700 MHz Spectrum Auction FAQs

700 MHz Spectrum Auction FAQs

NOTE: This document provides plain language information about the 700 MHz auction process but is not a substitute for the actual auction policies, rules and licensing framework.

FAQs: results of 700 MHz auction, February 19, 2014

What is 700 MHz spectrum and how does it compare to other spectrum bands?
Spectrum in the 700 MHz band was formerly used by broadcasters to provide over-the-air television and was repurposed for mobile broadband services. It is valued by service providers because it carries signals well over long distances and penetrates structures better than higher frequency bands, making it well-suited to delivering next-generation wireless services.

What was being auctioned?
A total of 68 MHz of spectrum was available in this band. The spectrum was divided into seven licence blocks in 14 service areas, for a total of 98 licences.

Who won 700 MHz licences?
Eight Canadian companies won spectrum licences in the auction, raising $5.27 billion in revenue for Canadians. The 700 MHz Spectrum Auction—Process and Results Backgrounder provides more details on the auction results.

Where does the money go and when will the licences be issued?
The revenue from this auction will be deposited in the Consolidated Revenue Fund and reinvested in priorities that matter to Canadians.

Provisional licence winners must pay 20 percent of the final payment amount within 10 business days (of the announcement of the results). The remaining 80 percent of the final amount must be paid by April 2, 2014 (within 30 days of the announcement).

Licences will be issued when final payment is received by the Receiver General.

How long did the auction last? When exactly did it end?
The auction started on January 14, 2014, and ended on February 13, 2014. It ran for a total of 22 business days. In total, there were 108 rounds of bidding.

When are the final payments due and when will the licences be issued?
Deadline for final payments for winning bids is April 2, 2014 (30 business days after the announcement of the results). 

When are you planning to re-auction the one unsold licence?
The remaining licence in the Yukon, Northwest Territories and Nunavut will be allocated in a future licensing process. The timing and terms for that process will be determined at a later date.

When will bidders be able to start talking to each other about possible agreements related to 700 MHz spectrum?
The prohibition on discussions concerning possible agreements related to 700 MHz spectrum, which also covers media interviews, is in effect until after the deadline for final payments for winning bids, which is April 2, 2014 (30 business days after the announcement of the results). 

How do the 700 MHz auction revenues compare to other auctions?
It's not possible to make a meaningful or accurate comparison between auctions that take place in different countries for different types of spectrum licences.

Due to high adoption rates for tablets and smart phones, there has been exponential growth in the demand for next-generation wireless services, such as Long Term Evolution (LTE). As a result, the price per MHz per population for Canada's 700 MHz auction was $2.32 per MHz per population for a 20-year licence. The United States' 700 MHz wireless auction, which took place in 2008, before the existence of smartphones and tablets, was CA$1.11 per MHz per population for a 10-year licence term.

For Canada's 2008 Advanced Wireless Services auction, revenues were $4.3 billion and the price per MHz per population was $1.34 for a 10-year licence.

The revenue for the 700 MHz auction was the most ever raised for an auction in Canada.

How were the final prices determined?
 Licence values are dependent on the amount of spectrum acquired, the particular licence areas and the business case for particular packages of spectrum licences. Ultimately, prices were determined based on the values that bidders placed on the spectrum. 

How did the spectrum cap contribute to the success of the auction?
 Competition in the auction was vigorous and the demand for licences was high—especially for those licences not covered by the spectrum caps. The spectrum cap put in place by Industry Canada enabled a fourth wireless player in every region across the country.

National (over 10 percent market share) and regional large wireless service providers (over 20 percent market share in their respective licence areas) were limited to one paired block of prime spectrum (blocks B, C and C1/C2). Therefore, blocks A, D and E were not included in the cap and were in high demand in this auction. This is reflected in the final prices and the fact that virtually all licences were assigned—bidders obtained 97 of 98 available licences.

How did the bidding work in this auction?

This auction used the Combinatorial Clock Auction format, CCA for short. It is a common format for spectrum auctions internationally. Like any other auction, the CCA format uses supply and demand to arrive at the final price. However, bidders express interest in a package of licences instead of on an individual basis. This ensures that bidders do not end up with some, but not all, of the licences they require to support their business case.

