Canada Gazette Notice No

Canada Gazette Notice NoCanada Gazette Notice No. DGSO-004-12
Consultation on a Licensing Framework for Broadband Radio Service (BRS) — 2500 MHz Band
Reply Comments of
17 December, 2012
Contents
Executive Summary ................................................................................................................................... 3 Bidder Participation Rules .................................................................................................................. 3 Auction Format and Rules – Supplementary Round ............................................................................ 5 Proposed Conditions of Licence .......................................................................................................... 6
4. Auction Format and Rules ................................................................................................................... 7 5. Bidder Participation – Affiliated and Associated Entities ................................................................... 8
5-1(a) and (c) -- Definition of Associated Entities............................................................................... 9 5-1(d), (e) and (f) – Bidder Participation Rules ................................................................................ 11 5-1(b) Auction Integrity and Transparency ....................................................................................... 13 5.2 Prohibition of Collusion ............................................................................................................ 14
6. Conditions of Licence for Spectrum licences to be auctioned in the 2500 MHz Band ..................... 16 6-2 CoL re Spectrum Aggregation Limits .......................................................................................... 16 6-3 CoL re Licence Transferability and Divisibility ......................................................................... 17
8. Auction Process ................................................................................................................................... 18 8.1 Application to Participate .......................................................................................................... 18 8.4 Pre-Auction Deposits ................................................................................................................. 19 8.5 Bid-Payments and Forfeiture Penalties ..................................................................................... 19
APPENDIX “A” – REVISED SUMMARY OF RECOMMENDATIONS ............................................ 20
Data & Audio-Visual Enterprises Wireless Inc. 17 December 2012 Canada Gazette Notice No. DGSO-004-12 Page 3 of 25
EXECUTIVE SUMMARY
i. In Consultation on a Licensing Framework for Broadband Radio Service (BRS) – 2500 MHz
Band1 (hereinafter “2500 MHz Licensing Consultation”), the Department seeks comments on proposed
specific measures to implement the policy and technical decisions announced in the preceding Policy and
Technical Framework: Mobile Broadband Services (MBS) – 700 MHz Band, Broadband Radio Service
(BRS) – 2500 MHz Band (hereinafter “700 MHz and 2500 MHz Policy and Technical Framework”).2
ii. Data & Audio-Visual Enterprises Wireless Inc., dba Mobilicity (hereinafter “Mobilicity”)
generally supports the Department’s proposed licensing framework for the 2500 MHz auction but has
significant concerns about several discrete aspects of the framework, as outlined below and discussed in
further detail in the within Reply Comments.
BIDDER PARTICIPATION RULES
iii. Mobilicity was in full support of the Minister of Industry’s policy decision in the 700 MHz and
2500 MHz Policy and Technical Framework3
iv. However, as in the 700 MHz consultation, Industry Canada has proposed dramatic changes to the
bidder participation rules. Taken together, the proposed changes to the Associated Entity and anti-collusion
rules not only allow bidders to cooperate regarding the auction, available spectrum, bid strategy, network
sharing, or the post auction market, but to do so while operating under separate caps.
to adopt a “dual-cap” aggregation limit in the 700 MHz band
and a 40 MHz aggregation limit in all areas (except the Yukon, the Northwest Territories and Nunavut) in
the 2500 MHz band.
v. Mobilicity does not support the proposal that carriers, particularly large wireless carriers that
share network facilities and services
1 Canada Gazette notice no. DGSO-004-12 (October 2012).
, would have separate caps. Mobilicity was surprised to see in the 700
MHz Licensing Consultation and now, in the 2500 MHz Licensing Consultation, the Department’s proposal
to exempt carriers, including large wireless carriers, from the application of the spectrum aggregation limits
set for the 700 MHz band and 2500 MHz band, respectively. The effect of such an exemption would be to
incent or enable the large wireless carriers to accumulate even more mobile wireless spectrum than they
already hold in abundance.
2 Canada Gazette Notice No. SMSE-002-12 (March 2012). 3 Canada Gazette Notice No. SMSE-002-12 (March 2012).
vi. The Department’s proposal to permit Associated Entities to acquire spectrum under separate caps
undermines incentives for efficient spectrum sharing arrangements, such as urban/rural splits and broader
geographic splits. It will contribute nothing towards the Government’s objective of ensuring that all
Canadians have access to at least four wireless carriers. In order to be meaningful, Mobilicity assumes that
the Government intended all Canadians to have access to four independently operated wireless networks. If
implemented, the Department’s proposal will, in all likelihood, only lead to further concentration of unused
spectrum holdings in the hands of the entrenched, national, large wireless carriers.
vii. Proposals such as those of the Bell Companies, to dilute the bidder participation rules to exclude
tacit or unwritten arrangements and to exclude significant joint equipment purchase agreements should be
rebuffed as self-serving attempts to rewrite the rules to exempt actual or contemplated associations.
viii. Given the total absence of competitive market forces in the provision of roaming and antenna
tower and site sharing, and the fact that the spectrum aggregation limits established in the 700 MHz and
2500 MHz Policy and Technical Framework, are the only pro-competitive feature of the Department’s
licensing frameworks for these spectrum bands, Mobilicity reiterates that the bidder participation rules
should be strengthened to
(a) capture all agreements, arrangements or understandings that pertain to the acquisition and
use of the spectrum to be auctioned (700 MHz or 2500 MHz), the joint buildout and
preferential use of mobile wireless network facilities and services (including roaming,
resale, antenna tower and equipment purchases) or the post-auction market structure
(including marketing, and branding or assignment of roles and responsibilities along
territorial lines);
(b) provide for a process whereby Disclosure Filings4
(c) provide for a public process for the review of Disclosure Filings and determination of
Associations;
must be made by potential participants in
the auction at least four (4) months prior to the deadline for applications to participate in the
auction and that the Department’s decision on qualified, Associated and Affiliated Entities
be published at least three (3) months prior to the deadline for making the pre-auction
financial deposits;
4 This is the terminology that Mobilicity uses to refer to the disclosures referred to at paragraph 90 of the 2500 MHz Licensing
Consultation.
