other operators offering WiMax. You start influencing the direction the market’s going to go in.” Foster said debates in Europe and the U.S. have seen opposing approaches. Americans have pushed for more unpaired space for WiMax while Europeans have allocated more to paired spectrum to support phone operators. U.K. regulator Ofcom once made what Foster called “a brilliant proposal” to let the market decide, establishing blocks of 5 MHz throughout the spectrum and allowing companies to bid how they saw fit. But the auction never went forward for unrelated reasons, Foster said. The stakes are now very high for operators and regulators in Canada's 2500 MHz auction. “Because there’s a lot of spectrum in the band, there’s the potential for many, many new operators coming in who are interested solely in providing broadband services to people. The threat, though, is that WiMax is evolving in such a way that it could potentially provide voice service as well over TDD ,” he said. Foster said the 2500 MHz auction features complicated commercial issues and market structures. “There’s a lot of pressure on the regulators to decide whether we let the market decide entirely on how the band should be eventually assigned through auction, or whether there’s a level of intervention here. That intervention can take place by making decisions on how much spectrum you allocate to FDD versus TDD and the channel size,” he said. He added that the auction also involves “a lot of strategy and gamesmanship.” Existing operators already picked up significant chunks of spectrum in the 2100 MHz auction, he said, and will be gaining “very valuable spectrum” in the 700 MHz auction to support LTE and 4G voice networks. Incumbents Rogers Communications Inc. and BCE Inc. say they have plans to launch fourth-generation LTE networks this year, and Telus Corp. says it plans to deploy LTE early next year. All of the incumbent providers say they need significant portions of the 700 MHz band to deploy LTE services nationally. A lot of operators are only now starting to use their previously acquired 2100 MHz spectrum, Foster said. Many companies—including Rogers Communications Inc., SaskTel, Public Mobile and the Public Interest Advocacy Centre—requested in their reply comments the creation of a “use-it-or-lose-it” mechanism to prohibit fallow spectrum. The Industry Department has not yet announced policies for the 700 MHz and 2500 MHz auctions, but it has ambitiously said it intends to hold the 700 MHz auction next year. Spectrum licensing for the bands could be combined into a single auction, for which some companies have advocated. Foster added that new entrants are likely to prefer larger channel-size assignments because “their current spectrum endowments are far less than what the incumbents have.” Michael Hennessy, Telus’ senior vice-president of regulatory affairs, said the company would use 2500 MHz spectrum acquired in the auction for urban mobile broadband. He said paired blocks at 5+5MHz would be a sufficient building block for LTE, and that larger blocks could lead to a shortage with so many carriers bidding for it. Hennessy said Telus has moved away from the “hard-core, ideological” position in support of a wide-open auction. “We recognized, politically, given past is prologue, that the government is trying to encourage the survival of at least one or two new entrants,” he said. “In that environment, you’ve got to recognize what are the trade-offs you have to make.” An auction with caps and small blocks, he said, can “achieve that balance of some competitive intensity in bidding and the likelihood that you end up with multiple winners.” Hennessy said booming smartphone adoption is creating a need for more spectrum. “The amount of capacity of those millions of customers requires really exponential growth in your spectrum arsenal in order to be able to deliver on the promise of mobile broadband without some of the crashing we’re already seeing on some of the networks in the U.S. So it’s very critical spectrum,” he said. Bell Canada spokeswoman Jacqueline Michelis wrote in an email to The Wire Report that the company will use the 2500 MHz spectrum for next-generation mobile services like LTE, supporting both voice and data. “It's important spectrum because it is very effective in increasing capacity,” Michelis wrote. “Bell's national network focus and our ongoing fast growth in smartphones and new data services means we need more spectrum. Having larger contiguous blocks of spectrum increases the efficiency of next generation mobile technologies.” mburgess@thewirereport.ca

2500 MHz auction debate heats up as players argue over block sizes

News | May 27, 2011

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