333 Bloor Street East Toronto, Ontario M4W 1G9 Tel. (416) 935-7211 Fax (416) 935-7719 [email protected]
Dawn Hunt Vice-President Government & Intercarrier Relations
March 14, 2003
Jan Skora Director General Radiocommunications and Broadcasting Regulatory Branch EMAILED TO: [email protected] Industry Canada 300 Slater Street Ottawa, Ontario K1A 0C8
Dear Mr. Skora,
Re: Comments - Canada Gazette Notices: DGRB-004-02 and DGRB-001-03 Consultation on a New Fee and Licensing Regime for Cellular and Incumbent Personal Communications Services (PCS) Licensees
Pursuant to the Canada Gazette, Part I, dated December 21, 2002, and February 21, 2003 respectively, RWI is pleased to file the attached comments regarding the above noted proceeding.
The comments are submitted in Adobe Acrobat (PDF) version 5.0 software produced on a computer using a Windows 2000 Professional operating system.
If there are any questions regarding these comments, please do not hesitate to contact the undersigned.
Sincerely,
Original Signed by: Joel Thorp On Behalf of: Dawn Hunt, DH:jt
Attach. Department of Industry
CONSULTATION ON A NEW FEE AND LICENSING REGIME FOR CELLULAR AND INCUMBENT PERSONAL COMMUNICATIONS SERVICES (PCS) LICENSEES
DGRB-004-02
COMMENTS OF ROGERS WIRELESS INC.
March 14, 2003 COMMENTS OF ROGERS WIRELESS INC. DGRB-004-02
Table of Contents
1EXECUTIVE SUMMARY ...... 3 DETAILED COMMENTS...... 4 CURRENT SPECTRUM FEES ...... 4 An Assessment of the Cumulative Impact of Federal Policies is Required ...... 4 Distortions in the Current Spectrum Fee Regime ...... 5 PROPOSED SPECTRUM FEES...... 6 Treasury Board of Canada Cost Recovery and Charging Policy...... 6 Overriding and Competing Policy Objectives...... 7 Public Benefits...... 9 The Proposed Spectrum Licence Fee should be Applied to Other Users ...... 11 Increased Fees for Cellular/PCS Spectrum are not Appropriate ...... 14 Comparison of Fees in Canada and the US ...... 16 Spectrum Licence Fee Benchmarks...... 17 The State of the Canadian Wireless Industry ...... 18 Higher Fees Will Reduce Investment and Will Raise Wireless Rates ...... 20 A Two-Tier Spectrum Fee Structure Would Be A Mistake...... 20 Spectrum Fee Relief for Certain Licensees is Not Warranted ...... 21 Radio Station Installations ...... 23 Licence Transferability and Divisibility ...... 25 Cellular and PCS Service in Underserved Areas...... 26 Renewal of Auctioned PCS Spectrum ...... 26 Lawful Interception...... 27 Provision of Technical Information...... 27 Cellular Analog Resale and Roaming...... 27 Spectrum and Geography...... 27 CONCLUSION ...... 28
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EXECUTIVE SUMMARY
1. Rogers Wireless Inc. (“RWI”) is pleased to submit the following comments in response to the public consultation initiated by The Department of Industry (“the Department”), entitled `Notice No. DGRB-004-02 – Consultation on a new Fee and Licensing Regime for Cellular and Incumbent Personal Communication Services (PCS) Licensees’ (“the Consultation Paper”).
2. In the Consultation Paper, the Department has invited public comments on all aspects of the Department’s proposal.
3. RWI has also participated in the development of the comments that have been filed by the Canadian Wireless Telecommunications Association (“CWTA”) and fully supports the CWTA’s comments in their entirety.
4. RWI currently operates Canada’s largest national commercial mobile communications services network, providing coverage to over 93% of the Canadian population. RWI has been granted spectrum licences for radio frequencies in the 800 MHz and 1900 MHz frequency bands. These spectrum licences were obtained by means of comparative review and spectrum auction processes.
5. Using its licensed spectrum, RWI operates a national cellular and PCS network that is comprised of fixed, mobile, circuit- and packet-based technologies, which employ a variety of technical standards. RWI believes that it is in an excellent position to provide the Department with constructive and relevant input regarding the Consultation Paper.
6. At the outset, RWI continues to be alarmed by the high level of direct and indirect taxation that the wireless industry and its customers bear. RWI believes that this problem is a direct result of the fact that numerous federal departments have implemented individual policies and decisions that affect the wireless industry, without having conducted an assessment of the cumulative impact of such policies and decisions. As outlined in greater detail below, coordination is urgently required amongst the federal departments whose policies affect the wireless industry and an assessment of these impacts is required immediately.
7. RWI is concerned that the proposed spectrum fees being considered by the Department are excessive. Absent the recommendations put forward by RWI in the following comments, a new spectrum licence fee regime may curtail the quality, affordability and availability of wireless services in Canada, and may undermine the competitiveness and health of the wireless industry. Current spectrum licence fees are already unreasonably high and, therefore, any new licence fee regime must seek to remedy this problem.
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8. In addition to setting spectrum licence fees that are more reasonable than current fees, a new spectrum licence regime must seek to be fair and equitable in its treatment of licensees. RWI is concerned that the proposed regime fails to adequately apply the principle that licensees should pay for radio spectrum that they hold, regardless of the extent to which, and the manner in which, they choose to utilize it. RWI believes that this principle should be applied to all licensed spectrum in the 300 MHz to 3000 MHz frequency range (“the UHF band”).
9. RWI believes that a mandatory System Access Fee (“SAF”) statement is unwarranted and should not be imposed as a licence condition.
10. RWI believes that the more onerous requirement for public consultation in connection with antenna structures is unwarranted. The wireless companies already perform public consultation for antenna structures to the degree required by the local community.
DETAILED COMMENTS
CURRENT SPECTRUM FEES
An Assessment of the Cumulative Impact of Federal Policies is Required
11. RWI continues to be alarmed by the high level of direct and indirect fees and taxation that the wireless industry and its customers bear. RWI notes that numerous federal departments affect the wireless industry through their individual policies and decisions.
12. For example, as a cellular/PCS licensee, RWI must pay spectrum licence fees, is required to invest 2% of adjusted gross revenues in research and development (“R & D”), is required to provide specific lawful access capabilities, must pay CRTC Contribution, and is subject to federal and provincial taxes.
13. RWI notes that the Province of Newfoundland has empowered itself and the municipalities of the Province to tax utilities, including Wireless Service Providers (“WSPs”), an amount equal to 2.5% of the revenues generated within their boundaries. Other governments and public authorities have attempted to impose access and right-of-way charges on WSPs.
14. Despite the substantial level of funds extracted from cellular/PCS licensees in this manner, it would appear that neither the Department, nor any other federal department, has undertaken an adequate assessment of the cumulative impact of these policies and decisions.
