Floor 16 200 Consilium Place Scarborough, Ontario Canada M1H 3J3

Serge M. Bertuzzo 416 279 3014 Telephone Director, 416 279 3166 Facsimile Spectrum & Regulatory Affairs serge.bertuzzo@.com

June 25, 2002

Michael Helm Director General Telecommunications Policy Branch Industry Canada Room 1642-B 300 Slater Street Ottawa, Ontario K1A 0C8

Dear Mr. Helm:

Subject: Reply Comments to the Consultation Request to Modify the Treatment of Enhanced Specialized Mobile Radio Systems under the Mobile Spectrum Cap Policy – Canada Gazette Notice DGTP-003-02

TELUS Mobility is pleased to submit Reply Comments pursuant to the above captioned Gazette Notice arising from an application made by TELUS Mobility.

Five comments were submitted by other parties; on behalf of the Bell Alliance (Bell), Microcell Telecommunications Inc. (Microcell), Inc. (RWI), Techcom Inc. (Techcom) and W2N Inc. (W2N). TELUS Mobility has reviewed each of these in detail.

TELUS Mobility notes that all five of the parties who chose to comment in this proceeding are competitors of TELUS Mobility and its ESMR service. Quite predictably, these competitors oppose TELUS Mobility’s proposal, undoubtedly motivated by the desire to limit the ESMR service and to constrain TELUS Mobility in any possible manner. Only Techcom1, a small regional SMR operator, supported modified treatment of ESMR spectrum under the cap.

In any event, we observed nothing in any of these comments that would suggest that Industry Canada should refrain from modifying the ESMR treatment as proposed.

Indeed, it appeared to us that our competitors struggled mightily to find and/or create arguments in an attempt to persuade Industry Canada to hold back and retain the status quo. In all our years of reviewing gazette comments we have rarely observed a weaker argument than W2N’s opening complaint that Industry Canada should not change the spectrum cap policy as quickly as the weather! Similarly, we note Microcell’s plea that Industry Canada first resolve every

1 Perhaps as an SMR operator, Techcom understands the inherent limitations of SMR/ESMR spectrum better than many of the other respondents. As an operator with spectrum interspersed with that of TELUS Mobility’s ESMR spectrum, certainly the Techcom comments amply demonstrate some of the extra complexities involved in utilizing this spectrum relative to cellular/PCS spectrum. 2

other major Canadian telecom policy issue2 prior to dealing with this relatively minor and straightforward issue. Even Bell seemed unable to muster little more than the suggestion to utilize an awkward and inefficient waiver process rather than simply making the policy adjustment. TELUS Mobility submits that these types of comments offer no relevant or meaningful basis on which to make such a decision.

We assume also that the Department will note the tremendous irony in the rather transparent effort by RWI and Microcell to further their own agenda by using this rather narrow ESMR issue to attempt to induce the Department to expand the scope of the proceeding to remove the cap altogether. This incredible “flip-flop” can only be described as laughable. Aren’t these the same entities that in 1999 pleaded against removing the cap unless additional spectrum was released at the same time? What an incredible “flip-flop”!

In any event, we shall examine the various comments and positions below in further detail.

ESMR Service Differentiation, Push-to-Talk Capability and Competitive Equity

Our competitors indicated3 that the ESMR service capability is similar to PCS and cellular service, that dispatch service capability is not unique or exclusive to ESMR and therefore there is no basis for modified treatment of ESMR under the cap as a result. While TELUS Mobility is aware of developments whereby push-to-talk may become available on other major PCS technologies, it should be noted that we are not aware of any PCS operator actually offering such a push-to-talk dispatch capability on their network currently. Therefore, ESMR is indeed unique at this point in time due to the push-to-talk capability.

In any event, most other competing dispatch services today are not considered ESMR and as a result are not counted under the cap. Therefore, constraining ESMR spectrum used for dispatch actually disadvantages ESMR operators such as TELUS Mobility in this respect and we believe this should remain an important consideration for modified treatment of ESMR spectrum under the cap.

