CPC-2-1-10 — Spectrum Licence Fee Calculations for Cellular and Incumbent Personal Communications Services (PCS)

5.3 New Party Cellular Licence Fees

Radio Systems Policy 019, Policy for the Provision of Cellular Service by New Parties (RP-019), applies to cellular licensees only. The Department will accept bona fide letters of intent from potential new service providers outlining proposals to offer specified services in one particular cellular sub-band, within a geographic area that is not being served by any cellular service provider or that is being served by only one cellular service provider.

Should the two parties agree to the transfer, the licence fees to be paid will be as per the transition scheme outlined in Gazette Notice No. DGRB-005-03.

Should the two parties be unable to come to an agreement and should the Department agree to authorize the new party applicant, the Department will revoke that portion of the geographic area with the applicable spectrum and assign it to the new party. Therefore, this new party application would be treated as a new application and would not be transitioning over the remaining period outlined in Gazette Notice No. DGRB-005-03.

Scenario1: Fee Increase

In this scenario, incumbent Company ABC has been notified by the Department that their spectrum licence renewal fee will see an increase over the seven-year graduated implementation plan. Therefore, the 2003/2004 renewal fee for their spectrum licence valued at $250,000 is less than the determined 2010/2011 renewal fee of $342,425. A graduated annual fee increase calculation would then be employed as shown in the table below. To determine the renewal fee for each respective fiscal year, the following formula would be used:

Fee = Spectrum (in MHz) x population (2001 census data) x A,
where A = B + [D x (C - B)]

For example, based upon PCS spectrum of 10 MHz, a population of 974,915, and A = 0.026997597, the licence renewal fee for the fiscal year 2004/2005 would be $263,204.

Year	A $/MHz/pop	B $/MHz/pop	C $/MHz/pop	D	Fee $	Increment $
2004/2005	0.02699759	0.02564326	0.03512361	0.142857	263,204	13,204
2005/2006	0.02835192	0.02699759	0.03512361	0.166665	276,407	13,204
2006/2007	0.02970625	0.02835192	0.03512361	0.2	289,611	13,204
2007/2008	0.03106059	0.02970625	0.03512361	0.25	302,814	13,204
2008/2009	0.03241494	0.03106059	0.03512361	0.333335	316,018	13,204
2009/2010	0.03376927	0.03241494	0.03512361	0.5	329,222	13,204
2010/2011	0.03512361	0.03376927	0.03512361	1	342,425	13,204

Scenario2: Fee Decrease

In this scenario, incumbent Company ABC has been notified by the Department that their spectrum licence renewal fee will see a decrease over the seven-year graduated implementation plan. Therefore, the 2003/2004 renewal fee for their spectrum licence valued at $400,000 is more than the determined 2010/2011 renewal fee of $342,425. A graduated annual fee decrease calculation would then be employed as shown in the table below. To determine the renewal fee for each respective fiscal year, the following formula would be used: 

Fee = Spectrum (in MHz) x population (2001 census data) x A,
where A = B - [ D x (B - C )]

For example, based upon PCS spectrum of 10 MHz, a population of 974,915 and A = 0.04018556, the licence renewal fee for the fiscal year 2004/2005 would be $391,775.

Year	A $/MHz/pop	B $/MHz/pop	C $/MHz/pop	D	Fee $	Decrement $
2004/2005	0.04018556	0.04102921	0.03512361	0.142857	391,775	(8,225)
2005/2006	0.03934191	0.04018556	0.03512361	0.166665	383,550	(8,225)
2006/2007	0.03849825	0.03934191	0.03512361	0.2	375,325	(8,225)
2007/2008	0.03765459	0.03849825	0.03512361	0.25	367,100	(8,225)
2008/2009	0.03681092	0.03765459	0.03512361	0.333335	358,875	(8,225)
2009/2010	0.03596727	0.03681092	0.03512361	0.5	350,650	(8,225)
2010/2011	0.03512361	0.03596727	0.03512361	1	342,425	(8,225)

Scenario 3: Calculation of Fees for a Licence Transfer in Whole

In this scenario, Company ABC has been notified by the Department that the 2003/2004 renewal fee for their spectrum licence is valued at $250,000, and will undergo annual fee increment increases over the seven-year graduated implementation plan, as shown in the table below.