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15. RWI provided comments to the Department in response to Gazette Notice DGTP-004-02 -Revision to the 1992 Spectrum Policy Framework for Canada (“DGTP-004-02”). In its comments, and among other things, RWI urged the Department to adopt the following principles within the new spectrum policy framework:
• When setting spectrum fees, the Department should take into consideration the aggregate revenues extracted from licensees by all federal departments or agencies.
• In competitive industries such as mobile wireless, spectrum fees should be restricted to cost recovery.
16. RWI urges the Department once more to undertake an assessment of the direct and indirect costs that are imposed on cellular/PCS licensees by federal departments, and to reduce this burden to a more reasonable level.
17. As outlined in more detail below, before any new spectrum licence fee is implemented, the Treasury Board Cost Recovery Charging Policy (“the Treasury Board Policy”) states that such an assessment is required.
Distortions in the Current Spectrum Fee Regime
18. RWI is in favour of the timing of the proposed new fee and licensing regime. However, as noted already, a substantially lower spectrum licence fee rate is urgently required.
19. RWI believes that some parties will argue that the implementation of the proposed fee regime should be delayed, and that the current regime should remain in effect. RWI submits that, if the Department elects to delay the implementation of the proposed regime, it should only do so if it is prepared to eliminate a significant existing distortion that favours certain licensees. Specifically, RWI notes that the existing spectrum fee structure for the 800 MHz cellular band is not technology neutral in that it favours licensees that operate wide bandwidth channels.
20. For example, under the existing fee structure, Code Division Multiple Access (“CDMA”) transmitters and receivers that operate in the 800 MHz cellular band are subject to the same initial radio license fee and annual spectrum license fee per radio channel as alternative mobile wireless technologies, but consume far more spectrum. A CDMA channel consumes 1,250 kHz while an Analog Mobile Phone Service (“AMPS”) or Time Division Multiple Access (TDMA) channel consumes only 30 kHz of radio spectrum. The CDMA operators therefore pay only 2.4% of the annual spectrum license fee per MHz of spectrum per re-use as does the TDMA operator.
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21. Despite the significantly wider bandwidth of CDMA channels, the Department currently applies the same fee as is paid for channels using less bandwidth. This confers an unwarranted competitive advantage on 800 MHz cellular licensees using CDMA technology by applying a lower spectrum fee per MHz than what is applied to licensees using alternative technologies.
22. Effectively, 800 MHz cellular licensees using CDMA technology have not paid their fair share for the radio spectrum resource that they consume. RWI submits that the Department should apply a retroactive credit to licensees that do not utilize CDMA technology, based on the same fee paid per MHz per re- use of spectrum as the CDMA operators, since the non-CDMA operators have contributed a disproportionately large share of the spectrum fee revenues collected by the Department.
PROPOSED SPECTRUM FEES
Treasury Board of Canada Cost Recovery and Charging Policy
23. Spectrum licence fees are a form of user charges.
24. RWI notes that a number of provisions in the Treasury Board Policy govern the extent to which federal government departments may impose user charges.
25. Among other things, one aim of user charges is “to earn a fair return for the Canadian public for access to, or exploitation of, publicly-owned or controlled resources”.
26. It is also significant to note that the Treasury Board Policy states that “It is government policy to implement user charges for services that provide identifiable recipients with direct benefits beyond those received by the general public, unless overriding policy objectives would be compromised” (emphasis added). Similarly, the Treasury Board Policy states that departments “have an obligation to consult with other affected parties to ensure that competing policy objectives are not compromised”.
27. An overriding principle contained in the Treasury Board Policy is that user charges “cannot be used simply as a means of generating revenue to meet the funding requirements of a department or agency”.
28. Consistent with this principle, federal departments must conduct meaningful consultations with affected clients and, as stated within the Treasury Board Policy, “the aim of consultations should be to avoid imposing unreasonable cost burdens on clients”.
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29. RWI also notes that the Treasury Board Policy requires that, before imposing user charges, federal departments must “conduct impact assessments to identify all significant effects, positive and negative, and factor those results into sound fee-setting decisions”.
30. The Treasury Board Policy further states that government departments must “work with clients to assess the cumulative impact of multiple fees from all federal sources, and assess proposed fees in that context”.
31. Remarkably, despite these requirements that govern the imposition of user charges, the Consultation Paper is silent with respect to the following important issues:
• The relationship between the proposed licence fee regime and competing policy objectives. • Whether the proposed licence fee regime compromises any overriding policy objectives. • The results of impact assessments that identify all significant effects and how any such effects have been factored into the proposed fee regime. • Evidence that the Department has worked with licensees to assess the cumulative impact of multiple fees from all federal sources and the extent to which this assessment has influenced the proposed fee regime.
32. These omissions are alarming and they call into question the reasonableness and validity of the proposed spectrum licence fee regime.
33. As outlined in greater detail below, it is doubtful that the proposed spectrum fee regime is consistent with a number of policy objectives.
Overriding and Competing Policy Objectives
34. RWI notes the following policy objectives that have been established by the federal government:
• Innovation: to foster innovation in recognition of the importance it will play in our knowledge-based economy.
• Connectedness: making Canada the most connected country in the world.
• Broadband Access: promoting the widespread availability of broadband facilities to Canadians.
35. The Department has, from time to time, recognized the importance of wireless services in relation to the policy objectives noted above. Indeed, the Consultation quotes Canada’s Innovation Strategy, which was launched on
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February 12, 2002. The wireless industry has been, and will continue to be, a driver of innovation, primarily through its investments in R & D, in the purchase of new technology, and in the development of new and innovative wireless services. Additionally, the Canadian wireless industry is helping Canada realize the Innovation Strategy through its investment in engineering and information technology (“IT”) services, and its employment of skilled workers.
36. Yet, surprisingly, the Consultation Paper is silent with respect to these facts. RWI believes that this silence betrays a serious flaw in the proposed spectrum fee regime. The Department has not demonstrated that the proposed regime will not compromise these policy objectives.
37. Similarly, the Consultation Paper does not demonstrate that competing policy objectives are not compromised by the proposed regime. For example, the Consultation Paper does not demonstrate that the proposed regime is consistent with the objectives of Canadian telecommunications policy, as defined in Section 7 of the Telecommunications Act. Among other things, these objectives aim to:
• Facilitate the orderly development of telecommunications throughout all regions of Canada.
• Ensure that high quality and affordable telecommunications services are accessible to Canadians in both urban and rural areas.
• Stimulate research and development and to encourage innovation in the provision of telecommunications services.
• Enhance the efficiency and competitiveness of Canadian telecommunications at the national and international levels.
38. RWI strongly believes that the implementation of the proposed spectrum licence fee regime for cellular/PCS spectrum is hostile to all of the above noted policy objectives.
