CommunicationDevelopmentService delivery
September 16, 2019

600 MHz auction: A rare opportunity for Canada’s rural communities

Earlier this year, the federal government kicked off an auction for wireless spectrum, pitting a dozen regional and national operators against each other. At stake was the right to low-band 600 MHz spectrum, a valuable section of the airwaves that could confer a long-term competitive advantage to the winners.

The auction itself raised $3.47 billion, but the concern for this auction goes beyond profit and loss. The deployment of 600 MHz spectrum, which travels further and penetrates obstacles better than any other wireless data frequency, will provide a unique opportunity to connect Canada’s hardest-to-reach communities. A look south of the border demonstrates the potential advantages of 600 MHz for covering rural areas – but also hints at how the government may be squandering an opportunity for major change.

600 MHz: a new frontier for coverage

At their most basic, mobile networks function by sending signals over radio waves, much like FM radio or broadcast TV. If you’ve ever noticed that an FM radio signal is much more consistent than your cellphone signal, you’ve discovered that low-band radio waves – those with a lower frequency – travel further and pass through objects much better than their higher-band counterparts.

This is particularly important for mobile networks, because your cell service provider doesn’t just use one frequency. Canadian operators rely most heavily on mid-band and high-band spectrum, such as 1700 MHz and 2600 MHz, for the majority of their LTE networks. The lowest frequency currently in use is 700 MHz, and it has not been fully deployed across the country.  The 600 MHz spectrum that the government is now auctioning off was previously used for broadcast television, and when deployed, will be the furthest-travelling cellular frequency in use.

In practical terms, operators using 600 MHz will see a 25% coverage improvement compared to 700 MHz, and a 200-400% improvement compared to mid-band frequencies like 1800 MHZ. For customers in rural areas, the benefits are obvious: coverage and speeds will improve, meaning fewer dropped calls and usable mobile internet in more places.

600 MHz’s potential for rural coverage has already been proven to work in the wild. In 2017, US operator T-Mobile spent $8 billion USD on licenses for 600 MHz covering the whole country. In the two years since, hundreds of thousands of rural Americans have reaped the rewards.

T-Mobile has rolled out 600 MHz region-by-region, depending on how quickly each state has been able to clear the airwaves previously used by TV stations. In Kansas and Missouri, some of the first states to receive 600 MHz coverage, average download speeds and coverage are up by around 15% compared to Indiana and Ohio, neighbouring states that are yet to see 600 MHz built out.

When looking at just rural areas within those states, the improvement is even more stark: cell signal is 30% better for T-Mobile subscribers in rural Kansas and Missouri, compared to Indiana and Ohio customers. Achieving that kind of coverage improvement typically takes a long-term infrastructure investment, but it’s been less than two years since T-Mobile first bought its 600 MHz spectrum, which demonstrates the immediate impact that low-band spectrum can have on rural communications.

A deepening digital divide

If the sole result of the 600 MHz deployment is bringing expensive data plans to rural areas, however, Ottawa will have missed a rare opportunity to take a slice out of the digital divide. Research suggests that Canada has the costliest data plans (per gigabyte) in the developed world, which means that even if rural customers have great coverage, they can’t use mobile data for their home broadband.

The federal government has made some effort to address this problem with the format of the 600 MHz auction: over 40% of the spectrum licenses have been set aside for bidders other than the big three national networks, which Ottawa hopes will give regional carriers a fair chance to compete.

It’s a similar strategy to one that has been employed in previous spectrum auctions, and one that Innovation Minister Navdeep Bains has credited with “gradually driving price decreases in mobile wireless.” However, the strategy naturally promotes the development of regional carriers focused on a handful of cities, such as Shaw’s Freedom Mobile or Quebec’s Videotron. The government’s own price comparison report only samples pricing from six Canadian cities, and doesn’t capture how rural areas are left behind by promoting urban-centric regional carriers.

The CRTC’s current flagship project for closing the digital divide sets a target that 90% of Canadians will have 50 Mbps download/10 Mbps upload unlimited broadband by 2021. Achieving this target using wireline internet will prove tremendously expensive, thanks to the cost of building out last-mile infrastructure to every single house. Thanks to improvements in wireless technology – both current LTE-Advanced and the coming 5G standard – the targeted unlimited 50/10 service is easily achievable wirelessly, provided that sufficient spectrum is made available, and wireless companies are incentivized to build out the infrastructure.

Plans for closing the digital divide typically focus on improving the penetration of wireline home broadband services, while efforts to improve wireless competition are exclusively measured by monitoring prices in urban areas. A more holistic approach to these two policy planks would provide new options for connecting rural areas, while simultaneously helping address the cost of Canadian telecoms plans.

With the 600 MHz spectrum auction itself now complete, it’s too late for the government to try novel solutions to the decades-old digital divide. However, providers now have the tools in their hands to deploy this new spectrum in the most impactful way. Meanwhile, with more spectrum auctions and the 5G rollout – which has enormous potential for wireless home internet – looming in the next year, the time is right for a frank assessment of how Ottawa can help cure one of Canada’s starkest geographical inequalities.

Absent a magic wand, spectrum auctions remain the government’s best opportunity to steer the telecoms industry down a more consumer-friendly (read: cheaper) path. Previous governments have tried soft-touch incentives; however, an examination of the more stringent policy and regulatory models of other countries, with similar geographic challenges but more accessible telecoms, suggests an alternative path forward. Finnish operators, for example, offer cheap unlimited wireless data plans which, thanks to conditions attached to spectrum licenses, cover 99% of Finland’s citizens and are popular for rural connectivity.

Some segments of the telecoms industry are likely to cry foul over firmer conditions on spectrum licenses. Don’t forget that as for any other scarce national resource, the government has a duty to ensure that our airwaves are optimally used for the greatest public benefit – not the greatest private profit.

Image: Pxhere.

About this author

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Hunter Macdonald

Hunter Macdonald is co-founder and CEO of Tutela. A born entrepreneur, Hunter is passionate about challenging and innovating the mobile industry to provide outstanding network experiences for users.

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