Study of Market-based Exclusive Spectrum Rights
4. Current Canadian Spectrum Policy and Practices
In this chapter, we review current Canadian spectrum management policy and practices and provide a description and general assessment of the processes by which spectrum in Canada is allocated and assigned. We also comment upon the core documents which guide the Spectrum Management Program which are listed below:
- the Radiocommunication Act – R2 1989
- the Telecommunications Act
- the Radiocommunication Regulations – RR 2003
- Spectrum Policy Framework – DGTP-002–07
- Framework for Spectrum Auctions in Canada – 2001
- Consultation Paper on Advanced Wireless Services – DGTP-002–07
Finally, we review a representative sample of a current spectrum licence definitions and conditions.
4.2 Industry Canada Responsibility for the Spectrum Resource
In Canada, responsibility for management of the spectrum resource lies solely with the Minister of Industry (hereafter referred to as the Minister) unlike the situation in many countries where different regulatory entities are responsible for regulating different portions of the spectrum.
The Minister is also required to ensure the integrity and functionality of the telecommunication infrastructure pursuant to provisions developed under the Emergency Preparedness Act.
The enabling legislation by which the spectrum is managed in Canada is the Radiocommunication Act,Footnote 78 (hereafter referred to as the Act). The Act sets out the powers of the Minister with regard to planning the allocation and use of the spectrum, licensing, other authorizations, control of interference, etc. See Annex 1 for an extract of Section 5 of the Act.
Two other Acts which are relevant and whose objectives are to be taken into account by the Minister when regulating the use of the spectrum are the Telecommunications ActFootnote 79 and the Broadcasting ActFootnote 80. Concerning broadcasting, it is the Canadian Radio-television and Telecommunications Commission (CRTC) which licences broadcast undertakings for which the Minister issues a broadcasting certificate. Broadcasting certificates regulate the technical aspects of broadcast undertakings. The telecommunications policy for Canada is set out in Section 7 of the Telecommunications Act and the broadcasting policy for Canada is set out in Section 5 of the Broadcasting Act.
Interestingly, the Radiocommunication Act contains no policy objectives such as those that are found in the Broadcasting Act and the Telecommunications Act, although there is a link in Section 5 of the Radiocommunication Act to the policy objectives contained in Section 7 of the Telecommunications Act. Having high-level policy objectives set out in legislation provides some stability, since legislation is not readily changed. Policy objectives simply set out in documents issued by the Department can be revised much more easily. However, this can be a two-edged sword. On the one hand, it can be argued that such policy objectives can more easily keep up with the rapidly changing radiocommunication environment, but on the other hand, it can also lead to more uncertainty for spectrum users if policy objectives change too frequently.
There are five categories of authorizations in Canada:
- Apparatus licences
- Spectrum licences
- Broadcasting certificates
- Technical acceptance certificates
- Other authorizations such as radio operator certificates
The main emphasis of review in this report will be on apparatus licences, spectrum licences and technical acceptance certificates.
There is an interesting point to make in the case of broadcasting, a major user of spectrum, before moving on. Broadcasters are not licensed by the Minister but rather by the Canadian Radio-television and Telecommunications Commission (CRTC). A broadcaster does require a technical authorization (for spectrum use) known as a broadcasting certificate which is issued by the Minister. The Minister has the power to determine when harmful interference is occurring and to issue orders to abate harmful interference.
Apparatus licences constitute the bulk of authorizations in Canada with over 270,000 licences in force represented by over 70,000 client accounts in fiscal year 2003/2004. Spectrum licences authorize the use of specified frequencies within specified geographical areas. Technical acceptance certificates are issued for both radio apparatus and interference-causing or radio-sensitive equipment. These are especially relevant to the discussion in this report of unlicensed operations or what is often referred to as the spectrum commons.
Since, for markets to function, there must be an appropriate level of disclosure of information, it is also interesting to note that information about the use of radio apparatus and even the cost of installing or maintaining it can be required to be disclosed to the Minister. Whether this power is sufficient to enable disclosure of sufficient information for a well functioning market is not clear, since the existing power is largely apparatus-based and addresses only disclosure to the Minister rather than public disclosure.
It should also be noted that, in Canada, the power to make regulations dealing with the spectrum rests with the Governor General in Council not the Minister. Thus the Minister must propose and seek adoption by the Governor General in Council of any regulations which can deal, inter alia, with technical requirements and technical standards, eligibility criteria (including ownership and control of corporations, fees for authorizations and services provided by the Department, requirements for exemption from licensing, penalties for not complying with the regulations, etc.
4.4 Policy Objective
As mentioned above, there are no high-level policy objectives set out in the Radiocommunication Act. Rather, the Department's current high-level objective in managing the spectrum is set out in its Spectrum Policy Framework (SPF), the most recent version of which was issued in June 2007.Footnote 81 The policy objective stated in that document is:
"To maximize the economic and social benefits that Canadians derive from the use of the radio frequency spectrum resource."
