Call for Applications to Develop and Operate Direct Broadcast Satellite (DBS) Facilities
The following questions of clarification are those received by November 25, 1996, in line with section 9.2 of the Call. In the replies, the term "fast track" refers that part of the Call under which applications are due on December 16, 1996. DBS facilities are those direct-to-home (DTH) satellite facilities provided in the context of the ITU Broadcasting Satellite Service (BSS) Plans, Appendix 30/30A of the ITU Radio Regulations.
Type of Interim Satellite Facilities
The first clarification refers to the type of interim satellite facilities that would be acceptable. Both Section 2 and Section 6.2 refer to this topic. Section 6.2, for example, says:
"Industry Canada is also seeking a description of any interim measures which might be implemented prior to the launch of the DBS satellites, in order to enable the most rapid possible introduction of DTH/DBS services to Canadians."
The reference to "DTH/DBS services" suggests that either FSS or BSS satellites could be used on an interim basis. Could you please confirm this interpretation or clarify the types of interim facilities that would be acceptable.
Section 2, in describing the "fast track" approach with the first filing date of December 16, 1996, sets out that the plan put forward by the applicant in this regard must relate to "operational DBS facilities", and goes on to clarify that the "DBS facilities referred to above may comprise interim satellite facilities…with DBS transmission capacity of at least ten high-powered DBS transponders". Accordingly, an applicant who wishes to pursue the "fast track" approach and utilize interim facilities, must be prepared to make available DBS (BSS) facilities on or before June 16, 1997. However, in the case of Section 6.2 (describing an evaluation criterion to be applied within one of the tracks), the reference is to "interim measures which might be implemented prior to the launch of the DBS satellites, in order to enable the most rapid possible introduction of DTH/DBS services to Canadians". These unspecified interim measures need not comprise the operation of DBS facilities, and could therefore include the use of FSS facilities.
Section 6.6 of the Notice states:
"Any applicant proposing to modify the existing ITU DBS Plans, in accordance with the Industry Canada proposal or otherwise, should include an appropriate technical and interference analysis sufficient to carry out international coordination."
As you know, a full technical and interference analysis is a substantial undertaking, particularly in light of the December 16, 1996 deadline. Our request is therefore for a clarification of the scope and depth of the information that is required with the initial application.
[We] recognize, as stated in the Gazette Notice, that if [an applicant] is successful with this application, it will provide such additional information and assistance as might be required during the international coordination activities.
The Call indicates that an "applicant proposing to modify the ITU DBS Plans, in accordance with the Industry Canada proposal or otherwise, should include appropriate technical and interference analysis sufficient to carry out international coordination …" It is recognized that a complete analysis of the impact of a proposed change to the DBS Plans represents a major amount of work which may not be possible to complete within the time frame of the "fast track" submission date.
Nonetheless, applicants may wish to demonstrate their understanding of the impact of their proposal on other entries in the ITU DBS Plans through various calculations and estimations, based on either the Industry Canada proposed change or otherwise. It is recognized that the ITU will render the definitive determination of the need for coordination with any particular entry in the Plan, based on the current configuration of the Plans as well as proposed changes by other administrations.
- Section 7 (Fees) indicates the initial authorization fee will be "due within 30 days of the issuance of the radio authorization by the Minister" and thereafter "on April 1st of each year". When will the radio authorization be "issued"? If the authorization is issued when an application is approved and construction and launch of a satellite takes two years, does this mean that approximately $4 million in fees would be payable before the satellite is launched?
- Would you please confirm that the authorization fees are not applicable for interim facilities located in a non-Canadian orbital slot.
- The current policy on fees for spectrum usage is to charge only for transponders that are activated. Is it Industry Canada's intent to depart from this practice?
As indicated in Section 2 of the Call, the Minister may decide not to issue any authorization pursuant to this Call. However, in the event that an applicant is successful, a public announcement will be made as soon as possible after the submission filing date and the radio authorization will be issued shortly thereafter. Thirty days after the issuance of the radio authorization, the appropriate fee, as outlined in Section 7, will be due. Such fees are payable whether or not the authorized DBS system is in operation, given that the spectrum resources in question will have been assigned to the applicant and are thus denied to other entities. Furthermore, the use of an interim DBS facilities in a non-Canadian orbital slot, while not attracting a fee in and of itself, does not diminish the need to pay the specified authorization fee to take advantage of an award under this Call.
It should be noted that interested parties are invited, in section 7, to comment on the appropriateness of the proposed fee. The deadline for such comments is December 16, 1996.
Section 8 states that "the transfer of an authorization" to another party will not be allowed… This raises the issue of the length of the "authorization" period. Would the authorization be for a fixed period of time (e.g. 15 years), the lifetime of a satellite, perpetuity, etc.?
Authorizations are generally granted with the expectation that they will continue, unless otherwise specified in the conditions of authorization, for the commercially operational lifetime of the system. Thus, the applicant may wish to address the matter in the business plan or otherwise.