Indeed, it is noteworthy to point out that some of the very competitors alleging in this proceeding that this proposal will unduly advantage ESMR operators actually benefit themselves in that they offer services similar to those provided on our ESMR system using spectrum which does not count at all under the cap today4. TELUS Mobility believes that should modified treatment of ESMR spectrum be denied, that competitive equity would demand that the spectrum for these other similar, competing services be aggregated under the spectrum cap as well.

2 including spectrum licence fees, cellular and PCS licence conditions, including spectrum aggregation, and foreign ownership restrictions, Microcell response to DGTP-003-02, page 1, item iv.

3 Bell response to DGTP-003-02, page 2, paragraph 4 W2N response to DGTP-003-02, page 5, paragraph 7 Microcell response to DGTP-003-02, page 9, paragraph 3 RWI response to DGTP-003-02, page 4, paragraph 9

4 including, for example Bell’s dispatch services such as the GMCP system, mobile-data services operated by Bell (Ardis) and RWI (Mobitex) and air-to-ground mobile telephone services operated by Bell and RWI. 3

Revised ESMR Treatment will not Create a Significant New Competitive Advantage for TELUS Mobility

The competitors5 generally claim if Industry Canada grants TELUS Mobility’s approval of the proposal that such a decision would create a significant new competitive disadvantage to them. In our view, however, none of the respondents making this contention have offered any convincing evidence that this would actually be the result.

W2N states that the TELUS proposal would undermine the spectrum cap policy and others, and would likely result in the reduction in spectrum available for other SMR service providers and in the choice of SMR service providers.6

However, as noted previously our competitors have stated that SMR/ESMR services are very similar to cellular/PCS services and that the unique dispatch capabilities of ESMR (and SMR) may soon be duplicated on these other wireless platforms. Therefore, it does not follow that any reduction in spectrum available for other SMR service providers or in the choice of SMR service providers will deprive the public of choice in services or providers.

Bell states that “approval of selective and special treatment of ESMR spectrum would place one of Canada’s largest incumbent wireless players in an extremely advantageous competitive position relative to its competitors in the market.” 7

Nevertheless, Bell fails to demonstrate with any reasonable degree of likelihood how this would negatively affect them or any of the other competitors.

Microcell asserts that granting the TELUS Mobility request would confer a benefit which is unavailable to other competitors, specifically the ability to acquire spectrum in excess of the 55 MHz cap8. Microcell states that “Telus, like Nextel in the U.S., would be able to purchase the totality, or quasi-totality, of ESMR spectrum in Canada”9 and that “providing unfettered access to all ESMR spectrum would effectively lift the mobile spectrum cap for Telus from 55 MHz to 75 MHz or more”10.

It is clear from these comments, however, that Microcell simply does not understand either the current status or the intricacies of the SMR/ESMR bands in Canada. If one truly examines and understands how the band is allocated and how the block sharing arrangement with the US operates, it is clear that very little additional 800 MHz spectrum remains available or could likely be acquired by TELUS Mobility in Canada in the major population centers. Certainly this would not remotely approach the 20 MHz of additional spectrum that would be required to reach Microcell’s 75 MHz figure.

5 other than Techcom

6 W2N response to DGTP-003-02, page 6, paragraph 3

7 Bell response to DGTP-003-02, page 3, paragraph 1

8 Microcell response to DGTP-003-02, page 1, item ii

9 Microcell response to DGTP-003-02, page 7, paragraph 4

10 Microcell response to DGTP-003-02, page 7, paragraph 6 4

Microcell also fails to understand that some of the spectrum that is being contemplated for use in the ESMR system is not new spectrum but is spectrum already licensed by TELUS Mobility and that the current treatment under the cap effectively restricts to inefficient analog service.

RWI submits that there are “negative effects” that would flow from the Department’s approval of the TELUS Mobility proposal11, and concludes that an appropriate remedy would be to remove the spectrum cap altogether for all providers.

