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CHRISTINE J. PRUDHAM EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL DIRECT LINE: 905‐944‐7952 E‐MAIL: [email protected] January 30, 2013 BY E- MAIL [email protected] Manager, Emerging Networks Spectrum Management Operations Branch Industry Canada 15th Floor 300 Slater Street Ottawa, ON K1A 0C8 Dear Sir/Madam, Canada Gazette Part 1, DGSO-006-12, October 2012 Consultation on Renewal Process for 2300 MHz and 3500 MHz Licences Please find enclosed the reply comments of Xplornet Communications Inc. and Xplornet Broadband Inc. (collectively “Xplornet”) in response to Canada Gazette Notice DGSO-006-12. Yours truly, CJP/ Christine J. Prudham Enclosure XPLORNET COMMUNICATIONS INC. 625 Cochrane Drive ● Suite 1000 ● Markham, Ontario ● L3R 9R9 ● www.xplornet.com INDUSTRY CANADA CONSULTATION ON RENEWAL PROCESS FOR 2300 MHZ AND 3500 MHZ CANADA GAZETTE PART 1 DGSO-006-12 OCTOBER 2012 REPLY COMMENTS OF XPLORNET COMMUNICATIONS INC. AND XPLORNET BROADBAND INC. Filed: January 30, 2013 - 2 - Introduction 1. These reply comments are submitted by Xplornet Communications Inc. and Xplornet Broadband Inc. (collectively, Xplornet) in response to Canada Gazette Notice DGSO- 006-12 announcing Industry Canada’s Consultation on Renewal Process for 2300 MHz and 3500 MHz Licences (the Consultation Paper). 2. After a careful and thoughtful review of all the comments submitted in response to the Consultation Paper, it appears that the respondents were struggling to confine their respective answers to the questions asked. While Xplornet appreciates that Industry Canada must work within the framework of the existing licences and has a limited scope of issues that it can address in this process, as is evident from the responses, the alternative proposals set out in the Consultation Paper are, at best, trying to put a good face on a bad situation. They do not address the heart of the issues with the 2300 MHz and 3500 MHz spectrum bands. 3. The issue is market failure. The Government of Canada has repeatedly stated its commitment to rural broadband and its willingness to encourage development of broadband in rural (less densely populated) areas of Canada.1 The technology exists to provide a reliable, quality broadband service in rural Canada. There is an economically viable business model to do so. These points are proven every day by the wireless Internet service providers across Canada that are serving Canadians in rural areas, including ABC Communications, AireNet Internet Solutions, Andrews Wireless, ccRoute, Chatham Internet Access, Routcom, Silo Wireless, High Speed Crow Inc., GL Mobile Communications, Xplornet and others that made submissions in response to the Consultation Paper. However, the element that distorts the otherwise economic and viable business model is the inability to purchase rural spectrum without purchasing urban spectrum because of the way current licence areas bundle urban and rural areas together. It imposes an extraneous and unnecessary cost on rural wireless Internet service 1 For example, “Policy and Technical Framework, Mobile Broadband Services (MBS) — 700 MHz Band, Broadband Radio Service (BRS) — 2500 MHz Band,” SMSE-002-12, March 2012, and “Harper Government Extends SaskTel’s Transition Deadline to 2012”, September 28, 2012 press release. - 3 - providers that hampers or breaks the business model. In short, there is no barrier to entry for rural broadband providers, except for the barrier to entry created by Industry Canada’s design of the spectrum licence areas. 4. A few fixed wireless Internet service providers, such as ABC, ccRoute, Chatham Wireless and Xplornet, have taken on the risk and the financial burden of buying the bundled spectrum. However, as indicated in the submissions made in response to the Consultation Paper, these service providers cannot expand their packages to offer higher speeds and more throughput to meet the demands of the Canadian consumers because no additional spectrum is available. Inukshuk has quietly been purchasing the 3500 MHz spectrum. Xplornet and others have learned that we cannot outbid Inukshuk, although we have tried. The reason is a second point of market failure. The 3500 MHz spectrum has more value to Inukshuk, on the speculation that it might someday be mobile, than any business model in rural can support in its current use as a fixed wireless access spectrum today. In other words, Industry Canada’s willingness to consider changing the rules, such as making a spectrum band mobile or permitting something other than the original licensed use, makes the 3500 MHz spectrum more valuable as a speculative purchase for future use than as an asset to be deployed today in its current designated use. As a result, the necessary element of rural spectrum is priced out of reach for fixed wireless access service providers and rural Canadians continue to be deprived of the Internet service they should have today. 