Archived—Spectrum Licensing Policy for Cellular and Incumbent Personal Communications Services (PCS)

Executive Summary

In December 2002, the Department released a Gazette Notice DGRB 004-02 entitled Consultation on a New Fee and Licensing Regime for Cellular and Incumbent Personal Communications Services (PCS) Licensees. Industry Canada proposed a transition of the cellular and incumbent PCS licensees to a new licensing and fee regime based on spectrum licences and a common fee. Comments and reply comments were received in March and April 2003. There was agreement among respondents on the majority of the attributes of the proposed fee and licensing regime. However, there was no support for the proposed fee rate, and there was no support for the proposed new condition of licence concerning System Access Fees (SAF). Industry Canada analysed all the comments received on the various aspects of the policy and licensing process and is now in a position to define the final policy for the transition of cellular and incumbent PCS licensees to the new licensing regime.

In proposing a fee rate the Department used as a basis an existing cellular network and the annual fees being paid to the Department for this network. The respondents stated that using these fees would mean an overall increase in annual licence fees. They proposed a number of alternatives including one that was based on the current level of fees paid by the industry. Our review indicates that a fee rate based on the current level of fees paid by the industry is suitable for this spectrum. Concurrent with the publishing of this policy, the Minister is issuing a fee order pursuant to section 19 of the Department of Industry Act, in order to implement the new fee regime by April 1st, 2004.

The Department also proposed a condition of licence that would require licensees to clarify the SAF charge to their subscribers. The respondents felt this was an inappropriate and unnecessary condition for a spectrum licence. Our review indicates that it is indeed in the interest of consumers to impose a condition related to SAF, as it helps consumers understand the charges on their bills. The condition meets our objectives of protecting consumers (as clearly defined within section 6 of the Department of Industry Act) and maintaining an efficient and effective competitive marketplace (as mandated in the Telecommunications Act). However, the Department will amend the proposed condition to reflect the concerns raised by respondents in the consultation.

It is the intention of the Department to implement the new fee and licensing regime for cellular and incumbent PCS licensees by April 1st, 2004.

1. Background

In December 2002, the Department released a Gazette Notice DGRB-004-02 entitled Consultation on a New Fee and Licensing Regime for Cellular and Incumbent Personal Communications Services (PCS) Licensees. Industry Canada proposed a transition of the cellular and incumbent PCS licensees (refer to Appendix A for a list of licensees) to a new licensing and fee regime based on spectrum licences and a common fee. The goal of the proposal was to meet Industry Canada's priority of creating a marketplace framework for the wireless telecommunications industry that is fair, efficient, and competitive. The framework would operate in accordance with common regulations, policies and procedures. This framework would further the telecommunications policy for Canada as set out in section 7 of the Telecommunications Act, the objectives of which include fostering increased reliance on market forces for the provision of telecommunications services and ensuring that regulation, where required, is efficient and effective. This provides the stability and efficiency required to conduct business, while maintaining consumer confidence in the products, services and transactions of the marketplace.

The proposed licensing regime also had as a goal to meet the government's commitment toward smart regulation. The Speech from the Throne 2002 committed the government to move forward with a smart regulation strategy "...to accelerate reforms in key areas to promote health and sustainability, to contribute to innovation and economic growth, and to reduce the administrative burden on business." By eliminating the need for annual radio licences for each site (currently over 5000), the administrative burden on the industry will be reduced.

Comments and reply comments were received in March and April 2003. Industry Canada analysed all the comments received on the various aspects of the policy and licensing process and is now in a position to define the final policy for the transition of cellular and incumbent PCS licensees to the new licensing regime. This policy is in keeping with the Treasury Board's External Charging Policy on user fees. Note that copies of all documents, legislation and policies cited in this document are available on the Spectrum Management and Telecommunications Web site at: http://www.ic.gc.ca/spectrum.

1.1 Definitions

In the document:

  • Cellular licensee — is a radiocommunication carrier who operates radio apparatus installed in a base station that communicates on the transmit and receive frequencies in the radio frequency band 869.040 MHz to 893.970 MHz and the transmit and receive frequencies in the radio frequency band 824.040 MHz to 848.970 MHz.
  • Incumbent PCS Licensee — is a PCS licensee authorized in the comparative selection and licensing process of 1995.
  • PCS licensee — is a radiocommunication carrier who operates radio apparatus installed in a base station that communicates on the transmit and receive frequencies in the radio frequency band 1850 MHz to 1990 MHz.