Year	A $/MHz/pop	B $/MHz/pop	C $/MHz/pop	D	Fee $	Increment $
2004/2005	0.02699759	0.02564326	0.03512361	0.142857	263,204	13,204
2005/2006	0.02835192	0.02699759	0.03512361	0.166665	276,407	13,204
2006/2007	0.02970625	0.02835192	0.03512361	0.2	289,611	13,204
2007/2008	0.03106059	0.02970625	0.03512361	0.25	302,814	13,204
2008/2009	0.03241494	0.03106059	0.03512361	0.333335	316,018	13,204
2009/2010	0.03376927	0.03241494	0.03512361	0.5	329,222	13,204
2010/2011	0.03512361	0.03376927	0.03512361	1	342,425	13,204

In fiscal year 2006/2007, Company ABC transfers its entire spectrum licence to Company XYZ. Beginning in fiscal year 2007/2008, Company XYZ would assume the remainder of the same graduated fee schedule that was originally notified to Company ABC, as shown in the following table.

Year	A $/MHz/pop	B $/MHz/pop	C $/MHz/pop	D	Fee $	Increment $
2007/2008	0.03106059	0.02970625	0.03512361	0.25	302,814	13,204
2008/2009	0.03241494	0.03106059	0.03512361	0.333335	316,018	13,204
2009/2010	0.03376927	0.03241494	0.03512361	0.5	329,222	13,204
2010/2011	0.03512361	0.03376927	0.03512361	1	342,425	13,204

For example, based upon the formula: 

Fee = Spectrum (in MHz) x population (2001 census data) x A,
where A =B + [D x (C - B)], Company XYZ's renewal fee for the 2007/2008 fiscal year would be $ 302,814.

Scenario 4: Calculation of Fees for a Licence Partitioning

In this scenario, Company ABC has been notified by the Department that the 2003/2004 renewal fee for its spectrum licence is valued at $250,000, and will undergo annual fee increment increases over the seven-year graduated implementation plan, as shown in the table below.

Year	A $/MHz/pop	B $/MHz/pop	C $/MHz/pop	D	Fee $	Increment $
2004/2005	0.02699759	0.02564326	0.03512361	0.142857	263,204	13,204
2005/2006	0.02835192	0.02699759	0.03512361	0.166665	276,407	13,204
2006/2007	0.02970625	0.02835192	0.03512361	0.2	289,611	13,204
2007/2008	0.03106059	0.02970625	0.03512361	0.25	302,814	13,204
2008/2009	0.03241494	0.03106059	0.03512361	0.333335	316,018	13,204
2009/2010	0.03376927	0.03241494	0.03512361	0.5	329,222	13,204
2010/2011	0.03512361	0.03376927	0.03512361	1	342,425	13,204

During fiscal year 2006/2007, Company ABC partitions its spectrum licence by transferring all 10 MHz of spectrum in a specified geographic area, the population of which is 200,000, to Company XYZ. Company ABC would therefore be left with a spectrum licence for 10 MHz covering a geographic area whose remaining population is now 774,915 (reduced from the original 974,915 population value).

The fee schedules for the two new spectrum licences, calculated to begin for fiscal year 2007/2008, will be based on the original graduated annual fee schedule of Company ABC and be apportioned according to the population that each covers. The sum of the renewal fees for the two companies will be equal to the original annual renewal fee amount of Company ABC.

