Decision on the Licence Fee Framework for Fixed Point-to-Point Systems

1. Through the release of this document, Innovation, Science and Economic Development Canada (ISED), on behalf of the Minister of Innovation, Science and Economic Development, hereby announces the decisions resulting from the consultation undertaken in Canada Gazette notice DGSO-001-18, Consultation on Licence Fees for Fixed Point-to-Point Radio Systems (the Fee Consultation).

2. All comments and reply comments received on the Fee Consultation are available on ISED’s website. Comments and/or reply comments were received from:

• Alliance Corporation
• Bell Mobility Inc. (Bell)
• British Columbia Broadband Association (BCBA)
• Canadian Electricity Association (CEA)
• Canadian Wireless Telecommunications Association (CWTA)
• Canwisp
• Cogeco Communications Inc. (Cogeco)
• Corridor Communications Inc. (CCI Wireless)
• E-Comm Emergency Communications for British Columbia Incorporated (EComm)
• Ecotel Inc. (Ecotel)
• Kativik Regional Government (KRG)
• Masroor Ahmed Rehan (M. Rehan)
• Québecor Média Inc. (Québecor)
• Radio Advisory Board of Canada (RABC)
• Rogers Communications Canada Inc. (Rogers)
• Saskatchewan Telecommunications (SaskTel)
• Seaside Wireless Communications Inc. (Seaside)
• Shaw Communications Inc. (Shaw)
• TELUS Communications Inc. (TELUS)
• TeraGo Networks Inc. (TeraGo)
• Xplornet Communications Inc. (Xplornet)

3. Throughout the consultative process, many respondents suggested alternative approaches to fees. It is important to note that this decision is the first step of a multi-stage process to modernize fees for different services and licence types. The Minister may consider changes to how spectrum is licensed in any given frequency band. Should alternative licensing mechanisms (e.g. area-based or spectrum licensing) be considered to facilitate diverse uses within a band, ISED would consult with the industry and stakeholders.

4. The decisions herein apply to fixed point-to-point systems. The International Telecommunication Union defines point-to-point communication as "communication provided by a link, for example, a radio-relay link between two stations located at specified fixed points." Examples of fixed point-to-point systems include backhaul communications (defined as transport of aggregate communication signals from base stations to the core network) and studio-to-transmitter links. While the consultation considered point-to-multipoint systems, ISED has determined that the fee model will not apply to these systems (see section 6).

5. As the Fee Consultation did not apply to stations operating in or communicating with the land mobile, aeronautical, amateur, maritime, public information and radiodetermination services, transportables and their associated links in any service, nor to satellites or earth stations, licence fees for these stations will not change at this time.

6. Under the Department of Industry Act, the Minister may fix fees regarding the use of radio apparatus and spectrum in Canada, including new licence fees. Under the Radiocommunication Act the Governor-in-Council may make regulations prescribing fees for radio authorizations.

7. The Minister is responsible for developing goals and national policies for spectrum utilization and for ensuring effective management of the radio frequency spectrum resource.

8. The radio frequency spectrum is a unique and scarce resource that is an integral component of Canada’s telecommunications infrastructure. ISED encourages its efficient and optimal use through policy and standards to ensure its continued availability. Radio licence fees are one mechanism designed to promote both the effective use of spectrum and to earn a fair return for the Canadian public for the privilege of access to this public resource.

9. In developing this decision, the Minister was guided by the policy objectives of the Spectrum Policy Framework for Canada (SPFC) to maximize the economic and social benefit that Canadians derive from the use of the radio frequency spectrum in light of the challenges of a rapidly changing technological environment. ISED is committed to ensuring that Canada has a world-class telecommunications infrastructure and that Canadian consumers, businesses and public institutions continue to benefit from advanced wireless telecommunications services and applications.

10. Through Canada’s Innovation and Skills Plan and its focus on skills, research, technology and commercialization, program simplification, and investment and scale, the Government of Canada is committed to promoting innovation-led growth across all sectors of the Canadian economy. Spectrum is widely used by all economic sectors and is integral to Canada’s telecommunications infrastructure. Decisions made in this document support the Innovation and Skills Plan priorities as well as the SPFC policy objective by simplifying the fee structure while reducing fees overall to encourage upgrading of and deployment of new radiocommunication systems.

11. Radio licence fees are regulatory charges for a limited privilege, permitting access to the use of spectrum—a public natural resource—managed by the Government of Canada. Licence fees for fixed point-to-point systems, as set out in the Radiocommunication Regulations schedule III, Part II, are capacity- and apparatus-based, with separate fees for each transmit and receive frequency. These capacity-based fees are calculated by converting the throughput transmitted and received over a link, regardless of whether voice or data, into its equivalent number of voice channels.

12. ISED recognizes that the current fee model has not kept pace with changes in telecommunications technology and is intent on modernizing the fees for fixed point-to-point systems. These licence fees were last updated in 1996 when 2G was just entering the marketplace and voice communications dominated. Since then, wireless data consumption has grown significantly. According to the Cisco Visual Networking Index: Forecast and Trends, 2017–2022 White Paper, traffic from wireless and mobile devices will account for 71% of the total consumer IP traffic by 2022.

