Dawn Hunt 333 Bloor Street East, 9th Floor Toronto, M4W 1G9 [email protected] o 416.935.7211 m 416.505.7715

June 12, 2015 [email protected]

Senior Director Spectrum Licensing and Policy Branch Industry 235 Queen St Ottawa, ON K1A 0H5

Re: Canada Gazette Notice No. SLPB-002-15 Consultation on a Licensing Framework for Residual Spectrum Licences in the 700 MHz and AWS-3 Bands

Please find attached the reply comments of Rogers Communications in response to Canada Gazette, Part I, May 2015, Consultation on a Licensing Framework for Residual Spectrum Licences in the 700 MHz and AWS-3 Bands - (SLPB-002-15).

Rogers thanks the Department for the opportunity to provide input on this important issue.

Yours very truly,

Dawn Hunt Vice President – Regulatory Wireless

Attach.

SLPB-002-15 Consultation on a Licensing Framework for Residual Spectrum Licences in the 700 MHz and AWS-3 Bands

Reply Comments of Rogers Communications June 12, 2015

Rogers Communications SLPB-002-15 June 12, 2015 Consultation on a Licensing Framework for Residual Spectrum Licences in the 700 MHz and AWS-3 Bands

Executive Summary

E1. Rogers welcomes the upcoming licensing of residual 700 MHz and AWS-3 spectrum as Canadians are among the heaviest users of mobile data services globally and their demand for mobile data services is expected to continue to dramatically increase. Rogers serves a very high proportion1 of users on its extensive mobile wireless network and therefore requires additional spectrum in order to satisfy its customers’ growing demand for mobile data services.

E2. In particular, Rogers also requires additional spectrum to remain competitive with its primary competitors, Bell and , who continue to combine their spectrum holdings in order to provide faster LTE speeds. Rogers’ and other operators’ ability to effectively compete may be unfairly hindered without additional spectrum and this could negatively impact wireless consumers.

E3. Rogers supports Industry Canada’s plan to remove the set aside and open the AWS-3 spectrum to competitive bidding. Having market forces determine the outcome of spectrum licensing ensures those companies that value the spectrum the most will be able to acquire it and put the spectrum to its highest use. This will also make certain that all bidders pay the true market value of this scarce and valuable resource to the benefit of Canadian taxpayers.

E4. However, Rogers has concerns that the unintended consequences of historic spectrum cap and set aside policies may result in the entire AWS-3 spectrum band potentially being controlled by a single operator or network in Saskatchewan and Manitoba, as identified in the comments of other parties. One practical outcome of such deeply integrated networks obtaining all AWS-3 spectrum licences could be harm to the Department’s goal of facilities-based competition, as competing operators would not have access to AWS-3 spectrum to deploy new services or add capacity. The concentration of an entire spectrum band in a single network would negatively impact wireless consumers in those provinces. The affiliated and associated entities rules and the rules prohibiting collusion should be integrated into a single framework so that unintended consequences do not benefit one or more bidders.

E5. Rogers does not support the reduction of deployment timelines in Saskatchewan and Manitoba for AWS-3 licences. Technical standards yet to be finalized by the 3GPP may delay the availability of device and infrastructure ecosystems. Potential

1 83% of postpaid wireless base as of March 31st, 2015, Rogers Communications First Quarter 2015 Results

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challenges with the relocation of U.S. incumbent users could also negatively impact network roll-out timelines. Reducing the AWS-3 deployment timelines would provide an unjustified advantage to the current holders of AWS-3 licences, which were auctioned only months prior, and create an unfair policy.

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Introduction

1. Rogers Communications (Rogers) welcomes the opportunity to reply to the comments filed by other parties in response to Industry Canada’s (the Department) Consultation on a Licensing Framework for Residual Spectrum Licences in the 700 MHz and AWS-3 Bands (SLPB-002-15), May 2015 (the Consultation Paper).

2. Rogers stated its positions on all of the issues raised in the Consultation Paper in its comments of May 25, 2015. This reply is limited to comments on proposals made by other parties. Failure to address any specific issue raised by other parties should not be taken by the Department as Rogers’ acquiescence with the position.

Changes Proposed From Previous Licensing Processes

3. In our comments, Rogers supports the use of Tier 4 licence areas for the northern 700 MHz and AWS-3 spectrum. The majority of parties supported, or did not object to, the proposal for the use of Tier 4 licence areas instead of Tier 2 areas in the far north. Using Tier 4 borders in the far north will still allow for relatively large licence areas that will permit the effective use of the mobile radio spectrum for the provision of wide area services.

