Regulations Amending the Radiocommunication Regulations: SOR/2021-40

Canada Gazette, Part II, Volume 155, Number 7

Registration
SOR/2021-40 March 18, 2021

RADIOCOMMUNICATION ACT

P.C. 2021-153 March 17, 2021

His Excellency the Administrator of the Government of Canada in Council, on the recommendation of the Minister of Industry, pursuant to section 6^{footnote a} of the Radiocommunication Act^{footnote b}, makes the annexed Regulations Amending the Radiocommunication Regulations.

Julie Adair
Assistant Clerk of the Privy Council

Regulations Amending the Radiocommunication Regulations

Amendments

1 The long title of the Radiocommunication Regulations^{footnote 1} is replaced by the following:

Radiocommunication Regulations

2 Section 1 of the Regulations and the heading before it are repealed.

3 (1) The definition Minister in section 2 of the Regulations is repealed.

(2) Section 2 of the Regulations is amended by adding the following in alphabetical order:

fixed point-to-point service: means a radiocommunication service that provides for communications on radio frequencies above 30 MHz between two fixed stations that are each authorized to operate at a specific point, other than fixed stations that also operate within the land mobile service on the same radio frequency as the one assigned to the land mobile service. (service point à point fixe)
renewable radio licence: means a radio licence that is issued for a period of one year or less, that expires on March 31 and that can be renewed for a period of one year. (licence radio renouvelable)
temporary radio licence: means a radio licence that is issued for a period of 11 months or less and that cannot be renewed. (licence radio temporaire)

4 Paragraph 3(a) of the Regulations is amended by striking out “and” at the end of subparagraph (viii), by adding “and” at the end of subparagraph (ix) and by adding the following after subparagraph (ix):

(x) fixed point-to-point service; and

5 (1) The definitions broadband personal communications services radio frequencies and cellular mobile radio frequencies in section 55 of the Regulations are repealed.

(2) Section 55 of the Regulations is amended by adding the following in alphabetical order:

link: means the spectrum dedicated to an assigned radio frequency that is used to communicate between two stations. (liaison)
remote area: means any area not identified as an “Urban area” or “Rural area” on the Map of Radiocommunication Areas, published by the Department of Industry in February, 2021. (région éloignée)
rural area: means any area identified as a “Rural area” on the Map of Radiocommunication Areas, published by the Department of Industry in February, 2021. (région rurale)
urban area: means any area identified as an “Urban area” on the Map of Radiocommunication Areas, published by the Department of Industry in February, 2021. (région urbaine)

6 Section 56 of the Regulations is replaced by the following:

56 The radio licence fee payable in respect of a radio licence that is issued in respect of radio apparatus installed in a station and that authorizes the use of certain frequencies is

(a) in the case of a renewable radio licence, the annual fee for the period from April 1 to March 31 of the following year, that is payable in advance on March 31 of each year and that is the fee set out in section 61.1 or 65.1 or in column IV of Parts I to IV, V and VI of Schedule III;
(b) in the case of either a renewable radio licence or a temporary radio licence that is valid for a period of more than 30 days, the monthly fee set out in section 61.1 or 65.1 or in column III of Parts I to IV, V and VI of Schedule III multiplied by the number of months for which the licence is valid; or
(c) in the case of either a renewable radio licence or a temporary radio licence that is valid for a period of 30 days or less, the monthly fee set out in section 61.1 or 65.1 or in column III of Parts I to IV, V and VI of Schedule III.

7 (1) Subsection 61(1) of the Regulations is replaced by the following:

61 (1) Subject to subsection (2), the radio licence fee payable by a radiocommunication user in respect of radio apparatus installed in a fixed station, other than a fixed station that operates in the land mobile service or a fixed station described in section 61.1 or 62, is for each transmitter and each receiver installed at the station the sum of the applicable fees set out in Part II of Schedule III that corresponds to the number of telephone channels per radio frequency assigned to that transmitter or receiver.

(2) The portion of subsection 61(2) of the Regulations before paragraph (a) is replaced by the following:

(2) If a fixed station, other than a fixed station described in section 61.1, 62 or 63, communicates solely on one transmit radio frequency and one receive radio frequency that are not manually selected with another fixed station, other than a fixed station in the land mobile service, operated for the automatic reception and retransmission of radiocommunications within a communication system that does not accept traffic from or deliver traffic to external points by means other than radio, the radio licence fee payable is the sum of

8 The Regulations are amended by adding the following after section 61:

Fixed Point-to-Point Service

61.1 (1) The radio licence fee payable by a radiocommunication user in respect of radio apparatus installed in a fixed station that is part of the fixed point-to-point service consisting of two stations located in an urban area or one station located in an urban area and another in a rural area is, for each link authorized by the licence, the applicable base rate set out in item 1 of Part IV.1 of Schedule III multiplied by the assigned spectrum, in MHz, that is set out in the licence.

(2) The radio licence fee payable by a radiocommunication user in respect of radio apparatus installed in a fixed station that is part of the fixed point-to-point service consisting of two stations located in a rural area is, for each link authorized by the licence, the applicable base rate set out in item 2 of Part IV.1 of Schedule III multiplied by the assigned spectrum, in MHz, that is set out in the licence.

(3) The radio licence fee payable by a radiocommunication user in respect of radio apparatus installed in a fixed station that is part of the fixed point-to-point service consisting of at least one station located in a remote area is, for each link authorized by the licence, the applicable base rate set out in item 3 of Part IV.1 of Schedule III multiplied by the assigned spectrum, in MHz, that is set out in the licence.

(4) The minimum radio licence fee payable by a radiocommunication user in respect of radio apparatus installed in a fixed station that is part of the fixed point-to-point service is, for each link authorized by the licence,

(a) if the two stations are located in an urban area or one station is located in an urban area and the other is located in a rural area, the applicable fee set out in item 1 of Part IV.2 of Schedule III;
(b) if the two stations are located in a rural area, the applicable fee set out in item 2 of Part IV.2 of Schedule III; and
(c) if at least one station is located in a remote area, the applicable fee set out in item 3 of Part IV.2 of Schedule III.