13. Most recently, increased consumer demand for extended coverage, faster broadband data rates, and connectivity anytime and everywhere, is driving the significant growth of data traffic volumes. The number of wireless backhaul systems, as well as the amount of traffic that each carries (capacity) has steadily increased, driven by both commercial and consumer demand. Moreover, the demand for backhaul capacity is expected to grow to support the large data demands anticipated for 5G networks.

14. With the advance of technology, modern radio equipment can transmit more over the same, or even less, spectrum than previously possible. The current capacity-based fee model penalizes licensees by generating higher licence fees for systems that transmit more data using the same amount of spectrum. This fee model can have the effect of promoting the inefficient use of spectrum.

15. Wireless service providers are actively upgrading their networks with state-of-the-art technologies. New and innovative technologies continue to be developed, allowing for the more efficient use of spectrum (i.e. increased data over smaller bandwidths) and faster data rates.

16. Backhaul capacity has increased significantly over the past few years, driven by the growth in mobile and fixed broadband traffic. Recognizing the increases in traffic and demand on wireless backhaul networks, the expected capacity requirements and deployment scenarios of 5G, as well as continued demand for broadband and other services, ISED sought comments on a fee model to accommodate new developments in technology, service and architecture that would:

• encourage innovation and reward spectral efficiency
• reflect the relative utility of different spectrum bands
• be clear and predictable but adjustable to changing markets and technological advances
• reflect requirements of the Service Fees Act including implementation of a periodic fee adjustment

17. Specifically, ISED sought comments on a spectrum consumption-based model for fixed stations in the fixed service, specifically for point-to-point systems. The fees would be calculated based on the amount of spectrum used (bandwidth) per link (a link is a means of communication between two stations located at fixed points). This provides an economic incentive to achieve efficiencies, while taking into consideration the technical factors that influence the spectrum’s value. ISED proposed the following:

Summary of comments

18. The majority of respondents to the Fee Consultation were in favour of a consumption-based fee model. The BCBA, CCI, Cogeco, E-Comm, Ecotel, Québecor, SaskTel, Shaw, Seaside, TELUS and TeraGo supported ISED’s proposal to modernize the existing fee structure to focus on encouraging the efficient use of spectrum and investment in new technology. They also highlighted the positive impact new fees would have on operating budgets and their ability to offer enhanced network resiliency.

19. Respondents also linked the fee model to supporting 5G deployment. Cogeco highlighted that the proposed consumption model will facilitate the roll-out of new networks and technologies in Canada and, as a consequence, will enable Canadian consumers to benefit from greater choice, lower prices, and innovative and high-quality communications services. Québecor also supported the consumption-based model as it provides financial incentive to operators to maximize their capacity and control their costs, the results of which will permit investment in 5G. TELUS noted that under the proposed fee structure, licensees would not be charged additional fees for using technologies that encourage spectrum efficiencies and reuse.

20. Further refinements and suggestions were recommended regarding:

• the grouping of frequencies into ranges (for the purpose of setting base rates)
• the proposed base rates, particularly for the upper frequency ranges where significant growth is anticipated
• fee setting, which takes into consideration rural and remote areas
• the application of the model to point-to-multipoint systems

21. Rogers raised concerns that a consumption-based model would not adequately support emerging 5G connectivity and linked high spectrum costs to high consumer costs. Alternatively, while commending ISED on modernizing the capacity-based fees, Rogers, Bell, Xplornet, Alliance Corporation, and the CWTA recommended a cost recovery model, such as that used by the United States Federal Communications Commission (FCC). TELUS and Shaw also supported a cost-recovery approach in their reply comments.

22. These respondents indicated that such a model aligns better with ISED’s primary objective of maximizing the social and economic benefit of telecommunications, by lowering fees to encourage investment in infrastructure leading to better coverage, service and innovative services. Furthermore, Xplornet suggested the use of 10-year licences, paid up front.

23. While supporting a cost-recovery model, CWTA and Bell saw some merit in promoting efficient use of spectrum through a consumption-based model provided licence fees would be further reduced.

Discussion

24. Spectrum and radio licence fees are not designed to solely recover the costs related to the administration of the licensing regime. As noted in section 4, radio licence fees are regulatory charges for a limited privilege, permitting access to, and the use of, spectrum—a public natural resource—managed by the Government of Canada. ISED is of the view that a consumption-based fee model will advance policy objectives such as promoting the effective and efficient use of spectrum while earning a fair return for the use of the resource for the Canadian public. As such, ISED has decided to implement a consumption-based fee model.

25. Application of the consumption-based fee model and treatment of various system configurations are detailed in annex A.

26. Respondents' suggestions for improvements to the consumption-based fee model are addressed in upcoming sections of this Decision.

27. Modern radio equipment can transmit more capacity using the same or even less spectrum than previously required. As radio technologies evolve, licence fees should support more innovative solutions. ISED sought comments on using the channel bandwidth, as detailed in the Standard Radio System Plan (SRSP), as a proxy for consumption.

Summary of comments

28. While many respondents did not specifically comment on the consumption factor, SaskTel, Seaside and TELUS agree with ISED’s proposal to use channel plans published in the SRSPs as a proxy for consumption.