39. For example, under the proposal, spectrum fees will increase each year over the 2004 to 2011 timeframe. The effect of increased fees will be that funds will be diverted away from the above noted policy objectives. For a licensee such as RWI, which has yet to earn a profit, every dollar paid for spectrum licence fees is a dollar that is denied to activities that will promote these overriding policy objectives.
40. Similarly, a more onerous requirement for public consultation in relation to antenna structures would likely slow, if not halt, the orderly development of competitive wireless telecommunications throughout all regions of Canada.
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In any event, the current process protects the requirements of the local communities. The cellular/PCS licensees already perform public consultation for antenna structures to the degree required by the local community. RWI believes that this approach is more efficient than implementing a broad policy in an attempt to deal with rare exceptions. The current process works well and reflects the wishes of the local communities.
Public Benefits
41. Notwithstanding the very serious omissions and policy conflicts noted above, RWI submits that the proposed spectrum fee regime is also at odds with another important aspect of the Treasury Board Policy that governs user charges. Specifically, RWI notes that the Consultation Paper does not discuss whether, and the extent to which, the proposed spectrum fee has been influenced by the mix of public and private benefits associated with the radio spectrum.
42. With respect to benefit arising from the use of public resources, the Treasury Board Policy places government activities, such as defence, at the “public” end of the scale, and items such as housing rentals at the “private” end of the scale. A number of other examples are provided to illustrate the nature of the benefits that lie between these two extremes.
43. Significantly, access to the radio frequency spectrum is ranked immediately beneath the purely “public” benefits that are always associated with government activities, and higher than purely “private” benefits. Access to the radio spectrum is ranked significantly higher than other resource-related licences such as, for example, fishing licences.
44. RWI strongly believes that the public benefits arising from the use of the radio spectrum resource are substantial and, accordingly, they warrant a significant reduction in the spectrum licence fee applied by the Department.
45. For example, the Department states in the Consultation Paper that RWI’s cellular network “covers more than 93% of the Canadian population and the major traffic corridors.” At the end of 2002, there were approximately 11.9 million wireless subscribers in Canada. According to Statistics Canada, the population of Canada at that time was about 31.4 million. Therefore, approximately 37% of the population use wireless services, while 93% have access to these services. RWI submits that these levels of coverage and subscription imply that use of cellular/PCS spectrum provides benefits for virtually all Canadians, not only cellular/PCS licensees. These benefits include an array of useful applications such as public safety, business efficiency, and personal convenience. Other benefits include direct and indirect employment, R & D, innovation, and the provision of highly advanced services to Canadians in both urban and rural areas, in all regions of Canada.
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46. Rather than one, or a few, corporations and their shareholders benefiting from the use of this spectrum, the entire economy benefits from the provision of wireless services by means of radio spectrum.
47. As stated in the CWTA’s response the to the federal government’s Innovation Strategy consultation, dated October 2002, mobile wireless technology “is an enabling technology for many other sectors of the economy. In addition to constructing essential communications infrastructure, wireless technology fosters increased efficiency by employees by enabling them to provide faster customer service. It allows companies to monitor equipment in remote locations. It enables businesses to track mobile assets. For many small and medium enterprises, the convenience of mobile communications is vital and can contribute to work life balance. It makes possible immediate, virtual meetings at which crucial business decisions can be made. In short, wireless can enhance productivity in every sector – and fundamentally improve the way a business operates”.
48. These facts have been corroborated by the Department in DGTP-004-02, where it stated that:
“The telecommunications industry’s impact on the Canadian economy goes beyond the revenues and employment generated by the industry itself. Telecommunications, including wireless services, provides a critical infrastructure for knowledge-based and other economic sectors, which has an enormous ‘enabling’ impact on the rest of the economy”.
49. Added to this are benefits arising from wireless technology vendors and service application developers and providers. These benefits include the development of expertise for international trade and investment opportunities.
50. As noted already, the provision of wireless services is also consistent with a number of the federal government’s overriding policy objectives, including innovation, connectedness and broadband access. According to the Treasury Board Policy, these public benefits must be factored into any spectrum licence fee that is implemented by the Department, and must result in a reduction in the level of the user fees that would otherwise have been set to recover a fair return for the Canadian public. Clearly, the Canadian public is receiving a return in the form of numerous public benefits.
51. By comparison, and as noted above, the Treasury Board Policy assigns a significantly lesser degree of public benefits to the exploitation of the fisheries. At the same time, RWI notes that the Department of Fisheries and Oceans has conducted an assessment of the impact of fishing licences on that industry. The assessment was issued in the form of a report entitled “Cumulative Impact of Federal User Fees on the Commercial Fish Harvesting Sector”, dated March 1999. Despite the relatively low degree of public benefit
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arising from the exploitation of the fisheries, the report makes the case for lower fishing licence fees. RWI notes that the level of fishing licence fee revenue has declined since the publication of the report. It does not appear that a similar report has ever been prepared with respect to the impact of spectrum licence fees, and other direct and indirect charges, on the cellular/PCS industry.
52. RWI finds it alarming that two federal departments would apply the Treasury Board Policy in such an inconsistent manner. Yet, it is even more disturbing that the Department has not recognized the greater public benefit arising from the use of cellular/PCS spectrum, and that it has not proposed to reduce the level of the licence fees paid by cellular/PCS licensees.
53. RWI strongly believes that the Treasury Board Policy dictates that cellular/PCS spectrum licence fees be reduced to reflect the relatively significant extent to which public benefits are created as a result of the use of the radio spectrum resource.
The Proposed Spectrum Licence Fee should be Applied to Other Users
54. RWI notes that a key requirement of the spectrum licence fee regime that is proposed in the Consultation Paper is that licence fees will be associated with the amount of spectrum consumed instead of the number of sites or channels that have been deployed. Effectively, licensees must pay spectrum licence fees to the extent that the spectrum they have been assigned is denied to others.
55. RWI recognizes that this is an important principle. While RWI is not opposed to this requirement, RWI is concerned that the Department has arbitrarily and unjustifiably limited the application of this requirement to cellular/PCS licensees. Effectively, the Department has proposed a part-measure that will apply to only one segment of licensees, while the vast majority of other licensees are charged fees on a different basis.
56. RWI notes that radio spectrum in the UHF band is ideally suited for mobile services and applications. However, a range of non-mobile services and applications are allowed to occupy the UHF band. As a result, the spectrum used by these other services and applications is denied to cellular/PCS licensees.
57. The importance of spectrum in the UHF band in relation to mobile services is reflected in the steps taken by the US FCC to re-allocate and license specific blocks of television broadcasting spectrum for mobile services.
58. In RWI’s view, the principle that spectrum licence fees should be paid regardless of the extent to which, and the manner in which specturm is used,
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should be applied equally to all licensees in the UHF band. RWI believes that this approach would be more equitable than the proposal that only cellular/PCS licence fees will be assessed in this manner.
