When Industry Canada auctions spectrum, the frequency bands are divided into various sizes of geographic service areas – known as tiers. Think of it as creating a jigsaw puzzle: no piece overlaps and when assembled, the entire country is covered.
As an example:
- Tier 1 is the whole country;
- Tier 2 divides the country into 14 regional areas – almost following provincial boundaries, except NS and PEI are combined, the territories are combined and Ontario and Quebec are each divided into 3 blocks;
- Tier 3 uses 59 large metro areas;
- Tier 4 has 172 community areas.
Regardless of the tier, any given tier covers the whole country.
In the recent AWS auction, Industry Canada used Tiers 2 and 3 for various bands.
Sometimes, these tiers just don’t fit the way the service providers want to operate. Last Thursday, Barrett Xplore (BXI) and Mipps announced an agreement for BXI to acquire some spectrum from MiPPs, covering 2 Million Canadians in rural areas.
Mipps holds 35 Tier 4 licenses in the 3.5GHz, covering more than half the Canadian population. Despite the smaller resolution of Tier 4 (compared to the AWS tiers 2 and 3), the puzzle pieces include a lot of area that is outside Mipps urban target market. Those outlying areas fit perfectly with the rural markets that BXI wants to serve.
The deal benefits both companies and results in better utilization of the spectrum resources. In the past, BXI has called for consideration of more refined resolution in setting service area boundaries in the auction process.
In this case, market forces have allowed BXI and Mipps to correct overly broad geographic markets.