Wireless operators at odds over proposed spectrum licensing and fee regime

Industry Canada continues to come under heavy fire from the Canadian wireless industry for its controversial proposal to increase current spectrum licence fee levels paid by the mobile wireless sector by more than 30%. In comments to DGRB-004-02, the four national mobile wireless operators state that the proposed level of fees ($0.052 per MHz per person), which they deem to be excessive, will only serve to stymie growth in this already highly competitive market. While the carriers are more than willing to offer their condemnation for specific parts of the department’s proposal, they generally agree with its overriding direction to harmonize spectrum licensing by migrating to a spectrum-based licensing environment from a radio-station-specific regime. They say this is a step in the right direction to normalize the cost structure of building out networks by eliminating the site-specific radio licences under the old regime in lieu of a spectrum licence-based regime. When it comes to the fee regime proposed by the department, however, the carriers are in agreement with the Canadian Wireless Telecommunications Association that the proposed increases are out of step with reality and don’t follow sound economic practice (RoW, March 18/03). The carriers note in their respective comments that an approximate 35% increase in licence fees over the course of the transition period (2004 to 2011) is unreasonable given their estimates that spectrum licence fees under the current regime will actually decrease over that same period. According to Telus Mobility, "the total wireless industry annual fees paid for cellular and non-auction PCS spectrum would rise from approximately $137 million in 2003 to approximately $184 million in 2011. Telus strongly believes that this proposed increase is unwarranted and unreasonable." The wireless service providers tell the department that it made a serious mistake in basing its proposed spectrum licence fees on Rogers Wireless Inc.’s analog wireless network. Industry Canada’s decision to treat all cellular and PCS spectrum on the same footing is fundamentally flawed, they add. All four carriers go to great lengths to explain the differences between the 800 MHz and 1900 MHz bands – the two bands covered in this consultation – and the reasons why the department was wrong to use Rogers’ analog network to determine a fair and equitable rate for spectrum licences. In a nutshell, they note that due to propagation characteristics of the 800 MHz band, an 800 MHz network will require about half as many base stations as a network operating in the 1900 MHz band. With the exception of Rogers Wireless, all operators believe that PCS spectrum licence fees should be discounted compared to the analog spectrum. As can be expected, each of the wireless operators came up with its own fee. Microcell Telecommunications Inc. notes that spectrum licence fees for PCS spectrum should be half as much as those for analog spectrum. Telus Mobility states that there should be a 66% discount for PCS spectrum. Bell Mobility suggests that $0.02 per MHz per person would be more equitable. Rogers Wireless believes it is inappropriate to have lower rates for spectrum licences in rural regions compared to those covering urban areas. It wants the department to re-examine the spectrum licensing issue with the inclusion of the entire UHF band in the formula. "For example, if the total spectrum licence fee revenue collected by the department from all users in the UHF band is $200 million, then the spectrum licence fee rate applicable to all users in the UHF band would be $200 million / 2700 MHz / 28.8 million, or approximately $0.00257/MHz/Pop," Rogers writes. Writing on behalf of the Bell Wireless Alliance (BWA), Bell Mobility notes that a universal method of pricing spectrum regardless of geographic location is unfair to regional carriers that support a mostly rural population. As an example, the company points out that the rate per MHz per person in Aliant Telecom Inc.’s serving area calculated against the government’s revenue generated in the 2001 spectrum auction amounts to one-fifth of the proposed rate or $0.0089 per MHz per person. The BWA includes Bell Mobility, Aliant Telecom, MTS Communications Inc., MTT Mobility Inc., Northwestel Mobility Inc., SaskTel, and the Corporation of the City of Thunder Bay. Other key aspects under scrutiny by carriers In Industry Canada’s consultation paper, it proposes changes to radio station or antenna tower licensing procedures. The department’s suggestion to remove the word "significant" from the radio station installations conditions of licence and to expand consultations with "all" land use authorities as opposed to "the appropriate" has all four national operators up in arms. Industry Canada said last fall that it would conduct a consultation on tower siting procedures (RoW Update, Nov. 4/02). As part of that process, which has not fully begun, the department released an independent study on a particular case in British Columbia, which highlighted significant problems with the current system (RoW, Feb. 18/03). The BWA notes that while this may be an "innocuous" modification, it constitutes a significant revision of the tower siting procedures. "Bell Mobility strongly believes that it would be inappropriate to change this condition of licence in the absence of a full consultation," the wireless operator writes. In the same vein, Telus Mobility reminds the department that "Telus and the other cellular/PCS licensees already consult with the appropriate authorities as required by local bylaws. There is no evidence offered that this process is not working well." Rogers Wireless fears that the wording changes would result in a more onerous consultation process. "This, in turn, would seriously impair the extent to which licensees could expand and improve their service capacity and coverage," the company writes. On the other hand, Microcell believes that the tower policy review issue must also be included in the spectrum licensing consultation because it can be used to help solve network inefficiencies. Moreover, the struggling wireless carrier wants the department "to consider the need for a licence condition to mandate antenna sharing on all licensees for towers, rooftops and exclusive sites." Microcell is also the odd-man out when it comes to resale and roaming agreements among the carriers. It wants the government to maintain mandatory 800 MHz analogue cellular roaming, but also wants the condition of licence extended to include all technologies, not just analog. "Despite the desire for all stakeholders to see competitive market forces rather than regulatory fiat govern the wireless industry, the last few years have only served to highlight that market incentives will not suffice to complete reasonable digital roaming arrangements. This is particularly true if one party sees the perceived benefits – anti-competitive as the motives may be – to be greater if such arrangements are NOT completed," Microcell writes. The other three wireless operators believe that after the end of the 10-year licence term in 2011, resale and roaming agreements should be subject to commercial arrangements among the carriers and not mandated by the government. Bell Mobility and Rogers Wireless even concede that some carriers may decide to eliminate analog services in certain regions altogether. For this reason they say it is inappropriate for the department to mandate resale and roaming.

Wireless operators at odds over proposed spectrum licensing and fee regime

News | 03/31/2003 5:00 am EST

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