With the much-anticipated 700 MHz spectrum auction to start in a few days, Industry Minister James Moore has revealed details of the next auction on the government’s schedule.
An auction for spectrum in the 2500 MHz band is scheduled for April 14, 2015, with some rules similar to the sale that is to start Jan. 14.
Like that auction, there will be spectrum caps for incumbent carriers, and the format will be a combinatorial clock auction. In this type of auction, bidders create packages of areas they want – for example all frequencies across the country, or only in one province. In previous auctions bidders had to simultaneously submit bids on individual regions.
Dvai Ghose, research director at Canaccord Genuity, quickly put out a note to investors that the spectrum caps mean BCE Inc.’s Bell Canada and Rogers Communications won’t be able to participate in next year’s auction because they already have spectrum in the 2500 MHz band, which they got by taking over the Inukshuk project. This would give Telus, Videoton, MTS Allstream and other other regional carriers a leg up on getting more spectrum in the 2500 MHz auction, Ghose wrote, with the two biggest communications companies in the country out of the auction.
The good news for Bell and Rogers is they don’t have to return any of the unused 2500 MHz spectrum they already have.
In another attempt to help competition, Moore said that for the 2500 MHz auction the country will be divided into smaller geographical areas than next week’s auction, which the government believes will provide more of an opportunity for rural Internet service providers to become bidders.
The smaller geographical blocks could help Xplornet — a New Brunswick-based fixed wireless Internet provider — and other rural Internet providers buy cellular spectrum,
In addition, there will be “strict provisions” on any spectrum winners from transferring their frequencies, meaning Industry Canada will have to approve all licence transfers. In the 2008 spectrum auction, the Harper government set rules restricting new carriers that won AWS spectrum from transferring it for five years, which runs out this year. Last summer that put the government in an awkward position when Mobilicity wanted to sell itself to Telus, Shaw Communications wanted to sell unused AWS spectrum to Rogers and Videotron wanted to sell its unused Toronto spectrum to Rogers.
The announcement could be seen as a way the government tells bidders in the upcoming auction that if they don’t get spectrum – or the spectrum they want – there will be another opportunity in just over a year to try again.
However, the propagation characteristics of spectrum improves the lower down the band – in other words, 700 MHz spectrum is better than 2500 MHz.
Lower frequencies travel better within buildings. Their characteristics also mean that carriers need fewer antennas and towers to cover a given area. However, to take advantage of these benefits users have to have cellphones that are compatible with the spectrum. Those handsets aren’t on the Canadian market yet, although it won’t be long. Handsets capable of using 700 MHz band are already on sale in the U.S., and the Canadian frequencies being sold are adjacent to them.
As in some other auctions, the government has set minimum opening bids for the blocks of spectrum. A bidder for a national licence covering the entire country would have to put down $66.9 million dollars for 20MHz wide blocks. The most expensive minimum opening bid is for Toronto’s spectrum, at just over $18.6 million, followed by $11.773 million for Montreal, and $7.517 for Vancouver.
Bidder applications have to be filed by Nov. 27.
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