The SPF goes on to state that to realize this high-level objective, the Department follows the following enabling guidelines:
- Market forces should be relied upon to the maximum extent feasible;
- Notwithstanding (a), spectrum should be made available for a range of services that are in the public interest;
- Spectrum should be made available to support Canadian sovereignty, security and public safety needs;
- Regulatory measures, where required, should be minimally intrusive, efficient and effective;
- Regulation should be open, transparent and reasoned, and developed through public consultation, where appropriate;
- Spectrum management practices, including licensing methods, should minimize administrative burden and be responsive to changing technology and market place demands;
- Canada's spectrum resource interests should be actively advanced and defended internationally;
- Spectrum policy and management should support the efficient functioning of markets by:
- permitting the flexible use of spectrum to the extent possible;
- harmonizing spectrum use with international allocations and standards, except where Canadian interests warrant a different determination;
- making spectrum available for use in a timely fashion;
- facilitating secondary markets for spectrum authorizations;
- clearly defining the obligations and privileges conveyed in spectrum authorizations;
- ensuring that appropriate interference protection measures are in place;
- reallocating spectrum where appropriate, while taking into account the impact on existing services; and
- applying enforcement.
While the June 2007 version of the SPF is a much improved and simplified document compared to the previous 2002 version, the policy objective is quite general and timeless, more like what one might expect to find in legislation. Perhaps if the legislation were to be revised, this objective could be included in a revised Act.
The June 2007 policy guidelines supporting market-based mechanisms are general. Since there are no specific priorities stated with planned targets or timelines set out, as the U.K. for example has done, these should be developed and included in a subordinate strategic planning document such as a Spectrum Release Plan or included in a revised SPF.
The spectrum management program also seeks to ensure the following:
4.4.1 Equitable and Affordable Access
Canada is a world leader with regards to the affordability, coverage and efficient management of the spectrum. In order to achieve the goals of affordable access and coverage, the federal government has had to overcome certain challenges including ensuring the provision of services across a vast territory and varied climate to a dispersed population. Despite these challenges, 99.8% of Canadian households have telephones and access to up to hundreds of broadcasting channels. Expansion of the infrastructure, deregulation and privatization have led to an increase in the quality of service and yet access to the spectrum and pricing for basic telephony services has remained relatively constant.
Whether it is for broadcasting (remote reporting of news events), personal communications (cell phones, short message services) or for public safety (police, fire and ambulance services), the government's policy regarding spectrum access is to ensure fair and equitable access to these resources by all users — government or non-government, large or small, corporate or individual.
4.4.2 Timely and Effective Service
The Canadian government is committed to facilitating the provision of services or activities that contribute to Canada's economic development, efficient markets and international competitiveness. To this end, the spectrum management program continually seeks new ways to improve service delivery. The Department has a program underway to renew its integrated automated spectrum management systems which support its spectrum management operations.
4.4.3 Evolution of the Telecommunications and Spectrum Infrastructure
The Canadian government has ensured the continued evolution of spectrum usage by supporting research and development of new technologies and developing favourable policies and standards which create an environment which enables the introduction of new technologies and services. The Communications Research Centre (CRC), a research agency within the Department of Industry, is mandated to explore new communications technologies, systems, standards and their trends in order to provide advice to the Department on their potential impact. It also offers technical support as required to the spectrum management program through such things as propagation studies.
4.4.4 Competition and Regulation
Competition has been gradually introduced in the Canadian telecom service market over a number of years through policy and regulatory initiatives by the Department and the CRTC.
The CRTC has gradually, and in an orderly manner, opened up monopoly-based markets in the telecom and broadcasting sectors to competition over the years. The CRTC's approach to opening up various market segments to competition is to weigh the potential advantages and disadvantages and to strike a fair and reasonable balance between the often conflicting interests of all concerned, including incumbents, competitors and customers. The CRTC continues to remove obstacles to fair and sustainable competition, including eliminating barriers to access, and ensuring regulatory compliance while protecting and promoting Canadian culture and achieving key social objectives. In all of this, however, market mechanisms for granting access to broadcasting spectrum have not been employed by the CRTC.
4.4.5 International Harmonization
Since radio waves transcend national boundaries, the Department plays a vital role in securing Canada's right to access the spectrum. Canada participates in international forums such as the International Telecommunication Union (ITU), the Inter-American Telecommunications Commission (CITEL) and the World Trade Organization (WTO) to influence, advance and promote Canadian interests for use of the radio spectrum. With access to spectrum becoming an increasingly crucial resource, Canada must respond to international pressures which have the potential to restrict Canadian access to the radio spectrum.
Each country has a considerable degree of flexibility to decide on particular radio service allocations to meet domestic needs from among the services allocated internationally by the ITU. Consideration has to be given, however, to mitigating interference with neighbouring countries that use the spectrum in conformity with the ITU Radio Regulations. The Department reviews and reallocates specific frequency bands to services on a periodic basis including following decisions taken at ITU World Radiocommunication Conferences which revise the ITU Radio Regulations.
