Archived—DGRB-001-98 — TMI Communications

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September 11, 1998

Chron RJF98-007

Via Courier and E-mail

Mr. Ron Amero, P.Eng., Director
Space and International Regulatory Activities
Radiocommunication and Broadcasting Regulatory Branch
Industry Canada
Journal Building, North
300 Slater Street, 15th Floor
Ottawa, Ontario
K1A 0C8

Dear Mr. Amero:

Re: Canada Gazette Notice No. DGRB 98-Consultation on Spectrum License Fees for Mobile Satellite Services in Canada Using Mobile Satellite Service Spectrum above 1 GHz

TMI Communications (TMI) thanks the Department for this opportunity to provide the following comments in regard to the proposed licensing fee schedules for the Mobile Satellite Service (MSS) bands. TMI has been authorized to construct, launch and operate Canada's first domestic geostationary mobile satellite system -MSAT- which was successfully launched in 1996.

With the signing of the WTO Agreement and liberalization of most satellite communications services, non-Canadian-owned satellite systems may be authorized to provide satellite services in Canadian territories. TMI recognizes the benefits of a competitive market and welcomes the Department's initiative to modify current procedures to respond to a changing environment. The amended system should accommodate the entry into the Canadian market of foreign service providers in accordance with the WTO Agreement while allowing Industry Canada to retain its ability to collect license fees which recognize the value of accessing spectrum for service to Canadian customers.

One of the Department's stated objectives in the Notice is to minimize inequities in the treatment of service providers under the licensing regime which is adopted. In this regard, TMI submits that Geostationary ("GSO") MSS systems and Non-Geostationary ("NGSO") MSS systems (also known as "Big LEOs") have fundamentally different characteristics which might warrant a different licensing regime for each class of systems.

GSO satellites with coverage of Canada are generally regional in nature, and are characterized by wide spot beams, each covering more than one country in that region. Under the liberalized trade rules brought about by the WTO Agreement, it is reasonable to expect that a significant portion of GSO MSS spectrum will be used to provide services to Canadian customers.

Conversely, NGSO satellites provide global coverage and the frequency bands which are set aside in Canada for these systems are similarly designated throughout the world. TMI also notes that NGSOs typically can take advantage of very small spot beams, and can precisely associate allocated spectrum to geographical regions they operate within.

Under the existing satellite services licensing rules, the authorized non-Canadian-owned and operated satellite systems are only required to license with the Department their earth stations registered in Canada. This does not include mobile terminals roaming into Canada on a temporary basis. The present rules do not require that Industry Canada license the space stations associated with these systems, and indeed the Department states in the Notice that it has no authority to license foreign space stations. However, the Canadian-owned and operated satellite systems, such as the MSAT system, must license both their space station and the earth station terminals with the Department. With the current level of fees, this means that TMI, as the only domestic operator, must recover a higher level of license fees than its regional competitors and this may impact the ability for the Company to price competitively.

Under the proposed policy, the Department would levy license fees to each service provider on all radio frequency bands that are allocated to the mobile satellite service. For GSO MSS systems such as TMI, the new proposed policy as it stands presents a number of difficulties. To begin with, the proposed fees of $18,000 per 500 kHz would increase TMI's licensing expenses considerably, relative to those currently payable under the existing structure. Furthermore, applying a license fee based on the spectrum which can be accessed, including that which has been allotted to foreign systems, would appear to be equivalent to the licensing of the associated space station, whether domestic or foreign. As noted earlier, the Department has stated that it has no authority to license foreign space stations.

The Department should also consider that a foreign system seeking to enter the Canadian market would be faced with a significant upfront cost as soon as the first Canadian terminal was licensed. This may act as a barrier to entry and deter foreign entrants from providing competitive services in Canada, or encourage the creation of a gray market for the MSS services in Canada.

TMI believes that the charging of license fees based on the number of terminals in service is more appropriate in recognizing the value of access to Canadian customers. Those service providers with the most Canadian customers are deriving the greatest value from accessing the Canadian market and should therefore pay the highest fees.