Discussion

29. ISED recognizes that the expected capacity requirements and deployment scenarios of 5G will benefit from a consumption-based fee model based on the amount of spectrum used rather than on capacity. As the demand for capacity continues to grow, ISED recognizes the importance of spectrum efficiency as well as the ability for licensees to manage their fees. Licensees with lower capacity requirements can reduce their fees by reducing their spectrum consumption.

30. Channel bandwidths, as established in SRSPs, are a strong proxy for consumption. SRSPs state the minimum technical requirements for the efficient use of the frequency bands. SRSPs define channel plans and channel bandwidths for a frequency band. They are intended to be employed in the design and specification of radio systems and equipment. SRSPs are developed in consultation with industry stakeholders. While most systems fall within an SRSP, ISED permits non-standard operations where feasible.

31. As such, for frequency bands with associated SRSPs, ISED will use the narrowest channel width (as per the SRSP) that is greater than or equal to the link's occupied bandwidth in the fee calculation formula. For frequency bands without an associated SRSP, or when the occupied bandwidth is greater than the largest channel in the associated SRSP, ISED will use the spectrum assigned (occupied bandwidth).

32. Different frequency ranges exhibit different properties making some bands inherently more desirable than others depending on the particular point-to-point system and type of application. For instance, mid-range frequency bands are heavily used for backhaul, to transmit telephone, data and Internet traffic between cities, given their propagation characteristics.

33. ISED sought comments on the fees reflecting the frequency band’s utility, based on a series of frequency ranges covering the full radio spectrum.

Summary of comments

34. Both the RABC and Rogers recommended ISED modify and add new frequency ranges to more accurately reflect the propagation characteristics of current and emerging bands, potential channel sizes (bandwidth), categories of use, and types of applications. They also stressed the importance of also aligning with the International Telecommunication Union–Radiocommunication sector's (ITU-R) work and frequency arrangement recommendations, where feasible, in addition to Canada’s Standard Radio SRSPs and CTFA.

35. Specifically, Rogers and RABC noted the uneven distribution of spectrum within some of the proposed frequency ranges and suggested subdividing them, which would increase the number of ranges. They also indicated this as a means to future-proof the model, citing the continued release of new higher frequency bands as well as the work being conducted at the ITU in studying a fixed service allocation above 275 GHz.

36. Rogers and RABC’s proposals closely aligned, with minor variances. Table 1 summarizes their proposals.

37. Both RABC and Rogers noted that although their frequency range proposals capture all spectrum, it may be appropriate for some of the spectrum to be made available on a licence-exempt basis, especially the very high frequency bands.

38. TeraGo supported RABC’s proposal of further subdividing the frequency ranges, in their reply comments. Similarly, TELUS was supportive of additional frequency ranges between 10 and 56 GHz.

39. Cogeco also agreed in its reply comments that the 19.7-60 GHz frequency range was too broad, recommending further subdivisions, while cautioning against splitting existing frequency bands between the different ranges. M. Rehan also recommended dividing the proposed 19.7-60 GHz frequency range into smaller ranges.

Discussion

40. ISED understands the benefits of grouping frequency bands with similar propagation characteristics (e.g. path length), number of links, channel bandwidth sizes and usage together. ISED recognizes the importance of grouping frequency bands together based on similar usage both in terms of transport (e.g. long-, mid- and short-range) as well as applications (e.g. high-, medium- and low-capacity).

41. Additionally, ISED is mindful of not splitting contiguous frequency allocations for services unnecessarily within the International Telecommunication Union, CTFA and SRSPs.

42. Furthermore, increasing the granularity of frequency ranges further highlights and addresses differences in propagation characteristics and technical operating parameters, accounts for upcoming and future spectrum releases, as well as balances the amount of spectrum and overall usage.

43. Noting the break at 8.5 GHz in both the Canadian and ITU frequency allocation tables for fixed service primary allocation, ISED views this as an appropriate frequency range boundary. The bands within this range are typically used for long-haul transport. Currently, there are approximately 15,000 links licensed within this range.

44. Recognizing the benefits of further granularity, ISED is redefining the 10.55 to 19.7 GHz, forming two frequency ranges: 8.5 to 15.35 GHz and 15.35 to 24.25 GHz. The first range consists of the traditional 8 GHz, 10 GHz, 11 GHz, 13 GHz and 15 GHz bands, which are primarily used for medium-haul and to interconnect cities. The current frequency bands (18 GHz and 23 GHz) that form the second range are typically used within cities and urban areas. The frequency 24.25 GHz aligns with the lower most frequency edge of the 24 GHz band, forming a natural break. There are approximately 12,500 links licensed within the 8.5 to 15.35 GHz range and 13,000 links licensed within 15.35 to 24.25 GHz range.

45. To account for the expected increased usage and new spectrum releases, ISED will create new upper frequency ranges. The narrower 24.25 to 52.6 GHz frequency range takes into account fixed service CFTA allocations, equipment channeling plans as well as future spectrum releases outlined in the Spectrum Outlook 2018 to 2022 (e.g. 26 GHz and 32 GHz). The relatively low number of links (approximately 1,000) currently licensed demonstrates the growth potential for use of this range. Furthermore, a new 52.6-92 GHz frequency range recognizes the much wider channel widths available in these higher frequencies and does not artificially split recognized international bands (e.g. E-band at 70/80 GHz).

