Xplornet CEO Comments on Canadian Spectrum Auction

The Globe and Mail – Some telecommunications companies are urging the federal government to change the format of next year’s spectrum auction, arguing it is too complex and discriminates against smaller players.

Although it has been two months since Industry Minister James Moore announced the final details of the 2500 megahertz auction, some executives say there are reasons for him to take a second look – especially since Ottawa wants improved telecom services in rural communities.

Their concerns centre on the auction’s “combinatorial clock” format, which was also used for the recent 700 MHz auction. That method allows carriers to bid on packages of spectrum licences rather than competing for each one individually. The goal is to ensure that carriers are able to provide contiguous network coverage.

But critics say the format makes it more difficult for small telecoms to acquire spectrum because it is biased in favour of big companies with national networks. They point to the results of the 700 MHz auction as proof since regional carriers won only licences that were less desirable to incumbents.

“In future auctions, we would hope they would not use the combinatorial clock auction approach,” Ron Styles, chief executive officer of Saskatchewan Telecommunications Holding Corp., said in an interview. “It’s just as important that we get spectrum that we can deploy to all parts of our province – rural areas and urban areas as well – as it is for any of the big guys. And a point of fact, you’re not going to see any of the big guys deploying to rural Saskatchewan.”

Since the 2500 MHz auction is not scheduled to begin until April, 2015, he says there is still time for the government to change the rules.

SaskTel, however, has other concerns. Under the current rules, it is not permitted to participate in the coming auction because Ottawa has capped the amount of spectrum that each company is allowed to own.

Although SaskTel is already at the limit, Mr. Styles would like to acquire more 2500 MHz licences to provide rural customers with faster network speeds. The telco is using that frequency to roll out its new high-speed “Fusion” Internet product, which is a “fixed wireless access” service.

Unlike cities, where Internet access is provided through wires, rural communities are generally provided Internet via satellite-based services or fixed wireless access that uses a combination of spectrum and towers. SaskTel is planning to roll out its Fusion service to rural parts of Saskatchewan that are tricky to penetrate by satellite, mainly areas located south of Highway 1, which forms part of the Trans-Canada Highway.

Its Fusion service is based on new LTE-TDD (long term evolution time division duplex) technology, which is already being used in other countries such as Japan. “It needs to be powered by spectrum,” Mr. Styles said. “If we had more 2500, we’d have more of an ability to provide higher speeds.”

Other companies have also voiced concerns about the auction’s format even if they support the spectrum cap.“With respect to the auction rules, we made submissions at the Industry Canada hearings that advocated for the unique interests and important role of regional carriers as the important ‘fourth carrier’ in our markets,” Selena Hinds, a spokeswoman for Manitoba Telecom Services Inc., said in an e-mail.

Xplornet Communications Inc., a rural broadband provider, also plans to launch a LTE-TDD service over the next 12 to 24 months. It does not own 2500 MHz licences and has yet to say whether it will bid in next year’s auction.

“We find the process to be somewhat complicated,” CEO Allison Lenehan said. “We do agree with Ron [Styles] that the 700 auction format was heavily skewed toward urban, national incumbents.”

Still, Ottawa has created incentives for smaller companies to bid. For instance, licences for the 2500 MHz band will cover smaller geographic areas.

“Before finalizing the [auction] framework, Industry Canada invited comments and input from the telecommunications industry and other stakeholders through extensive public consultation,” a spokesman said in a statement.

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