Bell, Rogers, Telus, and others oppose any increases in spectrum licence fees

Canada’s national and provincial mobile wireless operators are united in their opposition to a proposal from Industry Canada to charge licence renewal fees based on the market value of mobile spectrum. Bell Mobility, MTS Mobility, Rogers Wireless, SaskTel Mobility and Telus Mobility argue that just because the spectrum policy framework is designed to “maximize the economic and social benefits” to Canadians for the use of spectrum, it doesn’t give the department the authority to levy excessive licence fees on them to earn a “fair return.” Mobile carriers suggest that a cost-recovery model, as employed in the US, would better serve the Canadian market by enabling mobile carriers to spend more money on network and service deployment. “Considering the billions of dollars already paid by these licensees in the form of spectrum licence fees and spectrum auction payments, as well as the wireless industry’s substantial contribution to the Canadian economy, it is clear that the department is receiving more than a ‘fair return’ for the use of the spectrum resource,” Rogers Wireless tells Industry Canada. “The department should limit spectrum licence fees to a level that will only recover the department’s administrative cost of managing the spectrum.” Rogers has already stated that if Industry Canada hikes licence fees, its subscribers will bear the brunt of the increase through higher monthly subscriptions rates. Total mobile spectrum licence fees for the 2008/2009 period were $130 million, amounting to 57% of total non-broadcasting licence fees. Employing the US model would bring Canadian licence fees down to $4 million. Industry Canada kicked off the cellular and PCS licence renewal consultation earlier this year, proposing a number of changes, but a controversial decision to first determine the market value of the mobile spectrum has the country’s wireless operators up in arms. As part of the consultation, the department indicated that it would conduct an analysis of the market value of mobile spectrum and, once complete, would launch an additional consultation on a proposed licence fee renewal rate. In response to the consultation, Bell Mobility suggests that given the severe economic downturn affecting all facets of the Canadian economy, Industry Canada should give wireless carriers a break on fees and institute a “spectrum fee holiday” to aid operators to “weather the current economic storm.” Alternatively, the company recommends a cost-recovery model. “Such a move would put Canadian licensees on an equal footing with their US counterparts,” reads Bell’s submission to Industry Canada’s licence fee renewal consultation. Telus Mobility says the department should sit down with the wireless carriers to find some common ground on fees. “We submit that rather than develop market-based formulas outside of a consultative process, the department work with industry to establish a methodology to set fees at a fair and reasonable level,” writes Telus, noting that the Radio Advisory Board of Canada could be an appropriate forum to determine a fair return for the government. The department’s interest in pricing licence renewal fees based on the market value of spectrum is up against evidence suggesting that it already charges too much in fees. A report from Martin Cave, first detailed in Report on Wireless last year, noted that licence renewal fees far exceeded the cost to administer the spectrum management program. From 1998/1999 to 2006/2007, program expenditures totaled about $550 million while revenue was $3 billion, consisting of $2 billion in licence fees, $888 million from spectrum auctions and $44 million from equipment certification. Move to indefinite or longer term licences: Industry Canada told While there is some disagreement regarding the length of licence terms, the wireless carriers also say now is the time for Industry Canada to adopt licence terms longer than the proposed 10 years. They say 15-year, 20-year or indefinite terms would provide them with more certainty. They note that even with longer term licences, the Minister of Industry would still have the authority to amend or withdraw licences in cases of non-compliance or for spectrum policy reasons. “In other words, save reallocating the cellular and PCS bands to a completely different use, the department has all the revocation powers it needs and should move to lengthen the licence term to a minimum of 15 or more preferably 20 years,” Telus tells Industry Canada in its submission. “Such a move would be consistent with the actions of other regulators who have either moved to 15 and 20 year licence terms, and who are considering the movement toward indefinite terms,” Bell writes, adding that it’s time for Industry Canada “to take the next logical step along the continuum of spectrum management development and move toward indefinite, or at the very least, 20-year licence terms with a permanent high expectation of renewal assuming compliance with conditions of licence.” Rogers agrees noting that a “15-year licence term for renewed cellular and PCS licences would be a reasonable first step in the direction of the much longer or indefinite licence terms that are used elsewhere in the world.”

Bell, Rogers, Telus, and others oppose any increases in spectrum licence fees

News | June 4, 2009

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