Broad policy review of PCS and land-mobile spectrum to be launched this spring

Industry Canada is considering a new approach to spectrum licensing, one that would result in lower fees for companies that are more spectrum efficient or operating in smaller markets, and higher fees for licensees in large urban markets. The proposal is part of a broad policy review to be gazetted this spring. The review is also expected to look at allowing spectrum licences to be divided and transferred to a third party, which would effectively create a resale market for spectrum in Canada. The department may also ask for comment on extending licence terms from five to 10 years. While the wireless industry says it welcomes the review, it stresses that the outcome must be one that results in an overall decrease in licence fees, particularly considering the significant increases this year in contribution payments. The Canadian wireless industry currently pays about $150 million in annual licence fees, and this year, will see its contributions to the phone subsidy fund increase from $15 million to about $200 million. Mike Connolly, senior director spectrum management operations at Industry Canada, says setting contribution is a CRTC responsibility, and isn’t a consideration in his department’s review of spectrum licensing. He says the government doesn’t envision lowering the amount of fees the wireless industry pays as a whole. However, carriers that make efficient use of spectrum resources will be rewarded, he adds, in that they will pay the same amount as carriers with less capacity. "A real novelty to the model (is) that for the first time, users would actually have the ability to influence their fees by virtue of how they design and implement their systems," explains Connolly. "There’s trade-offs to be made between infrastructure, modulation schemes, power and how much spectrum you’re going to use to deliver your service. So now they can come to some determinations about how they optimize their costs such that achieve the balance that’s right for them." The department will be conducting two separate reviews, one covering PCS spectrum and the other reviewing all other land-mobile spectrum. The goal of this broad review is to come up with a new structure that is administratively less burdensome, simple and flexible. It’s still unclear how this new model will affect the bottom line of individual carriers. Connolly says some of the carriers have good reason to be optimistic. "Certainly an awful lot of users are going to enjoy decreases in their fees," he told RoW. "But certainly those who are consuming spectrum in the urban areas are going to be seeing some increase." Lower fees are expected in areas where spectrum congestion isn’t an issue. Connolly says those fees will be designed to cover a proportion of spectrum management costs. In urban areas where spectrum is scarce, the fees will be increased to reflect the specific value of that market. "What we’re working on now is determining the magnitudes and the transition time because obviously it’s not in anyone’s interest to just flip a switch," says Connolly. "Users will need some time to look at the impact and consider their options." Industry looking for rationalization in fees The wireless industry’s chief lobbyist anticipates Industry Canada will look to rationalize spectrum licence fees since the introduction of new technologies and applications has expanded the fee base. Peter Barnes, president and CEO at the Canadian Wireless Telecommunications Association, says there are now elements in the fee structure, such as fee schedules, that don’t make sense anymore. Rogers Wireless Inc’s Ted Woodhead agrees that there needs to be some rationalization within a new fee structure. He notes the amount of fees paid by the terrestrial wireless industry may be out of proportion with respect to what others are paying. "At the end of the day, we are mostly interested in a process that rationalizes the cost of using spectrum across all carriers and doesn’t increase our obligations, or expenses or costs," he told RoW.Bell Canada supports enhanced transferability and divisibility of spectrum in blocks less than 10 MHz in size. Barry Chapman, VP convergence at Bell Canada, says the creation of a secondary spectrum resale market would be better for the industry as a whole. Debate over this part of the issue goes back nearly three years when former Bell executive Michael Hennessy told Report on Wireless in 1998 that "This would allow you to buy and sell where needed … It just makes sense. I think it’s a good way to settle the market." Current issue goes back five years The department began to look at the spectrum licence fee issue in 1995/1996 and proposed a new fee structure with a fundamentally different approach – one not based on the apparatus using the spectrum, but on the spectrum itself. Since that time new technologies have come on line and now the system is made up of both types of fee structure. Connolly offers a comparison of the old system to the new approach in referring to water conservation. In wanting to manage and conserve water because it is a scarce natural resource it would be better to tax the amount of water consumed by each household rather than putting a tax on each of the faucets in the house.

Broad policy review of PCS and land-mobile spectrum to be launched this spring

News | April 17, 2001

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