Consultation on a Fee Framework and Amendments to Conditions of Licence for Certain Spectrum Licences Used to Provide Commercial Mobile Services Below 10 GHz

2. The Minister, through the Department of Industry Act, the Radiocommunication Act and the Radiocommunication Regulations, while considering objectives of the Telecommunications Act, is responsible for spectrum management in Canada. The Minister's responsibilities include developing goals and national policies for spectrum resource use and for ensuring effective management of the radio frequency spectrum resource. Additionally, under the Radiocommunication Act, the Minister has authority to establish and amend conditions of licence.

3. Specifically, Section 19 of the Department of Industry Act grants the Minister authority to fix fees with respect to the spectrum privileges the Minister confers on a licensee. Section 21 of the Department of Industry Act requires the Minister to consult with such persons or organizations the Minister considers to be interested in the matter before fixing a fee under Section 19. Any such fees are subject to the Service Fees Act and this document also serves as a consultation pursuant to Section 12 of that Act.

4. Fees are an important part of the regulatory scheme in the Radiocommunication Act which deals with spectrum management in Canada. When developing policies and licensing frameworks, the Minister is guided by the Radiocommunication Act and the Department of Industry Act as well as the policy objectives of the Telecommunications Act and the Spectrum Policy Framework for Canada (SPFC). These frameworks, aim to maximize the economic and social benefits that Canadians derive from the use of the radio frequency spectrum resource.

5. Additionally, the Framework for Spectrum Auctions in Canada outlines the general approaches that ISED will use to auction spectrum licences. This includes specifying that any licences issued through a renewal process will be subject to licence fees that reflect some measure of market value.

6. The Spectrum Outlook 2023 to 2027 (The Outlook) outlined a Spectrum Licence Fee Framework that sets out clear objectives and guiding principles for the Minister's approach to setting spectrum licence fees. These policy objectives, along with the guidelines outlined in the SPFC, remain relevant for guiding spectrum management in Canada. When developing the proposed framework for spectrum licence fees for CMS, the Minister was guided by the following objectives and guiding principles:

Objectives:

• Incentivize the efficient use of spectrum for the benefit of Canadians; and
• Obtain a fair return to Canadians for the use of spectrum.

Guiding principles:

• Fees should be determined and applied in a transparent manner that provides reasonable clarity and predictability to licensees and other stakeholders, while also being responsive to changes in market, technological and social conditions;
• Fees should reflect the relative utility and potential economic value of the licence;
• Fees should encourage competition, innovation and incentivize spectral efficiency; and
• Fees should support continued and improved quality and availability of services across Canada, including in rural and remote areas.

7. In developing a fee framework, the Minister must also ensure that the requirements of the Service Fees Act are respected, including the implementation of periodic fee adjustments.

8. Radio frequency spectrum is a unique resource that benefits all Canadians. Wireless communications applications and devices rely on spectrum to transmit and receive information. However, demand for spectrum in-scope for this fee framework often exceeds supply. ISED's spectrum policy framework should reflect the relative value and finite nature of spectrum and help to ensure a fair return to Canadians for its use, especially in the context of spectrum primarily utilized by commercial service providers.

9. Importantly, fees form part of the overall spectrum management regulatory scheme that supports the efficient use of spectrum by licensees. Fees that are set appropriately can incentivize spectrum deployment, expand the provision of service to more areas and maximize the commercial value of each licence. Similar to Canada, many spectrum regulators across the world use licence fees as a means to support their regulatory frameworks and policy objectives.

10. Commercial mobile services (CMS) provide the mobile connectivity that Canadians rely on daily. Both the number of subscribers and data consumption continue to rise each year, driving increasing demand for CMS spectrum bands. Canadian wireless revenues (revenues generated from individual subscriptions for mobile phones, mobile broadband and other wireless devices) reflect this demand, rising 6.5% year-over-year, to $8.28B in Q4 2023, as data consumption continues to rise (Canadian Radio-television and Telecommunications Commission, Communications Market Reports (October 2024).

11. In Canada, all spectrum licences for CMS may be subject to annual fees unless otherwise specified. Fees apply to licences assigned through a non-competitive process as well as to licences assigned through competitive processes. Auction payments must be used in lieu of annual fees for the initial term of auctioned licences, but annual licence fees may apply on renewal after the initial auction term ends. This is further detailed in the Framework for Spectrum Auctions in Canada, and in previous publications, which indicate fees will apply to all new spectrum licences issued through each renewal process, subject to consultation.

