Policy and Call for Applications — Wireless Personal Communications Services in the 2 GHz Range — Implementing PCS in Canada

6. Policy Principles for Licensed PCS

The following policy determinations, of both broader and more specific application, are directed towards the provision of personal communications services within Canada in the spectrum defined in section 5.

6.1 Eligibility

6.1.1 Existing and new service providers

The construction of the extensive infrastructure necessary to provide existing radiocommunication services, and in particular the deployment of the base stations needed to link the mobile units to the public switched telephone network, could enable existing providers to realize economies of scale when adapting their networks to provide PCS. They could implement PCS relatively more quickly and with minimal duplication of telecommunications facilities. Of further interest and concern in any such deliberation is the current business environment in which the service providers must operate. This environment is marked by the growth of large firms seeking to offer a comprehensive range of services on a global basis and by regulators' evolving views on the appropriateness of permitting competition to resolve marketplace issues. The argument has been put forward that Canada needs a relatively small number of large telecommunications entities to compete internationally with the large multinational firms which are likely to dominate the industry in the near future.

At the same time, however, there are concerns that existing service providers, and especially cellular service providers, would simply replicate their operations and service offerings in a new frequency band. These concerns include the absence of competition and the fairness of any selection process in which potential new service providers could face disadvantages in competing to offer the new service.

More broadly, the question was raised of the extent to which the competing or complementary activities of the applicants should be considered in the selection process for a new wireless technology. Views have been expressed to limit the participation of those providers currently offering services with which the new service could be expected to compete. Allowing new entrants, which are not involved in the operation of existing systems, to implement the new services may result in more aggressive deployment and implementation strategies, foster price competition between services having overlapping target markets, and hasten the introduction of innovative new services.

Having considered the submissions outlined above and the policy objectives outlined in section 4, it has been decided to adopt certain eligibility criteria for those entities seeking to provide PCS. Any entity will be eligible to hold radio licences covering, in any geographic area, frequency assignments aggregating up to a total of 40 MHz of spectrum. This aggregation consists of:

  1. spectrum licensed for new PCS in the 2 GHz band;
  2. spectrum licensed for cellular mobile radiotelephony services in the 800 MHz band, and for similar public high-mobility radiotelephony services, other than air-to-ground telephony and mobile-satellite services;
  3. spectrum as defined in a. and b. above that is licensed to any affiliate2 of the entity); and,
  4. spectrum as defined in a) and b) above that is licensed to any other entity which has an operating and/or marketing arrangement with the subject entity (or with any of its affiliates) for the provision of uniformly-branded or jointly-offered telecommunications services.

An entity may undertake in its application for a PCS licence to divest itself of such spectrum resources, or to implement such changes in its commercial arrangements, so as to bring it within these eligibility criteria prior to the issuance of the requisite licences for PCS, in each case describing the mechanism and timetable under which such divestiture or change in arrangements would be effected. This limit on the aggregation of spectrum will be in effect during a term of three years from the initial selections of PCS licensees after which the restriction may be reviewed by Industry Canada. The aggregation rule will also be observed when the transfer of an ownership interest in a successful applicant is effected.

6.1.2 Operating areas of licences for new services.

Large regional and nationwide licences have the potential to provide consumers with the convenience of wide-area access, obviously important in the development of mobile telecommunications services. Smaller geographic operating areas, however, decrease the capital requirements of individual licensees, and may promote more rapid deployment and greater consumer responsiveness. Although the licensing processes for most of the recently introduced mobile radio services have been oriented towards favouring applications undertaking to provide national or broad coverage, there are likely to be mobile radio service applications in the future which will neither be demanded nor economic over large geographical areas.

Accordingly, while local, regional and national companies are fully eligible, and encouraged, to participate in the comparative licensing procedure for every spectrum block, preference in the larger blocks will be extended to companies that are capable of supplying integrated, nation-wide, end-to-end service. Individual companies could demonstrate this ability through, for example, evidence of contractual affiliations with other companies that would enable the necessary level of service to be provided.

6.2 Services

In Canada Gazette Notice DGTP-006-94, comments were solicited with respect to the types and descriptions of services that might be offered by PCS in the future. Public comments received in response to this Notice were overwhelmingly in favour of not predetermining services to be offered by PCS, and, as a result, there will not be any such requirements.

Industry Canada will give very careful consideration during the selection process to the innovative nature of the services that applicants propose to offer, as well as to proposals for the delivery of value added services and content. Applicants are therefore urged to carefully address in their applications how their proposed service offering would meet novel foreseen needs, existing needs in a new or improved manner, or demands not currently being adequately satisfied. Included within the scope of such explanatory materials could be the manner in which a proposed service would address niche markets, either as an offering in a diverse urban market or in a non-urban location that has different or unique demands. Applicants proposing to offer innovative services should be able to substantiate in reasonable detail their ability to deliver such services.