46. Establishing a split at 92 GHz will provide ISED with flexibility once spectrum above 92 GHz is more widely used. It also aligns with the bottom edge of the W-band (92-115 GHz). Given the lack of specific utilization policies and ongoing international discussions on the frequency bands above 92 GHz, ISED deems it premature to subdivide this frequency range. While ISED acknowledges differences in path length and bandwidth properties for spectrum in this uppermost range, it is too early to attempt to differentiate base rates from the adjacent range.

47. ISED will adjust the frequency ranges for point-to-point fees, as outlined below and in annex A. These revised frequency ranges allow for increased uniformity and address respondents’ concerns by specifying additional ranges above 4.2 GHz. These new ranges address the growth over the past few years (i.e. number of licensed links in each range) and likely future growth.

48. ISED sought comments on reflecting a band's utility through the associated base rate. This model was intended to provide not only an incentive to use spectrum efficiently (e.g. using higher frequency bands for shorter distances) but also to innovate, for example, by encouraging development of new applications and technologies in low-cost, underutilized bands. Base rates, expressed as $/MHz, were proposed for a series of frequency ranges covering the full radio spectrum.

Summary of comments

49. There was general support for ISED’s proposal of reflecting a band’s utility and relative value to other bands in the base rates, with some discussion about each factor. The majority of stakeholders suggested further refinements to base rates as well as a way of ensuring more significant fee decreases for deployments in rural areas. Bell, Cogeco and CWTA requested information on how ISED derived each of the base rates.

50. SaskTel agreed that the proposed base rates take into consideration the relative value and utility of each frequency band, propagation characteristics, the amount of available spectrum within the bands, the RF channel sizes available and overall usage. CCI and Seaside supported the proposed base rates, but specified their application would be more suitable in areas where spectrum is congested and higher frequencies can be leveraged (i.e. 5G). Xplornet suggested reducing the base rate of the reference band, 10.55-19.7 GHz, to $16/MHz.

51. TELUS supported the ISED model, noting that having a higher fee for lower bands will encourage operators to use the highest frequency feasible to meet their application needs in point-to-point deployments.

52. Rogers recommended significantly lower base rates suggesting that this approach would balance the playing field among wireless and wireless/wireline carriers. Bell, Rogers, M. Rehan and TELUS expressed concern that the proposed base rates may not be appropriate, particularly in the higher frequency ranges, where significant growth is anticipated and suggested ISED further reduce these base rates. Bell suggested an overall reduction of the proposed base rates of 50% and Shaw echoed Rogers' call for lower base rates.

53. Moreover, Rogers and CWTA expressed concern that the base rates proposed are not sufficiently low considering the anticipated growth of infrastructure to support 5G. They referenced the Accenture report "Fuel for Innovation: Canada's Path in the Race to 5G," commissioned by CWTA, which states that up to 273,000 5G small cells are likely to be deployed across the country over the next 5 to 7 years compared to the 30,000 large towers that were deployed over the past 20 years.

Discussion

54. ISED believes that licence fees should reflect a frequency band’s utility. This relationship between licence fees and utility should not only provide an incentive to use spectrum efficiently (e.g. using higher frequency bands for shorter distances) but also an incentive to innovate (e.g. by developing new applications and technologies in low-cost, underutilized bands).

55. As the frequency ranges were modified, as per section 5.2, ISED also adjusted the base rates taking into account propagation characteristics, the amount of available spectrum within the bands, channel sizes available, and usage. Additionally, the rates incentivize use of higher frequency bands where more spectrum is available, allowing lower frequencies to be used for longer haul and specialized systems.

56. In anticipation of significant growth in the use of the upper frequency bands, ISED is taking a bold step to support the next generation of deployments by reducing the proposed base rate for the ranges above 52.6 GHz by 50%. By implementing a consumption-based model and revising the base rates, licensees will see an overall fee decrease.

57. Furthermore, by setting fees for all bands, including those not yet released, ISED is providing certainty for network planning and thereby facilitating the deployment and timely availability of wireless services in Canada. The frequency ranges established in this Decision allow for greater granularity in setting fees for encouraging the use of spectrum in underutilized bands and reflecting the value of all bands. The revised rates acknowledge the anticipated growth of fixed point-to-point systems, while balancing the objective of maximizing the benefits Canadians derive from the use of the radio frequency spectrum resource. See annex A for final ranges and rates.

58. In response to stakeholders requesting the methodology used to determine the base rates proposed in the Fee Consultation, ISED published Methodology used to develop fees proposed in DGSO-01-18, Consultation on Licence Fees for Fixed Point-to-Point Radio Systems in May 2019. Given the changes made to reflect stakeholder comments, the original methodology and relationship between the base rates will no longer be applicable and will be archived within 30 days of the publication of this Decision.

59. Although not a component of the proposed fee model, stakeholders overwhelmingly expressed a need for reduced fees in rural and/or remote parts of Canada to support expansion of telecommunications networks.