59. This course of action is supported by the fact that mobile wireless licensees, specifically those that operate in the cellular and PCS bands, pay a disproportionately high amount of the total spectrum fees collected by the Department. For example, RWI estimates that cellular/PCS licensees pay nearly 70% of the total spectrum fee revenues collected by the Department. However, the cellular and PCS bands comprise only approximately 6.3% of the UHF band. Clearly, this situation is inequitable.
60. RWI urges the Department to recalculate, and apply, a uniform licence fee for all spectrum in the UHF band, by dividing the total spectrum licence fees collected from licensees in the UHF band, by the total bandwidth in this band, and by the population.
61. For example, if the total spectrum licence fee revenue collected by the Department from all users in the UHF band is $200 Million, then the spectrum licence fee rate applicable to all users in the UHF band would be $200 Million / 2700 MHz / 28.8 Million, or approximately $0.00257/MHz/Pop.
62. In the alternative, if the Department does not elect to adopt this more equitable alternative scheme, RWI urges the Department to uniformly allocate the total spectrum licence fees that it collects from land mobile licensees in the UHF band across all land mobile users in this band.
63. RWI notes that, within the UHF band, land mobile users range from commercial users, such as cellular/PCS and Enhanced Specialized Mobile Radio (“ESMR”) licensees, to non-commercial public licensees such as police, fire, ambulance, and the Department of National Defence.
64. As demonstrated in the comments and reply comments that RWI filed with respect to DGTP-003-02 -Consultation on a Request to Modify the Treatment of Enhanced Specialized Mobile Radio Systems under the Mobile Spectrum Cap Policy, dated June 10, 2002 and June 25, 2002 respectively, ESMR services and cellular/PCS services are clear substitutes. RWI believes that the current consultation provides the Department with a unique opportunity to eliminate the current inequitable treatment of cellular/PCS licensees and ESMR licensees, and to apply a uniform spectrum licence fee for the spectrum used to provide these directly competitive services. This would provide a more level playing field on which these licensees may compete.
65. RWI understands that some parties, specifically ESMR operators, have asserted that ESMR technology is different from cellular/PCS technology. These parties have alleged that spectrum used by ESMR operators should
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not be governed by the mobile spectrum cap policy. RWI fully expects these same parties to argue that ESMR should be excluded from the proposed spectrum licence fee regime.
66. Central to the position of these parties is the notion that the spectrum which ESMR operators occupy is an ‘unorganized patchwork’ containing different operators, yielding unusual interference problems and engineering challenges. These parties will argue that these technical challenges differentiate ESMR spectrum from cellular and PCS spectrum. On this basis, these parties will allege that a different spectrum licence fee regime is justified for spectrum utilized by ESMR operators. It is of note that the technology utilized by these parties does not require contiguity of spectrum and, as such, effectively utilizes the available spectrum to offer similar and competitive services.
67. In response, and as noted already, RWI believes that ESMR and cellular/PCS services directly compete with each other and are clear substitutes. Fair and equal regulatory treatment of these services is essential in a competitive environment. Therefore, spectrum licence fees must be applied equally to the spectrum used to provide these services.
68. In any event, RWI notes that the recent Canadian 1900 MHz PCS spectrum auction resulted in a similar patchwork of various WSPs located in areas that are geographically adjacent to each other, and occupying the same PCS frequencies. This situation in the 1900 MHz band yields identical interference problems and engineering challenges as exist in the spectrum band used by ESMR operators. Therefore, these challenges are not unique to the ESMR spectrum band.
69. RWI submits that not including ESMR in the proposed regime provides ESMR operators with an artificial advantage in their cost structure. This is anti- competitive, creates a market distortion and, ultimately, it undermines the objectives of the Telecommunications Act.
70. In its comments respecting DGTP-004-02, RWI urged the Department to adopt the principle that “spectrum fees shall apply equally where the radio spectrum is used in the provision of similar and competing services.” RWI continues to support this principle and, accordingly, strongly believes that ESMR spectrum should be included in the proposed regime. Otherwise, ESMR licensees will enjoy an unwarranted advantage over the cellular and PCS licensees with whom they directly compete.
71. The Department’s rationale for excluding ESMR is set out in Section 2.3 of the Discussion Paper. The first paragraph of Section 2.3 distinguishes ESMR because there is no dedicated ESMR allocation. However, once the spectrum has been made available to TELUS, this distinction becomes
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meaningless. The second paragraph says that government policy requires fees to reflect the value of the spectrum and that supply and demand conditions are different for ESMR. The idea that supply and demand is different for ESMR than for cellular/PCS is incorrect. An auction of ESMR spectrum would yield similar values on a MHz per pop basis to a cellular/PCS auction. By charging ESMR on a different basis than cellular/PCS, the Department is ignoring the value of spectrum as a de facto commercial input, ignoring demand and supply conditions and violating government policy. RWI submits that the Department’s comments in Section 2.3 of the Discussion Paper represent an attempt to reconcile an inconsistent position rather than a principled analysis of public policy.
72. The Department has a choice. They can charge cellular/PCS licensees based on their usage of the spectrum as they do currently. Fairness and economic efficiency may dictate that it is better to charge based on the “value of the spectrum as a de facto commercial input”. However, to do so for only cellular/PCS providers would be neither fair nor efficient. Fairness and efficiency require all users of the UHF band to be charged according to the value of the spectrum as a commercial input, regardless of the actual use of the spectrum.
Increased Fees for Cellular/PCS Spectrum are not Appropriate
73. As noted above, the level of direct and indirect taxation for cellular/PCS licensees is already unacceptably high. A full assessment of the cumulative impact of these costs on cellular/PCS licensees is urgently required, with or without a new spectrum licence regime. If the Department elects to implement a new spectrum fee regime, then the level of the new fee must reflect the results of a full assessment. In either case, RWI believes that the level of spectrum licence fees extracted from cellular/PCS licensees must be reduced.
74. In addition to the above-noted reasons for lowering cellular/PCS spectrum fees, RWI believes that the Department’s proposed fee calculation is fundamentally flawed.
75. RWI estimates that, under the proposed spectrum fee regime, the total annual fees paid for cellular and non-auction PCS spectrum would rise from approximately $137 Million in 2003 to approximately $184 Million in 2011. This represents an increase of approximately $47 Million, or 34%. RWI believes that this proposed increase is unwarranted and unreasonable.
76. Although the Consultation Paper does not attempt to explain or justify this increase, RWI believes that the Department has assumed that, under the current spectrum fee regime, the total amount of spectrum licence fee revenue will rise over the 2003 to 2011 timeframe. On the basis of this
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assumption, the Department has attempted to ensure that the proposed regime will recover the existing fee revenues, as well as the fee revenue growth that it expects from 2003 through to 2011.
