Methodology used to develop licence fees proposed in DGSO-01-18, Consultation on Licence Fees for Fixed Point-to-Point Radio Systems

Various stakeholders requested that Innovation, Science and Economic Development Canada (ISED) publish the methodology used to develop the fee model and base rates proposed in its consultation released through Gazette Notice DGSO-01-18, Consultation on Licence Fees for Fixed Point-to-Point Radio Systems.

In developing the consumption-based fee model, ISED was guided by the policy objectives of promoting the effective use of spectrum and earning a fair return for the Canadian public, such that the fee model:

  1. encourages innovation and rewards spectral efficiency
  2. reflects the relative utility of different spectrum bands (utility in the context of the consultation refers to the frequency band’s usefulness and overall amount of available spectrum, that is abundance or scarcity)
  3. is clear and predictable but can be adjusted to changing markets and technological advances
  4. reflects the requirements of the Service Fees Act including the implementation of a periodic fee adjustment

To ensure that the fee model was sufficiently agile, ISED considered the entire range of radio spectrum providing the flexibility to adjust to the release and designation of new frequency bands for fixed services.

The spectrum was subdivided into frequency ranges, as show in table 1. These frequency groupings were determined with consideration to similarities between the bands, including propagation characteristics, channel bandwidths, capacity (low-, medium-, and high-), usage (short-, medium-, and long-haul systems and land mobile systems) and path length, as well as consideration of the total amount of spectrum available in each range.

Attention was also given to not splitting frequency bands used for fixed service point-to-point and point-to-multipoint systems that are set out in ISED’s Standard Radio System Plans (SRSP) and the Canadian Table of Frequency Allocations. This ensures that individual frequency bands are not impacted by more than one fee. For detailed information regarding frequency ranges, their channel bandwidths and total spectrum, please refer to the frequency band’s corresponding SRSP.

The most heavily assigned frequency range (10.55-19.7 GHz) was selected as the reference band. This reference band acted as the anchor to which the base rates of the other frequency ranges were adjusted given their relative value.

A base rate for the reference band was determined by dividing the total annual fees by the total bandwidth assigned to licensees within the frequency range. This resulted in a rate of $30.42/MHz. Recognizing the potential growth of licensed point-to-point systems with the introduction of next-generation 5G and requisite for large bandwidths, ISED reduced the base rate by roughly 20% and rounded to the nearest dollar, to $24.00/MHz.

The base rates for the other frequency ranges were then determined based on their relative value to the reference range. The factors used to determine relative value included propagation characteristics, amount of available spectrum, size of bandwidths, and overall demand and alternative spectrum. Therefore, for increasingly higher frequency ranges, the base rates were steadily reduced, while moving to lower frequency ranges, the base rates were steadily increased.

In addition to encouraging the efficient use of spectrum, the proposed rates were set to reduce fees overall, recognizing and addressing the tremendous growth in demand for point-to-point spectrum, particularly in the mid and upper frequency ranges, over recent years, and anticipated growth with the advent of 5G.

Table 1: ISED proposed fees and ratios
Frequency ranges Characteristics Base rates ($/MHz) Ratio to reference band
< 890 MHz Primarily stations in the land mobile service, 5-125 kHz channels, limited spectrum available 2750.00 114.58
890-960 MHz Studio-to-transmitter and Fixed Wireless Access links, 125 and 375 kHz channels 138.00 5.75
960-4200 MHz Very low-, low-, medium-, high-capacity systems and some specialized use (STL, TV pick-up, electricity supply management), channels span 50 kHz to 40 MHz 45.00 1.88
4.2-10.55 GHz Low-, medium-, high-capacity systems and some specialized uses (STL, TV auxiliary services), channels span 1.25-40 MHz 34.00 1.42
10.55-19.7 GHz Low-, medium-, high-capacity systems and some specialized uses (TV pick-up, VHCM), bandwidths span 1.25-80 MHz 24.00 1.00
19.7-60 GHz Low-, medium-, high-capacity systems, bandwidths span 2.5-50 MHz 16.00 0.67
> 60 GHz Bandwidths of 250 MHz but can be aggregated, vast amount of spectrum available 1.00 0.04

Once base rates were developed, ISED then compared its proposed frequency ranges and pricing ratios with regulators in the United Kingdom (Ofcom) and Australia (ACMA), which also use fees as a policy tool to promote efficient use of spectrum. ISED used ratios to show relative differences to a reference band, instead of comparing base rates or overall fees directly. While each regulator established different band groupings, the ratios are similar and follow the same trend principle (i.e. the higher the frequency range, the lower the base rate/frequency band ratio).

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