Summary of comments

60. Two concepts were proposed for reducing base rates to support rural deployments:

• reduce base rates for the lower frequency bands typically used in rural areas
• distinguish between urban and rural parts of Canada for the purpose of applying fees

61. SaskTel suggested that ISED reduce base rates in uncongested areas for the 4.2-10.55 GHz and 10.55-19.7 GHz ranges to $20/MHz and $16/MHz, respectively. This rate change would incentivize use of frequency bands above 4.2 GHz to facilitate re-use of lower frequencies for mobile. CEA, SaskTel and Xplornet commented that ISED's proposal results in a fee-neutral impact on systems operating in the10.55 to 19.7 GHz range, therefore providing few benefits to those deploying in rural Canada.

62. Discounts in the 50-60% range were proposed for rural areas by BCBA, Canwisp, CCI Wireless, Québecor, Seaside, Shaw, TeraGo and Xplornet to reflect lower demand and lack of congestion. Alliance Corporation, CWTA and RABC also supported lowering fees in uncongested areas.

63. TELUS noted that expanding the fee structure to encourage rural deployment further fulfills the guiding principles set out in the Fee Consultation and policy objectives. TELUS proposed to maintain the ISED base rates for medium population centres, increase them by 50% for high population centres, and lower them by 30% for all other areas. Ecotel also supported higher fees in urban areas to encourage the use of fibre in support of 5G, and lower fees in uncongested rural and remote areas to encourage deployment to underserved areas.

64. Rogers preferred fee reductions across all bands, noting that the economic challenges to deployments in rural areas apply to all networks. While Bell was of a similar view as Rogers, favouring an overall reduction, it supported lowering rates in rural areas provided they are not countered with increased urban rates.

65. Three specific models were proposed to delineate urban from rural areas:

1. BCBA, Canwisp, Cogeco, Québecor, RABC, SaskTel, Seaside and TeraGo recommended using Statistics Canada’s Census Metropolitan Areas (CMA) and Census Agglomerations (CA) to define metropolitan and rural boundaries. Comments noted that these areas, while not perfect, approximate regions of higher population density, and by consequence, higher spectrum congestion. In addition, these areas usually follow defined and well-known provincial and municipal boundaries. Some commented that these boundaries could evolve over time as Statistics Canada issues updated CMA and CA areas.
2. Alliance Corporation and Xplornet suggested using ISED’s medium and high congestion zones as defined in Radiocommunication Regulations, SP 1-20 and RIC-42. BCBA also supported this method. ISED's congestion zones were established in 1996, and are still used to calculate service providers’ radio licence fees for particular services, such as land mobile. This suggestion was advanced because congestion zones are already defined and consistent with other wireless services.
3. TELUS recommended using the 2016 medium (30,000 to 99,999 people) and large (100,000+ people) Statistics Canada Population Centres (PCs) to define urban areas. Its suggested approach is similar to Option 2 of ISED’s Tier 5 consultation, (DGSO-002-18, Consultation on a New Set of Service Areas for Spectrum Licensing). TELUS noted that licensees have varied backhaul options in large and medium population centres, as opposed to in rural areas where there are limited options.

66. Additionally, KRG and Ecotel encouraged the adoption of a three-tier approach, recognizing the differences between urban, rural and remote areas and their ability to pay for ongoing licences.

67. The following sections will discuss rural and remote base rates and how ISED will define these areas.

Discussion on rural and remote base rates

68. As noted in ISED’s Spectrum Outlook 2018-2022, ISED is committed to developing licensing policies that consider encouraging service provision in rural areas. These policies will ensure that Canadian consumers, businesses and public institutions continue to benefit from access to high quality wireless networks at competitive prices in urban, rural and remote communities. From a licensing and fees perspective, this is particularly important in remote and rural areas.

69. Initiatives, both within and outside ISED, to promote improved broadband, high-speed Internet and cellular connectivity in rural and remote areas build upon these objectives and emphasize their importance in an increasingly digitally connected world. For example, Connect to Innovate is an ISED initiative, which funds "new backbone infrastructure" to ensure that rural and remote communities across Canada are well positioned to take advantage of the opportunities afforded by the digital age.

70. Outside of urban areas, the use of wireless, fixed point-to-point systems are a common option for backhaul to extend coverage into rural areas. ISED recognizes stakeholder concerns with the increasing costs associated with deployment in rural areas, especially in the most remote regions where subscriber density is low relative to the infrastructure needed to support service.

71. Reduced rates will further facilitate the economical deployment of broadband in rural and remote areas, lowering associated costs and extending equipment life in areas of low population densities.

72. ISED supports lower base rates, rather than a “band”-specific reduction, as it is a market-based and band-neutral approach to setting fees. Building on Decision 3, ISED will further reduce base rates across all bands by 20% in rural areas and by 50% in remote areas.

73. Based on current deployments, licensees will see an overall annual reduction from approximately $52M to approximately $27M. When coupled with efficiency gains, licensees will realize further cost savings. Licensees can continue to increase their throughput using the same bandwidth without paying additional fees.

Discussion on defining rural and remote areas

74. Within Canada, there is great geographic variety that often influences where populations live and where networks are deployed. Even within populated areas, there is a continuum of specific regional characteristics. ISED acknowledges that a large swath of Canada can be considered rural or remote.