9 Paragraphs 62(1)(b) and (c) of the Regulations are replaced by the following:

(b) communicate on radio frequencies at or below 30 MHz; or
(c) communicate on radio frequencies assigned to a radiocommunication service provider and for which the radiocommunication user does not come under the authority of the radiocommunication service provider’s licence as a subscriber.

10 Section 65 of the Regulations is replaced by the following:

65 The radio licence fee payable by a radiocommunication service provider in respect of radio apparatus installed in a fixed station, other than a fixed station referred to in any of sections 65.1 to 71, is for each transmitter and each receiver installed at the station the sum of the applicable fees set out in Part II of Schedule III that corresponds to the number of telephone channels per radio frequency assigned to that transmitter or receiver.

Fixed Point-to-Point Service

65.1 (1) The radio licence fee payable by a radiocommunication service provider in respect of radio apparatus installed in a fixed station that is part of the fixed point-to-point service consisting of two stations located in an urban area or one station located in an urban area and another in a rural area is, for each link authorized by the licence, the applicable base rate set out in item 1 of Part IV.1 of Schedule III multiplied by the assigned spectrum, in MHz, that is set out in the licence.

(2) The radio licence fee payable by a radiocommunication service provider in respect of radio apparatus installed in a fixed station that is part of the fixed point-to-point service consisting of two stations located in a rural area is, for each link authorized by the licence, the applicable base rate set out in item 2 of Part IV.1 of Schedule III multiplied by the assigned spectrum, in MHz, that is set out in the licence.

(3) The radio licence fee payable by a radiocommunication service provider in respect of radio apparatus installed in a fixed station that is part of the fixed point-to-point service consisting of at least one station located in a remote area is, for each link authorized by the licence, the applicable base rate set out in item 3 of Part IV.1 of Schedule III multiplied by the assigned spectrum, in MHz, that is set out in the licence.

(4) The minimum radio licence fee payable by a radiocommunication service provider in respect of radio apparatus installed in a fixed station that is part of the fixed point-to-point service is, for each link authorized by the licence,

(a) if the two stations are located in an urban area or one station is located in an urban area and the other is located in a rural area, the applicable fee set out in item 1 of Part IV.2 of Schedule III;
(b) if the two stations are located in a rural area, the applicable fee set out in item 2 of Part IV.2 of Schedule III; and
(c) if at least one station is located in a remote area, the applicable fee set out in item 3 of Part IV.2 of Schedule III.

11 The heading before section 69 and sections 69 to 70 of the Regulations are repealed.

12 Section 74 of the Regulations is repealed.

13 The heading of Part II of Schedule III to the Regulations is replaced by the following:

Fee Schedule Applicable for Fixed Stations that Communicate with other Fixed Stations or Space Stations

14 Schedule III to the Regulations is amended by adding the following after Part IV:

PART IV.1

(Subsections 61.1(1) to (3) and 65.1(1) to (3))

Fee Schedule Applicable for Stations in the Fixed Point-to-Point Service
Item	Column I Area and Assigned Radio Frequency	Column II Monthly Base Rate ($/MHz)	Column III Annual Base Rate ($/MHz)
1	Urban Area
	(a) ≤ 890 MHz	229.17	2,750.00
	(b) > 890 and ≤ 960 MHz	11.50	138.00
	(c) > 960 and ≤ 4200 MHz	3.75	45.00
	(d) > 4.2 and ≤ 8.5 GHz	2.83	34.00
	(e) > 8.5 and ≤ 15.35 GHz	2.00	24.00
	(f) > 15.35 and ≤ 24.25 GHz	1.33	16.00
	(g) > 24.25 and ≤ 52.6 GHz	0.83	10.00
	(h) > 52.6 GHz	0.04	0.50
2	Rural Area
	(a) ≤ 890 MHz	183.33	2,200.00
	(b) > 890 and ≤ 960 MHz	9.20	110.40
	(c) > 960 and ≤ 4200 MHz	3.00	36.00
	(d) > 4.2 and ≤ 8.5 GHz	2.27	27.20
	(e) > 8.5 and ≤ 15.35 GHz	1.60	19.20
	(f) > 15.35 and ≤ 24.25 GHz	1.07	12.80
	(g) > 24.25 and ≤ 52.6 GHz	0.67	8.00
	(h) > 52.6 GHz	0.03	0.40
3	Remote Area
	(a) ≤ 890 MHz	114.58	1,375.00
	(b) > 890 and ≤ 960 MHz	5.75	69.00
	(c) > 960 and ≤ 4200 MHz	1.88	22.50
	(d) > 4.2 and ≤ 8.5 GHz	1.42	17.00
	(e) > 8.5 and ≤ 15.35 GHz	1.00	12.00
	(f) > 15.35 and ≤ 24.25 GHz	0.67	8.00
	(g) > 24.25 and ≤ 52.6 GHz	0.42	5.00
	(h) > 52.6 GHz	0.02	0.25

PART IV.2

(Subsections 61.1(4) and 65.1(4))

Minimum Fee Schedule Applicable for Stations in the Fixed Point-to-Point Service
Item	Column I Area	Column II Minimum Monthly Fee ($)	Column III Minimum Annual Fee ($)
1	Urban Area	5.83	70.00
2	Rural Area	4.67	56.00
3	Remote Area	2.92	35.00

15 Items 4 and 5 of Part V of Schedule III to the Regulations are repealed.

16 Part VII of Schedule III to the Regulations is repealed.

Coming into Force

17 These Regulations come into force on April 1, 2021, but if they are registered after that day, they come into force on the day on which they are registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

Capacity-based fee model for fixed point-to-point systems in the fixed service

Innovation, Science and Economic Development Canada’s (ISED) capacity-based fee regime for fixed point-to-point systems has the undesired effect of generating higher fees for systems that use spectrum efficiently. This outdated fee model poses an increasing issue as 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. Modern radio equipment can transmit more capacity using the same or even less spectrum than previously required. Charging a fee based on capacity means that a system transmitting more data using a given amount of spectrum would be subject to higher fees than another system transmitting less data using the very same amount of spectrum.