The Canadian government negotiates bilateral and multilateral international agreements, where appropriate, to ensure an efficient and orderly use of spectrum at national and international levels. By virtue of its membership in the ITU, Canada is bound to certain treaty obligations under the ITU Constitution and Convention and the ITU Radio Regulations for stations which are capable of causing harmful interference to radio services of other countries operating in accordance with the Radio Regulations. Unlike Australia which does not have nearby neighbouring countries, the majority of Canada's population lies close to the United States and hence close coordination of spectrum use is required within the framework of the ITU Radio Regulations as well as various Canada/USA treaties and agreements. The Canadian government also negotiates bilateral agreements with many countries regulating the use of certain equipment and standards.
4.4.6 Appropriate Standards
Standards and conformity assessment procedures facilitate compatibility and interoperability, avoid interference and promote efficient spectrum management and utilization. The objective is to align Canadian standards and conformity assessment procedures to the greatest extent possible with international standards. Harmonization of radio system standards is an important consideration in this process.
4.4.7 Public Consultation
The Department consults with the public, interested individuals, organizations and affected parties on various policy issues regarding the development and formulation of policies, standards and procedures to realize the greatest public benefit. The use of notices, published in the Canada Gazette, is the formal instrument employed by the Department to initiate comment, to inform the public and to obtain representation on significant issues. Over the last few years, the Department has greatly expanded the use of the Internet as a means of making announcements, as well as disseminating and collecting information. This has facilitated the public's access to this information in a timely manner and expedited the process of public comment.
The Department also employs a systematic review process which includes the public consultation mechanism discussed and other activities including: spectrum policy reviews that have been done for specific frequency ranges; the preparatory activities for ITU World Radiocommunication Conferences; Gazette Notices on changes to licensing practices; and the development of proposed standards in cooperation with the RABC, etc. These processes address all aspects of radiocommunication including national and international policy, allocations and licensing and procedures, and technical standards. In addition, the Department promotes the use of government/industry technical committees and has established ongoing relationships with major industry associations and user groups.
Canada's spectrum management program must reflect overall government objectives and priorities. Over the past several years, following extensive public consultation, the Department has developed a Spectrum Policy Framework which is continually updated. The most recent version was issued in June 2007.Footnote 82 The usage of the radio spectrum is constantly changing as a result of the development of new technologies, new applications and services that use spectrum, availability of new spectrum using equipment, etc. In addition, the technical and operational characteristics of spectrum using systems are becoming increasingly complex and diverse pointing to the need for more flexible policies, regulations, standards and enforcement mechanisms.
Core documents governing the use of the radio frequency spectrum in Canada including legislation, regulations, policies, standards and other information are published on the Department's spectrum management web site.Footnote 83
The costs of the spectrum management program are exceeded by revenues received from licensees. Over the past several years, the program has consistently managed to contain its costs ($64.5 million in 2006/2007) and at the same time provide a considerable dividend to the federal government. Through advances in regulation, administrative efficiencies and increased automation, the program has successfully coped with increasing demands for access to spectrum and generated significant revenue. In 2006/2007, spectrum revenues were over 389 million dollars. Even if auction revenues (which are amortized over ten years) are deducted, revenues from licence fees were over $217 million in 2006/2007 of which over $74 million were derived from PCS licences. See Annex 3.
4.6 Allocation and Licensing of Spectrum
4.6.1 Spectrum Allocations
Based upon Article 5 of the ITU Radio Regulations, the Canadian Table of Frequency AllocationsFootnote 84 is the foundation of spectrum management. Canada's national spectrum allocation plan must factor in technical issues, such as electromagnetic compatibility, as well as the government's policy objectives which include ensuring that spectrum is efficiently and fairly allocated and its use is compliant with international treaties and agreements. The definition of radio services in Canada follows the definitions in the ITU Radio Regulations. Within allocations of bands to radio services, often designations of specific types of use are indicated via footnotes to the allocation table: for example, Canadian footnote C18 states that "The band 3 450 – 3 650 MHz is designated for fixed wireless access applications under the Fixed service." Thus the radio service to which this portion of spectrum is allocated is the Fixed service but fixed wireless access applications are authorized to operate within this frequency range in Canada. Designations are also often made in the ITU Table of Frequency Allocations.
4.6.2 Licensing the Use of Spectrum
Guidelines on the Licensing Process and Spectrum Release Plan are published on the departmental web site.Footnote 85 These guidelines set out when licensing will take place on a first-come, first-served basis (FCFS) and when a competitive process (comparative or auction) will be employed.
It should be noted that, whereas previously licences were issued only for specific radio stations, with advances in technology and the increase in demand, the Department may now also issue spectrum licences for blocks of spectrum rather than for individual stations. Radio licences are subject to annual renewal, while spectrum licences are usually valid for ten years.
When a comparative process is used, it begins with a public consultation, leading to the development of a spectrum utilization policy for the bands concerned. The policy announces that a comparative review process will be used to licence spectrum for a certain type of service, invites potential applicants to submit expressions of interest, and identifies the criteria that will be used to evaluate the detailed submissions .
In a second phase, a departmental committee reviews the submissions and compares them against the criteria. Compliance with the criteria is scored and a list of qualified candidates is forwarded to the Minister for consideration. In the third phase, the Department identifies the "winners" and issues licences to the successful applicants.
