OTTAWA, ONTARIO--(Marketwired - Feb. 19, 2014) - Industry Canada
Consumers are the big winners following the conclusion of the 700 MHz spectrum auction. Industry Minister James Moore today announced that 97 licences have been awarded to 8 Canadian companies. A fourth wireless provider obtained spectrum in every region of the country, delivering on our government's commitment to encourage more competition in Canada's wireless industry. The total revenue generated from the 700 MHz auction is $5.27 billion, the highest return ever for a wireless auction in Canada.
Through this auction, our government sought to make spectrum available in a way that would result in more competition for Canadian consumers. The auction results achieved this goal. Companies that obtained licences for these high-quality wireless airwaves will be able to start deploying in mid-April to provide better service to their customers on the latest technologies.
- The outcome of the auction supports more choice for Canadians by enabling a fourth wireless player in every region of the country.
- All winning bidders, including Canada's largest wireless companies, have secured spectrum to deliver the next generation of wireless services to their customers.
- The auction revenue, $5.27 billion-the most ever for a wireless auction in Canada-will be reinvested in priorities that matter to Canadians.
- The auction rules contain strict rural deployment conditions, the first of their kind in Canada, so that Canadian consumers living in rural and remote areas benefit.
"Our wireless policy is designed to benefit Canadian consumers, first and foremost. With the result of this auction, our policy has achieved this goal. Canadians will soon benefit from a fourth wireless player in every region of the country having access to this high-quality spectrum to provide all Canadians with dependable, high-speed wireless services on the latest technologies. Canadians have been clear that they want more choice, lower prices and better service in our wireless industry. With this auction, Canadian consumers are the big winners. Our government will continue to deliver on our Speech from the Throne commitment to protect wireless consumers by pursuing policies that put the interests of Canadians first."
- Industry Minister James Moore
- Backgrounder - 700 MHz Spectrum Auction - Process and Results
- 700 MHz Auction Results - Questions and Answers
- Backgrounder - R&D Investment and Learning Plan Obligations
- List of licence winners
- 700 MHz auction homepage
Follow us on Twitter: @IndustryCanada
R&D Investment and Learning Plan Obligations
On February 19, 2014, Industry Canada announced it will modify obligations on spectrum licencees that require them to invest in research and development (R&D) and learning initiatives.
The R&D obligation was first put in place in 1983 and soon became part of most long-term spectrum licences. It required licencees to invest two percent of the adjusted gross revenue they derived from using the spectrum in eligible R&D activities.
R&D is a fundamental part of the telecommunications industry. For large wireless companies, extensive investment in R&D is important to remaining competitive.
For smaller companies, the R&D requirement may represent a significant administrative and financial burden. The Government has removed this requirement for companies with less than $1 billion in wireless annual gross revenue to reduce this burden and provide additional flexibility to make investment decisions in line with their business plans.
The learning plan requirement was introduced in 1999 and applies to a few spectrum licences in lieu of the R&D requirement. This requirement was inconsistent with other spectrum licences, and it is noted that many companies invest on their own in local educational initiatives. Smaller providers found the paperwork to be burdensome. Where applicable, the Learning Plan condition will be replaced by the R&D requirement. All of the existing obligations that were undertaken as part of the Learning Plan condition will be honoured.
These decisions are consistent with the objectives of the Government's Red Tape Reduction Action Plan, which was launched in 2012 and aims to reduce the impact of paperwork from the federal regulatory system on entrepreneurs and small and medium-sized businesses.
For more information on the changes to R&D and learning plan obligations, see the Decision.
700 MHz Spectrum Auction-Process and Results
Bidding in the 700 MHz commercial wireless spectrum auction began on January 14, 2014, and ended on February 13, 2014. Ten companies participated in the auction, and 97 of 98 licences were awarded to 8 of those participants, with a total value of $5.27 billion.
Following this auction, at least four providers in every region of the country will be able to offer Canadians, including those in rural areas, improved wireless services on the latest devices. Due to high adoption rates for tablets and smart phones, there has been exponential growth in the demand for next-generation wireless services such as LTE (Long Term Evolution). The low frequency 700 MHz licences were highly valued by bidders as this spectrum is well-suited to delivering such services-it carries signals well over long distances meaning it requires less infrastructure to deploy and penetrates structures better than higher frequency bands.
This auction used the Combinatorial Clock Auction (CCA) format and featured package bidding, which eliminated the possibility that companies got some, but not all, of the licences needed for their business case.
The CCA consists of three stages:
In the first stage bidders can bid on one package of licences at a time. This informs price and demand and, as in a traditional auction, prices rise incrementally. As prices increase, bidders have the option to change to a less expensive package.
In the second stage of the auction, bidders can top up their bids for packages they bid on in the first stage of the auction and bid for other packages of interest.
The third stage allows winners to place bids on a particular licence within a group of similar licences.
The auction software determines winners based on the highest value combination of package bids and sets prices that ensure no other bidder was willing to pay more.
In this auction, there were 108 rounds of bidding that took place over 22 business days.
One of the benefits of this format is that every winner is ensured a licence package that supports their business case. Details of the number of licences won by each company and final price are as follows:
||Number of Licences Won
A second table is available at the following address: http://media3.marketwire.com/docs/industry_0219.pdf.
Winning bidders have until March 5, 2014, to submit 20 percent of their total final payment. The remaining 80 percent of their total final payment is due April 2, 2014. The revenue from this auction will be deposited in the Consolidated Revenue Fund for the benefit of all Canadians.
The next major auction of wireless spectrum licences will be the 2500 MHz band, scheduled to begin in April 2015. This spectrum is well-suited for addressing demand in more densely populated areas driven by increased smart phone and tablet use and for delivering broadband services to rural Canadians.
For more information, see the Backgrounder released at the start of bidding, as well as the 700 MHz auction home page.