The CCA consists of three stages: 

The first two stages are part of the allocation phase of the auction. The first stage consists of rounds of bidding where participants place bids on their preferred package of licences. For any licence that has more demand than supply, the price increases for the next round. As prices increase, bidders can choose to move to less expensive licences, reduce the package of licences they are bidding on or stop bidding in this stage. These rounds continue until there is no excess demand for any licence. For the 700 MHz auction, this stage consisted of 106 rounds.

This is followed by a second stage, the supplementary round, which allows bidders to increase their bids from the first rounds. They can also place bids on other packages that they want but couldn't bid on because they were limited to one package bid per round in the first stage. All bids are binding and could count in the final results, so bidders only place bids for packages of licences that they want.

At the end of the supplementary round, the auction software determines the winning combination based on the highest value combination of bids. The 700 MHz auction was very competitive and 97 of 98 licences were obtained by bidders.

The auction then proceeds to the assignment phase—only winning bidders participate in this third and final stage. This provides an opportunity for bidders who have won generic licences to place an additional bid for a specific licence within a particular category. These generic licences are similar enough to be substitutable. Bidders who are content with either generic licence in a certain area may opt not to participate in this round. This stage does not affect who won licences but can affect which particular licence in the spectrum band a winner would acquire.

How did you ensure auction integrity?
Industry Canada established rules to support auction integrity. These rules are set out in Licensing Framework for Mobile Broadband Services (MBS) – 700 MHz Band published in March 2013. As part of the application process, each bidder agreed to abide by those rules.

Industry Canada's Auction Centre—a highly secure room in Ottawa—was the operations hub for the 700 MHz auction.

The auction was conducted online from a secure website. Each qualified company had up to three designated bidders who were provided encrypted access to the online auction system.

Industry Canada secured the services of internationally renowned experts Power Auctions to develop the auction software and provide support throughout the auction process. Power Auctions has provided similar support to spectrum regulators in Australia and the U.S.

The results of the auction were verified by an independent third party—the highly respected Smith Institute, which is a world-leading mathematical consultancy that provides advice to governments and industry on system design and data analysis. They have provided third-party auction verification for spectrum regulators in the UK and Australia.

How did you ensure bidders were well-informed and prepared to participate in the auction?
In 2012, Industry Canada launched consultations on the 700 MHz auction format, rules and licensing framework. We carefully considered the comments provided by stakeholders and incorporated additional time in the auction schedule to ensure ample bidder preparation. Industry Canada took every step to ensure bidders were fully prepared to participate in the auction. This included:

  • Detailed training manuals
  • Training and information sessions
  • Three mock auctions
  • Access to auction software for six weeks

In addition, Industry Canada provided ongoing clarification to applicants and bidders regarding all auction-related matters, including questions on the rules and format, in a timely and transparent manner.

When will this spectrum be deployed?
The Government of Canada expects licencees to begin rolling out services to meet the needs of Canadians in a timely fashion. Companies who acquired licences for these high-quality wireless airwaves will be able to start deploying it in mid-April to provide better service to their customers on the latest technologies. At a minimum, companies that acquire 700 MHz spectrum licences must deploy to 20–50 percent of the population within 10 years, depending on the area.

Industry Canada has also set strict rural deployment conditions, the first of their kind in Canada, so that Canadian consumers living in rural areas benefit. Bidders that win or get access to two or more paired blocks of spectrum in the 700 MHz band have special coverage requirements. They must bring the next-generation services they'll roll out using the 700 MHz spectrum to at least 90 percent of the population covered by their 2012 High-Speed Packet Access (HSPA) network within five years of receiving their licence and 97 percent of the population covered within seven years.

Why are you changing the Research and Development (R&D) and Learning Plan licence conditions?
This measure will reduce the administrative and financial burden for smaller companies and allow them to make R&D decisions that are in line with their business plans, while ensuring larger firms continue to fund R&D initiatives as before.

Where applicable, the Learning Plan condition will be replaced by the R&D requirement. All of the existing obligations that were undertaken as part of the Learning Plan condition will be honoured.

