SaskTel says new auction rules mean unused spectrum in rural areas

Industry Canada's new rules for the 700 MHz spectrum auction means SaskTel will remain the sole provider of advanced mobile wireless services in rural Saskatchewan, John Meldrum, president of corporate counsel and regulatory affairs at SaskTel, said in an interview. “SaskTel is concerned that the public policy decisions made by Industry Canada will result in even more spectrum going unused in rural Saskatchewan,” Meldrum said in an emailed statement to The Wire Report. “Sasktel advocated a 'use it or lose it' framework for 700 MHz licences in order to ensure that rural Saskatchewan would be able to receive the benefits of the spectrum,” he wrote. Meldrum said in a phone interview that Industry Canada's new rules, announced last week, did not include an effective build-out requirement, which combined with the department's new roaming rules, encourage the country's largest wireless carriers not to roll out rural services using the 700 MHz band. “You can’t us have the obligation to let them on our facilities and let them buy spectrum and just sit on it,” Meldrum said. “That doesn’t work for us.” Among the new policies are rules requiring wireless carriers to enter roaming agreements with competitors on an indefinite basis and restrictions on how much “prime” 700 MHz spectrum each incumbent carrier could purchase in any given market. Four spectrum blocks of 10 MHz, called the B, C, C1, and C2 blocks, will be considered “prime spectrum” for the auction. They are popular with device manufacturers because they are used by Verizon Communications Inc. and AT&T Inc. in the United States. The auction rules will cap each bidder to one block of prime spectrum per market, which means incumbents Rogers Communications Inc., BCE Inc., and Telus Communications Co. will be collectively limited to three prime blocks per market and which effectively reserves at least one prime block in each licence area for other carriers. SaskTel will be considered in an incumbent in Saskatchewan for the auction. The proposed auction rules also impose build-out requirements for service providers that purchase prime spectrum. The rules do not require those carriers to expand into unserved areas, but to build next-generation, long term evolution (LTE) networks where they are already offering mobile HSPA wireless services. The policy allows competing carriers to purchase prime spectrum with no build-out requirements outside those urban centres because SaskTel is the province’s only rural HSPA provider. Meldrum said the requirements will force the provincial Crown corporation to help the incumbent carriers appeal to urban customers who will roam on SaskTel's network outside Saskatoon and Regina. “So the rural rollout requirements amount to nothing for anybody other than SaskTel,” he said. “That sure doesn’t sound like a rural commitment to me.” He pointed out that one of the government’s stated policy objectives in the auction is to make advanced wireless services available to rural Canadians in a timely fashion. Meldrum said incumbents Rogers, Bell, and Telus are operating in the province without committing to building out their networks in rural areas. He said Wind Mobile (owned by Globalive Wireless Management Corp.) is also planning a new service limited to Saskatchewan's two largest cities and the areas directly surrounding them. “They have made a minimal investment in rural Saskatchewan in terms of coverage, and now they’ll get rewarded by Industry Canada for having made that minimal investment, by being able to roam on our network,” Meldrum said of the incumbents. “Are we being rewarded for having bitten the bullet and expanded deep into the high-cost areas of this province? Not in the least,” he said. Meldrum said SaskTel was a strong proponent of a “use it or lose it” rule for the spectrum auction which would have ensured any carrier that purchased rural spectrum would be forced to offer facilities-based services in its licence areas. Without that requirement, he said, carriers can abandon plans to build out in the province’s rural communities. “Everyone talks about what a scarce resource this is, and yet Industry Canada doesn’t have the guts to put in some use it or lose it requirements,” he said. Meldrum said the Crown corporation will continue to push its position as Industry Canada consults on the policies announced last week. He said SaskTel will ask the department to require carriers to give up any unused spectrum, free-of-charge, in exchange for rural roaming privileges. “If we have an obligation to serve rural Saskatchewan, we’re going to be looking for an obligation to pay,” he said. Meldrum said free spectrum access is “likely the minimum” the company would request for its rural roaming service. In an interview Tuesday, before The Wire Report spoke to Meldrum, Ken Engelhart, Rogers’ senior vice-president of regulatory affairs, said Industry Canada's roaming requirements are good for consumers because it means they will no longer be stranded without cellular service if they go beyond their carrier’s service range. He said the new requirements follow an evolution of roaming rules that began with minimal requirements in the 1990s followed by “somewhat broader” rules after the AWS spectrum auction in 2008. “Now they’ve opened it up completely,” he said. Engelhart said the department's new roaming policy is “certainly good for Rogers” because it will allow the company’s subscribers to roam on the networks of Bell and Telus. He said the policy will be useful in Saskatchewan, Manitoba and Prince Edward Island, where the company has a smaller footprint than some of its competitors. “Historically, the provincial phone companies were quite aggressive about building out their footprint to quite a broad area,” he said. “We’ll now be able to provide our customers with the same footprint.” In a follow-up call, Rogers said it had no comment on Meldrum's comments. Rogers also takes issue with Industry Canada's proposal auction rule to limit incumbent carriers to a single 10 MHz block of the most coveted 700 MHz spectrum in each market. Engelhart told The Wire Report in previous interviews that Rogers sought to license a minimum of 20 MHz of prime spectrum in each market—mirroring spectrum holdings for LTE services by the largest carriers in the U.S.—to build out a fully functional LTE network. Simon Lockie, Wind Mobile’s chief regulatory officer, has also told The Wire Report that limiting carriers to a single block of prime 700 MHz spectrum effectively ensures that no single carrier can build out a strong, super-fast LTE network. Wind has come out strongly against several aspects of last week’s policy announcement, but Lockie said the government “absolutely got it right” with its roaming requirements. “This is not about SaskTel. It’s about consumers in Saskatchewan who should have as many wireless choices as possible,” Lockie said. “The intent behind these provisions isn’t to have everyone piggybacking on SaskTel’s network. It’s to provide Saskatchewan consumers with as many options possible.” Lockie said that, under the proposed policy, wireless companies will be required to negotiate the terms of roaming agreements and that incumbents could reap financial benefits from those agreements. He said SaskTel should use the policy to ensure other carriers turn to the Crown corporation for roaming agreements instead of seeking out agreements with Bell or Telus. “Reasonable commercial terms are what these agreements will be subject to, and if we can’t come to those terms, then arbitration will be available,” Lockie said. “We’re getting roaming. So, do you want to be the one that gets that , or do you want someone else to?” he said. nkyonka@thewirereport.ca

SaskTel says new auction rules mean unused spectrum in rural areas

News | March 21, 2012

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