Department consulting on rules for spectrum transfers, applies to Rogers-Shaw deal

OTTAWA—Industry Canada will consult on proposed new rules to regulate the transfer of spectrum licences in advance of a Nov. 19 auction of 700 MHz spectrum, Industry Minister Christian Paradis said. In an announcement at the Industry Department Thursday, Paradis released the finalized auction rules and format. He said the auction of 700 MHz spectrum licences, originally planned for the first half of 2013, will proceed in November with the same rules announced a year ago, including spectrum caps on incumbent carriers, conditional rural rollout requirements, and mandatory tower-sharing and roaming conditions. Before that auction will begin, Paradis said, the government will lay out new rules for how the department will review the sale and transfer of spectrum licences between carriers, such as Rogers Communications Inc.'s proposed purchase of AWS spectrum from Shaw Communications Inc. That deal is being criticized by small wireless players because Shaw's spectrum was “set aside” for new entrant carriers during the 2008 AWS auction and Rogers, an incumbent, plans to purchase it after a five-year moratorium is lifted in 2014 on the transfer of that spectrum to incumbents. “We will fully scrutinize the proposed transaction when it’s time to do it, but in the meantime I think we have to hold consultations, we have to put more precision on the criteria ," Paradis said, adding that the department has until September 2014 to approve or reject Rogers' acquisition of the Shaw spectrum. "It will be a very important tool for the next auction coming with the 700 MHz, but that being said, transfer will be compliant with the ultimate criteria that will be there as an outcome from these consultations.” Paradis told reporters that the objective for the consultation on the process for spectrum transfers is to promote competition in the wireless sector. “To be clear, our government wants to see at least four players in each market," he said. In consultation documents released Thursday, the department proposed a two-tiered review process for spectrum sales and transfers: a four-week “summary” review of simple transfers with minimal market impact; and a 20-week "detailed" review of more complicated sales or transfers. The department said any review would consider the impact of the proposed spectrum transfer on “the efficiency and competitiveness” of the wireless market, the “availability, quality and affordability” of wireless services, and the “economic and social benefits” Canadians derive from spectrum. In some cases, Industry Canada said, it will consider how much spectrum the proposed recipient would hold in any region of the country and the “overall distribution” of spectrum licences in that region. An Industry Canada backgrounder said the department's consultation will consider “whether there is a threshold in the form of concentration or a measure of MHz-pop ” that the department should set in determining whether a sale should be subject to a detailed review, “or whether there is some other type of threshold, screen or cap that should be used to decide if a detailed review is required.” The department proposed that any agreement resulting in the transfer of spectrum licences should be subject to a departmental review, including “option agreements” such as the deal between Rogers and Shaw. Those companies announced their deal on Jan. 14, which gives Rogers an option to purchase Shaw's spectrum for about $300 million after a deadline in September 2014 when the five-year moratorium is lifted. New entrant carriers have criticized the agreement, saying it undermines the AWS auction rules that aimed to encourage competition by ensuring that spectrum would be used by new market entrants. The Rogers-Shaw spectrum transfer must be approved by the department. Paradis did not say whether the department's review of the Rogers purchase would be completed before the 700 MHz auction. The department backgrounder said incumbent wireless carriers hold 85 per cent of the spectrum currently licensed to mobile providers in the country. Wireless carriers and the public have until April 3 to file comments on the proposed spectrum transfer review processes, the department said. Anthony Lacavera, former CEO of new entrant Wind Mobile, said he is encouraged by the proposed rules on spectrum transfers because it "sets the tone" that the government will not approve of putting more spectrum into the hands of the incumbents when that spectrum was intended to encourage a fourth player in the wireless market. He said he believes the department is taking a stronger stance on spectrum transfers to incumbents for both the AWS spectrum auctioned in 2008 and future auctions such as the 700 MHz band. Lacavera, chairman and CEO of Globalive Communications Corp., is leaving Wind Mobile as CEO after the new entrant carrier became formally owned by parent company VimpelCom Ltd. due to a share conversion. "The spectrum hoarding, spectrum warehousing issue, is being tackled directly," Lacavera