International comparison

12. International benchmarking can provide valuable insights when developing or updating spectrum licence fee frameworks. ISED conducted a survey of available data on annual licence fees charged by peer regulators for CMS bands in the low and mid-band frequencies. Many regulators implement annual licence fees which can be directly compared to Canada's approach to spectrum licence fees but may not be directly comparable in all cases. For instance, some spectrum regulators have adopted fee policies that aim to maximize the benefits of spectrum, increase fees in-line with commercial performance and recover economic value for access to the valuable public resource. In contrast, jurisdictions like the United States, have adopted cost-recovery fee structures. Others do not publish licence fee information at all.

13. ISED reviewed available data on annual licence fees for CMS spectrum licences in the low and mid-band frequencies made available in peer jurisdictions including the United Kingdom, Australia, and European Union countries. A mid-2024 review of relevant data from the past five years demonstrates that annual licence fee rates for CMS spectrum licences have an average in the range of $0.02 - $0.03 (CAD) / MHz / population.

14. ISED also examined auction results in the low and mid-band CMS frequencies in peer jurisdictions during the past five years. These peer jurisdictions included the United States, the United Kingdom, Australia, and European Union countries. The rates ranged from $0.005 - $0.11 (CAD) / MHz / population, a much wider range than annual licence fee rates set by regulators. Auction results are influenced by a variety of factors including technological, local economic and sector-specific considerations, as well as by conditions that regulators may impose on the auctioned licences. This can include minimum deployment requirements, limitations on the ability to bid on or transfer licences, or on services allowed. While not directly comparable, auctions can provide another reference for recent spectrum valuations internationally.

15. Overall, international spectrum licence fees have shown a downward trend over time as additional spectrum is made available and peer regulators seek to promote service deployment conditions. This framework seeks to establish spectrum licence fees to be more reflective of global trends, while also supporting ISED's telecommunications policy objectives.

Spectrum available for commercial mobile services

16. To meet the increasing demand for mobile services, ISED has made spectrum available for CMS across different frequency bands over the past three decades, as listed in Table 1 below. In addition to use for CMS, some of these bands are designated for use by other radiocommunication services as detailed in the Canadian Table of Frequency Allocations (CTFA).

Need for consistent application of fees

17. As of publication, 65% of the in-scope CMS licences lack fees. The inconsistent application of fees results in some licensees paying annual fees for most of their licences while others pay little to no fees for functionally similar spectrum.

18. In the Outlook, ISED stated its intent to modernize its framework for spectrum licence fees in the coming years. As outlined in Section 3: "Policy Objectives", the Outlook also established a fee policy framework to guide ISED's future activities in this area, including objectives and principles for modernization of spectrum licence fees.

19. In addition, ISED has previously signalled to stakeholders that it intends to address spectrum licence fees in a number of bands including through the following publications:

• Renewal Process for Cellular and Personal Communications Services (PCS) Spectrum Licences
• SLPB-001-18, Spectrum Licence Renewal Process for Advanced Wireless Services (AWS-1) and Other Spectrum in the 2 GHz Range
• SLPB-001-20, Policy and Licensing Framework for Spectrum in the 3500 MHz Band
• DGSO-001-20, Decision on the Spectrum Licence Renewal Process for Non-Auctioned Broadband Radio Service (BRS) Licences
• SPB-001-23, Decision on a Non-Competitive Local Licensing Framework, Including Spectrum in the 3900-3980 MHz Band and Portions of the 26, 28 and 38 GHz Bands

Current fee formula

20. As per the Renewal Process for Cellular and Personal Communications Services (PCS) Spectrum Licences, ISED calculates spectrum licence fees for licences in Cellular and PCS (blocks A-F) bands using a formula with a single base rate, accounting for the amount of spectrum licensed in MHz as well as population in the licensed area.

21. Cellular and PCS bands: For 2024-2025, these licences are subject to an annual fee formula that multiplies a base rate of $0.04212822 by the number of MHz held and population of the licensed area.