Revenue and Expense Projections
Section 6.5 asks for revenue and expense projections to be filed for the "life of the satellites". When preparing these projections, should we assume that revenue rates will be "market based" or regulated in the same manner as Telesat's current rates? If they are regulated in the same manner as Telesat's rates, is there a specific mechanism for determining the rate?
If DBS satellite facilities are provided on a common carriage basis, the regulatory oversight function of the CRTC will have to be considered. Accordingly, it would seem appropriate to include, in the response to this Call, your best financial estimates in light of these considerations.
The Call for Applications does not indicate the time frame in which Industry Canada will be rendering a decision on those applications that are submitted by the December 16, 1996 filing deadline. Given that the successful applicants must be in a position to offer facilities by June 1997, it is important to know for planning purposes when the necessary authorizations will issue.
The importance of a timely decision is fully appreciated. In the event that the Minister decides to award an authorization as a result of applications under the "fast track", an announcement will be made a quickly as possible. The issuance of the actual radio authorization will follow shortly thereafter.
Similarly, when can applicants who respond to the second submission filing date of February 28, 1997 expect a decision to be rendered by Industry Canada?
In the event of a successful applicant under the "fast track", the decision by the Minister to authorize the DBS satellite facility would obviate the need to consider any further application under this Call. However, should there be interest in developing another Canadian DBS orbital position, the Minister may decide to issue another Call to expeditiously address such a request.
In the event that no award is issued under the "fast track", Industry Canada will of course render a decision based on applications submitted by February 28, 1997, and make an announcement as quickly as possible.
Type of Interim Satellites Facilities
Sections 2 and 6.2 refer to the use of interim satellite facilities.
- Are FSS satellite facilities acceptable for proposals submitted on December 16, 1996?
- Are FSS satellite facilities acceptable for proposals submitted on February 28, 1997?
- Given the current shortage of Canadian FSS capacity, are non-Canadian facilities acceptable for both filing dates?
- As set out in Section 2 of the Call, the facilities which an applicant must offer to be considered for the "fast track" licensing approach must be DBS facilities, and even the interim satellite facilities must "comprise DBS transmission capacity of at least ten high-powered DBS transponders". Accordingly, FSS satellite facilities are not acceptable as the basis for a "fast track" application.
- The call for applications relates to the deployment and operation of DBS facilities. Accordingly, FSS satellite facilities are only acceptable as interim solutions under the regular licensing approach.
- The reply to this question is encompassed by the reply to Question 9b).
- Please confirm that in responding to the Call, applicants other than Telesat Canada or its affiliates are free to arrange interim BSS facilities with non-Canadian facility providers. It would obviously put applicants at a competitive disadvantage in responding to the Call if they were expected to arrange interim facilities through Telesat, given that Telesat is expected to file in response to the Call on its own behalf.
- For reasons similar to question 9a) above, please confirm that in responding to the Call, applicants other than Telesat Canada or its affiliates are free to arrange interim FSS facilities with non-Canadian facility providers.
- Industry Canada is of the view that applicants are free to make arrangements directly with U.S. DBS satellite operators for interim DBS capacity, once a determination has been made that no appropriate Canadian satellite capacity is available, and subject to the approval of Industry Canada for the interim use of that U.S. DBS capacity. Note this applies to interim facilities only, not to permanent ones.
- It is also felt that applicants are free to arrange interim FSS/DTH facilities directly with U.S. FSS satellite operators to secure any required interim FSS facility, once a determination has been made that Telesat Canada cannot provide that capacity, and subject to the approval of Industry Canada for the interim use of that U.S. FSS facility. Evidence that Telesat Canada cannot fulfil the stated requirements will need to be supplied to the Department.
Per Section 9.2 of the Call, if an applicant submitted a proposal for an interim service that involved
- Hauling Canadian programming via terrestrial facilities into the U.S.,
- Uplinking that programming from a U.S. uplink centre to a U.S. DBS satellite,
- Downlinking that programming from the U.S. DBS satellite to Canadian consumers,
would there be any regulatory obstacles to this approach presented by the CRTC, Industry Canada, or any other involved government regulatory bodies.
The use of interim facilities in the context of this Call is outlined in Section 2 of same. Industry Canada will assess applications according to the policy objectives and criteria set in the Call. If an applicant proposed the use of U.S. DBS facilities as an interim arrangement to the establishment of permanent facilities, Industry Canada will assess the overall submission, including the requested interim use of U.S. DBS facilities, and any authorization pursuant to this Call will encompass both phases of the implementation proposal. The approval of the interim use of U.S. DBS facilities to provide capacity to Canadian DTH licensees for Canadian programming will be done according to the satellite policy clarification contained in Annex A to the Call, and the 1972 Exchange of Letters dealing with capacity shortages and emergencies. The decision to permit the use of foreign satellite capacity will be communicated to the CRTC.
The CRTC providing the regulatory oversight on the operation of DTH satellite licensees and telecommunication carriers may choose to address any issues it considers appropriate.
December 2, 1996