What effect will the Government's new tower siting procedure have on winning bidders' deployment plans?
The improvements to Industry Canada's Antenna Tower Siting Policy announced on February 5, 2014, will ensure that local residents and municipal governments are at the forefront of the tower placement process.

Where providers have existing infrastructure, they will be able to use those towers for 700 MHz.

Before new towers are built—including those shorter than 15 metres—providers must consult with communities and local governments. This measure builds on our existing rules requiring carriers to explore sharing options before new towers are built.

In addition, as announced in Budget 2014, the Government will introduce legislative amendments to allow Industry Canada to impose monetary penalties on companies that violate tower rules.

What effect will the December 2013 announcement on roaming—and monetary penalties—have on winning bidders' deployment plans?
On December 18, 2013, the Government announced that it will introduce an amendment to the Telecommunications Act that will put a cap on wholesale domestic wireless roaming rates, preventing wireless providers from charging other companies more than they charge their own customers for mobile voice, data and text services. Currently, high wholesale domestic roaming rates hold back many providers, especially new entrants, from offering more choice, lower prices and better service to Canadians.

The Government will also amend both the Telecommunications Act and the Radiocommunication Act to give the CRTC and Industry Canada the option to impose monetary penalties on companies that violate established rules such as the Wireless Code and those related to the deployment of spectrum, services to rural areas and tower sharing.

FAQs: start of bidding in 700 MHz auction, January 14, 2014

When does the auction begin?
The deadline for bidders to submit applications for the 700 MHz auction and a 5-percent deposit is noon EDT on September 17, 2013. Actual bidding in the auction begins January 14, 2014.

How is a bidder's deposit determined?
Each spectrum block is assigned a certain number of eligibility points, which generally reflect the relative value of the licences. Each eligibility point is worth $130,000. Prospective bidders must decide which blocks they are interested in bidding on, tally up the total value of the eligibility points for those blocks, and then submit an initial deposit worth 5 percent of that amount along with their application on September 17, 2013.

Deposits can be counted toward the total cost of the winning bid. If a company is unsuccessful in its bid, the deposit is refunded.

What is the deadline for companies to pay the remainder of the deposit?
The deadline for companies to pay the remaining 95 percent of their deposit is noon EDT on October 29, 2013.

What are eligibility points?
Eligibility points generally reflect the relative value of licences and are the basis for pre-auction deposits. Each eligibility point is worth $130,000.

When will the list of applicants be available?
The list of applicants will be published on Industry Canada's 700 MHz auction homepage on September 23, 2013, before markets open.

What happens between September 17 and September 23?
During this time, Industry Canada processes the applications. It also begins its review of all the information in each application and follows up with applicants where necessary.

What information will be disclosed on September 23?
The list of applicants, with information on their ownership structure and associated entities—which are the companies the applicant has a relationship or agreement with regarding the 700 MHz auction—will be posted to Industry Canada's 700 MHz auction homepage on September 23, 2013.

During this time, are bidders able to discuss strategies for the auction?
No. After September 17, 2013, bidders that have applied to take part in the auction, as well as affiliated or associated companies and the owners of the company, are not allowed to publicly discuss bidding strategies, how they intend to bid, what the market might look like after the auction, or other subjects that could jeopardize the fairness of the auction. The ban on discussing this information, which also covers media interviews, is in effect until after the deadline for final payments for winning bids, which will be 35 business days after the bidding ends.

Discussions regarding the intention to participate in the auction are not considered to contravene the rules.

What rules are in place to prevent this?
Bidders that publicly discuss the sensitive information mentioned above could be disqualified from taking part in the auction, as well as possibly lose their deposit.

How long will the auction last?
Auction bidding begins on January 14, 2014, and ends when all licence assignments and winning prices have been determined. It is difficult to speculate on the duration since it depends on the level of competition.

Will there be updates posted during the bidding process?
Once the auction begins, no further public information will be provided by the Government of Canada until provisional winners are published (up to five business days after the auction concludes).

Is there a dedicated website for information on the auction?
Official material, including policy, technical and licensing information relating to the 700 MHz spectrum auction, can be found on Industry Canada's 700 MHz auction homepage.