75. ISED recognizes that there are multiple backhaul solutions available, including fibre, wireless microwave, satellite and leased lines. The selection of a particular solution is dependent on a variety of factors and considerations including technical performance, immediacy of deployment, capacity, cost and accessibility. In rural and remote areas, the number of solutions available is not as broad as in urban areas.

76. Moreover, ISED recognizes the unique characteristics of remote areas and the additional resources required by organizations to reach and to deploy in the farthermost areas of Canada. Reducing the cost of ongoing licence fees to encourage companies to further invest in quality networks and services for remote areas, is in the best interest of all Canadians.

77. ISED extensively evaluated stakeholders’ proposals for defining rural areas. While there were a number of views advanced, there was consensus on a need to sufficiently distinguish between urban and rural areas.

78. Given the importance of continued and further reaching deployment in rural and remote areas and ISED's parallel development of small service areas (i.e. Tier 5 service areas) for spectrum licensing, ISED will use Tier 5 service areas to build on stakeholders' proposals for defining rural areas.

79. ISED’s Tier 5 Decision (DGSO-006-19, Decision on a New Set of Service Areas for Spectrum Licensing document) lays out the methodology used to develop a new set of service areas and essentially subdivides the country into four categories using population and population density: metro, urban, rural and remote.

80. Statistics Canada defines large population centres as having populations greater than 100,000 and medium population centres as more than 30,000. ISED notes that population centers are important drivers to foster demand, which boosts backhaul use, including fixed point-to-point deployment. Therefore, for this Decision, ISED notes no need to distinguish between Tier 5 metro and urban categories and will define these Tier 5 service areas as "urban" for the purpose of calculating fees for the fixed point-to-point links within them.

81. Population density is a common method for determining what is considered to be a remote area. The Tier 5 Decision identifies the 10 lowest population density Tier 4 service areas^{Footnote 1} (see figure 1) having fewer than 0.2 people/km² as "remote." Therefore, for this Decision, ISED will define these Tier 5 service areas as "remote" for the purpose of calculating fees for fixed point-to-point links.

82. For this Decision, ISED will define the Tier 5 rural service areas as "rural" for the purpose of calculating fees for fixed point-to-point links.

83. This clear and consistent delineation of urban, rural and remote areas effectively incorporates population distribution and density, as well as areas of commute, future population growth, and areas of influence in a nationally consistent manner, addressing stakeholders’ views. Furthermore, aligning urban, rural and remote areas with established Tier 5 service area boundaries will promote licensing consistency and reduce administrative burden.

84. The International Telecommunication Union defines point-to-multipoint (PTMP) systems as communication provided by multiple links in the same geographical area, for example, radio links between a single station located at a specified fixed point and a number of stations located at fixed points within the coverage area of the central station.

85. ISED sought comments on a model where the total fee for a fixed PTMP system would be the sum of the fees for each of the individual links within the system.

Summary of comments

86. The majority of comments received regarding PTMP systems preferred an alternate fee calculation. Xplornet and SaskTel highlighted the spectral efficiency of these types of systems because the base station communicates with many sites using the same frequency, and there is no additional spectrum impact from adding a second, third or more stations. In such a scenario, Bell, CanWisp, CEA, Cogeco, RABC and TeraGo suggested that all stations, within the coverage of the PTMP base station, be treated as a single link. Similarly, Québecor recommended “star shaped" PTMP systems be charged as a single link or because they are communicating over an area, they could be area or spectrum licensed. RABC also suggested spectrum licensing as an alternative for PTMP.

87. The CEA also favoured system/area licensing for the 1800 MHz band, which is designated for use by electrical utilities and used for PTMP systems, in support of the anticipated growth in "smart grid deployments." Other supporters of system or area licensing included Canwisp, RABC and Rogers.

88. Stakeholders, including RABC and CWTA, also expressed concern that point-to-multipoint will be used to support 5G, for example in fronthaul solutions, and the per-link fee model will result in fees that are unrepresentative, forcing the use of competitive technologies such as fibre optics.

89. Conversely, TELUS did not agree that the proposed licence regime should be amended for PTMP systems, explaining that these systems utilize spectrum resources over a broader geography when compared to a single link despite reusing the same frequency. Moreover, TELUS contended that whether a system comprises several links or is part of the same PTMP system, the efficiency is not equivalent to a single link. Therefore, ISED's proposed fee regime reflects the spectrum resource utilization. TELUS also suggests an area licence may be more appropriate for frequency bands with short propagation characteristics, large bandwidths and PTMP application.

Discussion

90. ISED recognizes that PTMP and fixed wireless access systems are generally comprised of a base station (hub) using sectoral antennas to communicate with multiple stations over the same frequency(ies). These systems generally consume spectrum over an area and typically deploy sectorized antennas. Within these antenna beamwidths, other radio systems using the same spectrum cannot be deployed.

91. While ISED recognizes that on the surface PTP links branching from a single site can look similar to PTMP systems, the fundamental difference is that PTMP systems cover a wide area.

92. Many stakeholders noted that the proposed model is not suited for PTMP systems and applications. ISED notes that alternative licensing mechanisms would be more appropriate and provide opportunity for growth over time as well as greater autonomy to deploy and configure radio systems as desired (e.g. area-based or spectrum licensing). Given the different type of design and usage, the fee model established in this Decision will not apply to PTMP systems. Those systems will continue to be charged their current fees as per the Radiocommunication Regulations.