4. Additionally, there was general agreement with the disaggregation of the GHI block. Rogers submitted that the licensing of wider spectrum blocks, where possible, is preferable since this would allow the full benefits of LTE technology to be leveraged. SaskTel reluctantly agreed with the proposal, “along with the ability to allow bidders to aggregate blocks through package bidding on combinations of blocks.”2

5. The majority of respondents supported the Department’s proposal to eliminate the set aside for operating new entrants for all of the AWS-3 licences; although, they varied on why and how. As stated in our comments, Rogers does not generally support set asides or caps that can interfere with the operation of market forces and artificially distort outcomes, providing an unfair subsidy to one or more competitors at the expense of others.

6. Notwithstanding our general support of open bidding processes, Rogers shares the concern of other parties that the majority – and perhaps all – of the AWS-3 band could be acquired by a single operator in Saskatchewan and Manitoba. The AWS-3

2 SaskTel comments, paragraph 5.

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band was identified by the Department as a key band for North American LTE wireless networks.3 LTE, in particular, benefits from wide spectrum channels that allow for contiguous assignment to support advanced network speeds and capacity. Should a single network acquire the majority, or all, of the AWS-3 band, it could result in over 50 percent of consumers in Saskatchewan and Manitoba4 not being able to benefit from the advanced network speeds that Canadians have come to enjoy and demand.

7. This concern was raised by the regional carriers. For example, SaskTel states that they are “very concerned that given the current outline of the rules governing the AWS-3 auction, there is a distinct possibility that all 50 MHz of AWS-3 spectrum in Saskatchewan will be bought by one party.”5 For its part, MTS urges the Department to avoid such an outcome when they argue that “no one single carrier should have ownership directly or through subordination, to every block in the AWS- 3 band.”6 SaskTel identifies the negative impact of such an outcome, stating, in part,

Market forces, lower population densities, and the implementation of mandatory roaming at lower rates are all factors heavily working against any business to ever build networks in rural areas.

The spectrum blocks will be needed, however, by other network operators in these service areas to meet the increasing customer data bandwidth demands while still providing bandwidth to roaming customers from all other carriers.7

8. Due to the unintended consequences of set aside policies in the AWS-3 band, Rogers agrees with the regional carriers’ analysis. The Department’s AWS-3 licensing policy should enable regional carriers and other bidders to acquire enough meaningful spectrum to provide advanced wireless services using AWS-3 spectrum. Such measures could be introduced only in this particular licensing process in order avoid a situation where the entire AWS-3 spectrum band in Saskatchewan and Manitoba is acquired by a single bidder.

3 Industry Canada, Technical, Policy and Licensing Framework for Advanced Wireless Services in the Bands 1755- 1780 MHz and 2155-2180 MHz (AWS-3), paragraph 10. 4 CRTC, Communications Monitoring Report 2014, Table 5.5.6 Wireless service subscriber market share, by province and territory (2013). http://www.crtc.gc.ca/eng/publications/reports/PolicyMonitoring/2014/cmr5.htm#t5-5-6 5 SaskTel comments, paragraph 12. 6 MTS comments, paragraph 8. 7 SaskTel comments, paragraph 15-16.

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9. In regards to the proposed retention of the 700 MHz cap, commenters were split. Bell states, “we do not support the proposal to maintain the spectrum caps on the 700 MHz licences in this auction process.”8 Ice Wireless agrees with a need for spectrum caps and states that a single paired-block cap should be introduced, applicable to all licensees but grandfathered so as not to require the return of spectrum by any licensee currently holding two paired blocks.9 SSi goes further, suggesting “that large wireless service providers must be excluded from any allocation process for the residual spectrum licences in the 700 MHz and AWS-3 Bands.”10

10. As noted above, Rogers’ general position is that it supports open bidding to ensure that spectrum goes to those who value it most. TELUS highlights that, “In each of the last three auctions, spectrum went unsold in the northern licence areas leaving 60 MHz unassigned in every northern licence area – 10 MHz of 700 MHz band, 30 MHz of AWS-3 and 20 MHz of BRS.”11 The unassigned 700 MHz spectrum block was previously available to all bidders, and could have been won for the reserve price, which is the same $/MHz/pop that the Department is proposing for the residual auction.

11. Rogers continues to believe that caps and set asides can distort market forces and provide unfair subsidies for some competitors at the expense of others. If the Department decides to use caps in the residual auction, it should be limited to addressing previous unintended consequences. Thus caps should be designed specifically to avoid an outcome whereby a single bidder (or network) acquires all or the majority of spectrum in the 700 MHz and AWS-3 bands in any of Saskatchewan, Manitoba, , , or the North West Territories.