Until 1996, the only competitive process available to the Department was the comparative process. In June 1996, the Radiocommunication Act was amended to give the Minister the authority to use auctions. In August 1997, a public consultation process was undertaken on auction implementation issues. In August 1998, after reviewing the input received and analyzing other administrations' spectrum auction experiences, the Department published a document outlining the general framework and the rules that would normally be applicable for all spectrum auctions in Canada. This framework was updated in October 2001.Footnote 86
All auctions are preceded by a full public consultation, giving bidders the greatest possible knowledge of the spectrum at issue and the auction procedures and rules. Licensees are given the maximum possible flexibility in their choice of services and technologies with limits generally only for interference management purposes. Licensees are allowed to transfer their licences in whole or in part (in both bandwidth and geographic dimensions) to eligible third parties, subject to approval by the Department. Licences are assigned for an initial 10-year term with a high expectation of renewal for subsequent 10-year terms. Payment of winning bids is required in a lump sum amount a short time after the close of the auction. A simultaneous ascending auction format is used.
In the guidelines on the Licensing Process and Spectrum Release Plan mentioned aboveFootnote 87, are summarized below:
- most applications for fixed and mobile radio facilities are assigned on a First-Come, First-Served basis;
- the Department relies on an integrated spectrum management system that is comprised of existing spectrum allocation and utilization policies, licensing policies, radiocommunication regulations, and technical and radio system standards;
- the First-Come, First-Served (FCFS) basis is used in instances where there is sufficient spectrum to meet the demand in a given frequency band and where there is no additional measure required to advance particular telecommunication policy objectives;
- a competitive process for licensing is used by the Department where demand exceeds spectrum availability.
The Department has used competitive licensing in a number of cases (i.e., cellular radio, Personal Communications Services (PCS), Local Multipoint Communications Service (LMCS), broadband wireless at 24/38 GHz, 2.5 GHz Multipoint Communications Service (MCS), satellite orbital positions) and where there were indications that there would be more demand than spectrum available.
4.6.3 Unlicensed Use of Spectrum
There are a number of frequency bands identified, or being considered, as spectrum for licence-exempt (LE) devices or systems. The following are some of the main licence-exempt frequency bands:
- 902–928 MHz
- 1910–1930 MHz (LE-PCS)
- 2400–2483.5 MHz
- 5150–5250 MHz, 5250–5350 MHz and 5725–5825 MHz—Wireless LANs
- 59–64 GHz — Broadband access facilities
- 46.7–46.9 GHz and 76–77 GHz — Vehicular radiolocation (radar) applications
Some wireless technology developers are considering the 92 GHz range for access technologies including gigabit Ethernet-based systems that can connect buildings and extend metropolitan area networks.
4.7 Licence Definition and Conditions
As described earlier, the Radiocommunication Act provides for a system of licensing of spectrum use, with only limited exceptions. Access to the spectrum is gained through one of the four forms of authorization: apparatus licences, spectrum licences, broadcasting certificates and radio operator certificates. The two main types of licences, apparatus and spectrum licences, are described more fully below. Radio operator certificates deal specifically with authorizing persons to operate radio transmitters, whereas broadcast certificates authorize spectrum use related to a broadcasting licence issued by the CRTC.
4.7.1 Apparatus Licences
Apparatus licences represent the traditional form of licensing which generally authorizes the operation of a transmitter or receiver at a particular location.
The following information applies to most types of radio licences:
- All radio apparatus must be licensed under the Radiocommunication Act unless it is only capable of receiving broadcasting or is exempted under the applicable standard of the Radiocommunication Regulations.
- Generally, there are separate fees for each transmit and receive frequency and the total licence fee is the sum of all of the individual fees for the station. This does not apply to mobile stations.
- Radio station licensees are to inform the Department of any changes they make to their radio station's operating parameters, such as a change of location, frequency, power level, antenna height or pattern. They may also have to submit a revised application for further review by Industry Canada.
There are 9 apparatus licence types listed in Part I, Section 3 of the Radio Regulations with the licence specifying the category of service including: aeronautical, amateur radio, public information, developmental, fixed, intersatellite, land mobile, maritime and radio determination. Such licences are issued with technical conditions to manage interference.
Apparatus licences do not provide for much flexibility of use. The use to which they may be put is tied to the Table of Frequency Allocations, specific Spectrum Use Policies and related Standard Radio System Plans and Radio System Specification Standards. Apparatus licences are usually issued for one or five year terms. They are renewable (renewal processes are usually automatic).
4.7.2 Spectrum Licences
Spectrum licences represent the more market-oriented form of licensing in the mixed market/administrative system. They authorize the operation of (non-specified) devices within a defined geography. The geography is be defined by bandwidth, geographic area, and time. Licensees are free to use any type of equipment for any purpose, although they are subject to licence conditions and technical frameworks designed to minimize the risk of interference with other spectrum users.
Spectrum licences are transferable and can be divided and aggregated. They are issued for periods of up to 10 years. They are generally renewable under certain circumstances.
4.8 Example Licences Reviewed
Industry Canada spectrum licensing policies and conditions have evolved over time with the introduction of market-based assignments using auctions and transferability. Secondary markets for licences and greater flexibility in spectrum use by licensees remain as the next frontier in policy development.