The capacity-based fee regime for these systems also does not recognize the higher cost associated with deployment in rural and remote areas, especially in the most remote regions of Canada where subscriber density is low relative to the infrastructure needed to support service. Wireless technology is a key component of connectivity for rural homes and businesses, particularly in areas where wireline solutions, such as fibre, are less feasible.

Insufficient flexibility in the duration of radio licence terms

In ISED’s regulatory scheme, the licence fee payable in respect of a radio licence may either be an annual fee for the period from April 1 to March 31 of the following year, a monthly fee payable for the period of a year up to March 31 during which the licence is valid, or 30 days (one month). A licence with a term shorter than a month is charged the monthly fee. The lack of flexibility of licensing terms means that licensees who require a licence for more than one month but less than one year must choose between either an annual licence, a partial year licence with a term ending March 31, or renewing a monthly licence every month. Some respondents to the Consultation on Licence Fees for Fixed Point-to-Point Radio Systems (Consultation on Point-to-Point Systems Fees) noted that greater flexibility would allow licensees to better manage change in their radio systems and deploy equipment on a short-term basis while ensuring that their licence fees reflect their spectrum usage.

Unused and obsolete radio licence fees and outdated drafting conventions

The Radiocommunication Regulations (the Regulations) contain provisions related to fees payable for cellular mobile radio frequencies, broadband personal communications services radio frequencies, and radiocommunication service providers for space stations that communicate with mobile stations. These fees were phased out due to changes in the way that spectrum is licensed. They have been replaced by ministerial fee orders under the Department of Industry Act. These provisions are thus obsolete and must be removed. A few miscellaneous changes are also required to bring the Regulations up to date with the Department of Justice’s current drafting best practices.

Background

The Radiocommunication Act (the Act) governs the technical aspects of all wireless communications. Radiocommunication is a type of telecommunication and so is also subject to the Telecommunications Act. While the Telecommunications Act sets out the Canadian telecommunications policy objectives, the Act and the Regulations provide the mechanisms for the orderly development of radiocommunication in Canada. The Minister of Innovation, Science and Industry is responsible for developing goals and national policies for spectrum utilization and for ensuring effective management of the radio frequency spectrum. The Spectrum Policy Framework for Canada (SPFC) sets out the policy objective and enabling guidelines for the Canadian Spectrum Management Program that guide ISED in managing the radio frequency spectrum resource in Canada. ISED also seeks to advance other priorities through spectrum management, such as those of Canada’s Innovation and Skills Plan. This plan includes the Connect to Innovate initiative, which is bringing high-speed Internet services to some of Canada’s most rural and remote communities.

The radio frequency spectrum is a unique resource from which all aspects of society benefit. The radio frequency spectrum is divided into different bands that are used by a variety of communications services including broadcasting, cellular, satellite, public safety and two-way radio. Radio licence fees are one mechanism designed to both promote the effective use of spectrum and earn a fair return for the Canadian public for the privilege of access to this public resource.

The International Telecommunication Union defines point-to-point communication as “[c]ommunication provided by a link, for example, a radio-relay link between two stations located at specified fixed points.” Point-to-point systems use point-to-point communication, including backhaul communications (defined as the “[t]ransport of aggregate communication signals from base stations to the core network.”). Backhaul communications are a primary use for point-to-point communication and are an essential part of the infrastructure backbone that enables delivery of Internet, as well as data and voice traffic, by fixed and mobile broadband networks.

Backhaul is also used, for example, to interconnect remote sites and buildings for corporate, health and educational purposes and to support broadcasting undertakings in the transmission of news-gathering video. Point-to-point communication is therefore utilized by businesses in a variety of sectors as well as by governmental entities, such as municipalities and Crown corporations.

In December 2012, ISED published the Consultation on Spectrum Utilization Policies and Technical Requirements Related to Backhaul Spectrum in Various Bands, Including Bands Shared With Satellite, Mobile and Other Services on its website, which initiated a consultation on the technical aspects of point-to-point systems focused on backhaul communications. Many respondents to that consultation emphasized that a consumption-based fee model would result in high spectral efficiencies by providing incentives for operators to reduce the spectrum consumed. Following that consultation, ISED stated that it would consult on any proposed revisions to how the fees are established and assessed that might result from the review of licence fees that was underway at that time.

ISED examined the fee-setting methodologies of other countries such as the United Kingdom (U.K.) and Australia to inform its fee review.

In the U.K., radio licence fees are designed to reflect spectrum consumption and its overall availability, as well as take into account technical and operational factors. In addition to the amount of spectrum used (bandwidth), the fee also reflects the popularity of the frequency band as well as the system’s availability, the distance of the link and the use of spectral efficient technologies. Additional information regarding the U.K.’s fixed link licence fees can be found in the report entitled Fixed Service Unit – Fixed Link Licence Fee Algorithm in force from 2^nd June 2005 (PDF), published by the U.K.’s Office of Communications.
Australia’s pricing framework for fixed systems combines consumption-based fees (to provide incentives for efficient spectrum usage) with additional charges designed to recover administrative costs. In addition to the amount of spectrum consumed, the fee algorithm also takes into account the density of services and the demand for spectrum at different frequencies and in corresponding geographic areas (i.e. Australia-wide, high, medium, low, and remote density). The fee is also updated each year by the consumer price index. Additional information regarding Australia’s apparatus licence fee schedule can be found on the Australian Communications and Media Authority’s (ACMA) website.
The United States (U.S.) uses cost recovery as the basis for its pricing framework for fixed systems. The U.S. charges an application fee as well as a regulatory payment fee for licences, which have 10-year terms. Additional fees apply each time a licence is modified during this term. Fees are unrelated to the spectrum consumed, the frequency used, and the location of the station/system. Private enterprises are expected to have access to third-party databases for frequency coordination. Additional information regarding the U.S.’ regulatory fees for point-to-point links can be found on the Federal Communications Commission’s (FCC) website.

