Important Information No. 3 for Participation in the Second Phase of the Two Phase Residual Licence Auction for the 2300 MHz and 3500 MHz Frequency Bands

This notice provides an update on the opening round of the second phase of the auction – the online component – and its activity rule and bid increments.

Opening Round of Phase Two

Phase Two of the residual auction, scheduled to open on January 10, 2005, will start in Round 2 rather than Round 1. In preparation for the online component of the residual auction, Round 1 was run to serve as the transition between Phase One (Round 0) and Phase Two (Round 2 and all consecutive rounds). Given that Phase One was conducted offline, Round 1 involved the input of Phase One data to establish elements required for Phase Two, which are generated by the auction software. Round 1 served to determine the standing high bidder of licences where there is contention (as explained below), thereby establishing the list of licences for Phase Two of the residual auction.

When two or more bids are submitted on the same licence in the same round, a tie bid occurs and the standing high bidder in the next round is determined by a random selection process of the auction software. At this time, only qualified bidders who participate in the recommended practice period (outlined below) will see the standing high bidders, as determined in Round 1. Prior to the opening of Phase Two, Round 1 results will be made available to the public.

During the auction, interested parties may view the auction round results at any time on Industry Canada's Spectrum Management and Telecommunications Web site at http://strategis.gc.ca/spectrumauctions. Those with wireless application protocol-enabled mobile devices may view the results at the Spectrum Direct site at http://sd.ic.gc.ca/a.wml.

Activity Rule and Bid Increments

Bidders are defined to be active on a particular licence in a given round if they have the standing high bid from the previous round and have not withdrawn that bid, or they submit a new bid in the current round. If bidders wish to maintain full eligibility, they must be actively bidding on licences whose points correspond to a certain percentage of their bidder eligibility points. This percentage will vary depending on the stage of the auction.

The initial activity level will be set at 75 percent, upon the opening of Phase Two (Round 2, Stage 1).

Bid increments, like activity rules, are necessary to hasten the auction’s progress. To be acceptable, a new bid must be larger than the current standing high bid by the bid increment. The new standing high bid will be calculated by adding the standing high bid from the previous round to the bid increment and rounding the result to three significant digits from the left.

In the first stage of Phase Two, the bid increment will be the maximum value of either 15 percent of the standing high bid from the previous round, or $150 per eligibility point associated with the licence.

For details on the two preceding points, refer to Section 8.5 (Activity Rule) and Section 8.6 (Bid Increments) of the Policy and Licensing Procedures for the Auction of Spectrum Licences in the 2300 MHz and 3500 MHz Bands document, available online at http://strategis.ic.gc.ca/epic/internet/insmt-gst.nsf/en/sf06013e.html.