At the Canadian Telecom Summit 2021, experts from across the telecom industry underpinned poor regulatory decisions for the sky-high spectrum prices that could trickle down to consumers.
Earlier this year, the scarcity of 5G mid-band spectrum fueled an intense, all-out bidding war between carriers. When the dust settled, Bell, Rogers, and Telus, along with 20 other operators, collectively paid a record-setting CA$8.91 billion for 1,495 licences, a costly investment that could increase mobile prices in this country.
Canada’s wireless spectrum costs already rank the highest in the world and the recent mid-band 5G auction only reinforced the issue. On average, Canadian operators paid more for mid-band wireless spectrum than those in any other country. The average price was 164 per cent higher than the U.S., 10 times higher than France and 11 times higher than the U.K.
“Canada genuinely is falling behind on almost every level in terms of the volume of spectrum available, in terms of the timeliness of auctions, in terms of the likely times of future auctions in Canada, in terms of the amount of actual spectrum that is likely to be available to the main national operators who are likely to be in the best position to fulfill those broader objectives, which have all had the consequence of inflating the price paid for spectrum in Canada,” explained Rupert Wood, research director at Analysys Mason.
Analysys Mason described the spectrum scarcity in an August 2021 report titled Falling Behind: Comparing 5G spectrum policies in Canada and OECD countries. Canada has only purposed 200MHz between the 3450MHz and 3650 MHz spectrum for 5G, which was less than all but three countries that are a part of the Organisation for Economic Co-operation and Development (OECD). Moreover, incumbent Canadian ISPs retained 89MHz of the 200MHz in the spectrum range, leaving just 111MHz up for bidding. ISED has also set aside 47MHz of spectrum for smaller regional operators, further thinning the already constrained resource.
To achieve the higher bandwidth outlined in the International Telecommunication Union (ITU) IMT-2020 criteria, operators ideally would have 100MHz of contiguous spectrum. But in Canada, only one operator has such a block, out of the 172 tier-4 areas. To mitigate the issue, ISED has repurposed the 3800MHz band for 5G. Its auction is scheduled for 2023.
While the decision was a welcoming one, Canada’s national operators cautioned against using set-aside licenses as a means to drive competition. In their view, spectrum caps are a much more effective alternative.
“Everybody–competitive operators operating in every region of the country, and three national operators–can all have 100 MHz of spectrum at the end of this process if the policy is right,” said Jacob Glick, vice president of public policy at Telus, at the event. “It’s actually not that hard, we just have to make sure that the policy that gets set for the 3800MHz [auction] accounts for that, and probably the best way to do that will be through spectrum caps because otherwise, we will wind up with a situation that we had in 3500MHz [auction], where there’s a tiny amount of spectrum that is made available at open auction. And you have therefore the most expensive spectrum in the entire world, which only serves as a drag on operators’ ability to invest and as a hidden tax on every person’s bill.”
Spectrum caps limit how much spectrum an operator can own, with the leftover spectrum acting as an implicit set-aside. ISED declined to instate this method for the 3500MHz auction.
As part of the auction, ISED has set stricter deployment obligations for spectrum bidders to prevent spectrum hoarding. Although services must be deployed as per ISED’s timelines, whether the milestones will be enforced remains to be seen. Glick noted the lax rules surrounding deployment for set-aside license bidders.
“Historically, the deployment requirements have not been strict enough to result in actual networks being built in rural areas on spectrum held by people who got it set-aside, they just have much, much more lax deployment conditions,” said Glick. “The deployment conditions set on set-aside spectrum holders in the most recent auction are stricter than they have been historically, but that’s a low bar. And they are much stricter on the national operators. But those are the operators who are already building the networks. So in all likelihood, the current situation won’t result in a different set of outcomes if you live outside of a big city.”
Ian Fogg, vice-president analyst at Opensignal, said that the loosely defined deployment terms and regulations around spectrum purchasing will affect the industry for years to come.
“I think spectrum that was originally intended for other uses, for 2G, or 3G, or other uses entirely, those decisions made decades ago are still with us,” said Fogg. “Because one of the opportunities, when you think about 5G deployments, is using older spectrum that was licensed previously, and then deploying 5G on it. And we see in many countries, operators trying to switch off 2G and 3G networks in order to put much more efficient 5G on, which can therefore support more users, whether they’re Indigenous users or other users. And those policy decisions made decades ago are still somewhat with us. If we can tap into spectrum, that might be unused, that was previously licensed years ago, that can also help the 5G experience.”
The complex and frustrating spectrum war was at least partially to blame for some drama between operators. Last month, Telus and Bell asked the Federal Court to block Videotron’s purchase of the set-aside spectrum in western Canada, where it doesn’t yet provide service. Bell and Telus argued that Quebecor did not qualify as a set-aside bidder since it only services businesses, not consumers. Additionally, the two argued that Quebecor’s ownership of a fibre optic internet subsidiary did not equate to its developing mobile infrastructure in the region. The Federal Court rejected the request two months later.