5. It is acknowledged this consultation process was not intended to address the first point of market failure. However, Xplornet would respectfully submit that this process can and must address the second point of failure. Industry Canada must hold firm to its commitment to rural broadband and must require that the spectrum designated for fixed wireless access be used solely for fixed wireless access. A clear and unequivocal message must be sent that not all spectrum in Canada will or needs to be mobile and that the spectrum designated for fixed wireless Internet access must be used to fulfill the policies goals of the Government of Canada to actually provide primary Internet access to Canadians. Otherwise, Industry Canada has failed to fulfill its obligation to use the precious public resource of spectrum for the benefit of all Canadians by instead focusing - 4 - solely on the needs of mobile carriers, thereby hindering, rather than promoting, competition and innovation in rural telecommunications. 6. In addition to this important policy point, Xplornet would like to address a specific question of fact. It has been suggested in some of the responses to the Consultation Paper that there is a lack of available equipment for the 3500 MHz band and that a technology ecosystem never fully developed for the 3500 MHz band.2 Those suggestions are, as a pure question of fact, false. Contrary to what some parties would have the Department believe, there are wireless ecosystems available for deployment using the 3500 MHz spectrum band. Further proof of this fact can be found in the submissions of Global TD- LTE Initiative, Huawei Technologies Canada Co., LTD. and ZTE Canada Inc. which describe the robust ecosystem of available technology in the 3500 MHz spectrum band. Proof is further found in the submission of Silo Wireless Inc. which points out that Industry Canada has certified 146 radio models for use in the 3500 MHz spectrum band.3 The Consultation Paper itself states that the deployment requirements have been met in 128 (16.9%) of the 3500 MHz spectrum licences and are in progress in another 68 (9.0%) of the 3500 MHz spectrum licences.4 7. The real proof of an available technology ecosystem can be found by looking at the deployments. Xplornet has deployed Internet services to end-users in over 90% of its 3500 MHz spectrum licences and appears to be responsible for at least 50% of all deployment occurring in the 3500 MHz spectrum band. Xplornet first deployed 3G equipment in the 3500 MHz band in early 2009, is currently two years into its deployment of 4G equipment in the 3500 MHz band and, early last year, became the first company in North America to successfully test TD-LTE equipment in the 3500 MHz band. It is a fact that the ecosystem for the equipment in the 3500 MHz band has existed for several years, currently exists and will continue to evolve and exist for the foreseeable 2 tbaytel Comments, December 17, 2012, para. 6; Inukshuk Wireless Partnership Comments, December 17, 2012, paras. 3 and 6. 3 Silo Wireless Inc. Comments, December 17, 2012, p. 7. 4 Consultation Paper, Table 3, p. 11. - 5 - future. Any statement to the contrary should be seen for what it is – a fabricated excuse that Industry Canada should, once and for all, summarily dismiss. 8. The real question is whether or not Industry Canada wishes to extend the term for compliance with the conditions of use in the spectrum licences, for public policy reasons, on the belief that such an extension would improve the use of this scarce and precious public resource. Xplornet respectfully submits that it is not equitable for Canadian consumers who continue to wait for service or for companies like Xplornet, who have invested in and committed to the development of their networks in order to serve customers in compliance with their terms of licence, to now let the other licensees off the hook by either modifying the deployment requirements, or extending the period for compliance. Doing so will only serve to allow large incumbent carriers to continue to sit on unused spectrum without any serious financial consequences. In the meantime, companies like ccRoute, Chatham Internet Access and Xplornet, that are in need of additional spectrum, particularly in rural areas, do not have access to adequate quantities of spectrum despite the fact that they would immediately deploy it today if they were licensed to do so. 9. Xplornet agrees with the statements made by Saskatchewan Telecommunications (“SaskTel”) in its submission: “SaskTel believes that unused spectrum licences should be made available to parties that are willing and able to serve customers with wireless broadband services. SaskTel believes that licensees that are serious about serving wireless broadband in urban or rural areas would have found the opportunity to deploy using available equipment.”5 10. As discussed below in the detailed comments that follow, other parties have made similar calls for substantive measures to be taken to limit the ability of large wireless carriers to sit on undeployed spectrum in rural areas of Canada that are underserved.