In this section, examples of policies and licences have been selected from policies and licences issued over the past 10 years which reflect many of the changes to licence terms and conditions. Each of the licences reviewed has been summarized below in terms of background, the approach taken by Industry Canada in assigning the licences and their respective licence conditions. The examples include fixed and mobile licences issued for the provision of telecom services.
- Policy for Provision of Cellular Services by New Parties, RP-019 March 1998
- PCS and Cellular Spectrum Licences – Updated November 2005
- 2500 MHz Multipoint Communications Systems and MCS Policy 1999
- 2300 and 3500 MHz Frequency Bands Service Provider and Carrier Licences, July 2004
- Licence Conditions for Land Fixed and Land Mobile Authorizations, 2007
4.8.1 Provision of Cellular Services by New Parties – 1998
In 1998, at the conclusion of a public consultation process, Industry Canada revised its policy concerning cellular services in an effort to extend cellular and other services by third parties to underserved areas where competitive cellular services were not being offered. PCS services were included in the consultation given the analogous nature, from the consumers' standpoint, of PCS to cellular services.
The policy set in motion a process whereby a potential new service provider (not affiliated with an incumbent local wireline telephone company or Rogers Cantel) could apply to use un-utilized (otherwise assigned) frequencies in a geographical area. Where service was being provided by a service provider who was not the incumbent local wireline telephone company or its affiliate, or Rogers Cantel, any party (including an affiliate of Rogers) could apply to use un-utilized (otherwise assigned) frequencies in a geographical area. The result being that assigned but un-utilized frequencies would be re-assigned to interested parties who provided a 'comprehensive' plan to deploy mobile services. Where more than one party applied, Industry Canada awarded spectrum authorizations based on a comparative review of accepted applications.
Most of the conditions associated with the original public cellular licences were extended to the new licences (Canadian ownership and control, roaming, interconnection, and compliance with technical standards) with several exceptions such as exclusion from R&D funding requirements and provision of facilities for resale.
Under the provisions of the Radio Policy RP-019, there were 4 entities in 7 different underserved or unserved areas that were issued spectrum licences for cellular services in Ontario:
- T-Bay Mobility
- Superior Wireless Inc. (now T-Bay Mobility)
- Kenora Municipality
- NorthernTel L.P.
One could conclude that the reported take up was somewhat limited. However, it should be noted that there were applicants not included in the total that started under the RP-019 process but ended in agreements between parties.
4.8.2 PCS and Cellular Spectrum Licences – Updated November 2005
Licences for PCS and Cellular Services issued under direct assignment or comparative review were modified in 2005 to bring these licences into line with several features by this time incorporated into licences issued by Industry Canada. These attributes include:
- likely renewal of existing 10-year licence terms for an additional ten years;
- original licensee remaining in compliance of licence conditions;
- public consultation regarding licence renewal;
- payment of annual license fees unless the initial license was acquired through auction;
- transferability and divisibility, (licences maybe transferred (disaggregated) or divided (partitioned), subject to notification to the Minister, so long as the transfer from one carrier to another eligible carrier meets the ownership and control requirements in Section 10(2) of the Radiocommunication Regulations);
- removal of the spectrum cap through the Department's decision to rescind the spectrum cap policy;Footnote 88
- R&D requirement for radiocommunication carrier licensees — 2% of adjusted gross revenue resulting from their operations utilizing the assigned frequencies;
- implementation requirement: the spectrum has been put to use at a level acceptable to the Department, within 5 years of receipt of licence.
4.8.3 2500 MHz Fixed Multipoint Communications Systems – 1999
In 1985, the 2500 MHz band was divided into two distinct allocations for the fixed service and the broadcasting service in Canada. The lower portion of the band (2500–2596 MHz) was allocated to the fixed service and designated for MCS systems to advance local distribution of telecom services.
In response to considerable interest in anticipation of market demand for a variety of services including; voice, data, multimedia and broadcasting, Industry Canada, in 1999, undertook a policy review of spectrum use and licensing for the 2500 MHz band leading to a decision to award radio authorizations at the completion of a comparative licensing process.
MCS spectrum block area licences which provide for the utilization of specified radio frequencies within a defined geographic area by licensees were awarded at the conclusion of a comparative process. Since site-specific radio station licences were not required, it was expected to simplify the licensing process, thus reducing the administrative burden associated with licensing each radio apparatus.
One of two MCS ten-year licences was awarded to a consortium to provide services in 12 of the 13 metropolitan service areas across Canada. The other licence was awarded to Sasktel which committed to provide MCS services covering 96 percent of the province's territory.
The Government adopted an approach to licensing which permitted aggregation and licence transfer where no limits were imposed on the number of licences for which a given entity may apply. Licensees could apply to transfer a licence fully or through partitioning or disaggregation. Transfers (partitioning or disaggregation) of a licence required prior Ministerial approval and a joint application committing to ensure that the original licence conditions would be met by the new entities:
The frequency band 2500–2690 MHz had been the subject of considerable international debate arising from new radio technology developments. Furthermore, at the World Radiocommunication Conference in 2000 (WRC-2000), the band was identified as one of the possible bands for IMT-2000 radio services, also known as third generation mobile or 3G. Following the 2000 World Radiocommunication Conference, there was concern that MCS/MDS would be affected by the future use of 3G in the band and the future of the licensees was considered to be uncertain.