Formula 1.1 Current annual fee formula for Cellular and PCS bands:

Annual Fee = Base rate ($0.04212822) x MHz in Licence Area x Population of Licence Area

Base rate: This refers to the $0.04212822 base rate ISED applies in 2024/2025.

MHz: Licence bandwidth in MHz.

Population: The population covered by the individual licence, based on ISED 2001 census data, which is derived from Statistics Canada's Census of population (Census).

Minimum Fee: Should the formula result in an annual fee of less than $1,199.43 for licences in these bands then a minimum fee of $1,199.43 is applied.

22. Non-auctioned BRS 2500 MHz band: Currently these licences are subject to a fee formula that multiplies a base rate of $1.58 by the amount of spectrum licensed in MHz and the number of households (in thousands) in the licence area.

Formula 1.2 Current annual fee formula for BRS 2500 MHz:

Annual Fee = Base rate ($1.58) x MHz in Licence Area x 1000s of households in Licence Area

1000s of households: Based on ISED 1996 census data and rounded off to the nearest 500 households.

Proposed fee rate for CMS spectrum licences below 10 GHz

23. To ensure that fees are applied fairly and consistently across bands, ISED will propose a uniform fee structure for spectrum licences in all applicable CMS bands. This will result in annual fees being applied to all eligible CMS licences. ISED believes that such a framework would more accurately reflect the value of this spectrum, incentivize efficient use, and otherwise support ISED's policy objectives as outline in Section 3: "Policy Objectives".

24. ISED is proposing a common CMS fee framework that will be applied to the bands used to provide CMS, rather than establishing unique fee rates for each individual band. Such an approach would recognize the relative substitutability of spectrum and provide a more predictable framework for fees over time. ISED has seen that the bands below 10 GHz that are used for CMS are in high demand and provide significant value to all licensees. The economic value of these licences is supported by international standards and the International Telecommunication Union Radiocommunication Sector (ITU-R) has agreed on global designations of the in-scope bands for International Mobile Telecommunications ("IMT") to provide broadband mobile services (ITU-R, Spectrum for IMT). See Section 6: "Application of the CMS fee framework to spectrum licences in certain bands" for the bands where ISED is proposing to apply this new CMS fee framework.

25. Presently, the Cellular and PCS bands have annual fees that are calculated using a single base rate ($0.04212822/MHz/Population) that was established in 2004. In considering whether to apply this base rate to all CMS licences eligible for annual fees today, ISED considered the policy objectives and principles outlined in Section 3: "Policy Objectives".

26. As discussed in the "International Comparison" section, internationally benchmarked auction and licence fee valuations for comparable spectrum, used for comparable services, were observed at a range of valuations. Removing outlying data, fees and valuations were found to be in the range from $0.005 to $0.03 / MHz / population / year. While jurisdictions are not directly comparable, ISED notes that internationally CMS licence fee rates have trended downwards over time. ISED is of the view that an appropriate base rate could be set within this range.

27. ISED seeks to establish licence fees for CMS bands that reflect the high value and demand for these bands. As outlined above, ISED considered prices fixed by peer regulators for comparable bands. A single rate fixed within the range of $0.018 to $0.022 / MHz / population could be reflective of lower international pricing as determined through ISED's benchmarking exercise. This range may be appropriate to incentivize the efficient use of spectrum, while reflecting the economic value of this resource, and providing a fair return to Canadians.

Proposed three-rate fee framework

28. ISED considers that a single base rate could align with its objective for fees of providing a fair return to Canadians. However, the majority of spectrum licences are held by a few large licensees, and there is a risk that applying a single rate would not support all guiding principles outlined in Section 3. Recognizing this dynamic and in line with ISED's policy objectives, ISED is considering a discount mechanism to minimize impacts on small and medium licensees.

29. As such, ISED is proposing to implement a three-rate fee framework that would apply discounts to the base rate based on the aggregate total of each licensee's holdings of fee-eligible CMS spectrum licences (in MHz-pop). For certainty, this framework would not include non-CMS spectrum licences, spectrum licences currently in their initial auction term or spectrum licences in bands above 10 GHz. ISED proposes the rate structure and discounts in Table 2, including a calculation of the discount from the prevailing fee base rate:

*Reduction refers to current rate for Cellular and PCS band spectrum licence fees ($0.04212822 / MHz / Pop).