2. Legislation, Policy and Technical Considerations

The Department stated in its proposal that the transition of cellular and incumbent PCS licensees to spectrum licences does not obviate the requirement that licensees meet established legislative, policy and technical requirements. Some respondents suggested that Radio Systems Policy - 019, Policy for the Provision of Cellular Services by New Parties (RP-019) should be amended or revoked entirely. Comments suggested that, once the new regime is in place, those interested in obtaining spectrum to provide service in underserved or unserved areas might continue to burden the Department by applying for spectrum under RP-019 as opposed to approaching current licensees for transferred or divided spectrum.

After careful review of the comments received, the Department remains of the view that the policy should remain in force as stated. The policy fosters the telecommunications objectives of the Department as outlined in the Telecommunications Act, in particular the objective to render reliable and affordable telecommunications services of high quality, accessible to Canadians in both urban and rural areas in all regions of Canada. The policy is also consistent with the licensing regime described in this document, particularly with regards to transferability and divisibility. Thus, the legislation, policies and technical considerations that are of particular interest to the transition remain in effect and are reiterated below.

2.1 Ministerial Authority

Spectrum licences are subject to relevant provisions in the Radiocommunication Act (the Act) and the Radiocommunication Regulations (the Regulations). For example, the Minister has the power to amend the terms and conditions of spectrum licences (paragraph 5(1)(b) of the Radiocommunication Act). As well, section 40 of the Radiocommunication Regulations 1 regarding the assignment of frequencies, continues to apply. It is important to note that the Minister, pursuant to this regulation, would reallocate spectrum only under certain circumstances (e.g. a change in international allocation or where an overriding policy need arises to address a national security issue), taking into consideration that licensees have complied with the conditions of licence, made large investments in infrastructure, and are serving an established client base. If a reallocation were contemplated, it would take place only after full public consultation.

2.2 Spectrum Aggregation Limits

Cellular and incumbent PCS licensees continue to be subject to the spectrum aggregation limit in force. However, this is subject to any determinations that are be made pursuant to the public consultation release on October 18, 2003, concerning Advanced Wireless Services (AWS). Through this consultation the Department is seeking comments on the use of the bands 1710 MHz and 2110 MHz for new services and is launching a review of the mobile spectrum cap policy and roaming arrangements with noncompeting carriers in unserved or underserved areas of Canada.

Please note, under Section 10.3 entitled, Application of the Spectrum Aggregation Limit, in the document Amendments and Supplements and Clarification Questions to the Policy and Licensing Procedures for the Auction of Additional Spectrum in the 2 GHz Frequency Range, issued October 2000, the Department clarified, with respect to the spectrum aggregation limit, what is meant by an affiliate and an entity which has an operating and/or marketing arrangement.

2.3 Cellular Service to Underserved Areas

Policy for the Provision of Cellular Services by New Parties (RP-019) effected changes to policy respecting the authorization of cellular service providers operating in the bands of 824-849 MHz and 869-894 MHz. This policy facilitates the provision of cellular services to unserved and underserved areas in a timely and orderly manner by enabling entities, other than those which previously were or could have been authorized to offer such services, to obtain access to cellular spectrum in areas where incumbent licensees are not offering services or are underserving the area. Actions taken as a result of this consultation do not obviate this policy. The Department will continue to accept applications from potential new cellular service providers for authorization to offer cellular mobile voice telephony services in areas where competitive cellular service provision is not being offered at the time the application is made. The Department will follow the procedures for the submission of applications, including public notification of an application, that are outlined in RP-019.

2.4 International Coordination

The current arrangement for PCS licensees falls under the terms of an interim sharing arrangement that provides for frequency sharing in the Canada/United States border area. The operation of PCS systems that are within 120 km of the border shall comply with both domestic, technical sharing criteria and the terms of any interim sharing arrangement between Industry Canada and the Federal Communications Commission (FCC) of the United States. The present arrangement is entitled Interim Sharing Arrangement Between Industry Canada and the Federal Communications Commission Concerning the Use of the Band 1850 to 1990 MHz. As per the terms of this arrangement, licensees may be required to furnish all necessary technical data to Industry Canada for each relevant site for international coordination.

