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May 25, 2007 Leonard St-Aubin Director General

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May 25, 2007 Leonard St-Aubin Director General May 25, 2007 Leonard St-Aubin Director General, Telecommunications Policy Branch Industry Canada 300 Slater Street Ottawa, Ontario K1A 0C8 Dear Mr. St-Aubin: RE: DGTP-002-07 - Consultation on a Framework to Auction Spectrum in the 2 GHz Range including Advanced Wireless Services The Canadian Wireless Telecommunications Association (the “CWTA”) is pleased to respond to the above noted consultation. CWTA is the authority on wireless issues, developments and trends in Canada. It represents cellular, PCS, messaging, mobile radio, fixed wireless and mobile satellite carriers as well as companies that develop and produce products and services for the industry. CWTA is pleased the Department is releasing spectrum for mobile services as it will contribute to continued growth of the industry and will help ensure that Canadians continue to benefit from access to superior telecommunications services. MTS Allstream, a CWTA member, is not a party to these comments. While SaskTel, a member of the CWTA, agrees with most of the positions expressed in this paper, it has chosen to make its own submission in order to present its unique perspective. SaskTel does not agree with the positions expressed in this paper with respect to spectrum aggregation limits or with respect to minimum tier 2 service areas. Sincerely, Filed electronically J. David Farnes Vice President, Industry and Regulatory Affairs Canada Gazette Notice No. DGTP-002-07 Consultation on a Framework to Auction Spectrum in the 2 GHz Range including Advanced Wireless Services Published in the Canada Gazette, Part 1 dated February 24, 2007 Comments of: Canadian Wireless Telecommunications Association May 25, 2007 i SUMMARY The Canadian wireless market has been competitive from the outset and its dynamic growth and constant innovation are a direct result of competitive market forces. Billions of dollars have been invested in Canada’s cellular/PCS networks that currently reach 97% of the population and cover a massive area. Canadians have access to the most advanced wireless services and are among the heaviest users of wireless services in the world. This market should be permitted to continue to develop on the basis of competitive market forces and the framework used for the licensing of additional mobile spectrum should reflect this objective. The CWTA therefore recommends that Industry Canada rely on market forces to the maximum extent and should refrain from the use of artificial measures such as spectrum set-asides, spectrum caps and mandated roaming when licensing this spectrum. The continued reliance on competitive market forces will ensure that Canadian taxpayers receive the fair market value for this valuable public resource and that an important, intensely competitive and successful market will not be distorted. This approach would also be consistent with recent federal government telecommunications directives to rely on competitive market forces to a greater extent, to minimize the extent to which competitive markets are regulated, and to encourage facilities-based competition. Further, the CWTA strongly recommends that Industry Canada license this spectrum using Tier 2 service areas and harmonize the AWS band plan with the AWS band plan used in the US. These actions are crucial to the development of high quality and affordable mobile services that will be integrated with the US mobile networks and will benefit from economies of scale. By relying on competitive market forces and harmonizing with the US, the federal government will ensure that Canadians will continue to have access to the most advanced wireless services in the world and that this competitive market will continue to innovate and rapidly develop. ii BACKGROUND At the outset, the CWTA commends Industry Canada’s decision to license additional mobile spectrum at this time. This important release will allow Canadian wireless carriers to continue to deploy the advanced wireless services Canadians demand. CWTA expects this to occur as an evolution of current second (2G) and third generation (3G) systems, as well as through the use of future technologies. In the 22 years since Canada’s cellular networks were activated, mobile services have established themselves as indispensable tools for millions of Canadians. Canada’s cellular/PCS networks reach 97% of the population and cover a geographic area of approximately 1,300,000 km2. This area is larger than the combined areas of France, Germany and the United Kingdom. This is even more notable given that these three countries have a combined addressable market that is six and a half times larger than Canada. Canada’s cellular/PCS networks have been built to address the needs and demands