In November 2018, ISED published the Consultation on Point-to-Point Systems Fees on its website, in which ISED proposed to modernize the existing fee structure for fixed point-to-point systems to focus on encouraging the efficient use of spectrum and investment in new technology. The majority of respondents supported ISED’s proposal, highlighting the positive impact new fees would have on operating budgets and their ability to offer enhanced network resiliency. Respondents also linked the fee model to supporting 5G deployment. To implement reduced fees for rural and remote parts of Canada in this new fee model, ISED established methodologies for classifying areas as urban, rural or remote using its spectrum licensing policy, as outlined in the Decision on a New Set of Service Areas for Spectrum Licensing (the Tier 5 Decision).

Objective

This regulatory initiative seeks to advance the SPFC policy objective, being “[t]o maximize the economic and social benefits that Canadians derive from the use of the radio frequency spectrum resource.” The regulatory initiative also seeks to advance ISED’s Innovation and Skills Plan priorities, such as Connect to Innovate. It seeks to contribute to these objectives by simplifying the fee structure for fixed point-to-point systems and reduce fees overall by moving to a consumption-based fee model to encourage upgrading and deployment of new radiocommunication systems, particularly in rural and remote areas.

This regulatory initiative also seeks to modernize the Regulations by removing obsolete provisions and adopting up-to-date regulatory drafting conventions to further enhance their clarity and readability.

Description

Introducing a new fee model for fixed point-to-point systems in the fixed service

The Regulations Amending the Radiocommunication Regulations (the amendments) amends the Regulations to change the current capacity-based fee model for point-to-point systems in the fixed service to a consumption-based fee model with differential pricing for urban, rural, and remote areas. The new consumption-based fee model is based on the amount of spectrum that is set out on the licence multiplied by a base rate. The base rate is dependent on the frequency, with reduced rates for frequency ranges that have a greater amount of spectrum available as well as reduced rates in rural and remote areas. For example, base rates are reduced by 20% in rural areas and by 50% in remote areas. ISED has established methodologies for classifying areas as urban, rural or remote under its spectrum licensing policy, as outlined in the Tier 5 Decision. The amendments create a fixed point-to-point service to ensure the fee model is applied correctly.

The new fee model does 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; satellites or earth stations; and passive repeaters.

These stations were scoped out of the Decision on the Licence Fee Framework for Fixed Point-to-Point Systems (the Decision on Point-to-Point Systems Fees). While the Decision on Point-to-Point Systems Fees indicated that the new fee model would not apply to stations used as active repeaters, provided no additional spectrum is used, further review found that stations used as active repeaters do consume spectrum along the route of a licensed link. Therefore, links that are used by active repeaters are covered under the new fee model.

Flexible radio licence terms

The amendments introduce licence terms between 30 days and 11 months for all radio licences and also introduce definitions to clarify renewable and temporary licences. Renewable radio licences will be issued for a period of one year or less, expiring on March 31, and will be eligible for renewal for a period of one year. Temporary radio licences will be issued for a period of 11 months or less and will not be eligible for renewal. Fees for all radio licences shorter than one year will be assessed based on their monthly fee as prescribed in the Regulations.

Unused and obsolete radio licence fees and updates to drafting conventions

Lastly, the amendments repeal four unused radio licence fees identified by ISED and make a few miscellaneous changes to bring the Regulations up to date with the Department of Justice’s current drafting best practices.

Regulatory development

Consultation

Consultations prior to publication in the Canada Gazette, Part I

In December 2012, ISED published the Consultation on Spectrum Utilization Policies and Technical Requirements Related to Backhaul Spectrum in Various Bands, Including Bands Shared With Satellite, Mobile and Other Services on its website. A notice of consultation was published on December 22, 2012, in the Canada Gazette, Part I. ISED received 21 comments and 6 reply comments. Stakeholder comments, published in December 2014 in Decisions on Spectrum Utilization Policies and Technical Requirements Related to Backhaul, indicated that a consumption-based fee model would result in high spectral efficiencies by providing incentives for operators to reduce the spectrum consumed, as there would be a direct correlation between the amount of spectrum used and radio licence fees and recommended that such a model be implemented. With the advance of technology, modern radio equipment at that time was already able to transmit more capacity over the same or even less spectrum than previously required.

Therefore, the fees were viewed as penalizing licensees making use of modern highly spectrally efficient equipment and promoting inefficient spectrum use. ISED recognized stakeholders’ concerns and the difficulties highlighted with respect to the capacity-based fee structure as it related to point-to-point and backhaul systems.

In November 2018, ISED published the Consultation on Point-to-Point Systems Fees on its website. A notice of consultation was published on December 1, 2018, in the Canada Gazette, Part I. ISED received 20 comments and 8 reply comments from its stakeholders during this consultative process and posted their submissions on its website. The initial comment period ended January 4, 2019, and the reply comment period ended January 25, 2019. In July 2019, ISED released the Decision on Point-to-Point Systems Fees, which summarized the comments and reply comments received during the consultation and listed the respondents. Respondents suggested further refinements to ISED’s proposal to modernize the existing fee structure, many of which ISED incorporated into the final model, such as refinements to base rates as well as ensuring significant fee decreases for deployments in rural/remote areas.

Some respondents recommended a cost recovery model, such as that used by the U.S. FCC and 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. While ISED recognized the recommendations of these respondents, it clarified that spectrum and radio licence fees are not designed to solely recover the costs related to the administration of the licensing regime. 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 noted 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 decided to implement a consumption-based fee model.