(d) amend the anti-collusion rules such that any discussions pertaining to the acquisition and use
of the spectrum to be auctioned, the joint buildout and preferential use of mobile wireless
network facilities and services, and the post auction market structure are prohibited, prior to,
during and post-auction, except and unless disclosed to the Department; and
(e) prohibit Associated and Affiliated entities from bidding on or acquiring spectrum in excess
of a single cap.
ix. Mobilicity is strongly opposed to permitting Associated Entities to bid on and acquire spectrum
in excess of a single spectrum cap in any given licensed area. However, Mobilicity has considered
comments pointing out the public benefits of permitting cooperation between parties who wish to
collectively or jointly provide service in urban/rural areas, or by dividing up territories along East/West or
North/South lines. These are compelling arguments. There is no prejudice if Associated Entities are
permitted to bid separately in the auction to acquire packages along agreed upon lines, as long as both parties
to the association are not permitted to acquire spectrum in excess of a single cap in any given geographic
area.
x. As a result, Mobilicity clarifies that it believes that the policy objective of encouraging network
sharing and cooperation can be achieved without harming the policy objective of promoting new entry if
Associated Entities are permitted to participate separately in the auction, as long as the Associated Entities in
question are restricted to bidding on and acquiring spectrum under a single spectrum aggregation limit.
AUCTION FORMAT AND RULES – SUPPLEMENTARY ROUND
xi. There is an overwhelming consensus among new entrant participants (parties who have not yet
entered the mobile wireless market or having entered, collectively account for less than 10 per cent of
revenues in that market), that the proposed 2500 MHz auction format and rules (like the 700 MHz auction
format and rules) are inherently biased in favour of the entrenched incumbent national carriers. This is
particularly apparent in the Supplementary Round, in which the Department’s proposed auction rules
provide that preference will be given to the “highest value package.”
xii. While practically all new entrant participants voiced serious reservations about the potential for
large wireless carriers (Rogers, the Bell Companies and Telus), as defined in the 700 and 2500 MHz Policy
and Technical Framework, to “trump” the bids of regional or new entrant bidders, Mobilicity has not seen
any comments that addressed the concerns. Mobilicity notes with interest that Xplornet proposed that the
Department should extend the instant 2500 Licensing Consultation to hold at least two mock auctions
(featuring mock Supplementary Rounds), to permit parties to comment based on the learning that could be
gleaned from a mock auction exercise. However, Mobilicity is not convinced that anything can be done to
“improve” the Supplementary Round in order to alleviate the detrimental effects of this round on smaller or
regional players.
xiii. As a result, Mobilicity reiterates its recommendations and those of the vast majority of new
entrant players, that there should be no Supplementary Round if all spectrum is allocated in the final clock
round. In other words, the Supplementary Round should only be held if there is unallocated spectrum after
the final clock round.
PROPOSED CONDITIONS OF LICENCE
xiv. Most parties had few comments on the Department’s proposed conditions of licence, most of
which were uncontroversial.
xv. All parties were in agreement with the CWTA’s opposition to (i) the requirement to make all
“interconnected radio systems” intercept-capable and (ii) the requirement to contribute to the research and
development condition of licence. Mobilicity concurs.
xvi. Of the remaining comments, Mobilicity strongly opposes the Bell Companies’ proposal that
bidders be required to post a Letter of Credit equal to the value of bids submitted on the previous day. This
requirement would be prohibitive for smaller, regional players that do not possess the asset base that the
large wireless carriers enjoy as a result of over 100 years of incumbency in the provision of telephone
services and/or 30 years’ head start in the mobile wireless market. The Bell Companies’ proposals appear to
be designed to hamper competition and should be soundly rejected.
xvii. On the contrary, the Mobilicity reiterates its proposal that new entrants be permitted to pay
winning bid amounts in instalments over a five-year period.
xviii. For convenience, Mobilicity’s recommendations in relation to the proposals contained in the
2500 MHz Licensing Consultation, as amended in these Reply Comments, are summarised at Appendix “A”.
xix. In addition, the numbering in the headings used in the remainder of these Reply Comments
correspond to the numbering of headings and proposals used by the Department in the 2500 MHz Licensing
Consultation document.
4. AUCTION FORMAT AND RULES
1. As noted by Mobilicity in its June 25, 2012, comments on the 700 MHz Licensing Consultation,
mitigating exposure risk and incentivising truthful bidding (through the Second-Price rule, the use of
eligibility points and revealed preferences rules) are laudable objectives. If these benefits can be
secured through the CCA format, the added cost and complexity of the CCA is justified.
2. Most parties5
3. In particular, new entrant participants cited the likelihood that the Supplementary Round would,
“result[] in outcomes that bear little resemblance to the clock round outcome.”
agreed, by and large, with the Department’s proposal to use the CCA auction format in
the 2500 MHz auction with discrete modifications. The main feature of the proposed auction format
that is problematic is the Supplementary Round and the potential for strategic bidding in the
Supplementary Round to obliterate the benefits of truthfulness in the earlier clock rounds.