Therefore, TMI recommends that for GSO MSS systems, the basic structure of the current licensing regime be retained, subject to the following considerations:

TMI proposes a simplified blanket terminal licensing scheme to be applicable to MSS GSO terminals. This would involve development of a blanket license authorization scheme that would be applicable to the earth station terminals of the GSO systems authorized to operate in Canada. The Table of fees associated with terminal licensing authorization should be based on the existing fee structure for mobile satellite terminals. The size of blocks should be large enough to streamline the administrative process for Industry Canada and small enough not to overburden a start-up system, e.g. blocks of 1000 terminals or larger.

TMI proposes annual fees of order of $400 per 50 kHz to be applicable to the spectrum coordinated for use on any MSS GSO space stations licensed by Industry Canada. This new suggested fee takes into account the additional fees payable under the simplified blanket terminal licensing scheme for the terminals operating within a GSO network. Also, it will bring Canadian MSS space station license fees in line with the average of that of the other countries in the region.

As noted earlier, the Department's proposed licensing regime may be warranted for NGSOs and indeed their submissions in this proceeding may indicate their level of support for it. In the event that Industry Canada implements some or all of the proposals in the Notice, TMI offers the following comments which may be helpful to the Department:

The proposed licensing fee is based on dividing the aggregate of the coordinated spectrum on one system by 500 kHz and rounding up. TMI's experience during the L-Band spectrum coordination negotiations is that spectrum segments of smaller than 500 kHz are very valuable and given the efficient and scrutinized allocation of spectrum among L-Band MSS operators, the suggested rounding up is not reflective of the true value of the coordinated spectrum. TMI proposes that licensing fee calculation be established based on 50 kHz segments.

Not all of the MSS spectrum bands planned to be used or currently in use by the MSS systems have similar "Economic Values". For example, certain spectrum bands are restricted in use, such as the Aeronautical Mobile Satellite (Route) Service band, requiring commercial MSS satellite operators to preempt access to these bands in order to give priority to another network providing safety services. Restricted bands are not as valuable as those frequency bands which are allocated to one satellite operator for its exclusive use at all times, and therefore, the licensing fees for these bands should be reduced accordingly.

The proposed policy refers to licensing of the allocated spectrum for use in Canada. However, there are portions of the Canadian coordinated spectrum in use by TMI that do not cover any Canadian territories (e.g. spectrum in use by South beam of MSAT system). The proposal is silent on licensing requirements for this type of allocations. If these allocations were to be licensed in the same fashion as the spectrum used in Canada and other countries adopt similar licensing regimes as Canada, TMI could then be required to license the same spectrum in two or more countries. This would increase TMI's licensing expenses and ultimately lead to higher costs to the consumer.

The proposed policy requires clarification as to the applicability of the fees to usage of the spectrum in both uplink and downlink directions. Furthermore, the definition of the spectrum to be coordinated is not clear. TMI understands that the spectrum to be coordinated under the new policy (or variations of it) is the internationally coordinated spectrum for a given system, without reuse.

TMI agrees with the Department that there should be a reduction of fees based on the number of satellite systems sharing a band (e.g. systems utilizing CDMA access scheme) or based on the number of service providers using the same satellite system. However, the proposed reduction ratios need to be further investigated and proper safeguards put in place, so that one entity does not benefit from reduced fees when there is sufficient knowledge that the set criterion and potential sharing of the bands will not materialize in future.

Information in relation with the amount of coordinated spectrum and size of the terminal blocks licensed is commercially sensitive information and must be kept confidential.

Should any new method of licensing the spectrum be adopted, TMI may be required to reevaluate its licensing cost recovery techniques. In an increasingly competitive environment, and considering the slower than expected growth in the MSS market, TMI feels that an additional burden of increased licensing fees, which must in turn be passed on to the consumer, has a very negative impact in the marketplace. In addition, TMI would be faced with additional expenses in order to modify the network and billing systems. Since TMI's budget cycle is based on the calendar year, any policy changes to be adopted which would significantly impact expenses should be made known to TMI by early fourth quarter of the previous year. TMI requests that the Department provide a sufficient notice period between adoption of any new licensing regime and the date of implementation.

In conclusion, TMI applauds the Department's efforts to improve the licensing process to accommodate the evolving competitive environment. These new policies should be developed with a view not only to providing for the entry of WTO member satellite systems, but also to creating a balanced competitive environment which provides the maximum benefits for Canadian consumers, and yet promotes continued development of the Canadian satellite industry. We are eager to further discuss the above issues with you or your staff, at your convenience.

Yours sincerely

John Forsey, Director
New Satellite Ventures

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