Consultation on the Renewal of 24 and 38 GHz Spectrum Licences and Spectrum Licence Fees for 24, 28 and 38 GHz Bands

Contents

  1. Introduction

  2. General Conditions For Licence Renewal

  3. 24 and 38 GHz Licences
  4. Discussion of 24 and 38 GHz Licence Conditions for New Licences
  5. Licence Fees
  6. Procedure for Licence Renewals

  7. Unassigned or Returned 24 and 38 GHz Spectrum and 28 GHz Local Multi-point Communications System (LMCS) Spectrum

  8. Submitting Comments

  9. Appendix A: Proposed 24 and 38 GHz Conditions of Licence

  10. Appendix B: Proposed 24 and 38 GHz Annual Fees

1. Introduction

In August 1998, Industry Canada issued the Framework for Spectrum Auctions Footnote 1 which outlined the approach that the Department would take whenever spectrum is assigned by auction. This document noted that a spectrum licence issued via an auction will generally be valid for 10 years from the date of licence issuance with a high expectation of renewal for a further 10-year term unless a breach of licence condition has occurred, a fundamental reallocation of spectrum to a new service is required, or an overriding policy need arises.

In 1999, Industry Canada ran its first spectrum auction in the 24 and 38 GHz bands. Since that time, three other auctions have been undertaken and 10-year licences issued. More recently, the Department issued the Policy Framework for the Auction for Spectrum Licences for Advanced Wireless Services and other Spectrum in the 2 GHz Range Footnote 2. In that paper, the Department raised the issues surrounding renewal and specific criteria that may be considered prior to renewing long-term licences and noted that a future consultation would deal with these issues.

This consultation deals specifically with the renewal of the 24 and 38 GHz licences issued following the 1999 auction. The paper discusses whether 24 and 38 GHz licences should be renewed, a proposed renewal fee, the licence conditions that will apply to new and renewed licences, and proposes a first-come, first-served licensing process. Comments are also invited on making 28 GHz available for licensing using a first-come, first-served process, with a fee as proposed for 24 and 38 GHz.

2. General Conditions For Licence Renewal

A spectrum licence issued via an auction will generally be valid for 10 years from the date of licence issuance with a high expectation of renewal for a further 10-year term unless a breach of licence condition has occurred, a fundamental reallocation of spectrum to a new service is required, or an overriding policy need arises.

The Department recognizes that licensees benefit from certainty and hence the clarification of what to expect at licence renewal is essential to the planning of networks and development of business cases. At the same time, there is interest that spectrum be put to use and in areas where it is not being used, there are often others who are interested in having an opportunity to access that spectrum. To date, the Department has encouraged the use of secondary market trading to deal with this issue but there has only been limited activity in this regard.

The Department will consult separately on the general application of renewals, as was raised in the AWS paper (DGTP-007-07). It is expected that the decisions resulting from the consultation will apply to the renewal of all long-term spectrum licences.

3. 24 and 38 GHz Licences

3.1 Auction Results and Conditions for Renewal

In November 1999, Industry Canada completed the auction of the 24 and 38 GHz Broadband Wireless Access spectrum. In the auction, 400 MHz of spectrum in the 24 GHz band and 800 MHz in the 38 GHz band were made available for licensing (See Table 1). Both of these bands are allocated for fixed service using point-to-point and point-to-multipoint broadband wireless applications. Of the 354 licences available, 258 were awarded with bids totalling $171,821,520. Licences were awarded with 10-year licence terms and a high expectancy for renewal at the end of the term for subsequent 10-year terms.

Table 1: Spectrum Licence Packages Offered in 1999 Auction
Spectrum Licence Size (MHz) Lower Frequency
(MHz)
Upper Frequency
(MHz)
A 400 24,250-24,450 25,050-25,250
B 400 38,700-38,900 39,400-39,600
C 100 38,900-38,950 39,600-39,650
D 100 38,950-39,000 39,650-39,700
E 100 39,000-39,050 39,700-39,750
F 100 39,050-39,100 39,750-39,800

Of the general conditions for renewal discussed in Section 2, the main issue of concern for the 24 and 38 GHz licences is the licence condition regarding implementation of spectrum usage. This warrants review and is discussed below.