of Canadian consumers. Canada has 18.5 million mobile wireless subscribers and that number continues to grow steadily. In 2006, more than 1.6 million new subscribers were added to the networks, representing an increase of 10%. Most (80%) of these new subscribers are on post-paid plans reflecting the preference of Canadians for this type of contracted service. As the subscriber base grows, consumption per subscriber is also growing. The average Canadian subscriber uses 400 voice minutes per month1. This represents the 2nd highest monthly usage in the world and is growing rapidly. Canadians are also making greater and greater use of non-voice services. Since 2002, annual text message volumes have doubled each year, and in fact tripled in 2006. Canadians now send more than 560 million text messages per month. In addition, Canadians are taking advantage of the innovative data services that are continually being made available, e.g. ringtones, video clips, mobile TV, streaming radio, streaming movies, etc. Access to these networks and the services running on them is possible only as a result of the significant investments made since the first licences were awarded. Canada’s wireless carriers together invested approximately $20 billion in capital expenditures in the period between 1985 and 20052. Average annual capital expenditure since 1997 is $1.5 billion. This investment is over and above the billions of dollars rendered to the federal government in spectrum licence fees. According to the OECD, Canada collected the 5th highest amount of spectrum fees between 1999 and 20043. 1 Merrill Lynch Global Wireless Matrix, 3Q06 2 A Study On The Wireless Environment In Canada, Wall Communications, 2007 3 OECD 2005 Communications Outlook 1 It is worth noting that this investment has yet to be fully recovered by the industry. According to Wall Communications, at the end of 2005, there was a shortfall of more than $4 billion between cumulative Net Income plus Depreciation and Capital Investment for the period 1985-2005. With this new round of licensing and forthcoming roll-out of next generation networks, levels of capital expenditure will remain high. The continued growth, innovation and investment in the industry are largely the result of the healthy, robust competition between the operators. From the earliest days of cellular service, consumer demand and market forces – not regulatory fiat – have guided the decisions of the wireless operators. This was the result of deliberate emphasis on market forces in policy decisions by the government. In one of its earliest decisions concerning wireless services, the CRTC expressed the opinion that “the benefits which users may derive from this innovative service are likely to be greater if the terms of its provision are governed, as much as possible, by market forces rather than by regulation4.” In the 22 years since that statement, the CRTC has consistently found the market for wireless services to be competitive. In 1994, in reviewing the regulation of the wireless market under the then-new Telecommunications Act, the CRTC determined that the market for wireless service “was subject to sufficient competition to protect the interests of users5” and subsequently forbore from regulating wireless services. That determination has been reiterated repeatedly.6 In recent years, the CRTC has twice been asked to intervene in competitive disputes between wireless operators. In both cases, the CRTC refrained from intervening as a result of the robustly competitive nature of the industry. In 2003, the CRTC was asked to declare certain promotional offers and associated sales/marketing actions by RWI and Bell Mobility, which targeted Microcell's post-paid customers, unjustly discriminatory. After investigation, the Commission denied the request, noting that: …the wireless market is characterized by rivalrous behaviour, including vigorous and aggressive marketing campaigns on the part of the four national competitive suppliers, and that subscribers have demonstrated a willingness and ability to switch suppliers. The Commission 4 Telecom Public Notice CRTC 1984-55 5 Telecom Decision CRTC 94-15 6 Telecom Decision CRTC 96-14 , Telecom Decision CRTC 98-15, Telecom Decision CRTC 98-18, Telecom Decision CRTC 98-19, Telecom Order CRTC 99-991, Order CRTC 2001-501, and Telecom Decision CRTC 2003-81. 2 therefore considers the wireless market to be robustly competitive7. And in 2006, following a request to declare certain actions of TBayTel unjustly discriminatory, the Commission denied this request as well, and reiterated this view, stating: …this assessment continues to be valid with respect to the current state of competition in the wireless market. The Commission considers that the robustly competitive nature of the wireless market suggests that the Commission should exercise
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