6 Eastlink submitted
that the rules favouring the “highest value package” made it a virtual certainty that bidders for larger
packages would prevail in the Supplementary Round over the bids of smaller, regional bidders.7
Xplornet cited the inherent disadvantage that new entrant participants faced because of the large
number of licences in the 2500 MHz auction (318), the heightened possibility of large combinatorial
bids in the clock rounds, and hence the large wireless carriers’ superior ability to make higher
supplementary bids.8
4. Due to the Second-Price Rule in the Supplementary Round, bidders have a strategic opportunity to
place bids in order to raise the “second price” other bidders pay. As was seen in the Swiss and
Austrian CCA auctions,
9
5 The only exceptions appear to be Eastlink and SaskTel. Both opposed the CCA format because of its ingrained preference for
the “highest value package” inevitably placed regional providers at a significant disadvantage. Eastlink and SaskTel argued that the Department should adopt an SMRA format for the 700 MHz and 2500 MHz auction.
the Second-Price Rule can create disparities between what different bidders
6 MTS Allstream, paragraph 7. Note: All references throughout the footnotes are to the parties’ 19 November 2012 Comments except as otherwise noted.
7 Eastlink, paragraphs 18-20. 8 Xplornet, paragraphs 15-20, viz., paragraphs 16 and 18. 9 See Mobilicity, paragraph 12. For convenience, the specific examples from the Austrian and Swiss CCA auctions are
reproduced again here. The “Austrian 2.6GHz spectrum auction results show some consistency with previous auctions but the picture is still confusing,” The Coleago Blog, September 23, 2010, available at: http://coleago.wordpress.com/2010/09/23/austrian-2-6ghz-spectrum-auction-results-show-some-consistency-with-previous- auctions-but-the-picture-is-still-confusing/ (last visited June 20, 2012). See also “New mobile telephony frequencies for Orange, Sunrise and Swisscom,” Swiss Federal Office of Communications, February 23, 2012, available at: http://www.bakom.admin.ch/themen/frequenzen/03569/index.html?lang=en#sprungmarke3_44"_blank (last visited June 22, 2012).
pay for similar licences. Beyond issues of fairness, integrity and confidence in the auction process,
significant disparities in final auction prices can put different bidders on an unequal cost footing.
5. Mobilicity maintains that the Supplementary Round should be reserved for spectrum that remains
unassigned after the clock rounds. The Supplementary Round is almost guaranteed to disenfranchise
smaller or regional new entrant carriers. Mobilicity does not believe that this is consistent with the
Government’s objective of promoting competition in the market. The proposed bias in favour of the
“highest value package” in the Supplementary Round favours the incumbents, who already have
large caches of high-capacity spectrum over 2000 MHz.
6. The unfairness to smaller or regional carriers will amplify exponentially if the Department were to
adopt Rogers’ recommendations to extend the limit of supplementary bids to 2,000 bids.10
7. As a result, all carriers (except the Big Three and Globalive) submitted that a Supplementary Round
should not be held if all spectrum is allocated in the final clock round. Mobilicity urges the
Department to make this small, but important change to its proposed CCA auction format.
Indeed,
one can infer that Rogers’ request to extend the bid limit is because it sees an advantage that it can
exploit in the Supplementary Round.
5. BIDDER PARTICIPATION – AFFILIATED AND ASSOCIATED ENTITIES
8. In the 2500 MHz Licensing Consultation, the Department has sought public comment among other
things, on:
(b) bidder participation rules;
13
10 Rogers, paragraphs 53-56, viz., para. 56.
11 2500 MHz Licensing Consultation, Proposals 5-1(a) and 5-1(c) and paragraph 88. 12 2500 MHz Licensing Consultation, Proposals 5-1(d) and 5-1(e) and 5-1(f). 13 2500 MHz Licensing Consultation, Proposals 5-1(b). 14 2500 MHz Licensing Consultation, Proposals 5-2.
5-1(A) AND (C) -- DEFINITION OF ASSOCIATED ENTITIES
9. The Department has sought comment on its proposed definition of Associated Entities, as follows:
Any entities that enter into any partnerships, joint ventures, agreements to merge, consortia or any arrangements, agreements or understandings of any kind, either explicit or implicit, relating to the acquisition or use of any spectrum in the 2500 MHz band will be treated as Associated Entities. Typical roaming and tower sharing agreements would not cause entities to be deemed associated.
10. Mobilicity fundamentally agrees with the Department, as did most other parties, that the definition
should broadly capture both written agreements as well as unwritten agreements, arrangements or
understandings of any kind. This is entirely appropriate given that the objective of the Associated
Entities rules is to preserve the integrity of the auction process.
11. In Mobilicity’s view, the indicia of an association for purposes of the upcoming auctions of mobile
wireless spectrum are threefold. The relevant indicia are arrangements, agreements or
understandings of any kind:
(a) relating to the acquisition and use of the spectrum being auctioned (700 MHz or 2500
MHz);
(b) relating to joint buildout and preferential use of mobile wireless network facilities and
services,15
(c) relating to the post-auction market structure, including in relation to marketing, and
branding or assignment of roles and responsibilities along territorial lines.
including preferential arrangements relating to roaming, resale, antenna tower
and equipment purchases; and
12. Mobilicity agrees that standard-form roaming agreements would not normally be caught by the
definition of an association. However, for purposes of performing an assessment of association,
roaming arrangements should be disclosed and filed with the Department in advance of the 2500
MHz auction (and if such arrangements are entered into after the auction, they should be filed with
the Department post-auction – see Mobilicity’s recommendations re Prohibition of Collusion and
Licence Transferability and Divisibility). To wit, the Bell Companies describe the current
arrangement between Bell Mobility and Telus as a “joint build arrangement” but the Department
15 Mobilicity’s proposal here is echoed by Xplornet, which proposes that “exclusive” spectrum sharing arrangements be included
in the criteria for agreements giving rise to associations. See Xplornet, paragraph 30. However, Mobilicity does not agree that such arrangements need be exclusive in order to be seen as prima facie giving rise to an association.
should not lose sight of the fact that at its inception, the arrangement was initially described as a
preferential roaming arrangement.16
13. Mobilicity strongly opposes the Bell Companies’ proposal that only “legally binding and
enforceable relationship[s] of the sort that would give rise to legal redress before the Canadian
courts in the event of a breach,” should be considered to give rise to an association.