Industry Canada re-examined its policy again in 2001 and revised the Canadian Table of Frequency Allocations to include fixed and mobile allocations on a co-primary allocation basis throughout the band where incumbent licensees would be able to implement their current business plans in accordance with the terms and conditions of their licences. The decision was intended to harmonize these spectrum allocations with international allocations and provide increased certainty to current licensees to continue advancing their services to Canadians in the midst of changing technology.
4.8.4 2300 and 3500 MHz Frequency Bands Service Provider and Carrier Licences – Sept 2003, revised 2004.
In August 2001, Industry Canada commenced a process of public consultation addressing the auction of spectrum licences in the 2300 MHz and 3500 MHz Bands. Upon completion of the consultation, the Department embarked on providing definitions of policy and licensing procedures for this spectrum.
The resulting original policy document published by the Department in 2003 stated several objectives with particular relevance to Wireless Communication Services in the 2300 MHz Band and Fixed Wireless Access in the 3500 MHz Band.
These objectives included:
- to enhance the efficiency and competitiveness, at the national and international levels, of Canadian telecommunications;
- to render reliable and affordable telecom services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada;
- to foster increased reliance on market forces for the provision of telecom services and to ensure that regulation, where required, is efficient and effective; and
- to respond to the economic and social requirements of users of telecom services.
The Department also clearly stated a preference for market-based mechanisms in this case simultaneous multiple round auctions conducted in 2004 and 2005 for the awarding of spectrum licences.
"Within a competitive environment, a market-based spectrum assignment mechanism is best able to select licensees who can most efficiently provide the wireless services most valued by Canadian consumers. Auctioning has the ability to award spectrum in a transparent and economically efficient manner."Footnote 89
Industry Canada invoked several guiding competition principles in setting auction rules to ensure that while economic benefits are to be maximized, potential licensees will also be operating in a competitive marketplace.Footnote 90
- Entities possessing market power in one or more telecom services were restricted from participating in the auction. All other entities such as local exchange carriers and cable companies were able to participate.
- Spectrum aggregation limits were established of 100 MHz per service area during the auction and for a period after the auction, to act as a safeguard against anti-competitive behaviour. The Department held the view that no one entity should acquire the entire available spectrum in a given area.
Furthermore concerning spectrum set-asides for new entrants, the Department could find no compelling reason to set-aside spectrum exclusively for new entrants.
Licences were also designed to provide licensees with the maximum possible flexibility in determining the services they would offer and the technologies they would employ. Licensees needed to conform to applicable Canadian spectrum allocations and only those technical limitations required for interference management purposes and compliance with utilization policies. Licences had the following attributes:
- licences were to be auctioned within 172 areas of the country (with the exception of FWA systems on Vancouver Island);
- ten-year licence terms with transferability and divisibility (licences may be transferred or divided (partitioned));
- spectrum aggregation limits of 100 MHz to all participating companies, their affiliates and associated entities;
- implementation requirement: the spectrum had to be put into use at a level acceptable to the Department, within 5 years of receipt of licence;
- R&D requirement for radiocommunication carrier licensees: 2% of adjusted gross revenue resulting from its operations utilizing the assigned frequencies with an exception for small businesses with less than $5 million in annual gross operating revenues;
- open eligibility: successful bidders must be eligible to become radiocommunication carriers; and
- other standard conditions of licence apply (e.g. interference management, ownership and control, international and domestic coordination).
Transferability from a radiocommunication carrier to another party was restricted to transfers from one carrier to another eligible carrier meeting the ownership and control requirements in Section 10(2) of the Radiocommunication Regulations.
The Department also established policies and direction concerning transitioning of existing licensees to the new spectrum allocation. Fixed point-to-point systems were not provided any protection under the transition rules whereas fixed to multi-point systems were protected and made exempt from the transition rules. The rules called for displacement of existing licensees subject to notification and need for spectrum to implement new services.
4.8.5 Licence Conditions for Land Fixed and Land Mobile (LFLM) Authorizations, 2007
Land Fixed and Land Mobile Authorizations provide an example of licence conditions commonly applied to apparatus licences. The spectrum licensing policy recognizes the need to maximize access and use of spectrum by permitting low power fixed and mobile stations to be assigned frequencies on a no-protection, non-interference basis.Footnote 91 As such, due to heavy demand for radio frequencies in the UHF bands, frequencies assigned to a user may be shared with other users. The following illustrate the types of licence conditions associated with LFLM authorizations:
- assigned on a shared, no-protection, non-interference basis;
- in-building application only;
- low power and small antenna;
- non-flexible – specified equipment only.
Standard Radio System Plans 500–504 provide technical guidance to users and require in some cases technologies which are spectrally efficient so that frequency usage is conditional on the utilization of spectrally efficient/narrowband technologies. Land fixed and land mobile licences can be transferred or spectrum divided.
4.9 Discussion of Policy Options
4.9.1 Evolution of the Licensing Philosophy
The Radiocommunications Act provides for a system composed of administrative and market approaches. The Department has moved to implement market-based mechanisms by introducing them in a selective and incremental manner commencing with those areas of the spectrum subject to high commercial demand.
