700 MHz wireless spectrum auction FAQ
What is wireless spectrum?
The government will be auctioning off wireless spectrum — airwaves over which telecommunications companies transmit information to the various connected devices of consumers. Wireless spectrum is essentially the dial position on a television or radio, updated for the digital age. It's the network over which wireless data travels. The government sells the rights to use that network to various telecommunications providers.
What type of spectrum is up for grabs?
What's being auctioned is known as 700 MHz spectrum. It's more valuable than the spectrum that most wireless devices in Canada currently transmit on for a couple of reasons.
In general with spectrum, the lower the number, the easier it's able to pass through objects without losing the signal. The 700 MHz band is better at that than current networks, much of which are generally 1,700 MHz and higher.
Ideally, consumers get better, stronger cellular signals that work in places such as elevators, basements and parking garages where they currently sometimes cut out. And 700-block spectrum is cheaper for companies because it can transmit data over longer distances, while requiring fewer towers. It's not faster — it just penetrates objects better.
Interestingly, the 700 band is the frequency over which over-the-air TV signals use to travel. But they are now available for other purposes since television signals made the switch to digital.
Who's bidding on it?
Telecom companies you've probably heard of like Telus, Rogers and Bell. Fifteen companies paid deposits in September to participate in the auction. Four withdrew in the months that followed — meaning they won't be bidding. Then late Monday, Wind Mobile threw a wrench in the plans and also withdrew, so we're down to 10 companies still in it.
How long will the auction take?
The auction will start on Jan. 14, but how long it will last is anyone's guess. Once it starts, Ottawa says it won't offer any details of the auction's progress until the winners have been determined. That announcement has to be made no later than five days after the end of the auction.
How does the auction work?
It's a complicated system known as "combinatorial clock auction" that has been used successfully in other countries' auctions of spectrum space but essentially, bidders submit bids on packages of spectrum licenses in various parts of the country, and the price keeps going up until no excess bidders remain.
Not all spectrum blocks are equal, so not all bids will be equal. Bidding will start at $142,000 for an unpaired spectrum block in the North, for example. But the opening bid for an unpaired block in the more lucrative southern Ontario market will start at $13,370,000.
Unlike last time, there will be no blocks of spectrum set aside for new entrants. But there will be caps on how many spectrum packets any single bidder can bid on (to discourage hoarding) and the big three — Telus, Rogers and Bell — will also be limited from bidding on all the prime spectrum blocks.
Who gets the money?
"As has been the case with all previous spectrum auctions," the Government of Canada says, "funds generated by the auction will be remitted to the government's Consolidated Revenue Fund, which is administered by the receiver general." That's Ottawa's way of saying the money will be treated the same way any revenue would be spent: to pay for services, transfer payments, or paying down debt — any way the government deems fit, really.
Hard to say. The last time spectrum was auctioned off, government coffers took in more than $4.2 billion. The figure may be higher or lower this time, depending on the level of competition. But if nothing more than the minimum starting bids gets offered, Ottawa is going to make at least $897 million from the auction.
Telecom analyst Dvai Ghose says he expects the final tally to come in at around $2.5 billion this time.
When will I notice the change in my wireless service?
Ottawa says it expects the winners to roll out new services "to meet the needs of Canadians in a timely fashion." At a minimum, that means they will require winning bidders to roll out services on their new spectrum to at least 20 to 50 per cent of the population within a decade, or they'll lose their right to use the spectrum.
But they're also implementing some rigid requirements for rural service. Any bidder who acquires two or more paired blocks of spectrum has to bring that service to at least 90 per cent of their current network within five years, and extend that to 97 per cent of the country within seven years.
As for whether or not you'll notice a difference on your cellphone bill — time will tell.
- A previous version of this story contained incorrect information about the properties and relative merits of different wavelengths of wireless spectrum.Jan 13, 2014 8:32 AM ET