93. As this decision is the first step in a multi-staged fee modernization initiative, ISED intends to address licensing mechanisms and fees for PTMP systems in a later consultation.

94. The Service Fees Act (SFA) requires that all federal fees are periodically adjusted. If a fee escalator is not in place, departments are to apply the consumer price index (CPI) annually. In the Fee Consultation, ISED consulted on establishing a fee escalator using a fixed rate of increase instead of a variable amount to provide fee predictability. Subsequently, given the application of the SFA to all radio and spectrum licence fees, as well as to all fees related to certification and registration of radio and telecommunications apparatus, ISED consulted more broadly through DGSO-001-19, Consultation on Periodic Adjustments for Radio and Spectrum Licence Fees and Fees Related to Equipment Certification Services.

Summary of comments

95. CCI, CEA, SaskTel and Shaw supported the use of annual CPI as a fee escalator. To promote fee stability and allow for better planning others proposed either a lower, fixed rate of increase applied less frequently, or the use of CPI applied less frequently. Shaw suggested alternatively that ISED undertake regular reviews of its fees to ensure they reflect current market conditions and technological advances while Rogers was not in favour of such an approach. Canwisp and Seaside proposed adjusting fees by 7% every five years.

96. Given the broader applicability of the SFA, others preferred to reserve their comments for the SFA consultation.

Discussion

97. ISED is considering the comments from the Fee Consultation as well as those submitted in response to the broader Consultation on Periodic Adjustments. ISED is deferring a decision on the fee escalator given that broader consultation will also apply to fixed point-to-point systems.

98. Until that decision has been implemented, current fees will be adjusted annually by CPI. Note that a fee escalator would not be applied to the new, fixed point-to-point fees during the first fiscal year that the model goes into effect.

99. Licensees currently pay a minimum annual fee of $68 for each frequency assigned (i.e. $34 per transmitter and $34 per receiver). ISED sought comments on increasing the minimum annual fee to $70 per frequency per link.

Summary of comments

100. Those who commented did not object to this increment.

Discussion

101. Fees for radio licences have not increased in over 20 years. This modest $2 increase approximates the Service Fees Act mandated increase scheduled for March 2020, which is based on the April 2017 to April 2018 Consumer Price Index of 2.2%.

102. Given the modest nature of this increase, ISED will increase the minimum fee to $70 per frequency per link. As the majority of backhaul, point-to-point links employ a frequency pair (i.e. bi-directional transmit and receive frequencies), the minimum fee for these types of links would be $140 (an increase of $4).

103. To ensure minimum fees do not override the incentives built into base rates, the minimum fee will be adjusted by the same percentage reduction afforded to the rural and remote base rates. Therefore, the rural minimum fee will be approximately 80% of $70 and the remote minimum fee will be 50% of $70.

104. ISED’s fiscal year begins April 1 and concludes March 31; however, radio licences may be issued by ISED at any point during the year. ISED sought comments on continuing to prorate licence fees based on the month in which the licence is issued. Specifically, a prorated fee of 1/12 of the total annual licence fee was proposed, for each calendar month until March 31 of the current fiscal year, rather than a set, monthly fee used in the calculation.

Summary of comments

105. Comments were supportive of ISED’s prorated approach to monthly licence fees. Bell, Rogers, TELUS, and TeraGo suggested that pro-rated refunds should be issued once a licence is cancelled before the end of the licence term (i.e. March 31), some noted that this incentive would free spectrum which is no longer in use. It was suggested that the refund could also be in the form of a credit note.

Discussion

106. As per the Radiocommunication Regulations paragraph 56 (1)(a), annual licence fees are payable in advance of March 31 of each year. Once paid, licences are valid until March 31 of the following year.

107. ISED recognizes the benefits of licensees notifying ISED when spectrum is no longer in use so it can be reassigned and reduce congestion.

108. ISED therefore encourages licensees to make use of the new flexibility being introduced to short-term licences (see section 10) when their network plan includes licence cancellation prior to March 31. This effectively provides reduced licence fees for that portion of the year.

109. As per the Radiocommunication Regulations, a radio licence is available for a period of up to 30 days. ISED sought comments on its proposal to apply 1/12 of the total annual fee rather than a set monthly fee.

Summary of comments

110. While most respondents were supportive of retaining the current 30-day short-term licence term at 1/12 the annual licence fee, KRG suggested that the timeframe be increased from 30 days to 6 months.

111. TeraGo noted that for some applications and geographical locations, deployments of backhaul may become dynamic in nature as traffic requirements shift, and suggest that increased flexibility in short-term licensing may be advantageous in addressing this.

Discussion

112. ISED notes that there were no objections to its proposal of applying 1/12 of the annual fee for short-term licences of 30 days.

113. Moreover, given the comments that supported more flexibility for network planning, ISED is of the view that increasing the short-term licence period will address the needs of licensees who are planning to cancel a licence during the fiscal year.

114. Providing an incentive for licensees to cancel their licences when the spectrum is no longer needed or used will help reduce congestion in areas of high spectrum usage as well as enable ISED to reassign the spectrum, which will increase its efficient use.