77. For the following reasons, RWI strongly believes that total cellular and PCS spectrum fees under the current spectrum fee regime would grow substantially less than 34% over the 2003 to 2011 period.
78. First, the historical growth of spectrum licence fees is attributable to the use of non-auctioned spectrum. However, going forward, some licensees will make increasing use of the spectrum that they acquired in the 2001 PCS spectrum auction. By doing so, these licensees will have the ability to deploy additional coverage and capacity without having to pay additional spectrum licence fees. Therefore, past growth in the amount of spectrum licence fees collected by the Department is not a valid proxy for the future growth of these fees.
79. Second, technological improvements will increase the spectral efficiency and ‘reach’ of wireless networks. These improvements include: transceiver vocoder technology, data compression technology, frequency hopping techniques, “smart” antenna design, signal processing, noise and interference elimination and higher-order modulation techniques. All of these technological improvements will allow cellular/PCS licensees to expand and improve coverage, without the need to implement additional radio channels and base station sites, or to pay additional spectrum licence fees.
80. Further, as demand for digital services grows, and demand for analog services declines, cellular/PCS licensees will replace analog technology with higher capacity digital technology. The net effect of this trend over time will likely be an overall reduction in the number of radio channels. The same will be true when 2nd generation (“2G”) technology is replaced by 2.5G technology, and when 2.5G technology is replaced by 3rd generation (“3G”) technology, and so on. As lower capacity channels are replaced with higher capacity channels, the number of overall channels in the network will decline. As a result, spectrum licence fees will also decline. In fact, this is already the case. As noted above, CDMA operators have already reduced their total licence fees by implementing broadband channels.
81. All of these factors will offset the effects of continued network expansion, subscriber growth, and the provision of higher bandwidth services that have, historically, resulted in an increase in the total spectrum fees paid by licensees.
82. In light of the above, the proposed 34% spectrum licence fee increase is excessive and must be eliminated. RWI strongly believes that, at most, there should be no net increase in the total fees collected under the proposed regime, above what will be collected from the industry under the existing
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regime as of 2003-2004. As suggested above, and outlined in greater detail below, RWI believes that a net reduction in the total spectrum fees collected by the Department is both warranted and urgently required.
Comparison of Fees in Canada and the US
83. The proposed model places Canadian licensees at a cost disadvantage to their US counterparts. Higher fees for Canadian cellular/PCS licences will translate into relatively higher operating costs. Higher operating costs will make profitability more difficult for Canadian licensees. This disadvantage will negatively affect, among other important issues, the ability of Canadian cellular/PCS licensees to attract capital investment vis-à-vis US carriers.
84. RWI notes that the FCC had its spectrum fee mechanism set by the USA Omnibus Budget Reconciliation Act of 1993. The result is that the US FCC applies spectrum fees to recover its administration and enforcement costs. This fact is corroborated by reports that were filed at the International Telecommunications Union (“ITU”) (Document 1B/7-E 6/25/1998) which state that “these regulatory fees, which may change yearly, are used to offset costs associated with the FCC’s enforcement, public service, international, policy, and rulemaking activities.”
85. RWI notes that the 2002 rate that was set by the FCC for Commercial Wireless Regulatory Fees was $0.24 (US) per working cellular number/unit. Compared to current Canadian cellular/PCS spectrum licence fees, and converted to Canadian dollars, the FCC rate per subscriber is approximately 3% of the equivalent fee per Canadian cellular/PCS subscriber. This imbalance in the treatment of US spectrum licensees and Canadian spectrum licensees is extraordinary and counter-intuitive.
86. RWI believes that a FCC-style cost recovery mechanism would place Canadian cellular/PCS licensees on a more equal footing with their US counterparts. RWI notes that this approach would also be consistent with Section 7(c) of the Telecommunications Act which states that one of the objectives of Canadian telecommunications policy is “to enhance the efficiency and competitiveness, at the national and international levels, of Canadian telecommunications” (emphasis added).
87. As noted already, RWI submits that this approach would better serve the public interest than the proposed fee regime. Rather than extracting excessive spectrum licence fees from cellular/PCS licensees, the Department should drastically reduce fees in order that licensees may invest in new and innovative services, expand coverage and provide high quality services at affordable rates.
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Spectrum Licence Fee Benchmarks
88. The Department has proposed a new spectrum licence fee based upon RWI’s 2000/2001 800 MHz cellular network. The Department has characterized RWI’s cellular network as covering “more than 93% of the Canadian population and the major traffic corridors, is established in all provinces and the Northwest Territories, operates in the 25 largest Census Metropolitan Areas (CMA) of Canada, and is assigned 25 MHz of spectrum”.
89. RWI submits that the model selected by the Department is flawed. Both 25 MHz of spectrum in the 800 MHz cellular band and 10 MHz of spectrum in the 1900 MHz PCS band are used to serve the population and areas identified by the Department in its example. RWI has invested significant capital and technical expertise to create a network that, using hybrid systems and multimode subscriber handsets, utilizes both bands to offer a contiguous and seamless service to its customers. Therefore, the notion that only RWI’s 800 MHz cellular frequencies are used to provide services to 93% of the Canadian population is incorrect.
90. In light of this flaw, RWI recommends that the model should be modified to include the incremental 10 MHz of PCS spectrum, and its associated spectrum fees, in the calculation of the new fee. This would reduce the benchmark price to approximately $0.0365 /MHz/Population.
91. RWI notes that, alternatively, the Department could have elected to use the 2000 acquisition of Clearnet Communications Inc. (“Clearnet”) by Telus Corporation (“Telus”), or the 2001 PCS spectrum auction, as proxies for the value of cellular/PCS spectrum. RWI submits that neither of these “proxies” are valid spectrum pricing benchmarks for the following reasons.
92. The 2001 PCS spectrum auction prices reflected an artificial scarcity of spectrum that was created when the Department withheld 40 MHz of spectrum in the PCS ‘C’ band (30 MHz) and the PCS ‘E’ band (10 MHz). Together, these withheld blocks comprise 33% of the 120 MHz of allocated PCS spectrum in Canada, or 50% of assigned PCS spectrum in Canada. The effect of this artificial scarcity was that the prices paid at auction were unnaturally inflated.
93. The acquisition of Clearnet by Telus was not confined to radio spectrum, but included a customer base, marketing methods, supply agreements, goodwill, infrastructure, leased offices and infrastructure space, and a cross-Canada presence. All of these factors combined contributed to the value that Telus assigned to Clearnet.
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94. Moreover, both the auction and acquisition of Clearnet took place at a time when the high technology sector was dramatically overvalued and overpriced by public capital markets. The subsequent bursting of the “tech stock bubble” is evidence of this fact. RWI strongly believes that if the same auction and acquisition took place today, valuations and prices would be substantially lower. This is corroborated in news media and industry analyst reports.
