Federal Court confirms Minister of Industry's authority to impose spectrum caps

January 10, 2014

In the latest chapter in the ongoing battle between incumbent wireless service providers and the federal government over government policies intended to stimulate more competition in the wireless market, the Federal Court has dismissed an application by TELUS Communications Company (TELUS) for judicial review of the Minister of Industry’s authority to impose conditions on spectrum licences issued pursuant to the Radiocommunication Act.

The Court’s decision in the case of TELUS Communications Company v Canada, came less than two weeks before the scheduled start of Industry Canada’s auction of the highly desirable 700 MHz spectrum.

TELUS’s application was provoked by the imposition by the Minister of conditions of licence that capped the amount of spectrum that can be acquired by certain bidders in the pending 700 MHz spectrum auction, set to commence on 14 January 2014. 

More particularly, while Industry Canada’s Licensing Framework for Mobile Broadband Services (MBS) - 700 MHz Band (Licensing Framework) generally limits licensees to two paired spectrum blocks within each of the 5 blocks in which paired spectrum will be available, large wireless service providers will only be permitted to acquire one paired block of the most sought-after spectrum.

For the purpose of the Licensing Framework, companies with 10 percent or more of the national wireless subscriber market share, or 20 percent or more of the wireless subscriber market share in the province of the relevant licence area, will be considered to be “large wireless service providers”, and will therefore be limited to purchasing only one block of “prime” spectrum. According to figures provided in the CRTC’s most recent Communications Monitoring Report, only Rogers, TELUS, Sasktel, MTS and the “Bell Group” (wireless providers owned by BCE Inc.) are considered to be large wireless service providers.

The remainder of smaller incumbents and new entrant carriers will be allowed to purchase up to two prime blocks in all paired spectrum blocks; however, not all of these companies have applied and been qualified to bid.

The Court noted that the case was not a challenge to the wisdom or soundness of a government policy, but rather, raised the question of whether there is authority to enact decisions made under a policy. 

In dismissing the application for judicial review, the Court found that the Minister had the authority to impose conditions on spectrum licences - including the spectrum caps applicable to larger wireless service providers - in light of the Minister’s broad power to fix spectrum licence terms and conditions, taking into account the policy objectives of the inter-related statutory scheme comprised of the Radiocommunication Act, the Radiocommunication Regulations, the Telecommunications Act and the Department of Industry Act.

The Court also found that, in imposing spectrum caps as a condition of licence, the Minister did not transgress into the regulatory powers reserved to the Governor-in-Council under the Radiocommunication Act, rejecting an argument that the spectrum caps amounted to a spectrum licence eligibility requirement, which only the Governor-in-Council has the authority to prescribe.

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