Archived—DGBR-001-98 — Radio Advisory Board of Canada

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File: 5200

18 August 1998

Radio Advisory Board of Canada Response to Canada Gazette Notice No. DGRB-001-98: Consultation on Spectrum Licence Fees for Mobile Satellite Services in Canada Using Mobile Satellite Service Spectrum above 1GHz

General

The Radio Advisory Board of Canada ("the Board") welcomes the opportunity to comment on Industry Canada's Notice No. DGRB-001-98 published in Canada Gazette dated June 13, 1998, later amended by DRGB-005-98 (Extension to the comment period).

The Board is in favour of the approaches taken by Industry Canada leading to simplified, cost effective spectrum management. The direction taken in the proposed approach for spectrum licence fees for MSS above 1 GHz generally meets this objective. The Board offers below a series of comments to Industry Canada on ways the current policy can be either improved or clarified.

The Board is of the opinion that the key issue in the proposed revision to the MSS licence fee structure above 1 GHz is the following: two existing Canadian MSS Service Providers indicated that the revised MSS fees would translate into a significant increase over the licence fees they are currently paying. The Board believes that a change in how licence fees are applied should not be an opportunity for Industry Canada to raise such fees. Therefore the Board recommends that this situation be thoroughly explored and understood before a new fee structure is implemented.

Comments on the points raised by Industry Canada:

2.1 The impact this change in licensing approach may have on the provision of mobile satellite services in Canada

The Board observes that the newer MSS systems soon to be launched (so-called Big LEO's) are generally favourable to the proposed revised licence fee structure, taking into account the need for some adjustments or clarifications.

On the other hand, the existing operators of MSS services (using geostationary satellites) will incur a significant increase in their overall licence fees, according to their current interpretation of the proposed licence fee structure. This could impact significantly on their business, and the Board is of the opinion that the reasons leading to this increase in licence fees should be well understood (spectrum efficiency, bandwidth requirements, grey market, ability to collect licence fees from international users, etc.). Then a discussion between Industry Canada and the affected service providers could lead to a compromise position that would be acceptable to all parties, while remaining equitable to all MSS service providers.

2.2 The appropriateness of the proposed annual fee in reflecting the economic value of the spectrum resources.

Big LEO service providers indicated that the $18,000 annual fee per 500 kHz represents a fair economic "rent" for spectrum that is being used at reasonable capacity and is generating revenues. However, according to the current interpretation of the proposed MSS Spectrum fees, the value of $18,000 per 500 kHz would result in a considerably higher annual licensing fee for two of the existing GSO MSS service providers in Canada. The Board is of the opinion that a change in the licence fee structure as now proposed should not result into an increase of the licence fees for existing service providers. In the previous section The Board has proposed a discussion path for resolving this issue.

The Board is of the view that not all MSS spectrum allocations above 1 GHz have similar Economic Value. For example, the 2 GHz spectrum allocated to MSS is presently heavily used by terrestrial systems and may not be as valuable to MSS Service Providers as clean MSS spectrum assigned in the lower L band.

The Board notes that the proposed licence fee structure, as well as the current one, results in licensing fees on a per subscriber terminal basis that are significantly higher than those incurred for a terminal registered in the United States. This situation may stimulate a grey market, where Canadian companies/users would be encouraged to use a US address or subsidiary for registering a terminal in the United States, thus avoiding the higher Canadian Licence Fees. This would also result in lower revenues for Canadian Service Providers. The Board suggests that Industry Canada examine the U.S. Licence Fee structure for MSS and consider the consequences of any disparity between U.S. and Canadian fees.

It is not clear in the current Industry Canada proposal whether fees will be charged for both uplink and downlink spectrum, should the MSS system use different spectrum for these two links. The Board recommends that this point be clarified in the final text of the proposed licence fee structure.

The $18,000 annual fee for 500 kHz is high for start-up operations which will have little cash flow in the first year or two, and no profit for several years. The Board suggests as a more equitable approach a ramping-up mechanism, such as: 25% in year one, 50% in year two, and full fee in year three and thereafter. This will ensure that the Department receives a reasonable economic rent at all times and will allow start-up operations to put more financing in the early years towards building a viable business.