115. Furthermore, ISED recognizes that many events last longer than 30 days, especially given the up-front installation and testing requirements. Expanding the definition of short-term licensing would also benefit other services, reducing the red tape and administrative burden of reapplying for multiple licences that extend beyond 30 days.

116. ISED will extend the term of short-term licences to allow flexibility for network planning. This change will apply to all radio licensing. Stakeholders may provide comments when ISED announces proposed changes to the Radiocommunication Regulations in the Canada Gazette Part I.

117. ISED will specify details around eligibility for short-term licences in a future Client Procedures Circular.

118. To provide licensees with an opportunity to review and optimize their systems and associated licences, ISED sought comments on its proposal that the fee model be implemented for fees payable starting April 1, 2020.

Comments received

119. The BCBA, Ecotel, Québecor, Shaw and the Alliance Corporation requested an earlier implementation and some sought information as to why this may not be possible.

Discussion

120. Public consultation is one of the first steps in the implementation new fees. Following consultation and the issuance of a decision, ISED must make the required changes to the Radiocommunication Regulations, following the required process. In addition, modifications to the Spectrum Management System in order to issue licences using the new fee model will be required. While these changes are taking place, licensees will be provided with a mechanism to ensure their current data is reflected in the Spectrum Management System so that licence fees, which in the future will be based on base rates and channel bandwidths, are accurate.

121. ISED intends to implement the point-to-point fee table, as outlined in annex A, by April 1, 2021.

Fees for fixed point-to-point systems will be based on the link’s assigned frequency(ies)—i.e. the amount of spectrum consumed, the frequency band used and location of operation.

This fee model does not apply to stations operating in or communicating with the land mobile, aeronautical, amateur, maritime, public information and radio determination services, transportables and their associated links in any service, nor to satellites or earth stations. Licence fees for these stations will not change at this time.

Furthermore, all fixed point-to-multipoint and fixed wireless access stations will continue to be charged current fees based on Radiocommunication Regulations, subject to a future consultation.

Application details

Consumption factor

Channel bandwidth, as established by ISED in the relevant Standard Radio System Plans (SRSPs), will be used as a proxy for the consumption factor in the fee calculation formula.

For frequency bands with associated SRSPs, the assigned spectrum will equate to the narrowest channel width (as per the SRSP) that is greater than or equal to the system’s occupied bandwidth.

For frequency bands without an associated SRSP, or when the occupied bandwidth is greater than the largest channel in the associated SRSP, the spectrum assigned will be used as the consumption factor in the fee calculation formula.

Link location

The location of the fixed point-to-point link station will determine the base rate used to calculate the licence fees. Urban, rural and remote areas align with Tier 5 service areas. Urban areas will comprise of all metropolitan and urban Tier 5 service areas, rural areas will comprise all rural Tier 5 service areas and remote areas will comprise all remote Tier 5 service areas.

Should either station of the link be located within a remote area, the remote base rate will apply. Where one station of the link is located within an urban area and the other in a rural area, the urban base rate will apply.

Fixed point-to-point links located within Canada, which are not captured by Tier 5 service areas (e.g. offshore), will qualify for the remote fee.

Short-term licence fees

Short-term licence fees will range from a minimum of 30 days up to a maximum of 11 months. Fees will be charged for each calendar month (in whole or in part), starting with the month in which the licence becomes valid. Short-term licences will not be renewable.

Fees for fixed point-to-point links issued for a term shorter than one year will use the prorated fee calculation. Fees for all other short-term radio licences will be based on their monthly fees as set out in the Radiocommunication Regulations.

Prorated fees

The prorated fee for fixed point-to-point links will be 1/12 of the total annual licence fee, charged for each calendar month (in whole or in part), until March 31 of the current fiscal year, based on the month in which the licence becomes valid.

Treatment of various system configurations

This section provides further clarification on how the fee model will be applied to various configurations of point-to-point systems. ISED will provide more information to assist in fee calculation.

Single-frequency and two-frequency links:

A single-frequency link (e.g. uni-direcitonal radio link) will be charged for the spectrum consumed over a single frequency. A two-frequency link (e.g. bi-directional radio link) will be charged for the spectrum consumed over both frequencies.

Standby and diversity links:

Provided no additional spectrum is used, no additional fees will be incurred when the following links or kinds of equipment are deployed by a licensee along the route of a licensed link:

• space diversity
• hot standby (Radio Information Circular (RIC)-42 defines different sites as sites located more than 30m apart)
• co-channel dual polarization (CCDP)—same channel but orthogonal polarization
• active and passive repeaters

For the purposes of route and frequency diversity, where independent links are deployed across different paths or additional frequencies are used along the same route, the spectrum used by each link would be charged fees accordingly.

Adaptive modulation:

Adaptive modulation allows systems to maximize their throughputs by varying the modulation during adverse propagation conditions (e.g. rain fade). Provided no additional radio spectrum is consumed, no additional fees will be applied when adaptive modulation is employed.

Time division duplex systems:

For systems employing the same frequency for both transmit and receive (i.e. single frequency), then only the spectrum consumed (bandwidth) over that single frequency link will be charged.