3.2 Implementation of Spectrum Usage

The original licence condition for the implementation of spectrum usage was outlined in the May 1999 Policy and Licensing Procedures for the Auction of the 24 and 38 GHz Frequency Bands:

"Within three years of the auction's close, the licensee must demonstrate to the department that the spectrum has been put into use. The establishment of eight links per one million population (rounded up to a whole number) within a service area, or some other indicator of usage which is acceptable to the department, will be required."

Given that licences were issued on different dates, the original implementation deadlines varied. As the original implementation deadlines approached, the Department received requests from several licensees for an extension, citing a lack of suitable and affordable equipment preventing them from meeting the implementation deadline. After reviewing the requests, the Department agreed that the reasons outlined justified an extension to July 2, 2007.

More recently, as the 2007 implementation deadline approached, Industry Canada again received requests for a further extension. The availability of suitable and affordable radio equipment was again cited as hindering deployment. After reviewing the requests, the Department decided that the reasons outlined justified a further extension of the deployment requirement deadline. Gazette Notice No. DGRB-003-07 Footnote 3 was published on May 25, 2007, extending the deadline to all auctioned 24 and 38 GHz licensees who had not yet met their implementation deadlines, until the end of the licence term. The licence term for the majority of licensees will end in 2010, with some ending in 2012 and 2013.

At the time of the 24 and 38 GHz spectrum auction during the technology boom ("tech bubble"), this spectrum held great promise for fixed wireless broadband access, with service providers hoping to offer competitive voice, data and multimedia services. Unfortunately, the technology has not developed as expected, and the availability of suitable and affordable equipment remains an issue. It appears that the majority of spectrum has not been put to use. The Department also notes that there has not been any significant interest in the spectrum by non-licensees and that other countries are experiencing a similar lack of development.

At the close of the 24 and 38 GHz auction, some spectrum remained unassigned. Over the course of the licence term, one licensee returned its spectrum licences to the Department and another declared bankruptcy. Their licences were revoked by the Department. Industry Canada has received very little interest for the unassigned spectrum licences. Furthermore, the Department has met with 24 and 38 GHz licensees who have been actively trying to enter into commercial arrangements with other companies (e.g. to sell, lease or trade) to make use of their spectrum. Based on this evidence, the Department is of the view that there is an excess supply of spectrum in these bands and that spectrum warehousing by licensees is not an issue.

Industry Canada also notes that secondary markets can be more expeditious than the time required for the Department to establish a new licensing process for the spectrum and to provide access to it.

The high expectancy of renewal was based on compliance with all licence conditions, including "Implementation of Spectrum Usage." Although the implementation condition of licence was deferred, it was not waived. As a result, the requirement would have to be met at the time of renewal.

Recommendation

Under the circumstances, the Department proposes to waive implementation of spectrum usage as a factor in determining whether to renew the 24 and 38 GHz licences. Compliance with the remaining licence conditions will be reviewed by the Department prior to approving renewals.

Note that the decision of the Department to waive the implementation of the spectrum usage licence condition for the 24 and 38 GHz bands is specific to the 24 and 38 GHz bands, and does not apply generally to determinations that the Department may make with respect to the implementation of spectrum usage licence conditions in other frequency bands.

Comments and supporting rationale are sought on the Department's recommendation to waive the implementation of spectrum usage as a factor in determining whether to renew current 24 and 38 GHz licences.

4. Discussion of 24 and 38 GHz Licence Conditions for New Licences

The following section discusses the existing 24 and 38 GHz licence conditions, and proposes amendments, additions and deletions. Many of the proposed changes are to update the text with the current wording being used by the Department. A complete list of the proposed licence conditions can be found in Appendix A.

4.1 Licence Term and Renewal

At the time that the 24 and 38 GHz policy was written, it was anticipated that 10-year terms were sufficient to provide licensees and investors the required certainty for long-term investment.

Since the release of the policy in May 1999, there has been a trend towards longer licence terms in a number of countries to provide greater investment certainty. For example, Guatemala, France and Australia provide 15-year terms. The United Kingdom provides 20-year terms for 3G licences and New Zealand provides 20-year terms for cellular spectrum rights. The United States has generally maintained 10-year terms. Longer and indefinite licence terms are generally viewed as providing a more stable investment climate for licensees recognizing the initial investment in spectrum licences and the need to establish networks and recover costs.