Nevertheless, we were unable to find any list or description in RWI’s comments of just what these negative effects might actually be, let alone how they would result from such a decision. We suggest that it makes little sense for RWI to suggest a remedy after failing to demonstrate that any “negative effects” would actually occur in the first place. It seems strange that a company that has suddenly reversed itself to embrace a deregulatory agenda would be in opposition to a clearly minor change of the application of the cap. Perhaps the new suit of deregulatory clothes is not yet completely comfortable.

Revised ESMR Treatment does not give TELUS Mobility a Cell-Splitting Advantage

A number of the competitors indicated that TELUS Mobility could utilize its ESMR spectrum more efficiently by employing cell splitting12. Clearly, these respondents are either unaware, do not understand or simply prefer to ignore the fact that TELUS Mobility has made extensive use of cell splitting in its ESMR network already.

As clearly outlined in both our initial request13 to the Department and in our response14 to the Gazette Notice, TELUS Mobility fully recognizes that a certain amount of cell splitting must continue to be used in order to achieve good spectrum efficiency in our network and we are committed to continuing this practice.

In reality, TELUS Mobility’s ESMR network is at a cell splitting disadvantage relative to cellular and PCS due to the fact that ESMR spectrum is not fully substitutable for PCS/cellular spectrum 15. Rather than providing a cell-splitting advantage for TELUS Mobility’s ESMR service over cellular/PCS, any cell-splitting relief which would result from this policy change will actually only partially go the distance towards placing TELUS Mobility’s ESMR network on a more even footing with that of cellular and PCS networks.

Revised ESMR Treatment Improves, rather than Inhibits, Spectrum Efficiency

Some of the respondents claim that TELUS Mobility’s proposal is an attempt to escape its responsibility of making efficient use of the spectrum that it currently holds and for which it is

11 RWI response to DGTP-003-02, page 10, paragraph 21

12 RWI response to DGTP-003-02, page 7, paragraph 14 Microcell response to DGTP-003-02, page 12, paragraph 1 W2N response to DGTP-003-02, page 3, paragraph 7

13 Letter of November 27, 2001, Cell-Splitting, page 3

14 TELUS Mobility response to Gazette Notice DGTP-003-02, page 3

15 as well as a more limited amount of spectrum available for ESMR 5

licensed. Microcell claims, for example, that modifying the treatment of ESMR spectrum would undermine the role and competition of objectives of the spectrum cap and that TELUS Mobility will simply warehouse the SMR spectrum16. W2N states that the TELUS Mobility proposal is simply one that will enable TELUS Mobility to acquire additional spectrum in order to avoid frequency planning17.

Nothing could be further from the truth and TELUS Mobility takes offense at such suggestions. .As the Department is already well aware, TELUS Mobility’s record regarding spectrum efficiency is second to none and TELUS Mobility’s ESMR network is one of the most, if not the most, spectrum efficient radiocommunications services in Canada today.

For example, TELUS Mobility has worked hard to utilize the so-called “pfd” channels and to develop cross-border spectrum sharing agreements in order to enhance spectrum efficiency to a very high degree. These initiatives have involved considerable extra effort and complexity. There is no reason to suspect that TELUS Mobility will not continue to demonstrate similar exemplary behaviour in the future in this regard.

As the Department is well aware, the iDEN technology utilized in TELUS Mobility’s ESMR system was specifically developed to dramatically enhance spectral efficiency relative to the traditional analog dispatch systems. ESMR can, in effect, be considered as a voluntary form of redeployment (or re-farming) of the spectrum.

In fact, TELUS Mobility’s proposal to modify the ESMR spectrum treatment under the cap is all about increasing spectrum efficiency and endeavouring to continue to be able to make the most effective and efficient use of the available radio spectrum that is currently held by TELUS Mobility.

In particular, TELUS Mobility’s proposal seeks to remove the constraint that currently prevents it from re-deploying certain analog spectrum it already holds to much more efficient digital operation in our ESMR network. Indeed, this is possibly the single most important reason for our original proposal to the Department, yet our competitors seem to be completely unaware of it and all have completely failed to address it.