14. If the Bell Companies’ proposed amendment to the definition of Associated Entities were adopted,
coupled with the Department’s proposed anti-collusion rule, which merely restricts discussions
between the deadline for applications to participate in the auction and the deadline for the final
payment on high bids, parties would be free to discuss, tacitly agree and even enter into contingent
memoranda of understanding, without being required to disclose such arrangements to the
Department. They would also be free to participate separately in the auction under individual
spectrum caps.
15. It would be ludicrous for two parties who have entered into a tacit, unwritten arrangement to acquire
(bid on) spectrum along territorial lines, and to grant to each other preferential access to network
facilities, services, equipment or other infrastructure and to have such an arrangement not fall into
the definition of Associated Entities. This would totally undermine the principal measure adopted
by the Department in this auction in order to ensure that Canadians each have access to at least four
competitive wireless carriers.
16. Mobilicity is also opposed to the Bell Companies’ proposal that agreements, including written
agreements, pertaining to joint equipment purchases should not be included in the definition of
Associated Entities. This proposed amendment by the Bell Companies of the definition of
Associated Entities appears designed to favour the Bell Companies and Telus and their self-
described “joint build arrangement.” Such joint build arrangements likely involve tower site
sharing, preferential roaming and backhaul arrangements as well as arrangements with respect to the
acquisition of equipment.
17. A large proportion of such joint build arrangements are usable across different spectrum bands –
obviously, neither the Bell Companies nor Telus will be building a brand new antenna tower
network or backhaul network for each of the 700 MHz and 2500 MHz spectrum bands. As Rogers
16 See Mobilicity’s 25 June 2012 comments on the 700 MHz Licensing Consultation,
puts it, “economics and technology will ensure it is extended into the 2500 band.”17
18. To be clear, Mobilicity does not object to the type of joint build arrangement that Bell Companies
and Telus have entered into. To the contrary, these types of arrangements should not be
discouraged. However, what must be avoided at all costs is a situation where parties that have
entered or are contemplating entering into such arrangements bid on and acquire spectrum in excess
of a single cap.
build arrangements are, therefore, highly relevant to whether an association exists for purposes of
the spectrum to be auctioned.
19. Applying the foregoing definition of Associated Entities will ensure that there will be four (4)
competitive, independently operated networks in Canada, as opposed to three (3) or less.
5-1(D), (E) AND (F) – BIDDER PARTICIPATION RULES
20. As in the 700 MHz consultation, Industry Canada has proposed dramatic changes to the bidder
participation rules. Taken together, the proposed changes to the Associated Entity and collusion
rules not only allow bidders to cooperate regarding the auction, available spectrum, bid strategy,
network sharing, or the post auction market, but to do so while operating under separate caps.
21. Mobilicity notes the concerns regarding the proposed changes voiced by other participants.
22. Rogers states that, “any bidder who has privileged knowledge of what another bidder is likely to do
has a greater ability to make inferences from the information provided each round. This is a
fundamental unfairness that results from any arrangement or understanding between bidders about
bid strategy, even if there is no communication between those bidders each round.”18
23. Companies involved in joint ventures should be considered Associated Entities for the purpose of
the 2500 MHz auction.
19 Public Mobile states that Bell and Telus are associated and must operate
under a single cap.20
24. On the other hand, several participants noted the benefits of sharing spectrum. Xplornet stated that it
wanted the freedom to develop partnerships with other service providers in order to serve rural
17 Rogers, paragraph 100. 18 Rogers, paragraph 98. 19 BCBA, paragraph 9. 20 Public Mobile, paragraph 29.
areas.21 Rogers states that the rules should enable urban and rural carriers to share spectrum in order
to meet the needs of their respective markets.22
25. On a related note, Rogers noted that, “[s]ome inter-carrier relationships may include exclusive
territories that are a small subset of a licence tier. It would be prejudicial to force two carriers to bid
as a single bidder under a single cap where there is only a small portion of the licence area where
they do not compete. It unduly harms both carriers’ ability to deliver service and compete outside
the exclusive area. This in turn will reduce competition. Under these circumstances, carriers should
be entitled to bid as normal as long as the exclusive portion constitutes less than 50% of the
population of the entire licence tier.”
23
26. In Mobilicity’s respectful view, it is entirely inconsistent with the Government’s objective of
bolstering competition and ensuring the availability of at least four competitive alternatives for every
Canadian consumer for the Department to provide for discretionary exemptions from spectrum
aggregation limits and bidder participation rules for large wireless carriers that have or may form
Associations. In essence, what the Department proposes to give with one hand, it appears to want to
take away with the other. The Government’s policy objectives will not be achieved if large wireless
providers can do indirectly, through Associations, what they cannot do directly, namely, bid on and
win more than 40 MHz of 2500 MHz spectrum.
Mobilicity disagrees with this recommendation and suggests
that regional associations should be subject to a single regional cap. Two carriers that share a
network in Saskatchewan for example, should be subject to the same single cap. Failing to do so
will almost guarantee that the regional carrier and its associated partner will be able to acquire
spectrum in excess of their needs.
27. However, Mobilicity has considered comments pointing out the public benefits of parties who may
wish to cooperate to collectively or jointly provide service in urban/rural areas, or by dividing up
territories along East/West or North/South lines. For example, Xplornet proposes that Associated
Entities may participate in the auction separately, and may have the spectrum caps applied
individually.24
21 Xplornet, paragraph 29.
22 Rogers, paragraph 103. 23 Rogers, paragraph 102. 24 Where all members of an association are large wireless providers, Xplornet proposes that while these parties may participate in
the auction separately, they may only bid on and acquire spectrum subject to a single spectrum aggregation limit. See Xplornet, paragraph 38.