Coordination is required of any cellular transmitter installation which is within 70 km of the Canada/ United States border to eliminate any harmful interference, and to ensure continuance of equal access to the frequency block by both countries. Systems operators carry out the necessary coordination and are required to notify Industry Canada of their arrangements. The general principles for the coordination of cellular systems in the border area are outlined in Standard Radio System 503, Plan Technical Requirements for Cellular Radiotelephone Systems Operating in the Bands 824 - 849 MHz and 869 - 894 MHz (SRSP-503).

3. Framework for Cellular and Incumbent PCS Licensees

In the consultation the Department proposed two initiatives to create a framework that is more fair, efficient, and competitive:

  1. Amend current five-year spectrum licences issued to cellular and incumbent PCS licensees in 2001 to include enhanced privileges similar to auctioned PCS spectrum licences and eliminate the need for associated radio station licences other than in specified exceptional circumstances.
  2. Implement a common fee regime for cellular and incumbent PCS licensees using a rate that takes into account the amount of spectrum assigned (number of MHz) and the total population included in the service area (number of pop).

The Department received comments on a number of the aspects related to these two initiatives. Based on the comments received the Department will introduce the new framework for cellular and incumbent PCS licensees as outlined below.

3.1 Spectrum Licences

Respondents were generally in favour with the proposal, however, issues were raised with some of the proposed attributes of the spectrum licences. A discussion of the issues raised is provided below. Based on the comments submitted, the Department will issue amended spectrum licences to the cellular and incumbent PCS licensees to include enhanced privileges similar to the auctioned PCS spectrum licences and eliminate the need for associated radio licences. Spectrum licences allow that licensees are authorized the use of specific frequencies or a frequency block within a defined geographic area (refer to Appendix B for the service areas) under certain minimal constraints. The privileges that would be associated with the amended licences allow (subject to compliance with the Act, the Regulations and the terms and conditions of licence) the ability to transfer in whole or in part the licence in both the geographic and spectral domains (refer to Appendix C for current spectrum holdings).

3.2 System Access Fees

The Department proposed a new licence condition which would apply to all cellular and incumbent PCS licences that would require they include in their customer invoice a statement regarding System Access Fees or Network and Licensing Charges or a similar line item. The statement would explain that such charges are neither required nor collected by the Government. Those who commented were strongly opposed to the proposed condition and some suggested alternative wording.

Consumer enquiries to Industry Canada indicate that there is confusion as to what this line item on wireless phone bills represents. The ability of consumers to make an informed choice may be limited due to the lack of clarity of the pricing information available. The Department remains of the view that a condition of licence is required concerning this line item. However, the condition will be modified to meet the concerns of the licensees while maintaining the Department's goal of having a marketplace where consumers can make an informed choice. Licensees are not required nor permitted to levy charges to their subscribers on behalf of the government.

3.3 Resale and Roaming

One respondent suggested that the current requirements for analogue cellular resale and roaming be extended to include the digital technologies at 800 MHz of the cellular licensees. Other respondents were not in agreement with this suggestion. As this suggestion could have significant impact on certain cellular licensees and is outside the scope of this consultation, the condition of licence will not be extended to include digital technologies under this initiative. Further, the Department has initiated a public consultation outlined in Notice No. DGTP-007-03 - Consultation on the Spectrum for Advanced Wireless Services and Review of the Mobile Spectrum Cap Policy in which it seeks comments on the development of advanced digital mobile telephony and ancillary services in unserved and underserved areas by the cellular and PCS licensees. The conclusion of this issue will be addressed separately from this consultation on Advanced Wireless Services (AWS).

3.4 Transferability/Divisibility

Some respondents pointed out that the minimum geographic size that any licence may be partitioned should be a single spectrum grid cell, instead of the proposed census subdivision or new Local Telephone Service Provider Tier service area created to accommodate the serving areas. Industry Canada is of the view that this proposal is acceptable and consistent with other Departmental policies. The Department will modify the Transferability and Divisibility licence condition accordingly.

3.5 Census Data

The Department had used the 1996 Census data to determine the population of the service areas for the spectrum licences. A number of respondents requested the that Department use more up-to-date census figures. The Department concurs and will be using 2001 census data for the determination of population of the service areas.


Footnote

1Section 40 of the Radiocommunication Regulations reads: "The assignment of a frequency or frequencies to a holder of a radio authorization does not confer a monopoly on the use of the frequency or frequencies, nor shall a radio authorization be construed as conferring any right of continuing tenure in respect of the frequency or frequencies."

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