This artificial constraint needlessly results in the very inefficient use of a valuable resource. Further, by needlessly constraining TELUS Mobility from being able to transition this analog spectrum to much more efficient digital operation in our ESMR network, the rate at which we need to perform cell splitting is increased. As mentioned in our previous comments this in turn merely serves to divert valuable capital from being used to expand service to under served areas and thereby providing a greater choice to Canadians.

Thus, contrary to the comments of some of our competitors, modified treatment of ESMR spectrum under the cap enables, rather than inhibits, improved spectrum efficiency.

16 Microcell response to Gazette Notice DGTP-003-02, response to question b), page 11

17 W2N response to Gazette Notice DGTP-003-02, page 2, paragraph 5 6

Revised ESMR Treatment Recognizes that ESMR Spectrum is not Fully Substitutable for PCS/Cellular Spectrum

Our competitors appear to be all over the map when it comes to the question of whether additional complexity exists with respect to spectrum planning and engineering for ESMR and whether ESMR spectrum is fully substitutable for Cellular/PCS spectrum or not.

On the one hand, RWI claims that the complex spectrum planning and engineering design are no different than those used by cellular and PCS service providers18 and that since these other carriers do frequency planning, cell splitting and employ frequency reuse on their cellular and PCS spectrum then TELUS Mobility should do likewise. On the other, Microcell acknowledges this complexity in its statement “Telus has awoken to argue that, because ESMR channels are assigned on a station-by-station basis rather than on an area basis, this means that ESMR is not in fact like cellular or PCS.”19 Bell says nothing about the matter, and we must therefore assume that silence tacitly acknowledges that additional complexities exist.

W2N seems to be very confused on the question, claiming in one instance that the ESMR spectrum planning process and engineering design are “no different than cellular and PCS”20, while contradicting itself that “the non-contiguous ESMR frequencies introduces complexities compared with cellular and PCS”21 in another.

We also refute W2N’s assertion that the biggest difference between ESMR and cellular or PCS systems is not the need for complex spectrum planning - but rather ESMR’s easier and quicker spectrum licensing scheme because of its First Come First Served (FCFS) treatment.22 This is factually incorrect. PCS and cellular sites can be implemented and capacity added with only the requirement that a periodic report be submitted to Industry Canada. On the other hand, each time TELUS Mobility adds an ESMR channel to one of its sites, Industry Canada requires the submission of a full application and payment of the associated fees prior to receiving authorization to activate the channel. Further, turn around time for processing depends on Industry Canada workload but is typically in the 4-6 week timeframe for most locations.

RWI attempts to compare their capacity limitations and the fact that they have spent money on cell splitting for capacity increases23, claiming they have built three national networks all without the benefits of additional spectrum. What they fail to mention, however is the fact that the spectrum at their disposal was contiguous and further, that RWI enjoys the additional benefit that no other users are interspersed throughout their spectrum. This is not the case for ESMR spectrum and TELUS Mobility submits that this is an “apples to oranges’” comparison and has no merit.

18 RWI response to DGTP-003-02, page 7, paragraph 14

19 Microcell response to DGTP-003-02, page 5, paragraph 2

20 W2N response to DGTP-003-02, page 2, paragraph 2

21 W2N response to DGTP-003-02, Question a) of the consultation, page 5, paragraph 3

22 W2N response to DGTP-003-02, Complex Frequency Planning, page 2

23 RWI response to DGTP-003-02, page 7, paragraph 14 7

Finally, Techcom’s comments24 claiming interference25 within the 800 MHz band is a clear demonstration of the additional complexities involved in the deployment of an ESMR network.

We believe that the Department can have no doubt that ESMR spectrum planning and engineering is more complex than for Cellular or PCS and that as a result, the spectrum cannot be considered fully substitutable.

The Great Rogers Wireless - Microcell Spectrum Cap Flip Flop!

As has been clearly indicated by the Department on numerous occasions and most recently reiterated again on page one of the cover letter to the Gazette Notice, the Department does not intend to launch a full review of the existing 55 MHz mobile spectrum cap until the consultation process begins for the allocation and licensing of additional spectrum for advanced mobile systems.