95. For example, the New York Times recently reported a US Supreme Court ruling that reversed the license cancellation of Nextwave Communications: “Industry analysts say the value of such (1996 PCS Spectrum Auction) licenses has been falling since the Federal Communications Commission tried to reauction them in early 2001.”
96. Another article discusses industry trends in the following terms: “I believe the resolution of [the Nextwave] case paves the way for the future structure of this industry, says Mark Lowenstein, Managing Director of Mobile Ecosystem and veteran industry analyst. The most immediate impact, according to our analysis, will be a clearer view of the value of spectrum in the wireless industry’s new reality, characterized by slowing subscriber growth, liquidity challenges among the operators, and uncertainty about the prospects for wireless data.”
97. Clearly, mobile spectrum has a significantly lower value in 2003 than it did at the time of the US and Canadian PCS spectrum auctions, and at the time of the Telus acquisition of Clearnet. Therefore, neither the 2001 PCS spectrum auction, nor the Telus acquisition of Clearnet, provide a valid or useful proxy of the value of cellular/PCS spectrum in Canada. Accordingly, these “proxies” should not be used to determine the spectrum licence fees for cellular/PCS spectrum.
The State of the Canadian Wireless Industry
98. RWI submits that a number of factors associated with the Canadian wireless industry dictate that spectrum licence fees should be reduced rather than increased.
99. RWI notes that intense competition in the Canadian wireless industry has produced low rates for consumers, while at the same time providing networks with a high quality of service, wide coverage, and innovative features. Additionally, capital investment is required on an ongoing basis to keep wireless networks current and to maintain a high grade of service.
100. As a result, the Canadian wireless industry is highly dependent on the capital markets. Higher spectrum licence fees will increase operating costs and will reduce the capital available for the development and provision of new and innovative wireless services. These effects will have a negative impact on the
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ability of cellular/PCS licensees to raise capital in public markets, and will make it more difficult for these licensees to secure funds for improving network grade of service, for expanding network coverage, and for developing and providing innovative services.
101. RWI notes that it has invested more than $2 billion in network upgrades since 1999, even though prior investments have not been recouped. Additionally, RWI plans to spend approximately $425 million in 2003. This capital must be raised by vehicles, such as debt financing, which, while helpful, also contribute to the challenge of making a profit. However, the alternative of not expanding network capacity and capability or developing new services is not an option. Fierce and vigorous competition, such as that which exists in the Canadian wireless market, demands that competitors must be constantly on the leading edge of technology.
102. Additionally, RWI notes that intense competition in the Canadian wireless marketplace has forced prices so low that Microcell Telecommunications Inc., which was awarded a national PCS spectrum licence, has recently entered into bankruptcy protection. As a result of its financial difficulties, Microcell has undergone a series of project suspensions and workforce reductions. These consequences are contrary to the intent of the Innovation Strategy. Andre Tremblay, President and Chief Executive Officer of Microcell Communications Inc., is quoted in a December 10, 2002 news release as stating, “we believe that the reduction of our operating expenses is a necessary step to enable us to remain an effective competitor on the market and to ensure our future growth.” RWI finds it hard to understand an overall spectrum licence fee increase when aggressive competition in the marketplace has driven prices and associated margins down to commodity levels.
103. Further, RWI estimates that the Average Revenue Per Unit (“ARPU”; the measurement of average revenue per wireless customer) has dropped by approximately 54% in the past 11 years. Moreover, in recent years, there has been an emphasis on the acquisition of prepaid customers, which provide an ARPU of approximately 20% of that of traditional postpaid subscribers. Overall, this decline in ARPU is expected to continue as customers expect larger minute buckets at the same overall price. Yet, the Department’s proposal to increase cellular/PCS spectrum licence fees fails to reflect this trend.
104. RWI notes that, in the Consultation Paper, the Department states “Government policy clearly states that fees are to reflect the value of spectrum as a de facto commercial input”. RWI acknowledges that cellular and PCS spectrum does indeed have high traffic levels, but the same spectrum has yielded low or non-existent profit margins. RWI has been operating since 1985 and has yet to earn a profit. RWI aspires to have free cash flow, yet even this is something less than an accounting profit. RWI
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believes that fees should not simply reflect the revenue associated with spectrum, given that the associated profits are significantly lower.
Higher Fees Will Reduce Investment and Will Raise Wireless Rates
105. RWI emphasizes that any increase in spectrum fees would likely divert funds away from improvements in quality of service, expansion of coverage, and development of innovative services. WSPs would likely also find it necessary to reduce the quantity of goods and services purchased from network technology vendors.
106. RWI submits that the vast array of federal fees is already affecting capital investment, as IDC Canada has released a report entitled Telecom’s Continuing Chill: Canadian 2003 Capital Spending Outlook, identifies another WSP capital expenditure drop in 2003, approximately 40% below levels recorded in 2001.
107. In addition to redirection of investment away from service and coverage improvements, in an environment of declining ARPU, the significant cost increases on service providers would likely have the effect of driving wireless service rates upward. Service providers will have no alternative but to pass these costs on to their customers in the form of higher rates. This in turn may curtail the extent to which Canadians adopt wireless services. It should be noted that the Canadian wireless adoption rate (also known as ‘penetration’) is already among the lowest in the industrialized world.
A Two-Tier Spectrum Fee Structure Would Be A Mistake
108. RWI is aware that some regional cellular/PCS licensees may support a two- tier fee structure, whereby rural and outlying areas are subject to lower spectrum licence fees than urban areas. RWI is strongly opposed to a two- tier spectrum fee structure. Such a system is unwarranted, and it would contravene efforts to harmonize the cellular and PCS spectrum fee regimes.
109. RWI submits that, under the proposed fee structure, the fee formula includes a population factor. This means that spectrum fees in rural and outlying areas will be lower than in urban areas. Therefore, rural fees already include a significant discount. This proposed scheme is an improvement upon the existing apparatus-based methods of charging spectrum fees, since it reflects the relative value of spectrum in densely populated and sparsely populated areas.
110. Further, the notion of a two-tier fee structure is hostile to the stated objectives of the proposed regime which are that all cellular and PCS spectrum licensees will operate under a common framework that is intended to be fair and consistent. Moreover, the introduction of a two-tier spectrum
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fee structure would only serve to perpetuate one of the discontinuities that the Department set out to eliminate in this consultation.
111. Implicit in a two-tier fee structure is the notion that networks are more expensive to deploy in rural areas. However, RWI notes that radio base stations are not necessarily less expensive to construct in urban areas than in rural and remote areas. In urban areas, there are increased engineering challenges such as interference and land topology complicated by buildings, and higher radio base station property lease rates.
112. RWI strongly urges the Department to reject any assertions that a two-tier spectrum licence fee be incorporated in the final policy.