The Government noted that other governments have conducted recent spectrum policy reviews with:
"a common finding of moving from a prescriptive form of spectrum management to one that embraces more flexibility and a greater reliance on market forces, particularly with respect to spectrum used for commercial purposes."Footnote 92
The rationale behind the Government's policy guidelines is to move towards increased flexibility by enabling users to operate telecommunication services in a manner appropriate to their circumstances. The Department understands that effective management of the radio frequency spectrum is essential to the future growth of the communications in Canada. From phones, to broadcasting, to satellite services, to air traffic control, to reaching out to remote communities, Canadians expect these services to be available, free of interference, and properly managed.
There are inherent difficulties with the administrative approach, in that the Department has had some difficulty in keeping pace with the demands and evolution of the market-place and technological innovations. Nevertheless, it is fair to say that the rationale for the introduction of market-based approaches is assuming the mantle of orthodoxy. However, implementation of market-based approaches remains gradual and is being done in incremental steps. A better approach would be to follow the U.K. example and propose a definite plan (targets, dates, etc.) to make a major switch in the balance between traditional and market-based methods of spectrum management.
4.9.2 Spectrum Demand and Supply
It would appear that this three-pronged approach to authorizing the use of spectrum, (i.e., first-come, first-served licensing of radio apparatus or systems, competitive processes including auctions, and unlicensed operations in certain frequency bands) has served the Canadian public well to date. That being said, however, it is not felt possible to quantify the "economic and social benefits that Canadians derive from the use of the radio frequency spectrum resource" in order to see if the high level policy objective of maximizing these benefits as stated in 4.4 above has indeed been achieved. Perhaps the pertinent question though is "What does the future hold"?
Managing the spectrum is certainly becoming more complex and demanding as technology advances and new uses are made of the spectrum. More and more applications, such as new generation cell phones, direct-to-home satellite television and Internet access, geographic location systems such as GPS, wireless local and wide area networks, etc., are targeting consumers directly. Thus on the demand side of the equation, one can reasonably predict a growing demand for access to spectrum both for uses identical or similar to today's, as well as for new, yet to be developed technologies which will need access to the spectrum resource.
Spectrum has not been designated for conversion to the market system and continues to be assigned under an administrative system, whereas on the supply side of the equation more spectrum-efficient technologies for existing applications will provide some relief. For example, the move from analogue to digital transmissions especially in broadcasting could release a significant amount of spectrum, the so-called digital dividend. Of particular interest is the spectrum below 1 GHz which, given its characteristics, is extremely attractive for mobile applications but which has, for years, been inefficiently used by the broadcasting service. The key to obtaining benefits from the digital dividend in this portion of the spectrum is the availability and take-up of digital broadcast receivers.
4.9.3 Market-based Approaches
As noted in Chapter 3, several countries are turning to market-based approaches to deal with the increasing challenge of regulating the use of the radio frequency spectrum. Canada has already gone some way in this direction. Reform of licence fees in 1987 ensured that all users, public or private, pay the same fees for the same usage of spectrum. In other words, the licence fee structure contains no hidden subsidies since it was the policy of the government that, right across all government operations, any subsidies that are required should be explicit and not hidden in fee structures. In addition, fees were generally set according to the amount of spectrum consumed and according to whether the location of operation was in a spectrum congested area or not, thus providing some incentive to use spectrum more efficiently. Furthermore, the Department moved to ensure that the costs of spectrum management were entirely covered by the revenue from licence fees.
In recent years, spectrum revenues have far exceeded the costs of the spectrum management program. For the six years from fiscal year 1998/99 to 2006/07, program expenditures totalled some $549.8 million while program revenues for the same period totalled $3.011 billion, made up of $2.078 billion from licence fees, $888.3 million from auctions (revenues which are amortized over ten years) and $44.4 million from equipment certification fees.
The Department is now accommodating spectrum leasing and will be issuing a revision to the information circular on licensing procedures for terrestrial services through subordinate licensing. The circular will describe how licensees who have spectrum licences which have transferability and divisibility privileges, can apply (together with a third party) for a third party to be permitted access to the spectrum via a subordinate licence issued by the Department.
The Minister will continue to have 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 would continue to apply. A written request would be made to the Department, by the primary and potential subordinate licensee jointly, for the issuance of a subordinate licence. In the joint submission, the frequencies, geography and licence term for which a subordinate licence is sought would have to be clearly defined. The Department would then review the request and, subject to being satisfied with the application (including demonstration of compliance with applicable eligibility requirements), may approve the request and issue the third party a subordinate licence.
4.9.4 Summary of Review of Licence Conditions
Industry Canada has made several attempts at keeping pace with demand and with changes in technology. The administrative method for assignments combined with comparative review demonstrates that there can be a considerable lag from the time it is recognized change may be required to a change in policy and licensing resulting from having consulted with stakeholders. In the examples reviewed, specifically PCS and MCS/MDS, policy changes occurred over several years.
