Wireless industry concerned about licence fees for mobile and satellite services

Spectrum licence fees are once again front and centre as the country's mobile wireless and satellite carriers complain that the fees and other financial obligations imposed on them by Industry Canada and the CRTC are too onerous. Telesat Canada warns that these obligations make it more difficult to compete in a liberalized competitive landscape.In comments to the government's Revision to the 1992 Spectrum Policy Framework (DGTP-004-02) document, the Canadian Wireless Telecommunications Association (CWTA) and Telesat say that disproportionately high and inequitable licence fees are potentially hampering growth in the sector (RoW Update, June 3/02).In its September 30 comments, the CWTA notes that the government's spectrum licence fee program is inequitable despite the department's attempt to strike the right balance between the use of economic principles and other regulatory methods in managing spectrum. The wireless lobby urges the government to make sure economic principles are applied to all commercial users of spectrum in an equitable manner.It notes that a small group of spectrum users currently contributes approximately half of the department's spectrum revenue, which is a disproportionate share when compared to all other commercial spectrum users. "CWTA estimates that cellular and PCS service providers pay in the range of 50% to 60% of the total spectrum fee revenues collected by the department," the association writes. "The remaining fees are paid by the remainder of all other licensees. These licensees contribute far less licence fee revenue to the department than cellular and PCS licensees, despite the fact that, in the aggregate - and in some cases individually - they have been licensed with far more spectrum."This isn't the first time the wireless industry has pressed the federal government on the spectrum licence fee structure. Last year, the industry had expressed hope that the government would rationalize spectrum licence fees (RoW, April 17/01). While government officials indicated that more efficient users of spectrum might see a reduction in fees, the aggregate amount of fees paid to Industry Canada wouldn't decrease.Satellite operator Telesat is also concerned that, since the country's satellite market opened up to foreign competition in 1997, stringent licence conditions and fees are giving foreign satellite operators an unfair competitive advantage in the market. "Significantly, no conditions of licence apply to foreign satellites operating in Canada. Neither are foreign satellite operators subject to the same level of licensing fees as are Canadian operators. These operators pay no fees in Canada and in their home jurisdictions generally pay fees considerably below the level imposed by the department on Canadian operators," Telesat writes in its September 30 comments.The company also indicates that while it supports the department's decision to rely more on market forces for regulating the industry, it notes that policy obligations imposed on it are counterproductive. "(Telesat) is concerned that the continued imposition of onerous social policy obligations and licensing fees on Canadian satellite operators may be a step in the opposite direction, or worse, may so seriously disadvantage Canadian operators that they will not be able to compete effectively with the foreign satellites operating with less encumbrances in the same markets," it writes.Telesat is concerned that a proposal to extend licensing fees to transmission equipment serving non-Canadian markets is sending the wrong message. "In the company's view, this runs counter to the government policy objective of promoting Canadian telecom company efforts to compete and expand into international markets, and is a matter which needs to be reconsidered by the department."The CWTA suggests that the department decrease spectrum licence fees for companies deploying networks in rural and remote areas as a solution to the licence fee quagmire. "The application of this principle would have the effect of driving down the cost of serving rural and remote areas and in creating a more favourable business case for carriers," the association notes. "This in turn would result in the provision of affordable services in areas that would not otherwise have proved economically viable."Opening the department's books on spectrum management costsAs another potential solution to the spectrum licence fee debate, the CWTA suggests that the department open the books on the cost of managing spectrum. "To ensure a transparent and equitable system, CWTA would encourage the department to publish on an annual basis, the spectrum management costs it incurs. This would be consistent with the Canadian Radio-television and Telecommunications Commission's annual publication of Broadcast Fees and Telecommunications Fees as well as the United States Federal Communications Commission's annual publication of its Regulatory Fees."Both the CWTA and Telesat express concern about the country's dual regulatory process to which wireless and satellite companies are subject. The wireless lobby notes that there seems to be little coordination among the various government departments and agencies that regulate wireless operations."CWTA urges the department to establish, as a priority, a mechanism for considering new and existing regulatory obligations within the context of the aggregate of all federal government regulations and requirements," it writes.Telesat indicates that obligations imposed on it by the CRTC are particularly damaging in terms of being able to effectively compete in a liberalized satellite marketplace. The satellite operator points out that the contribution regime is a case where foreign competitors have an advantage. It suggests that despite foreign companies' obligation to pay into the contribution pool, the "jurisdictional and practical considerations suggest that it is unlikely that all of the operators are contributing on an equivalent basis."Taking aim at the government's R&D commitment programTelesat also takes aim at the government requiring R&D commitments as a condition of licence. It indicates that the department's use of Canada Customs & Revenue Agency guidelines is too restrictive, which results in many research activities being judged ineligible."Telesat therefore recommends that the department revise the policy guideline in the Framework to make it clear that all R&D activities which fit within the 'SR&ED' definitions of the Income Tax Act would be considered as eligible expenditures for the purpose of R&D licence commitment, or in the alternative, that the department would consider such requests on a case by case basis," it writes.

Wireless industry concerned about licence fees for mobile and satellite services

News | October 15, 2002

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