28. As a result, Mobilicity clarifies that it believes that the policy objective of encouraging network
sharing and cooperation can be achieved without harming the policy objective of promoting new
entry if Associated Entities are nonetheless permitted to participate separately in the auction, as long
as the Associated Entities in question are restricted to bidding on and acquiring spectrum under a
single spectrum aggregation limit.
29. Mobilicity has amended its recommendation at Proposal 5-1(f) to clarify that Mobilicity is not
opposed to Associated Entities participating separately in the auction. It remains opposed to
Associated Entities bidding on and acquiring spectrum in excess of the 40 MHz spectrum
aggregation limit:
Mobilicity does not support the Department’s proposal that Associated Entities be permitted have the spectrum aggregation limits applied separately.
5-1(B) AUCTION INTEGRITY AND TRANSPARENCY
30. Mobilicity fully supported the Department's proposal at paragraphs 90-92 of the 2500 MHz
Licensing Consultation that applicants must disclose in writing, as part of their applications, the
names of Affiliated and Associated Entities. In addition, it is proposed that each applicant must also
submit a narrative, “describing all key elements and the nature of the affiliation or association in
relation to the acquisition of the spectrum licences being auctioned and the post-auction
relationships of said entities (collectively, the “Disclosure Filings”). The Department further
proposes that the “narratives” would be made publicly available on the Industry Canada website
prior to the auction.25
31. Mobilicity proposed a number of measures to bolster the integrity and transparency of the
Department’s bidder participation rules:
(a) moving up the deadline for the filing of the Disclosure Filings to at least four (4) months
prior to the deadline for applications to participate in the auction;
(b) clarifying that all agreements, arrangements or understandings that may give rise to an
association should be disclosed as part of the Disclosure Filings;
25 2500 MHz Licensing Consultation, paragraph 92.
(c) providing for a public process for the review of Disclosure Filings and the determination of
Associations;
(d) requiring that the Disclosure Filings be accompanies by an Affidavit of an officer of each
company certifying the completeness of the disclosure and that the company will not
cooperate, collaborate, discuss, negotiate or enter into agreements, arrangements,
understandings under the end of the bidding process; and
(e) providing for a full refund of financial deposits, should an applicant decide to withdraw
from the auction, upon publication of the Department’s decision on qualified bidders.
32. Mobilicity notes that Rogers’ proposals to enhance the transparency and integrity of the bidder
participation rules and auction process were quite similar to Mobilicity in that Rogers also promoted
a public process and requested changes to the timing of the filing of Disclosure Filings well in
advance of the auction application date (Rogers’ 90 days v. Mobilicity’s 120 days v. Department’s
30 days).
33. The main issue that separates Mobilicity from Rogers (and Globalive and Videotron) in relation to
the auction transparency and integrity rules, is these parties’ proposals that the Department provide
for the possibility of a confidential advance ruling. Mobilicity opposes the inclusion of this
mechanism. First, it will add unduly to the administrative burden on the Department to incorporate
an advance confidential ruling process. Second, from an administrative fairness viewpoint, the
Department has no institutional independence from the Minister. As such, it will be difficult for the
Minister to complete an independent review of whether two entities are associated for purposes of
the auction if the same staff have already given an advance ruling that the entities were or were not
associated.
34. Should the Department overrule the parties’ deep-seated concerns regarding the discretion to exempt
Associated Entities from the spectrum aggregation limits, there is an even greater need for
transparency and measures to bolster auction integrity.
5.2 PROHIBITION OF COLLUSION
35. In the 2500 MHz Licensing Consultation, the Department proposed a model, which in broad strokes
could be described as envisaging a strong definition of Associated Entities, no limits to discussions
and arrangements prior to the auction, and no discussions of any kind under the anti-collusion rules
during the auction, even amongst Associated Entities and Associated Entities permitted to
participate in the auction separately under the Department’s proposed discretion to grant exemptions
from the Associated Entities rules.
36. The foregoing is quite consistent with the Bell Companies’ and Telus’ preferred model, as disclosed
in these parties’ initial comments. Telus and the Bell Companies clearly prefer a weak anti-
collusion rule that would only preclude discussion during the auction period, thereby allowing
unlimited, undisclosed discussions both immediately prior to and following the auction period.
Under these large wireless providers’ construct, Associated Entities would not be able to discuss
strategy or outcomes during the auction period. However, with a “weak” anti-collusion rule, nothing
will have been lost, since bidding strategy will have been arranged in advance and network
deployment and spectrum sharing arrangements will be solidified post-auction.
37. In its first round comments, Mobilicity expressed strong support for the retention of an anti-
collusion rule, but made a number of recommendations to bolster its effectiveness:
(a) first, Mobilicity proposed that the application of the anti-collusion rule during the auction
period26 be extended to include discussions of any kind relating to the 2500 MHz auction
prior to the auction period.27 Rogers supported this reversion back to the anti-collusion rule
in place during the AWS auction;28
(b) second, Mobilicity requested that the Department clarify that the anti-collusion rules do not
apply to Associated and Affiliated entities.
29
(c) finally, Mobilicity proposed that in the post-auction period, all arrangements with respect to
use of the 2500 MHz spectrum will have to be submitted to the Department for approval.
This is to dissuade and deter parties from concealing the existence of or discussions to enter
into these kinds of agreements or arrangements prior to the auction, only to ink such
It is a fiction to pretend that parties that have
discussed bidding strategies, or the parties’ roles and responsibilities in terms of network
deployment and spectrum utilisation post-auction, are true “competitors”; and
26 At paragraphs 99 to 102 of the 2500 MHz Licensing Consultation, the Department proposes to prohibit discussions etc. of any
kind, “from the date of application until the deadline for final payment on winning bids … with any competitors regarding the licences being auctioned, bids, or bidding strategies in the auction, or the post-auction market structure.”
