CWTA urges Industry Canada to recalculate proposed spectrum licence fees

The Canadian Wireless Telecommunications Association (CWTA) is leveling harsh criticism at Industry Canada over its proposal to harmonize the spectrum licensing regime and implement a new spectrum licence fee schedule. While the CWTA agrees with the department that it should rationalize and harmonize the licensing regime, it has serious concerns that Industry Canada may be proceeding without the right to do so. Late last year, the department released DGRB-004-02 with the goal of rationalizing the country’s current mix of radio and spectrum licensing requirements (RoW Update, Jan. 13/03). In its March 14 comments to DGRB-004-02, the CWTA points out that the Treasury Board of Canada’s Cost Recovery and Charging Policy identifies the requirements governing the extent to which federal government departments may impose user charges. The wireless association indicates that the department hasn’t provided any evidence of a comprehensive review of the impact of licence fees on the industry as is required by the Treasury Board’s policy. The CWTA quotes Treasury Board policy to indicate that user charges cannot be used to generate revenue to meet the funding requirements of a federal department or agency. Federal departments must also conduct "meaningful consultations" with affected customers with the view to avoid the imposition of unreasonable cost burdens on a particular industry. It also notes that Industry Canada’s spectrum licence fee policy has evolved from a policy of cost recovery to one of recovering economic rent associated with a presumed value of spectrum. Since the first policy on non-broadcast spectrum was introduced nearly 20 years ago, fees have increased dramatically, the CWTA indicates. "The result of these policy shifts has been a continuing escalation in the fees paid by the industry, particularly by cellular/PCS operators, without – as required by the Treasury Board guidelines – a clearly articulated, thorough examination or discussion of the appropriateness of such fees, or the real impacts they have on the industry and on federal government policy objectives," the CWTA states in its comments. Canada’s wireless industry lobby group also indicates that such an examination cannot be conducted in isolation, either. The government would need to take into account fees imposed on the industry by other federal government departments or agencies. "CWTA has long argued for a more holistic approach to the various charges and fees imposed by government," the association writes. "Fairness dictates that the regulatory obligations established in the pursuit of government policy objectives cannot and must not be examined in isolation from other obligations. The entire ‘regulatory package’, meaning all obligations established by the government in pursuit of public policy objectives, must be examined in concert." Department made errors in calculation The CWTA also believes Industry Canada has severely miscalculated the level of fees it wants operators to pay. According to its calculations, the association indicates that the proposed $0.052 per 1 MHz of assigned spectrum per person in a defined geographic area will result in a 34% increase in the level of fees by 2011, the end of the phase-in period. "In real terms, this represents an approximate $50 million annual increase when the proposed regime is in full effect in 2011," the CWTA writes. The association indicates that the department has made some errors in coming up with the $0.052 per 1 MHz rate and doesn’t believe that using a single network to determine the level of fees is appropriate. It also notes that the department’s assumption that spectrum licence fee revenue will increase between 2003 and 2011 is false and that at best revenue will remain constant. Technological improvements, such as smart antenna design and frequency hopping techniques, among other factors will actually allow wireless operators to expand and improve coverage without having to implement additional radio channels or base stations. Thus the level of fees won’t increase, the CWTA states. The wireless industry lobby also notes that the migration from 2G to 3G will result in a reduction in the number of radio channels needed. "As lower capacity channels are replaced with higher capacity channels, the number of overall channels in the network will decline. As a result, spectrum licence fees will also decline," the CWTA writes. However, the association notes that these factors will be offset by network expansion, subscriber growth and the provision of higher bandwidth services, which tend to lead to higher spectrum licence fees. "Even in the event of organic growth of 1.5% annually, the proposed fee level is more than double any such growth. It is more likely, however, that under the current regime, licensees would be successful at maintaining or reducing licence fees between 2003 and 2011." Key policy objectives at risk The CWTA also notes that the excessive level of fees the wireless industry would have to pay if the department’s proposed regime came into force would also prohibit the wireless operators from meeting the following three key policy objectives set out by the government: innovation, connectedness and broadband deployment. "The CWTA submits that the proposed fee levels will increase the existing burden on wireless carriers, thereby hindering the licensees’ ability to further innovate, expand networks to connect more Canadians and invest in the delivery of new broadband mobile services," the association states.

CWTA urges Industry Canada to recalculate proposed spectrum licence fees

News | 03/18/2003 5:00 am EST

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