Gazette Notice No. DGRB-005-03

Department of Industry

Department of Industry Act, S.C. 1995, c.1

Notice No. DGRB-005-03 — Radio Authorization Fees for Wireless Telecommunication Systems that Operate in the Radio Frequency Bands 824.040 MHz to 848.970 MHz, 869.040 MHz to 893.970 MHz or 1850 MHz to 1990 MHz

Introduction

Certain technological advances and regulatory measures which support different privileges and conditions for similar services have created marketplace distortions among service providers in the cellular and Personal Communications Services (PCS) industry. In an effort to create a marketplace framework for the wireless telecommunications industry that is fair, efficient and competitive, the department recognizes the need for a common regulatory framework which minimizes marketplace distortions such as licensing fee costs that inhibit network expansion into lesser populated areas.

On December 21, 2002, Industry Canada issued a notice that invited public comments on all aspects of the paper entitled Consultation on a New Fee and Licensing Regime for Cellular and Incumbent Personal Communications Services (PCS) Licensees. The document explained the department's proposal for the transition of cellular and incumbent PCS licences to spectrum licences with the enhanced privileges of transferability and divisibility, similar to those of auctioned PCS licences. The proposal would also eliminate the requirement for radio licences other than in specified exceptional circumstances, and establish a common fee regime. The proposed common fee regime for cellular and incumbent PCS licensees would use a rate that takes into account the amount of spectrum assigned (i.e. number of MHz) and the total population included in the service area.

The department proposed a licence fee of $1,500,000 per 1 MHz of national spectrum which results in a licence fee of $0.052 per 1 MHz of assigned spectrum per person in a defined geographic area. The department also proposed a multi-year implementation time frame before the full measure of the new fee would become payable. Implementation would be graduated, based on the difference between the licence fees payable at March 31, 2003, and the final amount payable. This graduated implementation would apply to licensees who would see an increase in their current annual licence fees as well as for those who would see a decrease in their fees, including situations where geographic partitioning and spectral disaggregation take place.

In response to the consultation, several respondents said the proposed fee level is too high; represents an overall increase in fees to the industry that will negatively impact customers; and is a burden to an industry that is not yet profitable. These respondents proposed a lower fee. Industry Canada analysed all the comments received on the various aspects of the policy and licensing process and concurrent with this notice, the department announced the release of its policy document entitled Spectrum Licensing Policy for Cellular and Incumbent Personal Communications Services (PCS), which defined the final policy for the transition of cellular and incumbent PCS licensees to the new licensing regime. The cellular and 1995 PCS licensees will all pay the same annual rate in 2011 and the department will adopt a fee level based on the 2003 licence renewal fees of $129,982,841 paid by these service providers. This equates to $1,053,957 per MHz nationally or $0.03512361 per person given that the 2001 census population of Canada was 30,007,094.

To determine this fee, the department redistributed the total fee paid by cellular and incumbent PCS licensees in 2003 amongst the service providers by determining the amount of assigned spectrum bandwidth and the population in each licensee's service area.

The minimum fee for an authorization is set at $1,000. The department will implement the new fee over a seven-year time frame after which time the full measure of the new fee becomes payable. Implementation will be graduated based on the difference between licence fees payable at March 31, 2003 and the final amount payable. This graduated implementation will apply to both licensees seeing an increase in their current annual licence fees and to those seeing a decrease in their fees including situations where partitioning and disaggregation take place.

Complete details of the fees, established in accordance with the licensing policy and the client procedures circular, are set out in the following fee schedule.

Fee Schedule

The Minister of Industry, pursuant to section 19 of the Department of Industry Act, hereby fixes the following fees, effective April 1, 2004. The fees are applicable to radio authorizations issued by the Minister pursuant to paragraph 5(1) (a) of the Radiocommunication Act to establish wireless telecommunication systems in accordance with the terms of the radio authorization.