27 Mobilicity, paragraph 46. 28 Rogers, paragraph 110. 29 Mobilicity, paragraphs 48-51.
arrangements in the post auction period. This significant “loophole” to the policy should be
closed.
38. In essence, Mobilicity’s model could be summarised as follows: a strong definition of Associated
Entities; complete freedom between Associated Entities to discuss and enter into express or tacit
arrangements prior to the auction as long as any such arrangements are disclosed to the Department
and subjected to public scrutiny; complete freedom between Associated Entities during the auction
period to discuss bidding strategy and any other matter that is the subject of arrangements already
disclosed to the Department and to other bidders; and a strong anti-collusion rule prohibiting
discussions of any kind either prior to or during the auction, except as disclosed to the Department.
39. Rather than pretend that parties that have formed associations have not and will not continue to “talk
to each other”, Mobilicity proposes that Associated Entities be permitted to do so, subject to full
disclosure of their association to other bidders and to the Department. This model, in conjunction
with a strict application of the spectrum aggregation limit, such that Associated Entities are not
permitted to bid on or acquire spectrum in any given area in excess of a single cap, ensures a
transparent and fair auction.
40. Mobilicity submits that the foregoing “full disclosure” model is more realistic and serves the public
interest in preserving auction integrity and transparency by guarding against circumvention of the
anti-collusion rule and spectrum aggregation limits.
6. CONDITIONS OF LICENCE FOR SPECTRUM LICENCES TO BE AUCTIONED IN THE 2500 MHZ BAND
41. In relation to the proposed conditions of licence regarding the Department’s mandatory roaming and
antenna tower and site sharing condition of licence, Mobilicity believes that regulation of the rates,
terms and conditions of roaming and tower and site sharing is essential. Mobilicity repeats and
relies on its comments in response to DGSO-001-12 and SMSE-002-12.
42. Mobilicity’s reply comments regarding the conditions of licence proposed by the Department are as
discussed below.
43. Absent spectrum set-asides, spectrum aggregation limits are essential to ensuring new entry and
sustained competition. New entrants, much more than entrenched national players, need scarce
spectrum. While Mobilicity advocated for further measures in the proceeding leading up to SMSE-
002-12, it fully supports the imposition of a spectrum aggregation limit in the 2500 MHz band. It
opposes proposals to permit large wireless carriers to derogate from the spectrum aggregation limits
in both the 700 MHz and 2500 MHz mobile wireless spectrum bands.
44. Mobilicity notes that a number of parties proposed to vary the wording of the Department’s
condition of licence with respect to spectrum aggregation limits.
45. Eastlink submitted that the spectrum aggregation limits should remain in place for ten (10) years
rather than merely five (5) years in order to reduce speculative bidding by parties intent of flipping
the licences after five years.
46. Rogers made a number of proposals to allow it to bid and obtain spectrum over the 40 MHz cap.
These appear to be designed to “limit Bell and Telus’ network advantage” while giving Rogers a leg
up on all other new entrants. In Mobilicity’s view, there is no principled basis to amend the
spectrum aggregation limit condition of licence in favour of one bidder.
6-3 COL RE LICENCE TRANSFERABILITY AND DIVISIBILITY
47. As discussed above in Mobilicity’s comments on the anti-collusion rule, parties should be required
to apply to the Department where they enter into any agreement or arrangement with respect to the
acquisition or use of the 2500 MHz spectrum within five years (5) from the close of the auction.
48. Where such applications would have the effect of putting one or more parties over their spectrum
aggregation limits, consistent with Mobilicity’s submissions above, Mobilicity submits that such
applications should not be approved by the Department, contrary to what is proposed at paragraphs
113 and 115-119 of the 2500 MHz Licensing Consultation.
49. Mobilicity understands that subject to the spectrum aggregation limits for the 2500 MHz spectrum
band and to ongoing compliance with the Conditions of Licence, there would be no restrictions on
requests by new entrants or other parties from applying for transfer or division of any 2500 MHz
spectrum licences that they hold and that as currently proposed, there would be no impediment to the
AWS new entrants transferring or dividing their 2500 MHz spectrum holdings at the same time as
their AWS spectrum. Specifically, Mobilicity reiterates its request that any new rules pertaining to
transfer or divisibility of the 2500 MHz spectrum not impede the ability of the AWS new entrants
to transfer or divide any 2500 MHz spectrum at the same time as they transfer their AWS
spectrum, should such transfer be part of a single transaction.
8. AUCTION PROCESS
8.1 APPLICATION TO PARTICIPATE
50. The Department foresees the possibility of the transfer and/or return of existing spectrum licence
holdings in the 2500 MHz spectrum band prior to the start of the auction. It has established a
deadline of 4 October 2013, for the return of existing spectrum licence holdings by Inukshuk and the
other existing spectrum licence holders and has indicated that it will set a deadline for licence
transfers in the licensing framework decision resulting from this consultation.
51. A number of parties made recommendations regarding the auction process:
(a) Mobilicity recommended that “if an existing spectrum licence holder intends to rid itself of
existing spectrum holdings, then in Mobilicity’s view, such spectrum should simply be
returned to Industry Canada, to be allocated in accordance with consistent rules”;30
(b) Rogers recommended that where licensees planned on returning existing licences to
Industry Canada, “they be required to do so at least 90 days before the auction application
date.” This would allow other bidders to understand who holds the existing licences and
how many licences the other bidders may bid upon in sufficient time to develop their
bidding strategy;
31
(c) Rogers also requested that the Department clarify that any returned spectrum will be
added to the available auction licences.
32
52. Mobilicity reiterates its recommendations. It also adopts Rogers’ recommendations with the
following modification. The return of spectrum must be done by the deadline for submission of
Disclosure Filings.