The Department notes that in the case of the 24 and 38 GHz licences, very few licensees have put their spectrum to use to date. Given the continued uncertainty as to the availability of affordable equipment for these bands, the Department is of the view that 10-year licence terms are sufficient.

Recommendation

The Department proposes to provide licences with 10-year terms from the date of licence issuance. For subsequent terms, the Department may consult, if required, prior to the end of the licence term to deal with the specifics of the renewal process, depending on the circumstances at play at that time, including whether licence fees should apply for a subsequent licence term. Furthermore, the Department will consult separately on the general application of renewals as was raised in the AWS paper (DGTP-007-07). It is expected that the decisions resulting from the consultation will apply to the renewal of all long-term spectrum licences.

Factors that will be considered in the renewal process are discussed in Section 2 and the Department will make appropriate decisions at the time of renewal.

4.2 Licence Transferability and Divisibility

The Department proposes to maintain this licence condition, with some changes to update the text with the current wording used by the Department. The main changes are that licensees now have more flexibility in the amount of spectrum that can be transferred, and that departmental approval is required for each proposed transfer. Requests for transfers to eligible entities where the licence is in good standing will normally be approved. Note that this licence condition also allows for subordinate licensing as described in Issue 2 of CPC-2-1-23, Licensing Procedure for Spectrum Licences for Terrestrial Services.

Recommended New Wording (Main changes have been highlighted.)

The licensee may apply to transfer its licence(s) in whole or in part (divisibility), in both the bandwidth and geographic dimensions. The Department may define a minimum bandwidth and/or geographic dimension to the proposed transfer. Systems involved in such a transfer shall conform to the technical requirements set forth in the applicable standards.

Departmental approval is required for each proposed transfer of a licence, whether the transfer is in whole or in part. The licensee must apply to the Department in writing. The transferee(s) must also provide an attestation and other supporting documentation demonstrating that it meets the eligibility criteria and all other conditions, technical or otherwise, of this licence.

4.3 Spectrum Aggregation Limit

This licence condition is no longer required. On April 28, 2006, the Department issued Gazette Notice DGTP-004-06 - Decision to Rescind the Broadband Spectrum Cap Policy (http://www.ic.gc.ca/eic/site/smt-gst.nsf/eng/sf08564.html) removing the spectrum cap (aggregation limit) applicable to the 24 and 38 GHz spectrum bands.

4.4 Eligibility Criteria and Authorized Use

This condition of licence will continue to apply with no changes.

4.5 Radio Station Installations

This condition of licence will continue to apply. Licensees must comply with all requirements as set out in Client Procedures Circular CPC-2-0-03, Radiocommunication and Broadcasting Antenna Systems (http://www.ic.gc.ca/eic/site/smt-gst.nsf/eng/sf08777.html), as amended from time to time.

4.6 Laws, Regulations, and Other Obligations

This condition of licence will continue to apply with no changes.

4.7 Technical Considerations

This condition of licence will continue to apply with no changes.

4.8 International Coordination

This condition of licence will continue to apply with some amendments to update it to the current wording that the Department is using on other long-term spectrum licences, and to include reference to domestic coordination.

International and Domestic Coordination (New text in bold)

The licensee must comply on an ongoing basis with the requirements of cross-border sharing and coordination arrangements established between Canada and the United States, as amended from time to time. In addition, domestic coordination is required as per the Canadian technical standards for this spectrum. Although frequency assignments are not subject to site licensing, licensees may be required to furnish all necessary technical data to Industry Canada. Industry Canada will identify the appropriate data elements, format and means of submission.

Coordination between licensees within Canada will follow similar procedures as those for international coordination.

4.9 Implementation of Spectrum Usage

Experience with specific predefined implementation requirements has been mixed. In the case of the 24 and 38 GHz spectrum bands, the implementation requirements were met by only a few licensees in part due to the lack of suitable and affordable equipment. For those licensees who had not met their implementation requirements, the Department granted implementation extensions to the end of the licence term. This experience has proven how difficult it is to set specific implementation requirements given the uncertainty with respect to what may arise during the term of the licence.