Therefore, the suggestions by RWI and Microcell for the complete removal of the cap are completely out of scope of the Gazette.

Nevertheless, as noted in our introductory comments, the dramatic reversal of the positions of RWI and Microcell on the question of the spectrum cap as a whole is perhaps one of most interesting aspects of the comments.

It was not so long ago, that RWI (Cantel) stated:

“Cantel submits that a carte blanche modification or removal of the existing Spectrum Cap Policy is not required and would not be in the public interest at this time. If the Spectrum Cap were removed or modified, a concentration of spectrum, perhaps resulting from mergers and acquisitions, could lead to market power and anti-competitive conduct.” 26 and today:

“In RWI’s view, the spectrum cap has outlived its usefulness…RWI recommends that the Department immediately initiate a review of the Spectrum Cap as it applies to all players.” 27

Similarly, Microcell previously stated:

“With respect to the issues raised in Review of the Spectrum Cap Applied to Providers of Personal Communications Services, Microcell strongly recommends that the Department not rescind the Spectrum Cap, as it remains a necessary and effective safeguard

24 Techcom response to DGTP-003-02

25 TELUS Mobility has only recently been made aware of these issues and is investigating.

26 RWI (Cantel) response to DGTP-015-98 – Review of the Spectrum Cap Applied to Providers of Personal Communications Services, page 1, paragraph 4

27 RWI response to DGTP-003-02, page 2 , paragraph 4 8

against the real and persistent threat of dominance in the mobile wireless services market." 28

and today:

“Microcell would not oppose a complete lifting of the spectrum cap for all players.” 29

It would be interesting to determine what has changed since that time to now completely reverse their position and suggest to the Department that the cap should now be completely removed. Could it possibly be that RWI would like to acquire Microcell without having to return spectrum (as TELUS Mobility and Clearnet were forced to do) under the spectrum cap?

Perhaps they should have been more forthcoming with their support at that time. We would certainly have appreciated it. We would also enjoy hearing how they would plan to make TELUS Mobility/Clearnet whole again on the matter if the cap was fully removed at this point.

In any event, in order to be logically consistent these newly minted proponents of spectrum cap deregulation should support the modified ESMR treatment as a step in the right direction towards liberalizing the spectrum cap constraints. That they do not is perhaps indicative that their submissions are more about regulatory gaming and less about good public policy.

Frequency of Spectrum Cap Policy Adjustments

As noted previously, W2N’s comments 30 attempt to sway the Department from undertaking or further considering changes to the existing spectrum cap policy on the basis that the cap has already been changed twice within four years. TELUS Mobility believes this is irrelevant and that it is in the public interest for the Department to review and modify the spectrum cap policy whenever there is a compelling reason to do so, as the policy itself contemplates. Given that there are constant and ongoing changes being experienced within the wireless industry, it is prudent to make changes to the cap when justified and warranted. TELUS Mobility believes that the relief sought is justified and necessary and should be granted.

Broader Policy Issue Concerns

Microcell contends31 that the TELUS Mobility request for modified treatment of ESMR under the spectrum cap is only one part of a much broader and more pressing policy reviews that are still pending. In particular they cite the spectrum licence fees, licence conditions applicable to PCS and cellular mobile operators, as well as the foreign ownership restrictions (raised by the Broadband Task Force) because of their ultimate impact on the competitive structure of the Canadian industry. TELUS Mobility acknowledges that the aforementioned matters are very important issues that must be addressed by the Department at some point, and TELUS Mobility

28 Microcell response to DGTP-015-98 – Review of the Spectrum Cap Applied to Providers of Personal Communications Services, page 1, paragraph 2

29 Microcell response to DGTP-003-02, page 2, item (v)

30 W2N response to DGTP-003-02, page 1

31 Microcell response to DGTP-003-02, page 3, para 4 9

has full confidence that the Department will in due course, develop and issue appropriate consultation papers and seek comments on these rather important issues. However, we note that these issues are not within the scope of the current proceeding and as such should not influence the Department’s decision.