Spectrum Fee Relief for Certain Licensees is Not Warranted
113. RWI expects that certain non-auction PCS licensees may request interim relief from existing or proposed spectrum licence fees due to their own unique circumstances. RWI submits that providing relief to only some licensees and not others would create market distortions that would favour some competitors at the expense of others. This would be entirely unacceptable.
114. Further, licensees that acquired non-auctioned PCS spectrum licenses applied to the Department in a comparative bid proceeding for use of the PCS spectrum. In other cases, non-auction PCS spectrum licensees knowingly purchased the assets and obligations of another licensee. In either case, it is not reasonable for these licensees to be granted relief from spectrum licence fees when they knowingly accepted the licensing terms and conditions that are associated with the spectrum licenses that they currently possess. In light of the above, the Department should reject any such pleas for relief.
PROPOSED SPECTRUM LICENCE ATTRIBUTES
System Access Fee
115. In the Consultation Paper, the Department has asserted that consumers are “the subject of inconsistent messages from service providers when it comes to System Access Fees (SAF)”, and has also observed that the main cellular/PCS providers define SAF differently. In an attempt to minimize the perceived uncertainty regarding SAF, the Department has proposed that a mandatory statement explaining SAF be used by all cellular/PCS licensees.
116. In response, RWI notes that the practice of applying fees in order to recover government-imposed charges is not unique to Canadian wireless carriers. US wireless carriers apply similar fees and, indeed, explicitly associate these fees with government charges. For example, RWI notes that a recent Cingular Wireless advertisement states that a 'Regulatory Cost Recovery Fee' is applied to help Cingular Wireless "defray its costs incurred in complying
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with obligations and charges imposed by State and Federal telecom regulation, a gross receipts surcharge, and State and Federal Universal Service charges". Similarly, an AT&T Wireless advertisement identifies a 'Regulatory Programs Fee’, which it applies "to help fund AT&T Wireless compliance with various government mandated programs". Therefore, the application of such fees is common practice throughout North America.
117. RWI submits that a mandatory statement explaining SAF should not be required since the majority of cellular/PCS licensees already clearly explain the purpose of SAF fees in information that is provided on their web sites and in their service contracts.
118. Further, RWI strongly believes that the proposed mandatory statement will generate confusion and will lead to additional consumer inquiries to the Department. This is precisely what the Department seeks to overcome through a mandatory SAF message.
119. In any event, RWI strongly believes that the wording of the proposed mandatory SAF statement is fundamentally incorrect. Specifically, the Department suggests in the SAF statement it has proposed that “[t]here is no correlation between the license fees for the radio frequency spectrum and the number of subscribers to whom the service is provided”. At the end of 2001, there were approximately 10.7 million wireless customers in Canada and the population of Canada at that time was about 31.4 million. In a market of this size and maturity, there is a clear relationship between the quantity of customers and the country’s population.
120. Under the proposed regime, there will be a direct relationship between the spectrum fees that a given licensee must pay, and the population that is served by the licensee. Since the number of customers served is directly related to the population covered by mobile wireless radio transmitters for which spectrum licensing fees are paid, there is a clear relationship between the number of customers served and the spectrum licence fees that are payable to the Department.
121. RWI notes that, originally, the Department collected spectrum fees directly from public users of mobile radio transceivers- that is, mobile wireless customers. In 1987, the Department elected to delegate the responsibility for collecting these fees to WSPs, rather than continue to incur the expense of collecting the fees directly from wireless customers. Under the modified arrangement, spectrum fees were applied to each radio channel operated by a given licensee. The level of the spectrum fee per radio channel was determined by multiplying the previous fee by the assumed number of customers supported per radio channel. Therefore, the origins of the current spectrum fee corroborate the fact that there is a correlation between spectrum fees and the quantity of subscribers to whom the service is provided.
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122. Further, WSPs must add radio channels and/or fixed stations to their networks in order to support a growing number of customers. This also demonstrates that there is a direct relationship between the number of customers and the number of radio channels and/or fixed stations. Since fees are applied to radio channels and fixed stations under the current fee regime, there is a direct relationship between the number of customers and the spectrum fees that are payable to the Department.
123. Clearly then, whether in the context of the current fee regime, or under the proposed fee regime, there is a relationship between the number of customers and the spectrum fees payable to the Department.
124. Moreover, RWI notes that the proposed SAF statement includes the following sentence: “Industry Canada encourages consumers to seek the best value from among the competing service providers that have been licensed.” It is evident that the Canadian wireless industry is highly competitive and, therefore, such a statement is not necessary.
125. For the reasons provided above, RWI submits that the proposed SAF statement is misleading, if not factually incorrect. Therefore, RWI strongly believes that the proposed SAF statement is unwarranted and should not be imposed by the Department as a condition of licence.
126. In any event, RWI believes that the Department may not have the authority to impose such a condition, as it would impair the cellular/PCS licensees’ right to commercial speech that is guaranteed under the Charter of Rights and Freedoms.
127. RWI submits that, in the alternative, should the Department choose to impose specific SAF wording as a condition of license, it be required only on contracts and official company web sites, and it should be worded as follows:
The System Access Fee (SAF) is a fee charged on an ongoing basis to cover various costs associated with the operation, expansion, and maintenance of the network.
Radio Station Installations
128. RWI submits that it is both premature and inappropriate to introduce any segments of this topic when the Minister has announced that a National Antenna Tower Policy Review will begin in early 2003.
129. In any event, RWI is concerned with the proposed removal of the word “significant” from the license condition respecting radio station installations. Currently, this licence condition reads as follows: “prior to installation of
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significant antenna structures, meaningful consultation has taken place.” The proposed removal of the word “significant” will create ambiguity as to which specific antenna structures require meaningful local consultation, and which ones do not.
130. More importantly, this could have the effect of subjecting all antenna installations and augmentations to more onerous consultation procedures and invite capricious objections. This, in turn, would seriously impair the extent to which licensees could expand and improve their service capacity and coverage and, therefore, would not be consistent with the following objectives of Canadian telecommunications policy:
7(a) to facilitate the orderly development throughout Canada of a telecommunications system that serves to safeguard, enrich and strengthen the social and economic fabric of Canada and its regions
7(b) to render reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada
131. RWI believes that, in proposing this change, the Department did not intend to require that each and every antenna installation and augmentation would require public consultation. RWI believes that the Department intended that licensees be required to undertake public consultation to the extent that they are required to do so according to local policies. For its part, RWI already fully complies with consultation requirements that are stipulated in local policies, and will continue to do so.
132. For example, when RWI embarks on planning a base station or a base station augmentation, if the local zoning permits the specific proposed application, then a building permit is obtained. The local land-use and building authorities make this determination. If the local zoning does not permit the specific application, then a variance proceeding is initiated, which includes public consultation, and involves pre-advertised public hearings. RWI believes that this is a fair and reasonable practice, and is compatible with local requirements, which often vary from location to location.