Interpretation

1. For the purpose of this fee schedule,

"service area" means the defined geographic area specified in the radio authorization;

"specified frequencies" means the range of frequencies, or portion thereof, in the frequency bands 824.040 MHz to 848.970 MHz, 869.040 MHz to 893.970 MHz or 1850 MHz to 1990 MHz specified in the radio authorization;

"person" means the number of individual people in a census area as determined by Statistics Canada in the 2001 Census and as specified for the service area in the radio authorization;

"wireless telecommunication system" means a radiocommunication system which operates on specified frequencies in the service area specified in the radio authorization;

"renewal fee" means the annual fee payable for the continuance in force of the radio authorization until the radio authorization expires;

"new fee" means the applicable annual, prorated or renewal fee fixed under sections 2 to 5 or section 6; and

"old annual fee" means,

pursuant to the Radiocommunication Regulations, the applicable annual radio licence fees, paid by the holder of the radio authorization as of April 1, 2003 for the operation of stations on the specified frequencies, and
for fiscal year 2004/2005 and subsequent fiscal years set out in Schedule I, the previous fiscal year's annual fee expressed as a dollar value per MHz per person as determined on February 1^st of that year.

Annual Radio Authorization Fee

2. (1) The annual radio authorization fee, payable with respect to the specified frequencies upon which a wireless telecommunications service provider is authorized to operate, is for each 1 MHz, or portion thereof, $0.03512361 per person for the authorized service area specified in the radio authorization.

(2) The minimum annual radio authorization fee with respect to an authorization issued under subsection 2(1) is $1000.

(3) The applicable annual radio authorization fee payable pursuant to subsection 2(1) or (2) applies to all new authorizations issued effective April 1, 2004 with respect to specified frequencies in a service area:

never assigned to any licensee by the department prior to April 1, 2004, or
returned to the department for reassignment after April 1, 2004.

Prorated Fee

3. The prorated balance of the then-current fiscal year's authorization fee for the applicable specified frequencies for the authorized service area is due on the date of the issuance of the radio authorization.

4. The month that the Minister issues the initial annual radio authorization determines the applicable prorated fee.

5. The prorated fee is 1/12 of the total applicable annual authorization fee for each month until March 31 of the then-current fiscal year.

Renewal Fee

6. The renewal fee is the applicable annual radio authorization fee.

Fee Adjustments for Phased Implementation During Fiscal Years 2004 to 2011

7. During fiscal years 2004 to 2011, the applicable annual, prorated or renewal fee set out in sections 2 to 6 is adjusted in accordance with section 8 or 9 and Schedule I for:

all incumbent cellular or 1995 Personal Communications Services (PCS) licensees, or
after April 1, 2004, any new licensee who is authorized specified frequencies in a service area as a result of the transfer of the specified frequencies in a service area, whether in whole or part, from an incumbent cellular or 1995 PCS licensee.

Annual Fee Increase

8. (1) Where the old annual fee expressed as a dollar value per MHz per person is less than the new annual fee set out in section 2, the applicable annual fee for the then-current fiscal year is increased by:

the applicable fee adjustment factor set out in column II of item 1 of Schedule I for fiscal year 2004/2005, multiplied by the difference between the new annual fee set out in section 2 and the old annual fee; or
the applicable fee adjustment factor set out in column II for items 2 to 7 of Schedule I for each of the following fiscal years multiplied by the difference between the new annual fee set out in section 2 and the applicable old annual fee for the previous fiscal year.

(2) WhenB < C, the adjusted annual fee,A, for the then-current fiscal year is:

A= B + D (C - B)

where

A is the adjusted annual fee expressed as a dollar value per MHz per person for the then-current fiscal year;

B is the old annual fee expressed as a dollar value per MHz per person for the fiscal year 2003/2004; for the fiscal year 2004/2005 and for subsequent fiscal years set out in Schedule 1, B is the previous fiscal year's applicable annual fee expressed as a dollar value per MHz per person;

C is the annual new fee of $0.03512361 per MHz per person set out in section 2; and

D is the applicable adjustment factor set out in Schedule 1.

Annual FeeDecrease

9.(1) Where the old annual fee expressed as a dollar value per MHz per person is more than the new annual feeset out in section 2 the applicable annual fee for the then-current fiscal year is decreased by:

the applicable fee adjustment factor set out in column II of item 1 of Schedule 1 for fiscal year 2004/2005, multiplied by the difference between the old annual fee and the new annual fee set out in section 2; or
the applicable fee adjustment factor set out in column II for items 2 to 7 of Schedule I for each of the following fiscal years multiplied by the difference between the applicable old annual fee for the previous fiscal year and the new annual fee set out in section 2.

(2) When B > C, the adjusted annual fee, A, for the then-current fiscal year is:

A= B - D (B - C)