The enhancement of the efficiency and competitiveness of Canadian telecommunications, at both the national and international levels, is certainly an objective of Canadian telecommunications policy that PCS could be expected to foster. The telecommunications carriage and equipment-manufacturing industries are major sources of economic activity in Canada, employing over 100,000 people; they also represent Canada's leading high technology industries. The timely introduction of new personal communications services enables Canadians to take advantage of novel means by which to increase their productivity and enhance their personal lives. It also allows Canadian suppliers of services and products to gain experience with new technologies and new services.

6.3 Implementation

Industry Canada will require applicants to submit their proposed implementation schedules. Applicants that undertake to provide the most rapid and the most extensive population and geographic coverage within their identified service areas will receive comparatively more favoured consideration.

Applicants are reminded of the necessity to proceed in a manner that minimizes the displacement of fixed microwave stations while meeting their commitments with respect to PCS implementation. Selected service providers are, in any event, urged to obtain any required regulatory approvals and to effect any necessary contractual arrangements as soon as reasonably possible after the selection process has concluded.

6.4 Number of PCS licences available

How many service providers will be licensed to offer PCS? The licensing of radio facilities for essentially all eligible and qualified service offerings allows competitive forces to rationalize the offerings in accordance with consumer preferences, albeit at some cost in infrastructure investment and in spectrum utilization. To the extent that a variety of innovative services are to be encouraged, licensing more, rather than fewer, competitors would foster an environment in which consumers have the greatest and most direct ability to influence the market to meet their needs. At the same time, if there are applications that do not describe services which are likely to provide a significant benefit to the public, it would mitigate against an award of licences in all of the identified frequency blocks.

Accordingly, Industry Canada will not make a predetermination of the number of service providers that are to be licensed in the current process. Instead, it will review all the submitted applications with a view toward licensing those proposals most likely to lead to the development of innovative services that will be useful to Canadians, and which will effectively contribute to an expanding range of services and suppliers, subject to spectrum capacity and efficiency considerations. As a consequence, in the absence of sufficiently meritorious applications, Industry Canada will not necessarily license, in the initial selection round, all possible blocks of spectrum, and may instead reserve part of the identified spectrum resources for future services. Once the initial authorization of service providers has been completed, Industry Canada anticipates that no further authorizations for new PCS providers in the 2 GHz band will be issued for the near to intermediate term.

6.5 Technology and technical standards

Industry Canada is aware that the telecommunications industry is working aggressively to complete several voluntary interoperability standards for PCS. These standards are based on different technologies and for each technology these standards provide for interoperability and roaming across the PCS spectrum blocks as set out earlier.

In view of this standards development activity, Industry Canada will not mandate any particular standard at this time. Industry Canada will encourage PCS operators to adopt those standards for their service which would provide benefits of interoperability and roaming to consumers.

For the purposes of equipment certification, Industry Canada will use standards developed by industry standards development bodies. In addition, minimum technical standards will be used to avoid potential harmful interference to other PCS operations and to other radio services operating in bands other than the PCS bands. These minimum standards will be harmonized with those of the United States.

Applicants should provide with their proposals, information about the technical means for and costs of, providing for lawfully warranted interception of communications by law enforcement agencies under Part VI of the Criminal Code of Canada.

6.6 Other competitive and social considerations

6.6.1 Impact on basic telephone service

What impact could PCS services have on the principle of universal, affordable access to basic telephone service? Consideration must be given to new, competitive means by which local and other telephone services can be supplied, the public switched telephone network being only one type of network with which PCS terminals can be interconnected. PCS will likely include services that can compete with those higher margin services that have traditionally provided the revenues required to ensure universal access to local telephone service, and may promote the utilization of services that do not make use of existing commercial networks. PCS may also offer alternatives, through the exploitation of new technologies, which may decrease or eliminate the current transfer of resources deemed necessary to achieve universal access by regulated wireline carriers. Indeed, some analysts note that PCS can provide access to alternative telecommunications networks (new wireless or existing cable television networks, for example) without requiring the installation of additional or replacement access facilities to the home. These analysts foresee PCS as competing more with conventional, copper local loop technology than with such existing mobile telecommunications services as paging and cellular telephony. Others, however, believe that new mobility service applications will dominate, at least as long as spectrum remains relatively scarce.

Given the objective of fostering competition in the provision of services, the selection process will favourably consider the introduction of new PCS services which might have a beneficial impact on the competitive provision of affordable local service and universal access. Applicants should also, where appropriate, indicate other means by which they would support universal service, e.g. by making available hearing aid compatible terminals.

6.6.2 Impact on the Information Highway

What is the impact that any particular new telecommunications development might have on the information highway and the other critical developing information technologies of the future? PCS might serve as the "last link" of the conduit by which such services are provided to the consumer, or it may have a broader role. Accordingly, favourable consideration in the selection process will be given to the extent to which a service offering advances the development of an integrated personal communications system capable of fulfilling the objectives of the Information Highway.

6.6.3 Equality of competition

Order in Council P.C. 1994–1689, dated October 8, 1994, contains clear statements of government policy pertaining to competition between facilities-based carriers. Two of the policy statements contained in PC 1994–1689 that are directly applicable to PCS are repeated below.