said in a phone interview. "For me, this creates a really interesting dynamic where you no longer have spectrum speculators in the 700 MHz auction. You're going to have people who are committed to building. Overall, I'm very impressed with this." Lacavera said Rogers plans to purchase Shaw's spectrum for about $325 million, according to numbers disclosed in the deal, which means Shaw would earn $135 million by sitting on the spectrum licences it bought for $190 million five years earlier. "They had to do nothing but hold it for five years," Lacavera said, while new entrant carriers are losing money by using their spectrum and building out networks. New entrant Public Mobile Inc. said in a release Thursday that it welcomes a new policy governing spectrum license transfers to ensure sufficient competition in the wireless sector. Paradis clarified that the department will "scrutinize and require approvals for 'deemed spectrum license transfers,'" which can lock up spectrum assets, the company said. Public Mobile said it is happy to see the department's approach to new roaming and tower sharing rules and a reinforcement of "the authority of the CRTC to use its telecommunications expertise to set fair, competitive rates for both mandatory roaming and tower sharing." Alek Krstajic, CEO of Public Mobile, said in a statement that he is encouraged by the policy announcement. "We encourage the government to complete the formal process on spectrum license transfers as quickly as possible to ensure certainty ahead of the application deadline for the 700 MHz auction," Krstajic said. The department also released a document called the "Commercial Mobile Spectrum Outlook," which details additional spectrum bands the department will consider making available to wireless carriers by 2017, including spectrum in the AWS 2, AWS 3, AWS 4, WCS, 600 MHz and 3500 MHz bands. The department said it will hold “comprehensive consultations” before deciding which bands to allocate for mobile operators, and that it aims to make 222 MHz of spectrum available over the next five years. Paradis confirmed Thursday that the government will extend, indefinitely, requirements that carriers negotiate with each other for shared use of antenna towers and sites, and for roaming agreements. He said the department will reduce the timelines under which it expects companies to complete those arrangements before going to arbitration, if necessary. In a long-awaited decision, the minister said the 700 MHz auction, now scheduled for November, will allow carriers to form “associations” under which they can share 700 MHz spectrum even if they bid separately in the auction. The backgrounder said that “carriers intending to form associations to share 700 MHz spectrum may be permitted to participate in the 700 MHz auction separately if they disclose sufficient information regarding their association.” The department added: “These carriers may also request that the spectrum cap apply individually, but they will be required to demonstrate to Industry Canada's satisfaction that they are separately and actively providing services in the region.” Rogers had opposed that proposed rule during last year's consultation on the auction rules, arguing that it would give competitors BCE Inc. and Telus Corp. a competitive advantage due to their network sharing agreement. Bell and Telus share networks and wireless infrastructure, and under the rules may be permitted to bid separately in the auction, meaning they would be capped at 20 MHz of prime spectrum per market, while Rogers would be capped at 10 MHz. The 700 MHz auction's most sought-after spectrum will be the prime, “paired” blocks of 10 MHz. There will be four of those blocks available in each of the country's 14 licence areas, which will be used for next-generation LTE mobile networks. Bell spokeswoman Jacqueline Michelis said in an emailed statement that the company is analysing the final regulatory framework in detail and that the company will "work within the auction structure set out." The department set a deadline of 12 noon on June 11 for companies to apply to participate in the auction and to complete preliminary "pre-auction" deposits. —With reporting by Nicholas Kyonka at nkyonka@thewirereport.ca, and files from and editing by Simon Doyle at sdoyle@thewirereport.ca --- CORRECTION: An earlier version of this story incorrectly said Paradis could not say whether the new rules for reviewing spectrum transfers will be in place by the 700 MHz auction. The minister said the department may not deal with the Shaw-Rogers spectrum transfer before the auction. The story also said Rogers will purchase Shaw's spectrum for $275 million though the price is $275 million to $300 million plus $50 million for the option, if approved by Industry Canada.

Department consulting on rules for spectrum transfers, applies to Rogers-Shaw deal

News | March 7, 2013

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Department consulting on rules for spectrum transfers, applies to Rogers-Shaw deal

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