Waiver Process vs. Policy Change

Bell stated32 that the immediate needs of the TELUS Mobility ESMR network are limited to a few specific areas. They do not see the reason why any remedy (even temporary) should be applied in areas where ESMR is not facing capacity constraints. As noted above, they suggest instead a waiver application process to obtain the relief required. In our view the waiver proposal as suggested by Bell would be awkward, time consuming and very inefficient and will unnecessarily add even more time and complexity for both the Department as well as TELUS Mobility in ESMR licensing. This can easily be avoided with the straightforward policy adjustment proposed.

US Situation

A number of the responses indicated that they did not support adoption of the FCC’s attribution rule33, and claimed that rather than reaffirming its 1994 attribution rule, the FCC was actually questioning whether the rational for the 10 MHz limit was still valid in today’s US marketplace given that conditions and circumstances had changed dramatically since that time.

TELUS Mobility submits that whatever questions and considerations FCC might have reviewed, nevertheless the FCC’s decision to retain the 10 MHz limit 34 speaks for itself. Obviously, after due deliberation, FCC did not hold a significantly different view than it had at the time of the 1994 CMRS decision.

2001 PCS Auction

The comments made by some respondents that TELUS should not have participated in the 2001 auction35 so that we could have more room for ESMR spectrum is ludicrous. It is, perhaps, the type of comment one can expect from competitors attempting to manage one’s business. We note first of all that in some of the key areas where ESMR is being constrained (i.e. BC and Alberta) we were unable to participate in the auction and obtain more spectrum under the cap. The mere thought that we should not bid for additional PCS spectrum is also unreasonable, as we have an obligation to continue to advance our PCS services in Canada as well and this spectrum will most certainly be utilized for advanced mobile applications that will

32 Bell response to DGTP-003-02, response to Question c), page 3

33 W2N response to DGTP-003-02, page 4, paragraph 4 Bell response to DGTP-003-02, page 5, paragraph 2 RWI response to DGTP-003-02, page 10, paragraph 10 Microcell response to DGTP-003-02, page 3, paragraph 3

34 until, of course, CMRS spectrum is eliminated from the cap altogether in 2003.

35 Microcell response to DGTP-003-02, page 12, paragraph 2 W2N response to DGTP-003-02, page 3, paragraph 3 10

be required in the future. This assertion is also completely off the point of the consultation. The issue in question is how to count ESMR spectrum under the current spectrum cap. The question is neither about the spectrum cap nor TELUS Mobility’s past spectrum acquisitions.

ESMR Licence Fees

As though Microcell had not already demonstrated a complete lack of understanding of the issue, it does so once again by suggesting36 that if the ESMR proposal is adopted and TELUS Mobility was to hold ESMR spectrum in excess of 10 MHz, that TELUS Mobility might somehow escape with only paying licence fees on the 10 MHz of spectrum that is considered under the cap. While certainly a very innovative concept37, TELUS Mobility is not at all sure how Microcell reached this particular conclusion. At no point in time has TELUS Mobility ever stated that ESMR licence fees would be affected under a modified treatment regime. Since spectrum is licensed on a channel-by-channel and site-by-site basis it was our view that all ESMR spectrum would continue to be paid for on this basis irrespective of how spectrum is counted for the purposes of the cap.

Public Interest

TELUS Mobility’s competitors have, in our opinion and we submit in the opinion of an unbiased and fair-minded observer, failed to demonstrate that the relief sought is against the public interest. It is not for lack of trying but for lack of substance that they have failed.

It has been amply demonstrated that ESMR spectrum has inherent encumbrances and that the spectrum planning and engineering required to implement a digital ESMR system is significantly more involved than Cellular or PCS. A series of public hearings in the United States found that the relief sought by TELUS Mobility was in the public interest and this has been recently reaffirmed.

Therefore, TELUS Mobility submits that the Department proceed to modify the treatment of ESMR spectrum under the cap as proposed.

Electronically submitted.

Serge M. Bertuzzo Director Spectrum & Regulatory Affairs

36 Microcell response to DGTP-003-02, page 13, paragraph 5

37 perhaps the Department should review Microcell’s fee payments once again!