In November 2018, ISED published the Consultation on a New Set of Service Areas for Spectrum Licensing. Following the close of that consultation, ISED released the Tier 5 Decision on its website in July 2019. This decision set out a new tier of licence areas and provides a way to define urban, rural and remote areas in Canada. The amendments incorporate a document entitled Map of Radiocommunication Areas which contains a searchable map product in order to assist stakeholders in identifying whether a particular location is urban, rural or remote as set out in the amendments. The licence areas as set out in the Tier 5 Decision have been used to develop the fee areas in that map.

Comments received following publication in the Canada Gazette, Part I, on December 24, 2020

ISED published the proposed amendments in the Canada Gazette, Part I, on December 24, 2020, for a 30-day public comment period. A number of mechanisms were used to inform stakeholders of the publication and to invite them to submit comments on the proposal:

On December 24, 2020, ISED published a notice of the publication of the proposed amendments on its Licence Fee Modernization webpage. ISED also directly informed two major industry associations, the Radio Advisory Board of Canada (RABC) and the Frequency Coordination System Association (FCSA), of the publication of the proposed amendments and invited them to inform their members.
On January 4, 2021, ISED invited Canadians to comment on the proposed amendments through its Twitter, Facebook, and LinkedIn accounts.
On January 13, 2021, ISED held a question-and-answer call with the RABC and FCSA. The call was attended by 33 industry participants.

Summary of inquiries received during ISED’s question-and-answer call

Inquiries during the question-and-answer call primarily related to next steps in the regulatory process, details regarding the projected April 1, 2021 implementation date of the amendments and the potential for delays, and considerations related to the renewal/modification of licences should the new fee model be put in place. One participant also inquired as to whether there were any discrepancies between ISED’s Decision on Point-to-Point Fees and the proposed amendments.

ISED outlined the next steps in the regulatory process during the call and explained that meeting the projected April 1, 2021, implementation date for the new fee model was achievable but contingent on completing the final steps in the regulatory process with the Treasury Board Secretariat and the Department of Justice as well as receiving the necessary approvals. ISED encouraged stakeholders to submit their comments concisely and as early as possible in the comment period to facilitate the implementation of the fees by April 1, 2021. ISED clarified that the fees could not be applied retroactively should this implementation date be missed.

ISED explained that delaying licence renewals would likely be required to capture the new fees should the new fee model be implemented by April 1, 2021. In that case, ISED would extend licence validity beyond April 1 and accept a later payment for any invoices that include fixed point-to-point links. ISED also provided high-level procedural guidance with respect to modifications to existing licences and invited stakeholders to contact their Spectrum Management District Offices for further details.

With respect to any discrepancies between ISED’s Decision on Point-to-Point Fees and the proposed amendments, ISED explained that the only difference between the two proposals was that active repeaters would be charged under the proposed amendments and provided the rationale for this change.

Summary of submissions received in response to publication in the Canada Gazette, Part I

A total of four submissions were received from stakeholders in the wireless industry. All comments were reviewed and taken into consideration when finalizing the amendments. All submissions received during the comment period voiced significant support for the proposed amendments.

Stakeholders expressed that Canada’s current capacity-based pricing model for fixed point-to-point systems does not give operators sufficient incentive to maximize, and can even penalize, spectral efficiency. Stakeholders expressed that the new consumption-based fee model would address this issue by not charging disproportionately higher fees for systems that make efficient use of spectrum and would rather support innovative and efficient spectrum use. One stakeholder noted that the new fee model would directly contribute to the ability of wireless telecommunications service providers to provide enhanced coverage and capacity.

ISED response: ISED recognizes stakeholder concerns with respect to the prior capacity-based fee model for fixed point-to-point systems and is pleased to implement the new consumption-based fee model for these systems. ISED believes that the new fee model will contribute to the efficient use of spectrum by allowing for faster data rates over the same amount of spectrum.

Several stakeholders noted that the reduced annual licence fees for systems located in rural and remote areas would incentivize the deployment of broadband services in underserved or unserved regions across Canada. Multiple stakeholders noted that the COVID-19 pandemic has highlighted the importance of broadband connectivity in rural and remote areas due, in part, to a large number of Canadians being required to work and/or participate in online schooling from home.

ISED response: As stated in the Government of Canada’s Fall Economic Statement 2020, the COVID-19 pandemic has shifted much of our lives online and transformed how we live, work, and learn. Canadians in many rural and remote communities who still do not have access to high-speed Internet face a barrier to their ability to be equal participants in the economy. ISED believes that the new consumption-based fee model will encourage upgrading and deployment of new radiocommunication systems in rural and remote areas and thereby contribute to achieving the Government of Canada’s goal of connecting 100% of Canadians by 2030.

Several stakeholders strongly recommended that all efforts be made to implement the proposed amendments in order to ensure that they come into force on April 1, 2021. One stakeholder stated that the COVID-19 pandemic has caused an uncertain financial environment for Canada’s communication providers and another highlighted that the Canadian wireless industry is preparing to make major investments in network equipment and spectrum in order to implement 5G technologies and services. One stakeholder noted that delaying the implementation of the proposed amendments would have significant negative financial impacts on national, regional and local communication providers and would delay connectivity benefits to Canadians in rural and remote areas.

ISED response: ISED acknowledges stakeholder concerns with respect to the implementation of these amendments by April 1, 2021, and is making every effort to implement the new fees by that date.

One stakeholder noted that, while moving towards a consumption-based regime is a marked improvement, spectrum costs under the new model would still remain significantly higher than fee regimes based on cost recovery, such as the U.S. model.

ISED response: Spectrum and radio licence fees in Canada are not designed to solely recover the costs related to the administration of the licensing regime. 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 believes that a consumption-based fee model will promote the effective and efficient use of spectrum while earning a fair return for the use of the resource for the Canadian public. Therefore, ISED is going forward with implementing a consumption-based fee model.