30. The upper threshold for Rate 1 of 900 million MHz-Pop is approximately 5% of all in-scope CMS spectrum licences (in MHz-Pop) across Canada. Correspondingly, the upper threshold for Rate 2 of 1800 million MHz-Pop is approximately 10%. As additional spectrum is brought into scope upon renewal, and upon consultation in the future, ISED could maintain the thresholds proportionally.

31. The three-rate structure is intended to consider the value derived by licensees for use of spectrum while ensuring a fair return to Canadians. Rate 1 mitigates barriers to new market entrants and smaller licensees with smaller operating budgets, often in rural and remote areas. Rate 2 retains a moderate discount and certainty that costs for this resource can be predictably anticipated as small licensees scale and grow. ISED views the proposed three rate structure with discounts for the initial holdings of all licensees and a benchmarked rate for holdings in excess of 1800 million MHz-Pop as sufficient to incentivize efficient use of spectrum and return a fair value to Canadians.

32. Applying the rates from Table 2 above, the proposed steps for a licensee to calculate licence fees are:

1. Add-up the MHz-Pop from all in-scope licences, including licence holdings of affiliate licensees.

2. Licensees with a total MHz-Pop less than or equal to 900 million:

   1. Apply Fee Rate 1 to all licences: $0.0005 x MHz x population of licence area.

3. Licensees with a total MHz-Pop greater than 900 million and less than or equal to 1800 million:

   1. Initially apply Fee Rate 1 to MHz-Pop holdings ($0.0005 x MHz x population of licence area), until the sum of MHz-Pop reaches 900 million, and then;

   2. Apply Fee Rate 2 to all remaining MHz-Pop ($0.011 x MHz x population of licence area)

   3. To allow accurate calculation of licence fees for any individual licence, ISED proposes to provide 'blended fee rates' for all licensees with a total MHz-Pop greater than 900 million (for details on blended fee rates, see annex B). These licensees can calculate their fees using the following formula: Blended fee rate x MHz x population of licence area.

4. Licensees with a total MHz-Pop greater than 1800 million:

   1. Initially apply Fee Rate 1 to MHz-Pop ($0.0005 x MHz x population of licence area), until the sum of MHz-Pop reaches 900 million, and then:

   2. Apply Fee Rate 2 to all MHz-Pop ($0.011 x MHz x population of licence area), until sum of MHz-Pop reaches 1800 million, and then:

   3. Apply Fee Rate 3 to all remaining holdings: $0.022 x MHz x population of licence area.

   4. To accurately calculate these licence fees, ISED proposes to provide 'blended fee rates' for all licensees with a total MHz-Pop greater than 900 million (for details on blended fee rates, see annex B). These licensees can calculate their fees as: Blended fee rate x MHz x population of licence area.

33. These proposed annual fee rates represent a significant reduction to the current base rate of approximately $0.04213 applied to the Cellular and PCS bands. As a result, most licensees currently paying fees would see a reduction in their annual spectrum licence fees.

A new Condition of Licence to determine CMS Spectrum licence holdings

34. ISED notes that, for various commercial or historical reasons, some licensees may hold spectrum licences under multiple different company names. To accurately calculate the aggregate licence holdings of licensees with affiliated entities, ISED proposes that the licence holdings of affiliates in applicable CMS bands count towards the aggregate licence holdings of a CMS licensee when applying the fee rates and when calculating the annual fee for that CMS licensee.

35. Proposed definition of "Affiliated Entity": Any entity will be deemed to be affiliated with a licensee if it controls the licensee, is controlled by the licensee, or is controlled by any other entity that controls the licensee. "Control" means the ongoing power or ability, whether exercised or not, to determine or decide the strategic decision-making activities of an entity, or to manage or run its day-to-day operations.

36. Presumption of affiliate status: If a person owns at least 20% of the entity's voting shares (or where the entity is not a corporation, at least 20% of the beneficial ownership in such entity), ISED will generally presume that the person can exercise a degree of control over the entity to establish a relation of affiliation. The ability to exercise control may also be demonstrated by other evidence. ISED may, at any time, ask a licensee for information in order to satisfy any question of affiliation. ISED proposes to implement a new Condition of Licence that will place a requirement on licensees to submit information listing all affiliated entities that hold spectrum licences in Canada, in a timely manner, and update it as necessary to reflect changes to affiliation status.

