CRTC denies TerreStar’s request to deduct spectrum sale and subordination revenues from contributions

The CRTC has denied TerreStar Solutions Inc.’s request that spectrum licensing be declared a non-telecommunications service, effectively blocking the company’s attempts to deduct associated revenues from their contribution requirements. In an application submitted to the commission on Nov. 16, TerreStar argued that companies should be able to deduct spectrum subordination revenues from those used to calculate their contributions because it does not fall under the definition of a telecommunications service. “The only ‘service’ at issue here is TerreStar’s agreement to allow other entities to use, for a defined period, a portion of the spectrum,” wrote the company. Spectrum’s intangible nature, the fact that no facilities or equipment are involved in its subordination, and it is separately regulated by the department of Innovation, Science and Economic Development (ISED) make it “markedly different from other ‘services’ that the commission has had to consider under the Telecommunications Act,” the company explained. The current revenue-based contribution regime requires companies to contribute a percentage of their Canadian telecommunications services revenue (CTSR) to the National Contribution Fund. In their annual revenue report, filed in March of last year, TerreStar tried to deduct subordination revenues from its CTSR, lowering its contribution obligations. These deductions were rejected. TerreStar disagreed with the decision and despite the CRTC’s statement that subordination revenues are CTSR, requested a declaration of their “correct characterization.” “Prior to this, no other company had attempted to deduct revenues from the sale or lease of spectrum, despite these being common industry services,” said the CRTC. “TerreStar took a narrow view when constructing its argument,” the commission wrote, explaining that the company’s interpretation failed to account for the fact that “any service that is incidental to the business of providing telecommunications services” also counts as a telecommunications service. “Spectrum is a scarce resource, diligently allocated for specific purposes,” said the CRTC, adding that revenues derived from its sale must “at least be incidental to the business of providing telecommunications services.” TerreStar has been directed by the CRTC to file revised monthly contribution reports with the Central Fund Administrator by July 17. – Reporting by Phalen Tynes-MacDonald at pcreed@thewirereport.ca and editing by Jenna Cocullo at jcocullo@thewirereport.ca.

CRTC denies TerreStar’s request to deduct spectrum sale and subordination revenues from contributions

News | June 15, 2023

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CRTC denies TerreStar’s request to deduct spectrum sale and subordination revenues from contributions

News | June 15, 2023

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