12. Commenters generally agree with the reduction in roll-out requirements for the far north AWS-3 licences. As described by Ice Wireless, “A more ambitious deployment requirement would not be realistic given the challenges associated with providing services in the North.”12 Similarly, there were no objections raised to applying the current 700 MHz roll out conditions to the proposed new tier sizes. Rogers continues to support these two proposals.

8 comments, paragraph 5. 9 Ice Wireless comments, paragraph 7. 10 SSi Group of Companies comments, paragraph 33. 11 TELUS comments, page 2. 12 Ice Wireless comments, paragraph 9.

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13. There are differing views amongst carriers operating in Saskatchewan and Manitoba in regards to the proposal to reduce AWS-3 deployment timelines in Saskatchewan and Manitoba from 8-years to 5-years. Bell and MTS back the proposal, while offering no evidence to support such a move.13

14. SaskTel also agrees with the reduction, suggesting that general “progress” with the U.S. AWS-3 licensing proposal and “expected time frames” for infrastructure and device ecosystems should make the deployment reduction feasible.14 They go on to state that, “It would border on ludicrous to impose different deployment conditions on adjacent spectrum blocks in the same band auctioned in the same year”15 and suggest that deployment timeframes for AWS-3 J1 & J2 licences in Saskatchewan and Manitoba should also be reduced. In response, Rogers agrees with SaskTel that there is no justification for imposing different deployment timeframes for adjacent spectrum blocks that are licensed only months apart. There is also no justification for imposing different deployment timeframes in adjacent licence areas. For these reasons, we continue to urge the Department to maintain the 8-year timeframe for licences that will be awarded in the upcoming AWS-3 auction.

15. In their comments, TELUS also rejects the proposed reduction in deployment timeframes. They identify three specific issues. The 3GPP specifications for the AWS-3 band are as yet incomplete. Once standards are complete, the U.S. AWS-3 incumbents will still need to transition out of the band. And a three year reduction in deployment timeframes of spectrum auctioned less than six months prior would unnecessarily complicate management of the band.16 Rogers agrees with TELUS. No compelling justification has been provided for reducing the deployment timelines by three years for the residual auction, while valid concerns with the proposal have been raised.

Auction Format and Rules

16. In terms of auction format, MTS supports Industry Canada’s sealed-bid format without providing any reasoning or evidence.17 SSi states that they support sealed- bid but only with additional requirements.18 SSi’s proposal would result in a negative

13 Bell Mobility comments, paragraph 6; MTS comments, paragraph 9. 14 SaskTel comments, paragraph 20. 15 SaskTel comments, paragraph 22. 16 TELUS comments, page 2-3. 17 MTS comments, paragraph 10. 18 SSi Group of Companies comments, paragraph 37.

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impact for Canadian taxpayers and a subsidy for regional operators by keeping spectrum away from bidders who value it most and by licensing it for an amount below its true market value, in a band that has already been licensed using competitive bidding. Ice Wireless favours the use of a First Come, First Served (FCFS) process for the 700 MHz spectrum in the far north. Ice Wireless asserts that the auction should be delayed approximately one year if the Department elects to use the proposed sealed bid format,19 although Ice Wireless provides no justification for a delay.

17. Several commenters, including Rogers, state their preference for an alternative auction mechanism that supports price discovery. SaskTel explains the benefits of an SMRA format, which “allows for full price discovery, and bidders can most effectively express their value of the spectrum. For the Department, the SMRA format allows the highest bid payment prices to be realized.”20 Bell supports the use of either SMRA or CCA, noting they “prefer that Industry Canada adopt auction formats that allow for ascending-bids.”21

18. Rogers, SaskTel and Bell all recognize the Department’s desire for a low administrative burden in auctioning the residual 700 MHz and AWS-3 licences. Almost all commenters, excepting Ice Wireless, agree that the use of the sealed-bid auction format proposed by the Department in this particular circumstance is justified and that the timelines in the Proposed Table of Key Dates for a sealed-bid auction format are acceptable.

19. The Department’s proposal to allow for package bidding, with the exception of packages containing the blocks G and I as a combination, is agreeable to most commenters. Rogers specifically supports the Department’s proposal to not permit bids for non-contiguous blocks within a service area in order to potentially achieve wide channels of contiguous spectrum for efficiency and to provide higher speeds and capacity to users.22

20. SaskTel agrees with “the theory of the proposal”23 of bidders expressing their value for combinations of the G, H and I AWS-3 spectrum blocks but is concerned that the practical outcome of the proposal will result in the entire AWS-3 band being controlled by a single network in some licence areas. Specifically, SaskTel noted,

19 Ice Wireless comments, paragraph 11-12. 20 SaskTel comments, paragraph 29. 21 Bell Mobility comments, paragraph 9. 22 Rogers comments, paragraph 17. 23 SaskTel comments, paragraph 34.

