Gazette Notice No. DGTP-010-04

Department of Industry

Radiocommunication Act

Notice No. DGTP-010-04 - Decision to Rescind the Mobile Spectrum Cap Policy

Intent

1. The intent of this Notice is to implement the Minister of Industry's decision to rescind the existing Mobile Spectrum Cap Policy limiting the spectrum holdings of cellular and Personal Communication Services (PCS) radiocommunication carriers (Footnote 1) . The decision was announced in a News Release dated August 27, 2004 and takes into account the submissions received in the public consultation process initiated in Notice DGTP-007-03 and the policy objectives of the Telecommunications Act. The decision became effective on August 27, 2004.

Background

2. The spectrum cap policy was established in 1995 during the licensing of the spectrum for PCS at 2 GHz. The spectrum cap provided new entrants with access to a sufficient amount of radio spectrum resources. In conjunction with other regulatory provisions, such as analogue cellular roaming, the spectrum cap policy was to provide new entrants with the opportunity to become established in the market thereby fostering competition and choice for consumers. The mobile spectrum cap applied to frequency assignments for PCS at 2 GHz, cellular radiotelephony in the 800 MHz range and spectrum used for similar public high-mobility radiotelephony services.

3. In 1999, the spectrum cap policy was reviewed and the limit was increased from 40 to 55 MHz to allow existing carriers an opportunity to acquire new spectrum in view of the planned auction of the remaining PCS spectrum. The 2001 spectrum auction resulted in spectrum being mostly acquired by existing PCS carriers in various quantities, on a regional basis.

4. In October 2003, the Department launched a public consultation entitled Consultation on Spectrum for Advanced Wireless Services and Review of the Mobile Spectrum Cap Policy, to re-allocate large amounts of spectrum in the 1.7/2.1 GHz frequency range for Advanced Wireless Services (AWS) which include mobile cellular-type services. The cellular and PCS carriers expressed interest in using AWS spectrum for the expansion and evolution of their services. Because many of the carriers are near or at the spectrum cap limit in major markets, it was timely for the Department to initiate a full review of the spectrum cap policy.

5. In a separate consultation proceeding, the Department sought comments on the applicability of the mobile spectrum cap to mobile satellite operators planning to develop a terrestrial mobile component, known as ATC, as part of their mobile satellite service offerings.

Public Consultation

6. The Department sought comments on whether the spectrum cap policy continues to be relevant and serve the public interest. In particular, the department sought to establish whether the spectrum cap should remain or be rescinded as a policy instrument.

7. There were 13 responses to the public consultation with about half responding to the spectrum cap issue. Most of the wireless carriers indicated that the policy has achieved its objectives, is no longer relevant as the industry is very competitive and should be rescinded immediately. One of the wireless carriers indicated that maintaining the spectrum cap continues to foster competition and is needed to prevent consolidation. Another respondent also supported the retention of the spectrum cap policy, as a mechanism for promoting competition. A mobile satellite operator opined that the use of spectrum for a terrestrial mobile component (ATC) should not qualify under the mobile spectrum cap policy. Regarding the use of other mechanisms to prevent spectrum concentration, many respondents suggested the continued use of applying a limit to the amount of spectrum that can be acquired within a specific licensing process similar to what has been used in recent spectrum auctions.

Discussion

8. Spectrum is an essential component to the wireless industry and access to spectrum can be a significant barrier to entry. The planning and regulation of spectrum is the responsibility of Industry Canada. In the licensing of PCS wireless carriers in 1995, the Department elected to assist new entrants by providing sufficient spectrum as an opportunity to compete effectively with the cellular incumbents in operation since 1986.

9. The mobile spectrum cap is recognized as having played a role in providing new entrants with the opportunity to become established in the Canadian market. The Canadian cellular industry has extended coverage to more than 94 percent of the population and most major highways, and the migration to digital systems is well advanced. The wireless industry has matured and experienced tremendous growth in subscribers, and consumers are being provided with a range of voice and data services. After nine years, the Canadian wireless industry is well established.

10. In the near future, the wireless industry is going to have access to significantly more spectrum. The Department has proposed allocating and designating at least 100 MHz of new spectrum for the expansion and evolution of the cellular services such as advanced wireless services (AWS). As more spectrum becomes available, a spectrum cap policy to oversee spectrum concentration becomes less relevant.

11. At the time of licensing new spectrum, to ensure that the spectrum resources are fairly distributed among interested parties, the Department can impose a limit on the amount of spectrum an applicant can acquire. This limit would be subject to public consultation prior to the specific band being licensed.

12. In dealing with wireless telecommunications carriers, the Department recognizes the distinct oversight that the Canadian Radio-television and Telecommunications Commission (CRTC) and the Competition Bureau may have over the industry. The Competition Bureau reviews mergers and acquisitions where the merger or proposed merger prevents or lessens, or is likely to prevent or lessen, competition substantially. The CRTC oversees the wireless carriers under the Telecommunications Act, and may impose regulatory requirements.

13. In summary, the spectrum cap has been an effective tool in fostering a multi-carrier cellular industry. Since 1995, the new entrants have had a significant impact in stimulating innovation in the provision and choice of services. Over the years, the regulatory framework has also evolved, including more flexible use of spectrum, and expansion of services to rural areas under the new party cellular policy.(Footnote 2) The additional spectrum planned for release will also provide opportunities to existing and new carriers.

Decision

14. In view of the above, the Minister has announced his decision to rescind the spectrum cap policy effective immediately. This decision is consistent with the objectives of Canadian telecommunications policy and in particular, to foster increase reliance on market forces for the provision of telecommunications services and to ensure that regulation, where required, is efficient and effective.

15. In carrying out its role in the management of the radio frequency spectrum, the Department will continue to consult on releasing new spectrum resources and monitor the industry for excessive spectrum concentration. The Department will continue to promote a range of services with flexible spectrum allocations, to encourage increased coverage through roaming and new party access policies, and to facilitate access to spectrum.

16. With the removal of the spectrum cap policy the department rescinds Radio Systems Policy 021, Revision to the PCS Spectrum Cap and Timing for Licensing Additional PCS Spectrum (RP-021).

Obtaining Copies

Copies of this notice and documents referred to are available electronically on the Spectrum Management and Telecommunications Web site at: http://strategis.gc.ca/spectrum.

Official printed copies of gazette notices can be obtained from the Canada Gazette Web site at: http://canadagazette.gc.ca/index-e.html or by calling the sales counter of Canadian Government Publishing at (819) 941-5995 or 1 800 635-7943.

Issued under the authority
of the Radiocommunication Act

August 27, 2004

__________________
Larry Shaw
Director General
Telecommunications Policy

Footnotes:

1. See Industry Canada's News Releases at: http://www.ic.gc.ca/cmb/welcomeic.nsf/ICPages/NewsReleases

2. See Radio Systems Policy 019, Policy for the Provision of Cellular Services by New Parties (RP-019), available at: http://strategis.ic.gc.ca/epic/internet/insmt-gst.nsf/en/sf01593e.html