30 Mobilicity, paragraph 83. 31 Rogers, paragraph 156. 32 Rogers, paragraph 157.
8.4 PRE-AUCTION DEPOSITS
53. In its first round comments, Mobilicity stressed that the Department should ensure adequate lag time
between the Department’s determinations of applications by Associated Entities to participate in the
auction separately (assuming that this exemption power is maintained in the Licensing Framework
decision).
54. Mobilicity strongly opposes the Bell Companies’ proposal that bidders be required to post a Letter
of Credit equal to the value of bids submitted on the previous day. This requirement would be
prohibitive for smaller, regional players that do not possess the asset base that the large wireless
carriers enjoy as a result of over 100 years of incumbency in the provision of telephone services
and/or 30 years’ head start in the mobile wireless market. The Bell Companies’ proposals appear to
be designed to hamper competition and should be soundly rejected.
55. On the contrary, the Mobilicity reiterates its proposal that new entrants be permitted to pay winning
bid amounts in instalments over a five-year period.
8.5 BID-PAYMENTS AND FORFEITURE PENALTIES
56. The Department proposes that provisional licence winners pay 20 percent of their respective
winning bids within ten (10) business days of the close of the auction and to require the remaining
80 percent within thirty business days.33
57. Mobilicity reiterates its request that new entrant provisional licence winners be permitted to make
bid payments through instalment payments, payable in six (6) instalments over a period of five (5)
years.
APPENDIX “A” – REVISED
SUMMARY OF RECOMMENDATIONS
4-1 AUCTION FORMAT
4-1 Industry Canada is seeking comments on its proposal to use the CCA format, as well as the general attributes outlined above…:
(c) … and the revealed preference limit in the supplementary round; and
(d) the use of a second-price rule;
The Supplementary Round should be limited to licences that are unallocated at the end of the clock round.
5. BIDDER PARTICIPATION – AFFILIATED AND ASSOCIATED ENTITIES
5-1 (A) AND (C) – DEFINITION OF ASSOCIATED ENTITY
5-1 Industry Canada is seeking comments on its proposed changes to the definition and rules related to associated entities. Specifically, comments are sought on:
(a) the types of agreements that should be captured under the definition of associated entities; …
(c) the provision that typical roaming and tower sharing be specifically excluded from the revised definition of associated entities and whether other types of agreements such as the purchase of backhaul capacity should be deemed excluded;
Without limiting the generality of the foregoing definition of Associated Entities, agreements captured in the definition of Associated Entities include partnerships, joint ventures, agreements to merge, consortia or any arrangements, agreements or understandings of any kind, either explicit or implicit:
(a) relating to the acquisition or use of any spectrum in the 2500 MHz band
(b) relating to the acquisition or options to acquire an ownership interest in any bidder in the
auction of spectrum in the 2500 MHz band or any licensee of spectrum in the 2500 MHz
band, whether via the auction itself or post-auction;
(c) relating to the sharing, acquisition of or options to share or acquire rights in the spectrum
in the 2500 MHz band, whether via the auction itself or post-auction;
(d) relating to the amounts to be bid, bidding strategies or the particular licence(s) on which
the parties to the agreement will or will not bid;
(e) relating to access or sharing or options to access or share a party’s network in relation to
any of the mobile wireless spectrum bands (850 MHz, PCS, AWS and BRS), whether pre-
or post-auction;
(f) relating to the branding and marketing of services using any of the mobile wireless
spectrum bands; and
(g) relating to the post-auction structure of the market for mobile wireless services market.
In addition to the types of agreements particularized above as, “relating to the acquisition or use of any spectrum in the 2500 MHz band”, parties are required to disclose to Industry Canada any agreements relating to roaming and resale in any of the mobile wireless spectrum bands (900 MHz, PCS, AWS and BRS).
The test for association should include whether entities give to each other a significant preference in terms of wholesale access in any of the mobile wireless spectrum bands.
5-1 (D) AND (E) – BIDDER PARTICIPATION RULES
5-1 Industry Canada is seeking comments on its proposed changes to the definition and rules related to associated entities. Specifically, comments are sought on: (d) the proposal that entities that are deemed associated entities may apply to be treated as separate
entities for participation in the auction; (e) the proposal that associated entities may request to have the spectrum aggregation limit apply to them
separately, based on an analysis of their association and of whether they intend to compete in the same licence service area;
Mobile wireless carriers that share or intend to share the same network facilities should share the same cap.
If the Department intends to reserve to itself discretion to exempt parties that share or intend to share the same network facilities or are otherwise “Associated” from the spectrum aggregation rules, large wireless service providers and their Affiliates should be precluded from applying for such exemptions.
Furthermore, unless Bell and Rogers dissolve their partnership and return all of the Inukshuk 2500 MHz holdings, Bell and Rogers and any Associates or Affiliates thereof should not be permitted to participate in the auction separately nor should they be permitted to acquire, collectively, in excess of 40 MHz of 2500 MHz spectrum.