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The challenge of this approach is that one company can place a bid for all three blocks which supercedes a bid for only one block. This would allow one company to purchase all of the blocks in the AWS-3 auction which should not be permitted.24

21. Notwithstanding Rogers’ general support for open bidding in the licensing of mobile spectrum, so companies that value the spectrum the most will be able to bid for it and put it to its highest use, Rogers agrees with SaskTel in this specific instance. The unintended consequences of some of the Department’s historic policies around deeply integrated national bidders could result in the entire AWS-3 band being licensed to one network in Saskatchewan and Manitoba. Having one network control an entire spectrum band across two provinces – or the majority of a band across a territory, in the case of 700 MHz – may harm the Department’s goals of sustained competition that benefits consumers and businesses and that results in robust investment and innovation by wireless carriers.25

22. Respondents to the Consultation generally concur with the use of a second-price mechanism, including use of the “nearest Vickery” to determine the auctioned licence prices. SaskTel agrees with the second-price rule only if the Department does not adopt SaskTel’s recommendation for the use of an SMRA auction format.26 In its comments, Rogers supports an auction format that allows for price discovery, such as SMRA or CCA. However, in the event that the Department moves forward with the sealed-bid format, Rogers also supports the proposed second-price mechanism.27

23. Most parties, including Rogers, agree with the opening bid prices as proposed in Tables 4 and 5 of the Consultation, as these were the opening prices used in the original 700 MHz and AWS-3 auctions. Ice Wireless proposes that the Department either refrain from setting any opening bid for the far north 700 MHz licences or reduce them to levels comparable to the AWS-3 licences of $0.05/MHz/pop.28 SSi supports the AWS-3 licence opening bids but also argues that the 700 MHz opening bids were too high and that $0.05/MHz/pop for the far north tiers would be appropriate.29

24 SaskTel comments, paragraph 35. 25 Industry Canada Consultation, paragraph 4. 26 SaskTel comments, paragraph 36. 27 Rogers comments, paragraph 15-16. 28 Ice Wireless comments, paragraph 16. 29 SSi Group of Companies comments, paragraph 41-42.

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24. Spectrum is a scarce and valuable resource, the licensing of which should benefit Canadian taxpayers. Pricing spectrum well below its true market value, while the Department proposes to retain caps on the far north 700 MHz licences, may result in its acquisition by companies that are not incented to put the spectrum to its highest use. This result would benefit neither taxpayers nor potential wireless consumers in the far north. It would also provide an unfair and unjustified benefit to potential new licensees over those who participated and won licences in the original 700 MHz auction in 2014.

Bidder Participation – Affiliated and Associated Entities

25. There is a general consensus of support for the spirit of the Department’s proposed rules regarding affiliated and associated entities and rules prohibiting collusion but some concern with the application of the rules. Ice Wireless raises concerns with associated entities being able to bid separately, under separate caps. Ice Wireless is concerned that bidders will have “the ability to circumvent the intended effect of caps through commercial arrangements.”30 MTS states that “no one single carrier should have ownership directly or through subordination, to every block in the AWS- 3 band.”31

26. Rogers agrees with Ice Wireless and MTS that the Department should take additional steps beyond its proposed rules to promote a fair and efficient outcome in the 700 MHz and AWS-3 residual auction. Rogers believes that the Department must integrate its policies and auction rules regarding collusion and affiliated and associated entities within a single framework to ensure that unintended consequences do not benefit one or more bidders at the expense of others.

Auction Process

27. Several operators generally support the proposed auction process. In its comments, Rogers supports the proposed general auction process for residual 700 MHz and AWS-3 spectrum, notwithstanding a preference for an auction format that permits more bidding flexibility and price discovery. Further, Rogers supports the

30 Ice Wireless comments, paragraph 19. 31 MTS comments, paragraph 3.

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Department’s commitment to a Clarification Questions Process, and we support Bell’s request that the Department provide a filing date for clarification questions.32

Auction Process Licence Renewal Process

28. Respondents generally either support the proposed renewal process for spectrum licences in the 700 MHz and AWS-3 bands or raise no objections. Rogers continues to believe that, regardless of the licensing mechanism, licensees should have a high expectation of renewal at the end of the initial licence term in order to make the significant investments required to deploy the network infrastructure to deliver advanced wireless services for Canadians.

29. Rogers thanks the Department for the opportunity to participate in this Consultation Process.

32 Bell Mobility comments, paragraph 15.

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