How does the auction process work?
The auction uses a format known as a combinatorial clock auction. For a detailed explanation of how it works, visit the glossary page. This format has been widely used to auction spectrum internationally, including recent auctions in Australia, New Zealand and the U.K.

In brief, a combinatorial clock auction allows bidders to bid on a package of items (in this case, spectrum licences) instead of bidding on an item-by-item basis. This eliminates the risk that bidders may win some but not all of the licences needed for their business case.

There will be 68 MHz of spectrum available in this auction, representing 15 percent of the total commercial mobile spectrum currently licensed in Canada. The auction covers 14 licence areas in Canada; each is divided into seven blocks of spectrum. Four of these blocks are designated as prime spectrum, due to the availability of more advanced equipment for use in those blocks.

Geographic details on each licence area are available.

How do participants bid?
Bidding in a combinatorial clock auction consists of an allocation stage, which determines the number of spectrum licences a bidder wins. The allocation stage is divided into two phases: the clock rounds and the supplementary round. During each of the clock rounds, bidders put forward a single bid for a package of licences. At the end of each clock round, the price increases on licences with excess demand. The clock rounds end when there is no excess demand for any licences. The supplementary round then allows bidders to top up their clock round bids and place bids for other packages on which they are eligible to bid.

The allocation stage is followed by the assignment stage, where bidders who have won generic licences can make additional bids on the specific generic licences they prefer. At the end of the assignment stage, all licence assignments and winning prices will have been determined.

Bidders are restricted based on their initial deposits. All bidders are free to choose the preferred blocks they wish to bid on; no blocks have been pre-designated as "set-aside." However, caps will be applied to limit how much spectrum each bidder can bid for. An additional limit on the prime spectrum blocks will be imposed on Canada's large wireless service providers. This will provide an opportunity for a fourth player to be able to obtain spectrum and will effectively reserve, in each licence area, one block of prime spectrum for new entrants or regional providers. The remaining spectrum will be open to all bidders.

For a detailed explanation of how the combinatorial clock auction format works, see Annex B.

How are winning bidders determined?
The combinatorial clock auction format, which is used in many major spectrum auctions internationally, was adopted to eliminate the risk that bidders could get some but not all of the licences they need. Successful bidders are determined at the allocation stage of the auction (see "How do participants bid?"), when the auction software considers all bids and selects the highest combination of valid bids.

When will we know who the winners are?
Once the auction officially begins on January 14, 2014, no further public information will be made available by the Government of Canada until the provisional licence winners have been published (up to five business days after the auction concludes).

After the results are final, Industry Canada will also publish the following:

  • a list of all winning bidders, licences won and prices paid;
  • the bids submitted by each bidder in every clock round, including the identity of the bidders;
  • the supplementary bids submitted by each bidder, including the identity of the bidders; and
  • the assignment bids submitted by each bidder, including the identity of the bidders.

How much money does Industry Canada expect to generate from the 700 MHz spectrum auction?
The Government of Canada does not speculate on auction revenues. This auction is a competitive process; the final revenue generated will not be known until after the auction.

What will the Government do with the 700 MHz spectrum auction revenues?
As has been the case with all previous spectrum auctions, funds generated by the auction will be remitted to the Government's Consolidated Revenue Fund, which is administered by the Receiver General.

When will the licences be issued?
Licences will be issued once all payments are made and it has been determined that provisional winners meet ownership and control requirements, where applicable. The deadline for final payments for winning bids will be 35 business days after the bidding ends. Failure to make these final payments in a timely fashion will result in the licence not being issued and a possible forfeiture penalty.

When can we expect to see new services rolled out by the winners?
The Government of Canada expects licensees to begin rolling out services to meet the needs of Canadians in a timely fashion. At a minimum, the Government requires all companies that acquire 700 MHz spectrum licences to deploy to 20–50 percent of the population within 10 years, depending on the area.

In addition to general deployment conditions, Industry Canada has also set strong rural deployment conditions—the first of their kind in Canada. Bidders that win or get access to two or more paired blocks of spectrum in the 700 MHz band have special coverage requirements. They must bring the next-generation services they'll roll out using the 700 MHz spectrum to at least 90 percent of the population covered by their 2012 HSPA network within five years of receiving their licence, and 97 percent of the population covered within seven years.