37. In cases involving joint ventures or partnerships, where a licensee is jointly controlled by two or more non-affiliated licensees, ISED will require a declaration of ownership details from both the jointly owned licensee and each partner or co-venturer. This requirement will enable ISED to accurately assess fees for in-scope licences held by the jointly controlled licensee. With access to satisfactory ownership details, ISED proposes to calculate fees for jointly controlled licensees by applying the appropriate fee rates proportional to the controlling interest in the licence. See "Annex C: Calculating fees for a licensee partially owned by two licensees, each holding more than 900 million MHz-Pop of in-scope licences".

Minimum Fee

38. Given the proportionate reductions in the three-rate structure compared to the current base rate of approximately $0.04213, ISED is of the view that a reduction of similar magnitude is appropriate for the minimum fee. Consistent with statutory requirements, ISED is proposing to apply a $250 annual minimum fee per licence. This is a reduction from the current $1,199.43 minimum fee applied to licences in the Cellular and PCS bands.

39. In compliance with the Service Fees Act, the minimum fee amount will be adjusted annually based on the All-items Consumer Price Index (CPI) published by Statistics Canada in May of each year.

Pro-rated Fees

40. The monthly fee is 1/12 of the applicable annual fee, rounded to the nearest cent. The prorated fee is the monthly fee for each month including the month issued until March 31 of the then-current fiscal year or until the licence expiry date, whichever comes first. Annual fees for a new CMS licence issued on a day other than April 1st will be calculated using the minimum fee, Fee Rate 1 or the most recent Blended fee rate applied to the licensee as the base rate (whichever is higher) before the calculation of the monthly fees.

Annual adjustments

41. As prescribed by the Service Fees Act, radio and spectrum licence fees (fee rates and minimum fees) are adjusted annually based on the All-Items Consumer Price Index (CPI) published by Statistics Canada in May of each year. More information can be found on ISED'S Annual adjustments for spectrum and telecommunications fees — Questions and answers.

Population

42. ISED is proposing to use Statistics Canada's 2021 Census of Population as the basis for the population in the proposed fee formulas for calculating annual CMS licence fees described in section 5: "Proposed New CMS Fee Framework" within subsections "Proposed Fee Rates" and "Calculating annual fees".

43. ISED will also consider updating population data for the proposed annual fee framework according to forthcoming Statistics Canada's censuses of population, subject to future consultations.

44. Through this consultation, ISED is proposing to apply the CMS fee framework described in section 5: "Proposed New CMS Fee Framework" to the CMS licences in the following bands:

• Cellular
• AWS-1
• AWS-4
• PCS A-F blocks
• PCS G Block
• WCS 2300 MHz
• BRS 2500 MHz non-auctioned
• 3500 MHz non-auctioned licences

Henceforth to be referred to as "applicable bands". See Table 3: Initial applicable bands for fee modernization and current fee status.

45. ISED believes that these bands should be considered within the scope of the proposed CMS fee framework, as they have either reached the end of their initial licence term and were subsequently renewed, were licensed outside of an auction process, or should otherwise be subject to fees.

Application of the fee framework to additional bands in the future:

46. As discussed in section 5, "Proposed New CMS Fee Framework," ISED aims to establish a unified fee framework for all CMS bands below 10 GHz. ISED intends to consult on applying the proposed CMS fee framework to additional bands as they become eligible for renewal (such as after the expiry of their initial licensing term) unless otherwise specified in a decision.

47. This may include:

• Mobile Broadband Services (MBS) 700 MHz;
• AWS-3;
• BRS 2500 (auctioned);
• 600 MHz;
• 3500 MHz (auctioned);
• 3800 MHz (auctioned); and
• future CMS bands below 10 GHz.

Time frame

48. ISED proposes that, for the purpose of determining blended fee rates, MHz-Pop holdings will be calculated annually on June 15^th or the subsequent business day, taking into account annual adjustments to the rates based on StatsCan's annual Consumer Price Index, in accordance with the Service Fees Act. Note blended fee rates are only applicable for licensees with in-scope licence holdings greater than 900 million MHz-Pop. ISED would propose that any changes to in-scope MHz-Pop holdings that happen after June 15^th will be factored into the calculations at the same time the subsequent year. ISED would propose that any changes to in-scope MHz-Pop holdings that happen after June 15^th will not affect the rates applied to the holdings when annual invoices are sent out but would be factored into the calculations on June 15^th or the subsequent business day the following year.