There is some confusion regarding what exactly is a service provider, versus a reseller. The Board understands from discussions with Industry Canada that a company has to buy its satellite access directly from the Satellite Operator in order to qualify as an MSS service provider. Any other company buying its satellite access from a service provider would be considered a reseller. In some cases, for the operator of a Canadian satellite for instance, the satellite operator can also be a service provider. The Board requests Industry Canada that such definitions be clarified in the final text of the proposed spectrum licence fee.

2.3 The suitability of using a minimum bandwidth of 500 kHz with increments of 500 kHz as the basis for assessing the fee for any particular network.

Industry Canada is proposing to use a minimum bandwidth of 500 kHz with increments of 500 kHz as the basis for assessing the fee for any particular network. The Board found that the 500 kHz increment is not compatible with the way spectrum is currently assigned. The Board therefore proposes that spectrum exceeding the 500 kHz minimum bandwidth be either charged on a pro rata basis, or that a smaller increment be used, which increment should be consistent with the way spectrum is currently assigned.

2.4 The proposed reduction of licence fees where sharing of a common band of radio frequencies among two or more service providers is required.

The Board has reviewed the proposed reduction of licence fees where sharing of a common band of radio frequencies among two or more service providers of two or more satellite networks. The MSS industry members could not reach consensus on the correctness of the 1/3 multiplier, therefore the Board is not in a position to provide any recommendations on this proposal.

In the other sharing scenario where two or more Service Providers are associated with a single mobile network, the 1/2 applicable multiplier is acceptable to the Canadian MSS service providers.

Other Comments:

The Board notes that the Industry Canada proposal suggests that they have concurred with the global and domestic MSS providers with respect to the inappropriateness of spectrum auctioning for MSS Systems and that they will therefore not resort to spectrum auctioning for MSS spectrum in the future.

The Board also observes that Industry Canada mentions in Section 4 of the Gazette Notice that "(After the Department has reviewed all the responses, and incorporated any necessary changes, the Department will adopt an appropriate licensing approach and set the fee.)". The Board recommends that the Department continues its open public process when implementing these final changes, and that such changes if substantial be submitted to the public for comments.


File: 5200

11 September 1998

Industry Canada
300 Slater Street,
Ottawa, ON
K1A 0C8

Attention: Director, Space and International Regulatory Activities

Subject: Canada Gazette Notice DGRB-001-98, dated 13 June 1998

Spectrum Licence Fees For Mobile Satellite Services Using Radio Spectrum Above 1 GHz

Attached (in Rich Text Format (~.rtf) in the electronic version) is the Radio Advisory Board of Canada's response to Canada Gazette Notice DGRB-001-98.

This response was prepared by a the Mobile Satellite Service Sub-committee (chaired by Guy Boulay, CWTA/Iridium Canada) of the Mobile and Personal Communications Committee.

The response was sent for ballot to RABC sponsor members on 25 August 1998. The Responses were as shown in the following table.

Sponsor Approved Approved With Comment Abstained Disapproved Disapproved With Comment Did Not Respond
APCO Canada X          
AT&T Canada           X
Canadian Association of Broadcast Consultants           X
Canadian Association of Broadcasters     X      
Canadian Broadcasting Corporation           X
Canadian Cable Television Association           X
Canadian Electricity Association X          
Canadian Space Agency           X
Canadian Satellite Users Association           X
Canadian Wireless Telecommunications Association           X
Clearnet Inc.           X
Department of National Defence X          
Electro-Federation of Canada           X
Ontario Ministry of the Solicitor General           X
Mobility Canada X          
Municipal Electrical Association           X
NAV CANADA     X      
Radio Amateurs of Canada     X      
Railway Association of Canada X          
Royal Canadian Mounted Police     X      
Rogers Cantel Inc.     X      
Stentor X          
Teleglobe Canada           X
Western Canada Telecommunications Council           X

The total (out of 24) is:

Approved (without comment): 6

Abstain: 5

Did Not Respond: 13

Yours truly

E.R. (Ted) Campbell
General Manager

Attachment: 1 (RABC Response to DGRB-001-98)

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