2300, 3500 MHz spectrum should be accessible for small ISPs: Storm CFO
NEWS | THE WIRE REPORT
PUBLISHED: THURSDAY, 11/14/2013 6:59 PM EST
LAST UPDATED: THURSDAY, 11/14/2013 8:52 PM EST
With the government poised to take back some of the spectrum it auctioned off a decade ago because some holders are not using it to provide broadband Internet to rural Canada, the chief financial officer of one small ISP suggested access to affordable Internet could improve by providing spectrum licences for shorter terms at cheaper rates.

“A lot of the people in rural areas are getting their Internet access from small providers; wireless ISPs,” Jonathan Black, chief financial officer for Ottawa-based Storm Internet Services, said in an interview. “We could use that spectrum to continue to deliver service and offer advanced, higher-speed packages, but none of us can afford the hundreds of millions of dollars. Even if we pooled our resources, we could not come up with that money.”

Black is proposing that the government consider “setting up a lightly licensed regime where for a few hundred or a few thousand dollars a year, the small ISPs could deliver broadband Internet to rural Canadians using that spectrum in a co-operative manner.”

Industry Canada said in a release Thursday that 10-year spectrum licences in the 2300 and 3500 MHz bands, which were auctioned between 2004 and 2009, would start to expire in March. It added that companies that have not used this spectrum as directed by the government would lose the rights to renew these licences.

Spectrum that is not renewed would go back to the government, which said it would hold consultations to decide what to do with it. It said an announcement on this would come “in the months ahead following consultation.”

“These spectrum licences contained conditions requiring that the spectrum be used for fixed wireless access, which represents the most affordable high-speed Internet access for many rural Canadians,” Industry Minister James Moore said in the release. “Our government will only renew spectrum licences for those holders that have met all conditions of licence. Those that have not used the spectrum will lose it.”

“As we indicated in the speech from the throne, our government will continue to defend the interests of Canadian consumers by providing more choice, lower prices and better service in Canada’s wireless sector,” Moore added.

Some of the major buyers of spectrum from the initial auction of this spectrum in February 2004, according to Industry Canada’s website, were Rogers Communications Inc. and BCE Inc. Rogers won 33 licences for $5.9 million, while Bell obtained 138 licences worth $1.5 million.

In all, 392 licences were bought in the February 2004 auction in the 2300 and 3500 MHz band for total government proceeds $11.2 million, the Industry Canada website says.

Given the 10-year terms for these licences, it seems these are the licences that would come due first, though Industry Canada did not respond to a request for clarification Thursday.

Bell and Rogers were also active in subsequent auctions in August 2004 and January 2005, which sold 450 licences and raised $57.5 million for the government, according to the Industry Canada website.

Combined with the auction early in 2004, Bell won 234 licences for $36.1 million, but withdrew on three licenses because it exceeded the limit, and Rogers won 82 licences for $10.8 million, the website said.

An auction that followed in 2009, which did not feature Rogers, Bell or any other big Canadian carriers, raised $415,176 for the government, it said.

Iain Grant, a Montreal-based telecom industry analyst with the Seaboard Group, said the government’s statement on Thursday was expected, given the rules around this spectrum.

He added that “licensees that I guess this is focused on is current owners of Inukshuk, which was the company which was going to use an early version of WiMax.”

Inukshuk Wireless Partnership is jointly held by Bell And Rogers.

Grant added that Rogers and Bell “chose to emphasize the delivery of Internet using alternative technologies rather than deploying in the Inukshuk spectrum.”

When asked about the 2300 and 3500 MHz bands, Bell spokesman Jason Laszlo said in an email: “Inukshuk, a partnership between Bell and Rogers, holds this spectrum. We’re confident Inukshuk will satisfy all of Industry Canada’s conditions.”

Laszlo did not provide an answer to a follow-up question about how many customers Inukshuk serves.

Rogers did not return a request for comment.

A joint commentary made on behalf of Inukshuk by Bell and Rogers last December to Industry Canada about the 2300 and 3500 MHz bands said: “While both bands will be instrumental in adding much needed capacity to satisfy Canada’s demand for faster mobile broadband speeds, the [3500 MHz] band in particular will prove to be especially important in light of its relative size and its potential for enabling the operation of very wide blocks of contiguous spectrum for LTE.”

It added: “Significant technological uncertainty and the lack of available equipment continues to contribute to very low levels of deployment in these bands in Canada. Since these factors are beyond the control of licensees, the Department should extend all licences and deployment requirements to a common fixed date of December 2017.”

In comments made during the Canadian Telecom Summit in Toronto on June 4 of this year, Ken Engelhart, Rogers’ senior vice-president of regulatory affairs, said: “We’re using all our spectrum. … The only spectrum that we are not using right away is … for example, with our [2300 and 3500 MHz], where there is no LTE ecosystem yet.”

Black, who is also the treasurer of the Canadian Association of Wireless Internet Service Providers (CANWISP), said the group has been urging the government to take this spectrum away from carriers who are not using it as intended. He said some holders of this bandwidth are using it for internal “point-to-point” connections, as opposed to delivering services to businesses or consumers, and should lose their rights to this spectrum.

Black said he could not comment specifically on which companies are not using the spectrum properly. He said his understanding is that Bell and Rogers are using this spectrum to conduct beta testing of certain technology, which Black said should qualify as an appropriate use of the bands.

Black’s firm, Storm, provides Internet services to residences and businesses in eastern Ontario through DSL, fibre links and with wireless. The wireless business mostly focuses on customers in rural areas.

Another player in the rural Internet business that’s urging the government to take spectrum away from companies who are not using it is Xplornet Communications Inc., a service provider based in Woodstock, N.B., which provides services across the country.

“Hundreds of thousands of rural Canadians access the Internet through fixed wireless networks that operate on spectrum,” Xplornet president Allison Lenehan said in a statement put out by the company and also relayed by Jessica Fletcher, spokeswoman for the industry minister.

“Today’s announcement is a clear signal that spectrum designated for broadband use should be used for that purpose so that rural Canadians can experience the full benefits of broadband technology,” Lenehan added.

With reporting by Derek Abma at dabma@thewirerport.ca, files from Nick Kyonka at nkyonka@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca.

 

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