5-1 (B) AUCTION INTEGRITY AND TRANSPARENCY
5-1 Industry Canada is seeking comments on its proposed changes to the definition and rules related to associated entities. Specifically, comments are sought on: (b) the amount of information to be disclosed to the public prior to the auction;
In order to provide for a meaningful right of public comment on bidder qualifications:
(a) the Department should require parties to disclose the names of affiliated and associated
entities and the narratives referred to at paragraph 90 of the 2500 MHZ Licensing
Consultation (the “Disclosure Filings”) at least four (4) months prior to the deadline for
applications to participate in the auction;
(b) in the Disclosure Filings required to be filed at least four (4) months prior to the deadline
for applications to participate in the auction, prospective applicants must disclose not only
the names of affiliated and associated entities and a description of those agreements,
arrangements and understandings that the prospective applicant considers gives rise to an
Association or Affiliation, but also a description of all partnerships, joint ventures,
agreements to merge, consortia or any arrangements, agreements or understandings of
any kind, either explicit or implicit:
(i) relating to the acquisition or use of any spectrum in the 2500 MHz band;
(ii) relating to access or sharing or options to access or share a party’s network in
relation to any of the mobile wireless spectrum bands (850 MHz, PCS, AWS and
BRS), whether pre- or post-auction;
(iii) relating to the branding and marketing of services using any of the mobile
wireless spectrum bands; and
(iv) relating to the post-auction structure of the market for mobile wireless services;
(c) the Disclosure Filings will be made public. In addition and subject to any public rights of
access to information, parties must file with the Department copies of relevant
agreements, arrangements or understandings as referred to above;
(d) the Department will provide for a public process for review of the Disclosure Filings;
(e) the Department will require that applications be accompanied by an Affidavit provided by
an officer of the company stating that (i) there are no other arrangements, agreements or
understandings of any kind, either explicit or implicit, relating to the acquisition or use of
any spectrum in the 2500 MHz band or to the post-auction structure of the market for
mobile wireless services and (ii) the applicant will not cooperate, collaborate, discuss,
negotiate or enter into agreements, arrangements or understandings with any parties
other than its declared Affiliates and Associated Entities regarding the licences being
auctioned, bids or bidding strategies in the auction, or the post-auction structure of the
market for mobile wireless services, or signalling its bidding intentions, either publicly or
privately, until the end of the bidding process;
(f) the list of qualified bidders, the Associated and Affiliated bidders, and those that will be
permitted to participate separately notwithstanding their Association will be published at
least three (3) months prior to the deadline for making the pre-auction financial deposits
by at least three (3) months; or
(g) in the alternative, the financial deposits should be refundable upon publication of the
Department’s decision on qualified bidders, including those qualified bidders that are
Associated Entities that may participate separately and have the spectrum aggregation
limits applied separately.
5-1 (F) CRITERIA FOR EXEMPTION OF ASSOCIATED ENTITIES FROM JOINT APPLICATION OF SPECTRUM CAPS
5-1 Industry Canada is seeking comments on its proposed changes to the definition and rules related to associated entities. Specifically, comments are sought on: (f) the criteria to be considered in determining whether the entities are competing;
Mobilicity does not support the Department’s proposal that Associated Entities be permitted to participate in the auction and have the spectrum aggregation limits applied separately.
5-2 PROHIBITION OF COLLUSION
5-2 Industry Canada is seeking comments on the rules prohibiting collusion that would apply to bidders in the 2500 MHz auction.
The anti-collusion rules be modified as follows:
(a) from the deadline for the Disclosure Filings to the date for final payment on winning
bids, parties are prohibited from cooperating, collaborating, discussing, negotiating or
entering into arrangements, agreements or understandings of any kind, either explicit or
implicit, relating to the acquisition or use of any spectrum in the 2500 MHz band or to the
post-auction structure of the market for mobile wireless services;
(b) parties are also prohibited from signalling their bidding intentions, either publicly or
privately, from the Disclosure Filings deadline until the end of the bidding process;
(c) as an exception to the foregoing, pre-auction discussions and discussions during the
auction period are permitted between Associated and Affiliated Entities or if fully
disclosed to the Department;
(d) all pre-auction discussions shall be deemed to give rise to an Association, unless the
parties in question provide proof positive that in fact no understandings of any kind
relating to the spectrum being auctioned or the post-auction structure of the market for
mobile wireless services have been reached;
(e) applicants may be disqualified during the auction or may be stripped of licences won or
may be subject to monetary penalties should parties act in breach of the bidder
participation and anti-collusion rules; and
(f) licensees that enter into any agreement etc. with respect to the acquisition or use of the
2500 MHz spectrum within five (5) years of the conclusion of the auction must submit
such agreements etc. to the Department for approval. In deciding such applications, the
Department should give due consideration to the time elapsed between the close of the
auction and conclusion of the agreement or arrangement pertaining to use of the 2500
MHz spectrum, and reasons, as applicable justifying non-disclosure of the agreement or
arrangement prior to the auction.
6. CONDITIONS OF LICENCE FOR SPECTRUM LICENCES TO BE AUCTIONED IN THE 2500 MHZ BAND
6-3 Industry Canada is seeking comments on the proposed wording of the condition of licence related to transferability and divisibility.
Any new rules pertaining to transfer or divisibility of the 2500 MHz spectrum should not impede the ability of the AWS new entrants to transfer or divide any 2500 MHz spectrum at the same time as they transfer their AWS spectrum, should such transfer be part of a single transaction.
8. AUCTION PROCESS
8.5 BID-PAYMENTS AND FORFEITURE PENALTIES
Where licensees planned on returning existing licences to Industry Canada, the return of spectrum must be done by the deadline for submission of Disclosure Filings. Any returned spectrum will be added to the available auction licences.
New entrant provisional licence winners are permitted to make their bid payment through instalment payments, payable in six (6) instalments over a period of five (5) years.
*** END OF DOCUMENT ***
Proposed Conditions of Licence
5. Bidder Participation – Affiliated and Associated Entities
5-1(a) and (c) -- Definition of Associated Entities
5-1(d), (e) and (f) – Bidder Participation Rules
5-1(b) Auction Integrity and Transparency
5.2 Prohibition of Collusion
6. Conditions of Licence for Spectrum licences to be auctioned in the 2500 MHz Band
6-2 CoL re Spectrum Aggregation Limits
6-3 CoL re Licence Transferability and Divisibility
8. Auction Process
APPENDIX “A” – UREVISEDU SUMMARY OF RECOMMENDATIONS
4-1 Auction format
5-1 (d) and (e) – Bidder Participation Rules
5-1 (b) Auction Integrity and Transparency
5-1 (f) Criteria for Exemption of Associated Entities from joint application of Spectrum Caps
8.1 Application to Participate

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