Wireless operators oppose Industry Canada’s higher rate for LMCS spectrum

Spectrum licence renewal fees for local multipoint communications systems (LMCS) spectrum are too high, wireless network operators have told Industry Canada. They point to the failure of licensees to use the spectrum in any significant way and the $172 million paid for the bandwidth in the 1999 spectrum auction as evidence the proposed rate isn’t appropriate. Industry Canada had set the renewal fee at $0.003205 per 100 MHz, but suspended its application for another five years. The department now wants to apply this fee to unassigned LMCS spectrum. Bell Mobility says Canada’s spectrum regulator should set the licence renewal fee at a level that would cover the cost of administering the bandwidth. The company points to a previous Canadian Wireless Telecommunications Association assessment of spectrum administration costs which indicates a rate of one-tenth of what has been proposed as being more appropriate. One of the goals of Industry Canada’s spectrum policy is to ensure Canadians are fairly compensated for the use of a public resource. On this issue, Bell is equally adamant that imposing licence renewal fees would run counter to this objective. It states that since the spectrum has largely gone unused, the auction revenue was more than enough. “Bell Mobility submits therefore that the up-front auction payments, especially considering the circumstances regarding the lack of commercial development of these bands as the department itself has portrayed them in this consultation as well as in its April 2008 consultation, have more than adequately compensated the public for the use of this particular resource,” reads the company’s submission. Mobilexchange Spectrum Inc. (MSI), a company owned by Mike Kedar and one of the only firms to rollout an LMCS network, says imposing the proposed Industry Canada rate would send the wrong message to the market. “These fees would serve to significantly dampen the investment in telecommunications broadband infrastructure at a time when there are already many economic obstacles to such investment, yet the investment is desperately needed to enhance Canada’s prosperity and global competitiveness,” MSI tells the department. Mobilexchange proposed a fee that is half of what is proposed: $0.0016025 versus the $0.003205 set by Industry Canada. MTS Allstream agrees with both MSI and Bell Mobility, noting that “renewal fees being proposed by the department are far out of proportion to the ability of licensees to use this spectrum.” The Manitoba incumbent also says now is not the time though to be setting renewal fees for this spectrum. Rather that Industry Canada should wait until two years prior to the new expiry date of licences to begin a review. With respect to unassigned bandwidth, MTS says the department should wait until it has received a request for the spectrum from a potential licensee before it considers licencee fees. Telus Mobility suggests the renewal fee should be set at zero. After a review of how the licence fees were initially set for LMCS spectrum (Telus says that the licence fees for the 28 GHz band informed the licence fees for the 24 GHz and 38 GHz), the company concludes that since much of this spectrum hasn’t been used the department has little choice but to assign a zero dollar figure to the renewal fees. “Given the failure of the 28 GHz licensees to ever roll out service, if we accept the department’s statement…that the LMCS licence fees may be adjusted in accordance with a market determined valuation then the valuation must lead to a zero dollar amount for a licence fee,” Telus reasons in its submission. The company acknowledges the need to cover the cost of managing the spectrum, but suggests the government set a mark-up of between 1.4% and 2.65% – similar to government savings bonds – if it wants to earn a fair return for use of the bandwidth. Industry Canada has taken the tact that licence renewal fees should be based on market value of the spectrum. Wireless operators fear the same approach could be applied to more valuable PCS spectrum. In an earlier interview with Report on Wireless, Rogers Communications warning that any increase in licence fees would be passed on to consumers.

Wireless operators oppose Industry Canada’s higher rate for LMCS spectrum

News | May 6, 2009

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