Modern treaty obligations and Indigenous engagement and consultation

ISED completed an initial assessment of modern treaty implications. While the amendments will apply to licensees in modern treaty territories, no modern treaty implications were identified. A detailed assessment was found to not be required. Indigenous groups had the opportunity to take part in the Consultation on Point-to-Point Systems Fees and the Tier 5 Consultation. No issues related to modern treaty obligations were raised.

Instrument choice

The radio licence fees as well as licence terms are prescribed through the Regulations. Modernizing the fee model and providing more flexibility in the length of duration of licences to ensure efficient use of spectrum requires amendments to the Regulations. Therefore, a regulatory amendment was determined to be the most appropriate instrument to achieve this objective.

Regulatory analysis

Benefits and costs

Businesses in a range of sectors as well as several forms of governmental entities will be affected by the amendments. Major sectors that will be affected include national, regional and local telecommunications, broadcasting, energy production and delivery, resource extraction, and transportation. Governmental entities including municipal and provincial governments as well as federal government departments and provincial and federal Crown corporations will also be affected. These governmental entities are primarily involved in public administration and public safety.

A cost-benefit analysis was conducted using 2020 radio licence data from ISED’s Spectrum Management System, which includes the relevant technical information related to the systems impacted by the amendments. About 815 licensees will be impacted. From this total, approximately 650 licensees are expected to experience a net decrease in fees and approximately 165 are expected to experience a net increase in fees. As of May 2020, the impacted licensees held approximately 18 700 in-scope licences in total. These licences were used as the baseline for projections regarding the associated fees for any given year over the period of analysis. The new fee model set out in the amendments has been applied to these in-scope licences. The projections assume that the number of licences and type of equipment used by licensees remains constant over time. As a result, the estimated benefits from the reduction in fees should be seen as an approximation. In reality, licensees may decide to change their number of licences or their equipment, which may result in higher or lower estimates. These changes are not captured in this analysis because of the lack of appropriate and readily available information around potential options that may be chosen by stakeholders to achieve the most benefit of the new fee model.

The cost-benefit analysis uses a 10-year analytical period from fiscal year 2021 – 2022 to fiscal year 2030 – 2031; it presents the estimated costs and benefits to business and government in 2020 Canadian dollars and discounts the estimates to 2021 using a 7% discount rate. Overall, the amendments will result in a net cost and is estimated to be about $338,480 in present value over the period or an annualized value of $48,191.

Costs to businesses

The amendments are expected to result in costs to some of the businesses operating in the sectors indicated above including, in part, businesses in national, regional and local telecommunications, broadcasting, and in resource extraction.

Based on 2020 data, licensees that are businesses that are expected to experience a net increase in fees are projected to experience costs that amount to a total of $314,408 in present value over 10 years, equating to an approximate $44,764 in annualized average costs. These costs are the compliance costs resulting from increased licence fees for certain systems. Licensees with systems that use spectrum inefficiently will mainly experience fee increases as the new fee model is based on the amount of spectrum consumed, not the capacity of the system. It has been conservatively assumed for the purpose of this cost-benefit analysis that licensees will pay the higher fee rather than transitioning to new equipment. However, many of these licensees would be able to transition to equipment that uses spectrum more efficiently to take advantage of the new fee model. Assuming that a licensee would switch to more efficient equipment if it were cheaper than paying the higher fees, the costs to businesses may be overestimated.

Costs to governments

The new fee model is expected to impose net costs on some governmental entities. Governmental entities that are licensees are expected to experience costs of up to $780,729 in present value over 10 years, equating to about $111,158 in annualized average costs. Similarly to those felt by businesses, these compliance costs will primarily be the result of increased licence fees for systems that use spectrum inefficiently. These fees are in part charged to federal governmental entities, such as the Department of National Defence, meaning that the Government of Canada will bear a portion of the costs.

All radio licence fees are directed to the federal government’s Consolidated Revenue Fund, therefore the federal government will collect less revenue as there will be a reduction in fees following the introduction of the new fee model. The reduction in fee revenue is projected to result in approximately $218,129,255 in present value, equating to an approximate annualized value of $31,056,698.

Changes to ISED’s licensing and fee-charging system are required to implement the amendments. These changes will result in approximately $338,480 in present value costs, equating to an approximate $48,191 in annualized average costs. Should the amendments result in an increased number of licence requests for ISED, they may lead to increased costs to process new or amended licence applications. Given the normal year-to-year fluctuations in volume of licence applications, this potential increase is expected to be manageable using current resources and any increase in costs to process these applications will be absorbed by ISED’s standard operating budget.

ISED will carry other miscellaneous costs to implement these amendments, including time spent training staff and amending supporting policy and guidance documents. These activities will be carried out during the course of ISED’s standard operations, with any costs being managed using ISED’s standard operating budget. Benefits to business.

Benefits to businesses

The amendments are expected to result in cost savings to businesses. The new fee model will reward spectral efficiency, simplify the fee structure, and reduce fees overall. Businesses are expected to experience savings of up to $207,182,075 in present value over 10 years, or about $29,498,066 in average annualized value. These cost savings will be the result of decreased payment in licence fees. National, regional, and local telecommunications service providers will primarily experience these cost savings.

The amendments will also benefit businesses by introducing additional flexibility in radio licence terms, thereby reducing the burden on licensees by removing the need for licensees to constantly reapply for licences for events that last more than one month. The added flexibility will enable these entities to match licence terms to the duration of the activities, resulting in more efficient use of licences and potential reduction in payment of fees. It is not possible to quantitatively estimate the magnitude of this benefit due to lack of information regarding the extent to which increased flexibility in licence durations will be used by licensees. Nonetheless, this benefit is acknowledged qualitatively.

