OTTAWA – Industry Canada is proposing to switch from a single licence auction format to one where bidders would place a single bid on a package of licences. The department released its proposed 700 MHz licensing framework on Wednesday afternoon.
This new format, called a combinatorial clock auction (CCA), would enable a bidder to bid on a specific set of licences, or a package. This is different from the previously used simultaneous multiple round ascending (SMRA) auction where each bidder had to place bids on all the individual licences it wanted.
There are a number of benefits to the CCA format, says Industry Canada. One of the key ones is that it eliminates the “exposure risk” of bidders winning some but not all of the licences desired and “may be left stranded with licences that cannot be used as effectively.”
In its consultation, Industry Canada notes there is considerable importance to securing contiguous spectrum. With that in mind, the department is also proposing to give bidders winning a package of licences contiguous spectrum. For example, if a bidder wins the A licence and one of the B and C licences in a particular service area, then the bidder will automatically be assigned the A and B licences in that service area. “This would guarantee contiguity across these two categories in a service area, which is expected to lead to a more efficient use of the spectrum,” says the department.
In addition to proposing a move to a CCA auction format, Industry Canada wants to institute anonymous bidding. Whereas in previous SMRA auctions, all bidding information was publicly available, including the licences on which companies’ bid, under the 700 MHz auction limited information would be available to other bidders. At the end of each round, information on the aggregate demand for packages of licences and the prices for the next round would be made public.
The department notes that this information will be enough for bidders to make informed decisions with respect to their bidding strategy. “This means that bidders can focus their efforts on the relationship between their valuation of the licences, pricing and demand information provided rather than on the bidding behaviour of individual competitors. Thus, the potential for anti-competitive behaviour is minimized and the bidding process is simplified,” says Industry Canada.
Bell and Telus: associated entities or not?
One of the major issues leading up to the 700 MHz auction has been whether Bell Canada and Telus should be considered associated entities. While the new entrants and Rogers Communications say they are, because they share their HSPA wireless network, and therefore shouldn’t be allowed to bid separately in the auction, Industry Canada doesn’t seem to set the record straight one way or the other.
In the section on associated entities, the department defines an associated entity as companies 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 700 MHz band.”
Industry Canada is also requiring prospective bidders to disclose such information, including a “narrative” explaining why they should be allowed to bid separately and have the spectrum caps applied separately. This document would be “assessed to determine whether permitting both entities to participate separately would negatively impact the integrity of the auction process.” As well, “entities would be required to demonstrate that they intend to compete separately in the applicable licence area and continue to function as competitors to a level satisfactory to Industry Canada.”
Providing Canadians living in rural areas with the same services as urban dwellers was a big push for Industry Canada and it’s committed to rollout requirements. For companies securing or having access to two paired bands, they must cover 90% of the population of its HSPA footprint within five years and 97% within seven years.
The department is proposing 20-year licence terms. Total opening bid value for the 700 MHz auction is $897,324,000.
Comments on the proposals are due June 25 with reply comments on July 25.
We called a few of the wireless companies for comment but given the length and importance of this document, it's not surprising that we have yet to hear back.
