Update – April 2023. We published a report on the expected valuation of the Canadian 3800 MHz auction. For additional information see here.
Canada will auction its 3800 MHz C-band spectrum beginning on October 24, 2023 [see here]. This is very late!
The auction includes 250 MHz between 3650 and 3900 MHz. Together with the 3450 – 3650 MHz band, service providers could operate 5G in a maximum of 100 MHz cap in a 450 MHz range between 3450 and 3900 MHz.
Fragmented Spectrum Increases Deployment Costs
Canada had opened the 3450-3650 MHz band to 5G service at the conclusion of last year’s auction. Operators could combine their assets in the 3500 MHz and 3800 MHz spectrum bands through a license transfer process at the end of the 3800 MHz auction.
This is part of the reason why the auction is late. 5G radios typically have a 200 MHz bandwidth. Radios operating over 400 MHz are available from some of the large vendors, especially Huawei which led this segment driven internal China market demand to meet network sharing requirements between China Telecom and Unicom (but Huawei is not an option; MNOs are required to rip and replace their equipment: see here). However, the 400 MHz radios have lower power efficiency and are more expensive. Operators that have a contiguous 100 MHz bandwidth choose to deploy radios with just that bandwidth to maximize power efficiency [see here for power consumption in 5G networks]. The 450 MHz combined range is larger than any radio on the market today could support. Of course, operators could deploy two radios and carrier aggregation, but that adds cost and decreases network efficiency.
MNOs will aim to move their combined 3450-3900 MHz assets into the higher portion of the band. This will help them save hardware. It will also help them harmonize with US C-band for economies of scale pricing. But could operators succeed in this? For now, it is a difficult goal to achieve.
Delay in 5G Service
Some service providers are already in process of deploying 3.5 GHz 5G in the allocations they already have. With spectrum for both the 3500 and 3800 MHz bands auctioned for the relatively small Tier 4 service areas, operators could pick and choose the markets to turn on first. However, the late availability of 3800 MHz spectrum band cannot help but delay 5G service availability.
The true power of 5G comes from a large bandwidth allocation – e.g. 100 MHz. Bell and Rogers each managed to secure 60+ MHz of 3.5 GHz spectrum in key markets and will be better positioned to provide a 5G experience in this band in the short term. However, most of Bell’s frequencies are at the low end of the spectrum band where they will be harder to combine with the 3800 MHz spectrum.
On the other hand, Telus will need to be more aggressive to raise their ownership level in the three largest metro areas where 14 million of Canada’s 35 million population resides. Telus has an advantage though in the 3500 MHz frequency assignments being at the top-end of the band and adjacent to the 3800 MHz spectrum band. I would expect Telus to be aggressive in the assignment stage of the 3800 MHz band to secure contiguous allocations with its 3500 MHz holdings.
In summary, RAN sharing between Telus and Bell aside, Canadian subscribers won’t experience the full potential of 5G until sometime well into 2024 at the earliest (and later in the year rather than earlier).
Pricing Outlook
The 3500 MHz auction was the highest priced mid-band auction in the world, exceeding that of the US C-band auction [see here; a summary available for download below]. This C-band auction is highly unlikely to end close in price to the 3500 MHz auction. The 100 MHz spectrum cap will dampen demand by the major operators in the largest markets which drive overall valuation. The 3 national MNOs drove the valuation of the 3500 MHz band to astronomical level. This was in large part to the limited supply of 3500 MHz spectrum: average of 111 MHz, of which 50 MHz was set aside for regional players.
The structure of the C-band auction will work in favor of Telus and to-be-national operator Videotron, if its acquisition of Freedom Mobile goes through. Both of these operators have less spectrum in this band than Bell and Rogers. The 100 MHz spectrum cap will make it easier to equalize spectrum among the major operators. Consequently, spectrum prices in the major metropolitan areas should come out much lower than in the 3500 MHz auction.
| Service Area | Bell | Rogers | Telus | Vidéotron | Total | Remainder for other SPs |
| Toronto | 40 | 30 | 80 | 80 | 230 | 20 |
| Montréal | 40 | 40 | 70 | 50 | 200 | 50 |
| Vancouver | 50 | 30 | 70 | 50 | 200 | 50 |
The Regional Outlook
While spectrum price in the large metro areas is set to fall, it could well increase in some of the smaller cities and townships. The 4 largest service providers aiming to get their full 400 MHz allocation leaves only 50 MHz for the regional and rural operators. This is a small amount for small towns where subscriber density will drive towards 100 MHz requirement for fixed wireless access services. FWA service provider Xplornet should experience more competition in some of its rural markets. However, as Xplornet sits on a relatively good spectrum position, its FWA competitors would need to secure larger investments to win. This is why it will be critical for the small service providers in rural areas to plan ahead their spectrum strategy carefully and to secure the necessary investments. Given the tightening financial climate, the regional operators should start planning early.
Canada 3500 MHz spectrum auction summary. August 2021.
Concluding Remarks
The fragmentation of the 3 GHz mid-band spectrum is a policy error. Release of the 3500 MHz spectrum was delayed due to Covid, which in turn delayed subsequent auctions. Then there’s the issue of clearing Telesat’s C-band holdings for mobile services. Still, I don’t believe spectrum contiguity was seriously considered at the time the 3500 MHz was planned; and no MNO had raised the issue at that time.
Looking forward, I expect the competition for the C-band spectrum to shift to the smaller markets in light of the spectrum cap and market structure. This will place a heavier burden on the small and regional operator to plan ahead their spectrum strategy and work to raise the necessary investment to participate successfully.