Benefits to governments

The amendments are expected to benefit all levels of government. Over the 10-year analytical period, governmental entities are expected to experience savings of up to $10,947,179 in present value, or about $1,558,632 in annualized value. These quantified benefits will be the result of decreased payments in licence fees. Benefits are expected to accrue to governmental entities operating in a range of sectors, including, in part, broadcasting, energy production and delivery and public safety.

Governmental entities will also benefit from the additional flexibility in radio licence terms resulting from the amendments. Similarly to businesses, the additional flexibility in radio licence terms will reduce the burden on licensed governmental entities by removing the need to constantly reapply for licences for events that last more than one month. The added flexibility will enable these entities to match licence terms to the duration of the activities, resulting in more efficient use of licences and potential reduction in payment of fees.

The federal government will collect more revenue from increases to some in-scope licence fees as a result of the new fee model. The increase in fee revenue is projected to result in approximately $1,095,137 in present value, equating to an annualized average revenue of approximately $155,922.

Benefits to Canadians

The new consumption-based fee model will ultimately benefit Canadians by encouraging innovation through facilitating the adoption of innovative new technologies that allow for the more efficient use of spectrum and faster data rates. Reduced point-to-point fees in rural and remote parts of Canada will contribute to network development in these areas, facilitating greater connectivity and access to high-quality wireless networks at competitive prices. Encouraging the upgrading and deployment of new systems will contribute to the ability of Canadians to innovate and participate in our economy, democracy and way of life using new digital tools and cutting-edge services. Consumers may also benefit from the amendments if some of the cost savings are passed on to them by licensees that are wireless telecommunication service providers in the form of lower prices.

Other benefits

Other benefits with respect to spectrum management are expected as a result of increased flexibility in licensing terms. Stakeholders taking advantage of this increased flexibility will contribute to reduced congestion in areas of high spectrum usage. The increased flexibility will also enable ISED to reassign the spectrum based on need, which will increase its efficient use.

The removal of obsolete fees and unnecessary provisions, as well as making the other miscellaneous changes set out in the amendments, will ensure that the Regulations are kept up to date, improve their readability and ensure that the regulatory text is in line with current best practices in regulatory drafting.

Net impact

The statement below shows the estimated total present value and annualized average total costs and benefits associated with the amendments. These impacts include the projected changes in licence fees for systems in scope of the amendments for both businesses and governmental entities and the reductions in the federal government’s revenue from these fees, as well as the cost to implement changes to ISED’s licensing and fee-charging system.

In sum, the amendments are expected to result in net cost savings for licensees, which will be offset by an equivalent loss in revenue for the federal government. As well, the federal government will bear implementation costs in the first year. The key non-monetized impact associated with the amendments is the benefits associated with increased ability for licensees to expand network development and coverage to rural and remote areas.

Cost-benefit statement

Table 1: Quantified impacts (in Can$, 2020 price level / constant dollars)
Impact	Description of impact	Base year (2021 – 2022)	Final year (2030 – 2031)	Total (present value)	Annualized average
Benefits	Licensees — businesses	$27,568,286	$14,995,321	$207,182,075	$29,498,066
	Licensees — governments	$1,456,666	$792,329	$10,947,179	$1,558,632
	Increase in revenue to ISED	$145,722	$79,263	$1,095,137	$155,922
Costs	Licensees — businesses	$41,836	$22,756	$314,408	$44,764
	Licensees — governments	$103,886	$56,507	$780,729	$111,158
	Federal government revenue losses	$29,024,952	$15,787,651	$218,129,255	$31,056,698
	Implementation	$338,480	$0	$338,480	$48,191
Net cost	N/A	N/A	N/A	$338,480	$48,191

Qualitative impacts

Benefits:

Increased ability to utilize more efficient point-to-point systems;
Increased ability to expand network development;
Increased opportunity to expand network coverage to rural and remote areas; and
Increased flexibility in licensing terms.

Costs:

Staff training, modifications to supporting policy and guidance documents; and
Processing increased number of radio licence authorizations.

Small business lens

From the approximately 815 licensees that are expected to be impacted either positively or negatively by the amendments, 256 of them are considered to be small businesses. Therefore, the small business lens applies. A small business, for the purpose of the small business lens, is any business, including its affiliates, that has fewer than 100 employees or less than $5 million in annual gross revenues. Similarly to other businesses, small businesses might carry incremental costs or reap incremental benefits depending on whether their systems use spectrum efficiently.

The impacts on small businesses are estimated over 10 years, discounted to 2021 using a 7% discount rate and expressed in 2020 Canadian dollars. Overall, the net benefit to small businesses is expected to be about $5,279,600 over 10 years or approximately $751,696 annually.

Compliance costs to small businesses

Increase in payment of fees are expected to be felt primarily by licensees whose systems use spectrum less efficiently. In the case where a small business solely operates systems that use spectrum inefficiently (e.g. when using older equipment), the new fee model will most likely lead to a net increase to the fees of that business. It is estimated that approximately 57 small businesses may continue to use inefficient equipment. The total cost to these small businesses is estimated to be up to about $73,471 over 10 years or an annualized cost of $10,460.

Licensees, including small businesses, that are expected to see increases to fees have been advised in advance. ISED released an easily accessible account fee impact report tool in the fall of 2020 so that all businesses, including small businesses, are able to easily obtain estimates of how their licence fees will change. Licensees were also notified of the proposed implementation date as a part of the Decision on Point-to-Point Systems Fees, which was released in July 2019. It is expected that these businesses were able to make adjustments to their systems to take advantage of the new fee model and therefore have been able to prepare in advance of the expected implementation of the amendments in April 2021.

Benefits to small businesses

It is estimated that a majority of licensees that are small businesses, approximately 199, will substantially benefit from the reduction of fees caused by the new point-to-point fee model, especially in cases where they have point-to-point systems that use spectrum efficiently. The decrease in fees as a result of the new fee model is estimated to amount to up to about $5,353,071 over 10 years or approximately $762,156 annually.

