Spectrum trafficking

Speculating in spectrum can be extremely profitable as I was reminded last week. My Twitter timeline highlighted a couple articles about Canadian spectrum sales over the past few years.

One of the articles highlighted Videotron selling Shaw unused spectrum in Ontario, Alberta and BC in the 700 MHz band and 2500 MHz band for C$430M. Videotron acquired its 700 MHz spectrum in 2014 for C$233M and the 2500 MHz spectrum in 2015 for C$187M. So, on first glance, one might think the $430M sale in 2017 just covered the $420M total cost. But, the total cost included all of the spectrum Videotron kept for its own use in Quebec, so flipping the out-of-region spectrum resulted in getting Quebec for free.

The other tweet linked to a story about Videotron selling to Rogers some unused spectrum it was sitting on in Toronto. In that particular case, Videotron had acquired 10 MHz of AWS spectrum in the 2GHz band in Toronto in 2008 for C$96M, and sold it for C$184M nine years later, just a year before the original license expired.

These stories are insightful for some of the bidder qualifications that have been put in place for Canada’s upcoming 3500 MHz spectrum auction. To qualify to bid for spectrum in a particular area in the June 2021 auction, bidders must already be providing some kind of telecom services in the area. For greater precision, the auction will be conducted in Tier 4 geographic areas; there are 172 ‘localized’ geographic blocks in Canada using Tier 4 subdivisions. To qualify to bid for spectrum in any particular Tier 4 block, the bidder must already be providing a telecommunications service (such as internet, telephone, mobile, etc.) in the associated Tier 2 zone; there are 14 Tier 2 geographic blocks in Canada, generally one for each province except for Ontario and Quebec which have subdivisions.

Clearly, the consultation demonstrates there was a concern about spectrum squatting and trafficking. In the discussion about eligibility in the Licensing Framework, the Department wrote, “To promote optimal spectrum utilization and deployment, set-aside-eligible bidders must be actively providing commercial telecommunications services.” There are also specific deployment requirements set out as a condition of license, aiming to ensure spectrum is actually deployed, not hoarded.

Last week, I wrote about a recent Opensignal report that observed how Canada is falling behind its peers since the “full capabilities of 5G are best realized through the wider channel sizes in the new 5G bands”. The Policy and Licensing Framework acknowledges that “The development and deployment of 5th generation (5G) technologies will support Canada in becoming a global centre for innovation, and will position Canada at the forefront of digital development through the creation and strengthening of world-class wireless infrastructure. Beyond initial improvements to the speed and capacity of mobile broadband networks and services, 5G technologies are expected to transform services across all sectors of the economy including manufacturing, healthcare and transport.”

The 3500MHz spectrum is also important for rural broadband deployment since the mid-band frequencies provide a blend of coverage and capacity.

The upcoming auction was already delayed until June due to COVID, from its original December 2020 date. In the wake of the CRTC’s Wireless Review determination, some had called for the auction to be delayed in order to allow additional companies to decide to register to bid. Last week, Minister Champagne made it clear that the auction is moving ahead in June.

As you know, the deadline to submit an application to participate in the 3500 MHz auction was April 6, 2021. The auction’s timelines were made public in June 2020, and many applicants have now invested significant effort to apply despite the potential uncertainty surrounding the CRTC’s MVNO decision. The auction has also already been delayed by six months to allow providers to respond to COVID 19. Accordingly, we will not be reopening the auction application process at this time.

The June auction is hardly the last opportunity to acquire mid-band spectrum. It is critical for the auction to proceed without further delays, and for Canada to continue to make additional spectrum available – for deployment, not for speculation – in order to continue to support innovative new services and a seemingly insatiable thirst for wireless connectivity.

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