It is government policy that:

  • the facilities and capacity of telecommunications carriers under federal jurisdiction, ..., be made available for lease, resale and sharing by service providers and other carriers on a non-discriminatory basis; and
  • facilities and capacity, including support structures should, to the extent practicable, be provided in a manner that allows users to use and pay for only those parts of the network infrastructure that they require.

It is expected that applicants will indicate their intention to respect these policies by, for example, undertaking to make their future PCS and existing telecommunications facilities available to others on a resale basis. Applicants should be aware that facilities being used for the provision of cellular mobile radiotelephony services at 800 MHz are included within the scope of the policy referred to in this section.

Similarly, applicants are expected to respect Industry Canada's policy of encouraging shared use of advantageous antenna sites among mobile telecommunications service providers, where this is practical and where appropriate commercial agreements can be reached.

6.6.4 Access to 911 service

The introduction of PCS provides an opportunity to address a number of the concerns that Canadians have expressed over the past several years about the social impact of wireless communications. Wireless communications can offer a "lifeline" by means of which assistance can be summoned in the event of a medical emergency or when the assistance of law enforcement officials is required. This is especially important for the elderly and mobility impaired, for whom easier access to the telecommunications network can result in an enhanced sense of security and an increased level of convenience. Applicants will be expected to provide connection to appropriate 911 services.

6.6.5 Privacy

Similarly, Canadians have clearly expressed, in a number of fora, that they value their privacy. The use of radiocommunications to effect the link between the personal communicators and the conventional public switched telephone network (or other networks) has obvious ramifications for the privacy concerns of users, as evidenced most recently in the cellular area. PCS provides an opportunity to introduce a relatively high level of privacy protection for both voice and data applications. Applicants will be encouraged to delineate the enhancements to privacy protection that they can offer through the inherent technology being utilized and through the use of additional optional features.

6.7 Research and development

The Government of Canada encourages research and development in Canada through the objectives set out in the Telecommunications Act. To enhance the competitiveness of Canadian industry, successful applicants will be expected to support R & D activities in Canada relating to, in particular, communications technologies. Applicants who undertake and/or support research and development equitably distributed among the regions in Canada will be favoured.

6.8 Licences

6.8.1 Fees

Radio licence fees are prescribed by regulation. Industry Canada believes that PCS licence fees should correspond to fees for similar existing services. As a result, wide area coverage, high mobility type systems should have licence fees which generally correspond to the existing radio station licence fee for cellular radiotelephone systems. For smaller area coverage systems, where the radius of coverage is less than 1 km, fees should be scaled down proportionally from the wide area licence fee on a general basis. Industry Canada will be recommending licence fees of $17/MHz/station for limited area systems and $1,700/MHz/station for wide areas systems, based on the frequency block allotted. Thus, for example, for each station operating within a 10 MHz frequency block, the limited area system fees would be $170 per station and wide area system fees would be $17,000 per station. For each station operating within a 30 MHz frequency block, the limited area system fees would be $510 per station and wide area system fees would be $51,000 per station.

Applicants are further advised that Industry Canada is currently preparing a comprehensive review of the radio licence fee regime. Applicants are reminded that Industry Canada has yet to conclude its consideration of comments received in response to its preview of the comparative selection and licensing process and both, therefore, are subject to revision in the future. In formulating their proposals and business plans, applicants should be aware that Industry Canada is giving consideration to establishing licence fees in the future based on authorized, rather than utilized, spectrum. Further, Industry Canada continues to be of the view that radio licence fees should reflect the economic value of the radio frequency resource consumed.

6.8.2 Conditions of licence

The licensee must comply with the Canadian Carrier eligibility criteria as set out in subsection 16(1) of the Telecommunications Act and in the Canadian Telecommunications Common Carrier Ownership and Control Regulations. Licensees must also utilize equipment which meets applicable technical requirements and is approved for use in Canada and comply with the requirements and conditions for the transition of existing fixed microwave licensees as set forth in section 7 of this document.

Applicants are also advised that the conditions of licence such as, but not limited to, the following may be applicable:

  • the licensee will comply with the requirements and conditions set forth in this document except as specifically authorized to the contrary;
  • the system will be installed and operated in accordance with the implementation plan and all other commitments will be met as outlined in the phase two submission;
  • the licensee will file a detailed annual report outlining progress made in all areas; and
  • the licensee will fulfill its five year R & D commitments as set out in the phase two submissions.

6.8.3 Transfer of authorizations

Consistent with general policy in this area and the specific provisions of section 18 of the General Radio Regulations II, the transfer of an authorization to another party will not be allowed without a full review of the application by Industry Canada and the approval of the Minister. In the absence of exceptional circumstances, no transfer of authorizations will be permitted in the first three years after the award of an authorization granted pursuant to this policy to provide PCS.


Footnotes

2 "affiliate" is defined in the same manner as in subsection 35(3) of the Telecommunications Act; viz. "...a person who controls the carrier, or who is controlled by the carrier or by any person who controls the carrier."


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