133. RWI is also concerned that a more onerous requirement with regards to public consultation would place a national carrier such as RWI at a competitive disadvantage to other carriers. Specifically, RWI notes an enhanced reciprocal roaming agreement that was jointly announced by Bell Mobility and Telus Mobility on October 17, 2001. This agreement is between Telus Mobility and Bell Mobility (including its affiliates NorTel Mobility, Telebec Mobility, Northwestel Mobility), and Aliant Telecom Wireless companies (which includes MTT Mobility, NBTel Mobility, NewTel Mobility, and IslandTel Mobility). One provision of this agreement is that these carriers
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share each other’s radio installation sites and towers. As a result of this provision, the extent to which these carriers must acquire new locations for radio installations is considerably less than a carrier such as RWI. Therefore, the proposal that public consultation be required for all radio installations, irrespective of local land-use requirements and policies, would unjustly penalize a carrier such as RWI more than other carriers such as Bell Mobility and Telus Mobility (and their respective affiliates). This result would be anti- competitive and would be unacceptable.
134. As noted above, consultations and approvals beyond those required by local authorities would be counter-productive to the objectives of extending competitive, advanced, and high quality telecommunication services to all regions in an orderly manner. Further, RWI submits that the proposed change would be counter to the administrative efficiency objective stated in the Consultation Paper.
135. In light of the above, RWI does not support the proposed modification of this licence condition. In the alternative, if the Department elects to modify this licence condition, RWI recommends that the Department use the following wording:
Prior to installation of antenna structures, consultation has taken place with all local municipalities or land-use authorities, as may be required by local by-laws, with the aim of developing consensus solutions…
136. Further, RWI recommends that a maximum time limit be placed on responses from local land use authorities or municipalities, in order to prevent unreasonable delays to construction programs, missed seasonal (temperature and weather) construction opportunities, and delays to improvements in coverage and service.
Licence Transferability and Divisibility
137. RWI supports the proposals regarding transferability and divisibility.
138. RWI understands that, under the proposed transferability and divisibility guidelines, licensees will have the option of returning a portion of their spectrum licence to the Department. RWI would expect that licensees who elect to do so may request in writing that the Department amend their licence(s) accordingly. RWI further understands that spectrum may be returned to the Department at the discretion of licensees, without any requirement that they first attempt to dispose that part of their licence in the secondary market. RWI requests that the Department confirm these provisions.
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139. RWI believes that these are appropriate provisions, given the proposal that licensees will be required to pay spectrum licence fees for all geographic areas covered by their licence, whether or not they utilize the spectrum. Absent this provision, licensees will be required to pay spectrum fees for areas that they may have no intention of serving. RWI believes that this would be unfair.
Cellular and PCS Service in Underserved Areas
140. RWI appreciates the Department’s efforts in creating more positive business cases in rural and underserved areas. However, the burden of the proposed higher level of local consultation and approvals would likely surpass any benefit created by the proposed spectrum licensing approach, resulting in a less attractive environment to construct new base stations in rural and underserved areas.
141. RWI is concerned that the Department has proposed to sustain the Policy for the Provision of Cellular Services by New Parties (“RP-019”), without amending it to be compatible with the transferability and divisibility privileges that have been proposed. Specifically, the Consultation Paper refers to RP- 019 and states that “[t]he Department will continue to accept applications from potential new cellular service providers for authorization to offer cellular mobile voice telephony services in areas where competitive cellular service provision is not being offered at the time the application is made.” RWI notes that, under the proposed regime, potential new cellular service providers could minimize their attempts to obtain spectrum under the transferability and divisibility privileges, and burden the Department with applications to obtain a licence for the spectrum in question under RP-019. RP-019 should be revoked or amended.
Renewal of Auctioned PCS Spectrum
142. RWI notes that significant sunk capital investments have been incurred, and will continue to be incurred, in relation to 1900 MHz PCS auction spectrum. Accordingly, auctioned spectrum licensees have been granted a high expectation of renewal after the initial 10-year licence term. In addition to this high expectation of renewal, RWI believes that licence fees should not be applied to the auction spectrum during the renewal term. RWI notes that this approach would be consistent with the treatment of auctioned spectrum in the US.
143. For example, RWI notes that all PCS spectrum auctioned in the US will have a strong likelihood of renewal after their 10-year term, with no spectrum fees being applied. RWI strongly urges the Department to adopt a similar approach for Canadian PCS auctioned spectrum.
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Lawful Interception
144. RWI concurs that the lawful access requirements associated with 1900 MHz PCS licences presently include an obligation to provide lawful interception for circuit-switched voice telephony only.
Provision of Technical Information
145. With respect to requests for technical information on a particular station or network, RWI submits that any such requests must be reasonable and must afford licensees with adequate time to gather and provide the information.
146. When the production of the requested information will result in significant costs, the Department should compensate the licensee. RWI submits that a quotation process could be established to specify the critical requirements of the information requested and to stipulate a reasonable fee for such requests.
Cellular Analog Resale and Roaming
147. RWI submits that sufficient time has passed since 1995 to allow non-cellular PCS licensees to build their networks, eliminating the need to sustain the PCS licence condition applicable to incumbent cellular licence holders regarding analog resale and roaming. This licence condition should be removed.
148. In the alternative, should the Department elect to sustain this PCS licence condition, RWI understands that this condition only applies if an incumbent cellular licensee operates an analog network. RWI understands that incumbent cellular licensees may discontinue the provision of analog service at their full discretion.
Spectrum and Geography
149. RWI has analyzed the proposed Local Telephone Service Provider Tier and requests that the Department provide a clarification regarding the mapping of this tier onto tier 4.
150. RWI recommends the smallest divisible area be the 25 km2 spectrum grid cell, as was the case of the 2001 PCS spectrum auction. RWI requests that the Department provide a mapping of these grid cells onto the proposed Local Telephone Service Provider Tier, as well as on the proposed Local Telephone Service Provider Tier onto Tier 4.
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CONCLUSION
151. The high level of direct and indirect taxation that the wireless industry and its customers bear is alarming. As outlined above, coordination is urgently required amongst the federal departments whose policies affect the wireless industry. A reduction in these direct and indirect charges is urgently required.
152. RWI believes that the proposed spectrum fees being considered by the Department are excessive. Any new licence fee regime must seek to remedy this problem.
153. RWI believes that a uniform fee should be applied to all licensed spectrum in the UHF band. At the very least, services that are clear substitutes for cellular and PCS services, such as ESMR services, should be included in the new regime.
154. RWI believes that a mandatory SAF statement is unwarranted and should not be imposed as a licence condition.
155. RWI believes that the more onerous requirement for public consultation in connection with antenna structures is unwarranted and would be detrimental to overriding policy objectives.
156. RWI appreciates this opportunity to provide its comments to the Department.
*** End of Document ***
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