Telesat warns of Canadian exodus if Industry Canada auctions orbital slots

Telesat Canada warns it may leave Canada for countries with more hospitable regulations if Industry Canada moves forward with a proposal to use auctions to assign future satellite orbital slots and spectrum. The 40-year-old Ottawa company complains it already pays 10 times the amount for satellite spectrum licences than do its US counterparts. “Satellite operators, including Telesat, would re-evaluate the use of much less-attractive (auctioned) Canadian orbital spectrum in favour of spectrum licensed by other administrations without auctions,” Telesat states in response to Industry Canada’s proposal to use auctions to assign future satellite orbital slots and spectrum.“Of course, this would eliminate the possibility of Canada achieving social benefits as part of its licensing process. Furthermore, in the absence of the use of Canadian spectrum, the logic for an operator to locate its key functions and employment in Canada is greatly diminished.” The department is proposing a number of changes to its spectrum auction framework, including the possibility of auctioning satellite orbital slots. The move would reverse a November 2000 decision not to use auctions to assign orbital resources. Telesat isn’t the only satellite service provider vehemently opposed to the changes. According to Ciel Satellite Group LP, auctioning satellite spectrum isn’t practical because orbital rights fall under the radio regulations of the International Telecommunication Union (ITU). “If utilized, satellite auctions would result in essentially an auction of defeasible ITU priority rights or filings with a resulting indeterminate value, in contrast to the auction of discrete, more ‘exclusive’ licences that can be issued in the terrestrial context,” Ciel tells Industry Canada in its comments. Telesat says urgent reform in needed in the way the department licences orbital resources and adopting auctions isn’t the way to go. The company notes that there are “serious flaws” with the current comparative review process. It cites the length of time it takes from submitting an application to awarding a licence; the process is too laborious for both the applicant and Industry Canada; and the decision criteria, weightings and reasons for selecting one applicant over another aren’t clear. “While reform is urgently required, auctioning of satellite spectrum is not a solution. It would, in fact, make a bad situation worse. Telesat supports the view that a first-come, first-served approach to the award of satellite licences is the most expeditious and fairest method to award satellite licences,” the company writes. Telesat also claims the financial viability of Canadian satellite operators would be brought into question if the department adopted auctions for orbital slots. “While Telesat supports fair competition and 'open skies', we are greatly concerned that regulatory provisions in Canada, such as the high cost of satellite licences, place Canadian-licensed operators at a disadvantage relative to foreign-licensed operators for whom our domestic market is fully open,” the company writes. “Auctioning of satellite spectrum would greatly exacerbate this situation.” Telesat notes that it pays 10 times the amount for satellite spectrum licences than do its US counterparts. The company says that it paid in excess of $6.7 million for 10 Canadian satellites in 2009, while a US operator with a comparable amount of satellites would pay $1.27 or about 20% of Telesat’s licence fees. Ciel tells the department that consumers would bear the brunt of higher prices if it were to use auctions to assign satellite spectrum. The company says that innovations in satellite technology are available across all players in the industry, not that “deep, cost-saving innovations are simply not available to one satellite operator versus another.” “As a consequence, any price premium that is paid for satellite spectrum is likely to be reflected in higher consumer prices. Ultimately, customer and consumer prices are the only recovery option available to operators,” Ciel says.

Telesat warns of Canadian exodus if Industry Canada auctions orbital slots

News | 06/24/2009 6:25 pm EDT

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