As a result, Company ABC's revised graduated fee schedule would be: 

Year	A $/MHz/pop	B $/MHz/pop	C $/MHz/pop	D	Fee $	Increment $
2007/2008	0.03106059	0.02970625	0.03512361	0.25	240,693	10,495
2008/2009	0.03241494	0.03106059	0.03512361	0.333335	251,188	10,495
2009/2010	0.03376927	0.03241494	0.03512361	0.5	261,683	10,495
2010/2011	0.03512361	0.03376927	0.03512361	1	272,178	10,495

Company XYZ's corresponding graduated fee schedule would be: 

Year	A $/MHz/pop	B $/MHz/pop	C $/MHz/pop	D	Fee $	Increment $
2007/2008	0.03106059	0.02970625	0.03512361	0.25	62,121	2,709
2008/2009	0.03241494	0.03106059	0.03512361	0.333335	64,830	2,709
2009/2010	0.03376927	0.03241494	0.03512361	0.5	67,539	2,709
2010/2011	0.03512361	0.03376927	0.03512361	1	70,247	2,709

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Scenario 5: Calculation of Fees for a Licence Disaggregation

In this scenario, Company ABC's 2003/2004 renewal fee for its spectrum licence is $250,000 and they have been notified by the Department that they will undergo annual fee increments over the course of the seven-year graduated implementation plan. During fiscal year 2006/2007, Company ABC disaggregates its spectrum licence by transferring 5 MHz of spectrum for service area 2-11 to Company XYZ.

The fee schedules for the two new spectrum licences, calculated to begin for fiscal year 2007/2008, will be based on the original graduated annual fee schedule of Company ABC and be apportioned according to the remaining spectrum assigned to each. The sum of the renewal fees for the two companies will be equal to the original annual renewal fee of Company ABC.

The original graduated annual fee schedule for Company ABC was: 

Year	A $/MHz/pop	B $/MHz/pop	C $/MHz/pop	D	Fee $	Increment $
2004/2005	0.02699759	0.02564326	0.03512361	0.142857	263,204	13,204
2005/2006	0.02835192	0.02699759	0.03512361	0.166665	276,407	13,204
2006/2007	0.02970625	0.02835192	0.03512361	0.2	289,611	13,204
2007/2008	0.03106059	0.02970625	0.03512361	0.25	302,814	13,204
2008/2009	0.03241494	0.03106059	0.03512361	0.333335	316,018	13,204
2009/2010	0.03376927	0.03241494	0.03512361	0.5	329,222	13,204
2010/2011	0.03512361	0.03376927	0.03512361	1	342,425	13,204

Company ABC's revised graduated fee schedule would be: 

Year	A $/MHz/pop	B $/MHz/pop	C $/MHz/pop	D	Fee $	Increment $
2007/2008	0.03106059	0.02970625	0.03512361	0.25	151,407	6,602
2008/2009	0.03241494	0.03106059	0.03512361	0.333335	158,009	6,602
2009/2010	0.03376927	0.03241494	0.03512361	0.5	164,611	6,602
2010/2011	0.03512361	0.03376927	0.03512361	1	171,213	6,602

Company XYZ's corresponding graduated fee schedule would be: 

Year	A $/MHz/pop	B $/MHz/pop	C $/MHz/pop	D	Fee $	Increment $
2007/2008	0.03106059	0.02970625	0.03512361	0.25	151,407	6,602
2008/2009	0.03241494	0.03106059	0.03512361	0.333335	158,009	6,602
2009/2010	0.03376927	0.03241494	0.03512361	0.5	164,611	6,602
2010/2011	0.03512361	0.03376927	0.03512361	1	171,213	6,602

6. References

The following documents are available on the Spectrum Management and Telecommunications Web site at: http://www.ic.gc.ca/eic/site/smt-gst.nsf/eng/home.

• Gazette 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.
• Gazette Notice No. DGRB-006-03 — Spectrum Licensing Policy for Cellular and Incumbent Personal Communications Services (PCS).
• Client Procedures Circular 2-1-23, Licensing Procedures for Spectrum Licences for Terrestrial Services (CPC-2-1-23).
• Radio Systems Policy 019, Policy for the Provision of Cellular Services by New Parties (RP-019).
• Service Areas for Competitive Licensing.

7. Contact

For further information concerning the procedures outlined in this document or related matters, you may contact:

Manager
Operational Policies
Radiocommunications and Broadcasting Regulatory Branch
Industry Canada
300 Slater Street
Ottawa, Ontario
K1A 0C8
Phone: 613-948-2694
Fax: 613-991-3514