Small businesses will also benefit from the greater flexibility in licensing durations. This flexibility may especially benefit small businesses that require a licence temporarily by allowing them to more accurately target their required licence duration. Benefits to licensees that are small businesses are expected to be felt primarily by local telecommunications service providers, but will also be shared by licensees across a range of other sectors such as broadcasting, energy production and delivery, resource extraction.

Conclusion

The small business lens analysis indicates that most licensees that are small businesses will benefit from the amendments. The total cost per small business over the 10-year period of analysis is not significant and is estimated to amount to $287 or $41 annually.

The amendments are not expected to lead to disproportionate costs for small businesses in comparison to ISED’s other licensees. Prior to developing the amendments, flexibilities for small business were considered in the development of the fee model to ensure that small businesses do not bear a disproportionate burden.

Small businesses were given the opportunity to take part in ISED’s Consultation on Point-to-Point Systems Fees. During the consultation process, fixed wireless access systems were scoped out of the new point-to-point fee model due in part to the disproportionately high fees that would result from the application of the new model. Fixed wireless access systems are often licensed to small businesses that provide wireless Internet services in remote and rural areas of Canada. In addition, a prominent issue raised by small businesses was the need to incentivize smaller service providers to increase deployment of point-to-point systems in rural areas. This suggestion was considered and ultimately incorporated into the fee model by setting out discounted rates for links in rural and remote areas. No further flexibilities for small businesses have been built into these amendments in light of these actions and to preserve the effectiveness of the regulatory changes.

The summary below shows the estimated total present value and annualized average total costs and benefits to small businesses associated with the amendments.

Small business lens summary

Number of small businesses impacted: 256
Number of years: 10
Base year for costing: 2021 – 2022

Table 2: Costs and benefits to small businesses
Impact	Activity	Annualized value	Present value
Compliance costs	Increase in licence fees	$10,460	$73,471
	TOTAL COST (all impacted small businesses)	$10,460	$73,471
	Cost per small business	$41	$287
Benefits	Reduction in licence fees	$762,156	$5,353,071
	TOTAL BENEFIT (all impacted small businesses)	$762,156	$5,353,071
	Benefit per small business	$20,910	$2,977
Net benefit	N/A	$751,696	$5,279,600

One-for-one rule

The one-for-one rule does not apply, as there is no incremental change in administrative burden. Although the changes in the fee model may lead to a change in the number of applications for radio licences, the amendments will not modify any of the actual administrative requirements nor their scope.

Regulatory cooperation and alignment

Canada is not party to any international agreement whose obligations will need to be satisfied as part of implementing the amendments.

The amendments were not developed as part of a formal regulatory cooperation initiative. However, ISED examined the fee-setting methodologies of other countries, such as the U.S., the U.K. and Australia.

While many factors used to calculate fees in other countries are comparable, it is difficult to draw definitive conclusions on the international value of spectrum given the differences in each country’s spectrum environment and market. Differences include demographics, geography, timing of fee initiatives, and relative competitiveness — all of which have a significant impact on the value of spectrum. Most regulators seek to reflect the utility of spectrum in licence fees, but the approaches for accomplishing this vary considerably and are often affected by other historical and institutional factors.

In the area of spectrum management, ISED compares relatively closely with the regulators in the U.K. and Australia, where fees are used as a policy tool to promote efficient use of this resource and are directly linked to spectrum consumption. A description of fee setting and the factors considered in designing the fees in these countries is presented in the background section.

The new consumption-based fee model for point-to-point systems in Canada will increase alignment between Canada and the U.K. and Australia. Canada’s model will have unique base rates and frequency ranges reflective of its spectrum environment and market. Like Australia, Canada will now reflect spectrum availability in rural and remote areas by providing lower base rates. Reflecting spectrum availability in pricing by providing lower base rates in rural and remote areas is expected to encourage network deployment in these areas, ultimately facilitate greater connectivity and access to high-quality wireless networks at competitive prices.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan found no evidence that the amendments will have any potential for impacts to the environment. Therefore, a strategic environmental assessment is not required.

Gender-based analysis plus

A preliminary gender-based analysis plus (GBA+) was conducted to determine if any group would be affected differently than others based on gender or other socio-economic characteristics. While the amendments improve the fee structure and are expected to bring benefits to rural areas and people living in those communities, there is no evidence that women, men or any socio-economic groups will be impacted differently or that there will be a disproportionate distribution of the benefits among groups. Thus, no GBA+ impacts have been identified as a result of the amendments.

Implementation, compliance and enforcement, and service standards

Implementation

The amendments come into force on April 1, 2021.

To ensure the effective and efficient implementation of the amendments, ISED will modify its licensing and fee calculation system, make the required updates to its external and internal policies and procedures, appropriately train its staff, and engage in external communications to ensure that its stakeholders are informed of the changes.

The performance measurement of the new fee model for point-to-point systems will be incorporated into ISED’s annual Departmental Fees Report, as required by the Service Fees Act.

Compliance and enforcement

As the regulatory amendments will modernize licensing fees, they will not alter ISED’s existing compliance and enforcement strategies. Further information on compliance and enforcement can be found on ISED’s website.

Service standards

ISED has a number of established standards related to the processing of licences once a complete application has been submitted. The processing of licences associated with the new fee model for point-to-point systems will have the same service standards as fixed microwave radio stations, 28 calendar days (four weeks) for new licences or for amending existing licences subject to frequency coordination with users in some cases. For more information on service standards, refer to ISED’s Spectrum Management Service Standards web page.

Contact

Line Perron
Director
Broadcast, Coordination and Planning
Spectrum Management Operations Branch
Spectrum and Telecommunications Sector
Innovation, Science and Economic Development Canada
235 Queen Street, 6th Floor
Ottawa, Ontario
K1A 0H5
Telephone: 613‑863‑3362
Email: ic.spectrumregulatory-reglementationduspectre.ic@canada.ca