Backgrounder Information for the 2000 Auction of Additional PCS Spectrum

Wireless communications continues to be one of Canada's great success stories. Canadians have benefitted greatly from the additional choice created with the introduction of two new competitors through the 1995 licensing of Personal Communications Services, commonly referred to as PCS. Today, over 94% of the Canadian population has access to an analogue cellular network, over 88% has access to a secure digital cellular network and over 50% of the population has access to one of the PCS networks licensed in 1995.

Canada enjoys one of the lowest rates for wireless services in the world and Canadian companies continue to offer innovative services to the benefit of all Canadians. Over 7 million Canadians (nearly one in four) currently have a wireless phone, with one million of them becoming users in the last seven months. This phenomenal growth demonstrates that wireless phones have become an integral part of our daily lives. Canadians have come to count on these tools for convenience and business productivity, as well as safety and security. In order to keep pace with this incredible growth, Industry Canada, the Department responsible for granting access to the spectrum resource required for wireless services, has established policies that encourage a fair, efficient and competitive marketplace.

As we move forward, the importance of getting these policies right becomes even more important as the power of the Internet will soon be untethered and Canadians will demand access to the Internet, anywhere, anyplace, and anytime through a portable wireless device. Predictions are that wireless devices will replace the desktop and laptop computers as the preferred means for accessing the Internet. Canada leads the Organization for Economic Cooperation and Development (OECD) nations in our adoption of the Internet and Canadians will no doubt embrace the wireless Internet. Canadian companies, service providers, manufacturers, software developers and content providers are at the crest of the wireless wave and are well positioned to take a global leadership role in defining the wireless Internet.

With that in mind, Industry Canada consulted the industry, evaluated the evolution of the current and future market for wireless devices, examined the best interests of the public, and now releases the framework for the auction of an additional 40 MHz of PCS spectrum. The official policy document, The Policy and Licensing Procedures for the Auction of Additional PCS Spectrum in the 2 GHz Frequency Range, will be published on the department’s web site shortly. This policy will allow for the expansion of existing networks and sets the stage for the introduction of third generation Personal Communications Services (3G PCS). Third generation wireless services will enable the delivery of more advanced wireless services and innovative Internet-based multimedia applications to meet the growing business and consumer demand for advanced communications: whatever, wherever, and whenever they choose.

Consistent with our policy to foster competitive telecommunications markets, all entities are eligible to apply to participate. Our open entry policy will foster competition, provide opportunities for existing companies to get additional spectrum and will open up opportunities for new entrants with viable business plans. The department strongly believes that the demand for this spectrum will exceed the available supply and that the reliance on market forces to select licensees is in the public interest. Therefore, the department has decided to use an auction, similar to the one that was successfully used for broadband wireless spectrum in 1999. Auctions offer a number of advantages such as their ability to promote economically efficient use of spectrum, their openness and objectivity as an assignment mechanism, their procedural efficiency, and their ability to return appropriate compensation to Canadian taxpayers for the use of a public resource.

We will be licensing four blocks of 10 megahertz of spectrum. These four licences will be made available in each of 14 areas which cover all of Canada. The auction is to begin on January 15, 2001.

By proceeding now, we will allow timely access to spectrum that will enable the enhancement of existing systems, provide for the introduction of new third-generation-like services and stimulate innovation in the dynamic wireless environment.

The Evolution of PCS in Canada

In 1985, Rogers Cantel Inc. and Canada’s local telephone companies were licensed to provide 800 MHz cellular telephony services in Canada. Rogers Cantel Inc. and the local telephone companies each received 25 MHz of spectrum.

In 1995, four spectrum licences were awarded to provide PCS in the 2 GHz band. Two new entrants, Clearnet PCS Inc. and Microcell Networks Inc., were each granted 30 MHz of spectrum, while Rogers Cantel Inc. and the major local telephone cellular operators were each granted 10 MHz. To ensure that a competitive environment would be maintained, at the time of this licensing process, the department placed a limit on the amount of spectrum that any one entity or its affiliates could hold. This spectrum aggregation limit, commonly referred to as a spectrum cap, was set at 40 MHz and consisted of frequency assignments for PCS at 2 GHz, cellular radiotelephony, and similar public high-mobility radiotelephony services in the 800 MHz range such as Enhanced Specialized Mobile Radio Services (ESMR).

In the 1995 PCS licensing process decision, two licences were held in reserve: one 30 MHz licence (block C/C’) and one 10 MHz licence (block E/E’). In awarding licences for the four PCS spectrum blocks, the Minister noted that the decision would promote a strong base from which to enhance competition in the provision of wireless telecommunications services. By reserving the remaining blocks, the Department provided an opportunity to respond to future innovations in a timely fashion.

On November 5, 1999, the Minister of Industry announced that the spectrum aggregation limit applying to PCS would be raised from 40 MHz to 55 MHz, and that 40 MHz of additional spectrum for PCS would be licensed by auction. The 40 MHz of additional spectrum consists of PCS spectrum blocks C/C’ and E/E’, which had been held in reserve in 1995. These actions were taken to ensure the availability of adequate spectrum resources to meet the needs of the expanding PCS market, and also to enable the implementation of new offerings such as 3G PCS.

A public consultation paper on the policy and licensing procedures for the auction of the additional PCS spectrum was published on December 17, 1999, and the framework for the PCS auction was announced on June 28, 2000.

The Department will continue working with the wireless industry to ensure timely access to the spectrum required in order to continue offering Canadians the latest in advanced mobile wireless services. This will include developing the licensing process for the release of additional spectrum such as that identified at the International Telecommunication Union’s World Radio Conference that was held in Istanbul, Turkey in May 2000.

Personal Communications Services