Implementation requirements were recently discussed in the context of the upcoming Advanced Wireless Services (AWS) auction (http://www.ic.gc.ca/eic/site/smt-gst.nsf/eng/h_sf08089.html). It was decided that rather than having a mid-term implementation requirement, implementation would be reviewed at the time of licence renewal.

This approach provides licensees with the flexibility to implement over the course of the licence term without preset mid-term implementation deadlines as the Department has imposed previously. It will also allow the Department to adjust expectations according to technological advancements or changes in the market. The Department believes that a similar spectrum usage requirement would be appropriate for renewed and new 24 and 38 GHz licences, as well as for other long-term licences approaching renewal.

Recommendation

It is proposed that there be no condition of licence for mid-term implementation of spectrum usage, noting that implementation will be considered at licence renewal.

4.10 Lawful Interception

The following condition of licence is new to 24 and 38 GHz licensees, and applies only to radiocommunication carriers. It is a requirement in the Solicitor General's Enforcement Standards for Lawful Interception of Telecommunications (Revised November 1995).

Certain radiocommunication carrier licensees are required to provide for and maintain lawful interception capabilities in accordance with requirements or standards set by the Solicitor General's Enforcement Standards for Lawful Interception of Telecommunications. These capabilities address both technical and operational matters related to the lawful interception of telecommunications.

New Condition of Licence

Licensees must, from the inception of service, provide for and maintain lawful interception capabilities. The requirements for lawful access capabilities are provided in the Solicitor General's Enforcement Standards for Lawful Interception of Telecommunications (Revised November 1995). These standards may be amended from time to time, following consultation with the Department of Public Safety and the licensees.

Licensees may request that the Minister of Industry forbear from enforcing certain lawful interception capability requirements for a limited period of time. The Minister, following consultation with the Department of Public Safety, may exercise the power to forbear from enforcing a requirement or requirements where, in the opinion of the Minister, the requirement(s) is (are) not reasonably achievable. Forbearance requests must include specific details and dates when compliance to requirement(s) can be expected.

Applicants should be aware that a legislative package is being developed to ensure that law enforcement and national security agencies acting with lawful authority have effective access to communications and information. Industry Canada continues to meet with the Department of Public Safety and the Department of Justice on this initiative, and will provide licensees with appropriate guidance until such time as any new legislation is enacted.

4.11 Research and Development

This condition of licence will be maintained, as the Department continues to believe that important policy objectives will be achieved through this licence condition. However, the Department believes that small businesses with less than $5 million in annual gross operating revenues should be exempted from meeting the research and development expenditure requirement.

Recommendation (New wording in bold)

The licensee must invest, as a minimum, two percent of its adjusted gross revenues resulting from its operations in the 24 and 38 GHz radio frequency bands, over the term of the licence, in eligible research and development activities related to telecommunications. Businesses with less than $5 million in annual gross operating revenues are exempt from meeting the R&D expenditure requirement.

To facilitate compliance with this condition of licence, the licensee should consult the Department's Guidelines for Compliance with the Radio Authorization Condition of Licence Relating to Research and Development (http://www.ic.gc.ca/eic/site/smt-gst.nsf/eng/sf01638.html).

4.12 Annual Reporting

Industry Canada will maintain this condition of licence with some minor amendments to update the text to that currently being used by the Department.

Recommendation (Changes have been noted in strikeout and bold)

The licensee must submit an annual report for each year of the term of the licence indicating continued compliance with all licence conditions, including:

  • an update on the implementation of wireless services and spectrum usage within the area covered by the licence;
  • this update should include the number of hub and subscriber sites installed in each licensed area;
  • audited Financial Statements as required under the licensee's jurisdiction of incorporation, including an audited Statement of Research and Development Expenditures with an accompanying Auditor's Report, prepared in accordance with the same standards of reporting; and
  • to facilitate compliance with this reporting requirement, the licensee should consult the Guidelines for Compliance with the Radio Authorization Condition of Licence Relating to Research and Development; and
  • a copy of any existing corporate annual report for the licensee's fiscal year with respect to the authorization.

Comments are sought on all of the proposed conditions of licence.

Footnotes


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