Telus-Bell spectrum sharing unfair, leads to larger, superior 700 MHz blocks: Rogers

Telus Corp. and BCE Inc.'s spectrum sharing agreement will allow the companies to combine their 700 MHz spectrum licensed in next year's auction and build superior 20 MHz blocks supporting fourth-generation wireless technologies, leaving Rogers Communications Inc. and other carriers at a competitive disadvantage, Rogers said in comments filed with the department. Industry Canada's proposed rules for the upcoming 700 MHz spectrum auction leave Rogers vulnerable to “predatory bidding” by rival incumbents, the company said. The 700 MHz spectrum auction, planned to take place in the first half of 2013, will allow wireless carriers to bid on seven 10 MHz blocks of spectrum available in each of the 14 licence areas across the country. Industry Canada's proposed rules state that no single carrier can license more than one of the four available “prime” blocks of spectrum, known as the B, C, C1, and C2 blocks. The cap means national incumbents Rogers, Bell, and Telus will be collectively limited to acquiring three prime blocks per market, effectively reserving at least one prime block in each licence area, or market, for other carriers. Rogers told Industry Canada in comments filed June 25 that Bell and Telus' spectrum and network infrastructure sharing agreement, through which the companies can combine their spectrum holdings, will allow the companies to licence and use two adjacent blocks of 10 MHz spectrum in each licence area, effectively making faster and superior blocks of 20 MHz. The company said it could build its own 20 MHz blocks if it licensed a prime block and another block adjacent to it called the A block, but Bell, Telus and other carriers will have a competitive incentive to bid on the A block to drive up the price. Industry Canada's proposed “affiliated entity” rules for the auction allow Bell and Telus to share spectrum while bidding separately, Rogers said. “wing to LTE’s performance characteristics, the value of a second adjacent 10 MHz block will typically substantially exceed the value of the first block,” Rogers wrote. “Associated entities under a pre-existing spectrum sharing agreement who anticipate pooling spectrum that they win will benefit from these synergies, even if they are bidding individually.” Other bidders in the auction will know Rogers is under pressure to secure the A block, which will encourage them to bid and drive up its price even if they have no intent of licensing it, Rogers said. Rogers issued the comments to the department as part of its final consultation on a proposed regulatory framework for the 700 MHz spectrum auction. The deadline for comments was June 25. Rogers said Industry Canada should impose a rule to prevent auction gaming, suggesting a rule that carriers cannot bid for non-contiguous spectrum “where there is no commercial purpose” for it. In comments filed with the department June 25, Bell said its “joint build arrangement” with Telus has allowed the company to roll out its HSPA network about a year earlier than it would have without the agreement in place. This saved the company “hundreds of millions of dollars” and benefitted Canadian consumers, the company said “The benefits to the Canadian public resulting from such an arrangement cannot be over-emphasized,” Bell said. “This arrangement meant that the Company was able to ratchet up the benefits of competition by providing Canadian consumers with its competing offers in markets where there might otherwise have been only a single service provider," Bell said. Telus declined to comment for this story. Bell and Telus will have an opportunity to respond to Rogers’ comments reply comments due July 25. New entrant Wind Mobile, owned by Globalive Wireless Management Corp., said in its comments that it agrees with Industry Canada’s definition of “associated entities,” which says any arrangements with another potential bidder “would be deemed to create an Associated Entity relationship.” Wind said the associated entity rules must not penalize companies for seeking out spectrum sharing agreements prior to the auction or that “promote clarity for parties contemplating sharing agreements post auction,” Wind said. The description of any spectrum sharing agreements provided to Industry Canada should be sufficient for other bidders to understand it and give Industry Canada reason to permit or deny it, Wind said. “There should not be any disclosure of proposed spectrum sharing arrangements that Industry Canada is asked to review prior to the commencement of the auction,” Wind wrote. Wind CEO Anthony Lacavera told The Wire Report in April that the company was looking at spectrum sharing deals and possible consolidation with other wireless companies. New entrant Mobilicity wrote that the new entrants have generated more competition for consumers but there is a “pressing need” for more government action. Mobilicity said it agrees with Industry Canada's spectrum cap decision for the prime blocks as long as it is accompanied by a “strict definition” of associated entities and bidder participation rules, which the department should enforce “strictly.” “The Department’s policy objective of competition will not be achieved if large wireless service providers, as defined by the Department in the 700 MHz and 2500 MHz Policy and Technical Framework, are permitted to do indirectly, through Association, what Decision … ostensibly states they cannot do, namely, bid on and win two paired blocks (20 MHz) of prime spectrum,” Mobilicity said. Bell also urged the commission to take extra steps to avoid regulatory gaming. The company said in its comments to the department that each bidder should be required to produce a letter of credit before the start of each auction day to prove they have the capital to support their most recent bid from the day before. “By requiring bidders to provide a financial guarantee equal to 100% of the value of their previous day’s last package bid, this measure will incent bidders to determine their overall budget in advance of the auction and to bid only on spectrum blocks they desire,” Bell said. “If a bidder decides to inefficiently increase the price by bidding on spectrum blocks that they do not desire, it increases the probability that they will go over their pre-determined budget allotment.” Bell also reiterated its position that any large foreign carrier entering the auction should also be limited to a single block of prime spectrum. The company said a large, foreign carrier is not likely to prioritize a quick roll out of LTE services in Canada. “t is doubtful that executives in Texas or Germany would invest first in Edmonton, Canada’s fifth largest market, ahead of Phoenix, the fifth largest in the U.S. with twice the population,” Bell said. Under Industry Canada's rollout obligations for the spectrum, foreign carriers “would likely be satisfied by restricting the build out in less costly urban areas,” Bell said. Bell called on the department to impose rules binding all carriers to the same spectrum cap and rural rollout requirements “if at least one large foreign-owned and controlled carrier qualifies to participate in the action.” Telus, in its comments to the department, expressed concerns about Industry Canada's proposed buildout rules for rural areas, which requires carriers with two 700 MHz spectrum blocks in one licence area to roll out new networks to cover 90 per cent of their previous HSPA footprint within five years. Telus said that should be shortened to three years. The company added that Industry Canada's “general” deployment rules, which require companies with 700 MHz licences to roll out networks within 10 years, should be shortened to ensure the “valuable spectrum is commercially deployed as expeditiously as possible.” Telus called on the department to lay out what penalties would be handed down to carriers that don’t live up to the buildout requirements. news@thewirereport.ca

Telus-Bell spectrum sharing unfair, leads to larger, superior 700 MHz blocks: Rogers

News | July 3, 2012

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Telus-Bell spectrum sharing unfair, leads to larger, superior 700 MHz blocks: Rogers

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