Industry Canada to impose renewal fee on PCS licensees

Cellular and PCS carriers Bell Mobility, Rogers Wireless, Telus Mobility and the other regional wireless service providers will be on the hook for more money when it comes time to renew their spectrum licences, according to Industry Canada. What’s unknown, however, is whether the department will charge fees that cover the administrative costs of managing the spectrum or try to extract additional money based on the market value of the spectrum. The document, kicking off a consultation on licence renewals of the mobile wireless operators, quotes the 2007 spectrum policy framework saying the department must “earn a fair return for the Canadian public for the privilege of access to spectrum – a public resource.” “The challenge is to set fees that reflect the underlying market value while taking into account the wide variations in different markets and comparing prices paid for the spectrum in different auctions, which is further complicated by varying economic conditions, different auction bidding strategies and the overall demand for the spectrum at the time,” reads the consultation. Industry Canada will examine the current market value of the spectrum with the goal of setting the fee. After conducting its analysis, the department will launch another consultation on the appropriateness of the fee. Based on this, it appears the government has already made up its mind. But a previous consultation on auctioned licence renewal fees demonstrates that the carriers are likely going to put a fight if the rate charged exceeds the administrative costs of managing the spectrum. Imposing a fee for renewing a spectrum licence issued by comparative review (a beauty contest) isn’t new, but doing so for licences gained through a spectrum auction is. Industry Canada had proposed imposing a licence renewal fee of $0.003205 per 100 MHz per population on the 24/38 GHz spectrum auction winners. Licences would also be subject to a minimum fee of $150. This was met with stern opposition by some parties which criticized the department for trying to get more money from licensees who are trying to make a return on their investment in the spectrum. They also noted that the revenue generated from the 1999 auction (more than $170 million) is more than enough to cover the spectrum administration costs. MTS Allstream Inc. noted in comments to Industry Canada that the renewal fee would, in some cases, actually exceed the money it paid to acquire the licence in the first place. It points to the $60,000 it paid for A-band licence in Saskatoon compared to the renewal fee of $66,900 ($6690 levied annually over the 10-year licence term). Mobilexchange Spectrum Inc. (MSI) pointed to previous department comments that renewal fees should be cost-based. “In MSI’s view, the $171 million paid by licensees in the auction for 24 and 38 GHz spectrum, including the $74 million paid by the shareholders of MSI, constitute a more than adequate resource rent for that spectrum for a period well in excess of 10 years,” MSI said. Criticism from parties and the recognition that for the most part this spectrum has been underutilized resulting from a lack of equipment, the department chose to extend the licences for an additional fives years without any fees. Examples of proposed fee for 24/38 GHz spectrum A 400 MHz licence in the 24/38 GHz band for Vancouver would have a renewal cost of $29,613 with Montreal and Toronto being $48,516 and $72,247, respectively. Less populated licences such Prince George and Trois Rivières would have renewal fees of $2,564 and $2,145, respectively. The renewal fee for a 100 MHz 38 GHz licence would be one-quarter the cost of the 400 MHz renewal.

Industry Canada to impose renewal fee on PCS licensees

News | March 26, 2009

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