49. ISED proposes no changes to the current invoicing process for annual spectrum licence fees.

Invoicing

50. ISED will review the comments received and incorporate them as appropriate into the final version of the fee framework. ISED intends to publish a paper outlining the final decisions regarding the fee framework for certain bands allocated to CMS licences and implement the fee framework through a Ministerial Fee Order at a later date.

51. Following the release of a decision on the framework for CMS Licences, ISED intends to modify, replace, or release relevant Ministerial Fee Orders, which will be published in Part I of the Canada Gazette in accordance with Section 11(1) of the Statutory Instruments Act and must comply with the Service Fees Act. ISED also intends to release further guidance to stakeholders through the publication of additional guidance material such as the Client Procedure Circular.

52. ISED proposes to implement the new licence fee framework effective for the 2026-27 licence year. Annual fee invoices, issued for payment by March 31^st, 2026, will be based on the proposed new licence fee framework.

53. ISED has set service standards for each of its fees (see: Spectrum and Telecommunications Service Standards). Under "Terrestrial: Other non-auctioned licences" ISED is proposing to maintain the service standard of 28 days for licences issued for applicable bands to allow for review or evaluation by ISED. Licence applications would be subject to remissions as per ISED's Service Fees Remission Policy and the Spectrum and Telecommunications Sector (STS) program annex. This period would begin the date the licence applicant has submitted all relevant material required in order for ISED to make a licensing determination.

54. Respondents are requested to provide their comments in electronic format (Microsoft Word or Adobe PDF) by email to spectrumauctions-encheresduspectre@ised-isde.gc.ca.

55. To ease review, please specify the question number and provide a supporting rationale for each response.

56. Paper submissions should be mailed to the following address:

Innovation, Science and Economic Development Canada
c/o Director, Emerging and Horizontal Policy Division
235 Queen Street
Ottawa ON  K1A 0H5

57. All submissions should cite the Canada Gazette, Part I, the publication date, the title and the notice reference number SPB-005-24. Respondents should submit their comments no later than January 22^nd, 2025 to ensure consideration. Soon after the close of the comment period, all comments received will be posted on ISED's Spectrum Management and Telecommunications website.

58. As all comments will be posted on ISED's Spectrum Management and Telecommunications website, respondents are asked to not include confidential or private information in their submissions. After the initial comment period, ISED may, at its discretion, request additional information to clarify significant positions or new proposals.

59. ISED will also provide interested parties with the opportunity to reply to comments from other parties. Reply comments will be accepted until February 19^th, 2025.

60. Following the initial comment period, ISED may, at its discretion, request additional information if needed to clarify significant positions or new proposals. In such a case, the reply comment deadline may be extended.

61. All ISED publications related to spectrum management and telecommunications are available on the Spectrum Management and Telecommunications website.

62. For further information concerning the process outlined in this document or related matters, contact:

Innovation, Science and Economic Development Canada
c/o Director, Emerging and Horizontal Policy Division
235 Queen Street
Ottawa ON  K1A 0H5

This annex provides two example calculations for annual licence fees.

Example 1: Calculating annual licence fees for a licensee holding two in-scope licences

Licensee holds the following licences:

To determine the licence fees for this licensee, first add up the licensee's total MHz-Pop, in order to select the appropriate fee rates:

Sum of MHz-Pop for all licences:

Since this licensee holds less than 900 million MHz-Pop, all licence fees will be calculated using Rate 1: $0.0005 / MHz / population

Annual licence fees for this licensee would be:

Example 2: Licence fees for a licensee holding a mix of five in-scope licences

Licensee holds the following licences:

1. 20 MHz Tier 1 Licence (Service Area 1-001) covering all of Canada (36,990,713 population),
2. 20 MHz Tier 2 Licence for British Columbia (Service Area 2-013) with a population of 4,647,973,
3. 30 MHz Tier 2 Licence for Southern Ontario (Service Area 2-008) with a population of 10,609,746,
4. 20 MHz Tier 3 Licence for Quebec (Service Area 3-009) with a population of 1,042,589, and
5. 20 MHz Tier 3 Licence for Ottawa (Service Area 3-015) with a population of 1,516,983

To determine the licence fees for this licensee, first add up the licensee's total MHz-Pop. In order to select the appropriate fee rates:

Sum of MHz-Pop for all licences:

This licensee holds 1,202,257,540 MHz-Pop which is more than the 900 million threshold for Rate 1. Therefore some of its licences would be subject to Rate 1 ($0.0005), while others would be subject to Rate 2 ($0.011).