Changes permitting third party entry resulted in few actual licences being issued — four in the case of PCS (see Section 4.8.1). The example of MCS services licensing shows how, in dealing with the switch from the fixed to the mobile service, the administrative approach to making assignments and allotments can result in inefficiencies and delays in introducing advanced technologies and new services to Canadians.
Transferability and divisibility licensing terms (but not flexibility) were included in all auctioned services and certain services (PCS) have been revised to include the transferability and divisibility features. Transfers and divisions of spectrum require notification to the Department and are subject to Departmental approval.
The Department's position on flexible use is that flexibility should be permitted as far as possible. All licensees are required to comply with the applicable Standard Radio System Plans (SRSPs) and Radio Standards Specification (RSS) which, by implication, can limit the types of technologies used by the licensee and effectively limit transfers to third parties providing essentially the same or similar service.
A case in point is PCS and Cellular Licences, where licensees are required to comply with all technical standards for the referred to bands.Footnote 93 SRSPs 503 and 510 were created after consulting with industry, based on the knowledge of the technologies available at the time — AMPS, TDMA, CDMA and GSM. While the intention was to create certain technical restrictions to improve overall technical efficiency, future technical flexibility has been potentially restricted.
This example brings into focus some of the arguments in support of a transition to flexible spectrum usage rights which are explored in more detail in Section 5.4 below.
While the rationale for market mechanisms is clearly supported in the SPF, it is evident that the legal means are not in place to facilitate establishing secondary markets in a flexible manner, in other words, without both parties in secondary trades having to seek specific Ministerial approval rather than relying on self-certification for example (subject to audit by the Department). These legal issues require further exploration.
When it comes to spectrum trading, there are some significant differences between the Radiocommunication Act and the legislation in the U.K. and Australia as indicated below.
U.K. Legislative and Regulatory Spectrum Trading Framework
First of all, it is to be noted that the U.K. legislation is more detailed than Canada's Radiocommunication Act. Article 168 of the Communications Act of 2003 specifically provides for spectrum trading for wireless telegraphy licences and for grants of recognized spectrum access (i.e., for what would be termed apparatus licences and spectrum licences in Canada). Article 168 is worded quite broadly so as to open the door to a great many possibilities (extensive use of the permissive "may") which can then be set out in regulations (e.g., "may require the approval or consent of OFCOM for the making of a transfer"). Trading can result in a complete or a partial transfer of responsibilities, no transfer or concurrent responsibilities. In 2005, OFCOM published a timetable for allowing trading in various licence classesFootnote 94 covering the years 2004 to 2007 and beyond.
The regulations allowing certain trading made pursuant to the Communications Act of 2003 entered into force on 23 December 2004. These regulations allow trading of wireless telegraphy licences (i.e., apparatus licences) for specified radio services in specified frequency bands. They do not deal with trading in spectrum licences. The regulations specify that the regulatory authority (OFCOM) must consent to the transfers. In fact, prior to OFCOM's decision, a number of conditions have to be satisfied and, if they are, a notice must be published setting out various details of the transfer. The regulations also set out in some detail, factors which OFCOM has to take into account before rendering a decision.
The Canadian Radiocommunication Act contains no mention of spectrum trading. As mentioned above, trading with approval is allowed for spectrum licences which have been obtained in an auction and which have transferability and divisibility privileges. After reviewing the U.K. legislation and regulations, it is not obvious that such prescriptive detail cast in legislation or regulations is necessarily a good thing. On the one hand, it leaves little doubt as to what is required and the procedure to be followed by those wishing to engage in trading. On the other hand, it makes it more difficult to take a flexible approach. As experience is gained, in order to improve the process, there would be a need to change the very detailed provisions in the regulations and perhaps the legislation which can require considerable effort and time.
Australian Legislative and Regulatory Framework
The Australian legislative and regulatory framework appears to be more flexible than that in Canada. The Australian Radiocommunication Act of 1992Footnote 95 which, at 408 pages in length, is even more detailed and prescriptive than the U.K. legislation, provides for the trading of both apparatus licences and spectrum licences in whole or in part. Such trading requires the provision of certain information to the Australian Communications and Media Authority (ACMA) for the updating of its public registry and the trade cannot be completed until the registry is updated. ACMA has the power to vary the conditions associated with the spectrum licence.
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A spectrum cap policy was established in 1995 during the licensing of the spectrum for PCS at 2 GHz. It also applied to assignments of frequencies in cellular radiotelephony in the 800 MHz range and spectrum used for similar public high-mobility radiotelephony services. In 1999, the cap was revised from 40 to 55 MHz. to permit existing operators to obtain additional PCS spectrum being auctioned off at that time. The Minister rescinded the policy in August 2005 (DGTP-010–04).
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Policy and Licensing Procedures for the Auction of Spectrum Licences in the 2300 MHz and 3500 MHz Bands: Industry Canada, September 2003.
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Op cit, pages 3 & 4.
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Radio Standards Specification (RSS) 210 sets out requirements for the certification of licence-exempt (i.e. unlicensed) low-power radiocommunication devices.
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Spectrum Policy Framework, DGTP-002–07, page 2.
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Conditions for PCS and Cellular Licences: Industry Canada. November, 2005, page 3.
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