Applying the three-rate fee structure, ISED would apply the Rate 1 fee ($0.0005 per MHz per population) for the licensee's first 900,000,000 MHz-Pop and would apply the Rate 2 fee ($0.011 per MHz per population) for the licensee's remaining MHz-Pop:

Calculate remaining MHz-Pop, applicable for Rate 2:

Total annual fees for this licensee:

Note the licensee in example 2 in Annex A, holds in-scope licences with a total MHz-Pop greater than the 900 million MHz-Pop threshold for Rate 1. In cases where a licensee holds above the 900 million MHz-Pop threshold, ISED would propose to calculate a unique "blended fee rate" for licensees, to assist in calculating annual fees for individual licences.

Licensee blended fee rate = Total fees payable (applying the three rate fee structure, as calculated through the process outlined in Annex A) / total MHz-Pop

Total fees payable for this licensee: $3,774,832.940

Total MHz-Pop for this licensee: 1,202,257,540 MHz-Pop

Licensee blended fee rate = $3,774,832.940 / 1,202,257,540 MHz-Pop

= $0.00313979 per MHz / population

Note that blended fee rates will only apply for licensees who hold greater than 900 million MHz-Pop. Each licensee holding greater than 900 million MHz-Pop will have its own unique blended fee rate based on its individual licences. ISED would to calculate blended fee rates annually for these licensees as well as to take into account the annual adjustments to fee rates under the Service Fees Act (according to the All-items Consumer Price Index (CPI)) published by Statistics Canada.

In cases where a company may have joint ownership, ISED proposes that the licence owners self-declare the ownership status. For reference, please see the related section titled "A new Condition of Licence to determine CMS Spectrum licence holdings", which describes a proposed new Condition of Licence requiring licensees to declare their affiliated entities.

The following example explains the proposed method to calculate annual licence fees for licensees that are jointly-owned by other licensees.

For example, licensee "C" is jointly owned by two independent companies, "Owner A" and "Owner B" which are also licensees holding in-scope CMS licences.

• Owner A holds 5,500 million MHz-Pop of in-scope CMS licences.
• Owner B holds 3,500 million MHz-Pop of in-scope CMS licences.
• Jointly owned "Company C" holds 370 million MHz-Pop of in-scope CMS licences.
• Owner A and B have 50% / 50% ownership of Company C.

In this scenario, ISED proposes that Owner A would pay licence fees for its own holdings (excluding the holdings of jointly owned Company C) and Owner B would pay licence fees for its own holdings (excluding the holdings of Company C). Company C's licence fees would be calculated as the additional total fees payable when its holdings are added to the holdings of its parent companies. Company C would then be invoiced directly at the blended rate proportional to each of it's parent companies.

Example calculations:

Owner A annual licence fees, excluding the holdings of Company C:

• Rate 1 : 900,000,000 MHz-Pop x $0.0005 / MHz / population = $450,000.00
• Rate 2 : 900,000,000 MHz-Pop x $0.011 / MHz / population = $9,900,000.00
• Rate 3 : 3,700,000,000 MHz-Pop x $0.022 / MHz / population = $81,400,000.00

Owner A Total Fees = $91,750,000.00

Owner B annual licence fees, excluding the holdings of Company C:

• Rate 1 : 900,000,000 MHz-Pop x $0.0005 / MHz / population = $450,000.00
• Rate 2 : 900,000,000 MHz-Pop x $0.011 / MHz / population = $9,900,000.00
• Rate 3 : 1,700,000,000 MHz-Pop x $0.022 / MHz / population = $37,400,000.00

Owner B Total Fees = $47,750,000.00

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Joint licensee holdings are assigned to owners in-proportion to ownership percentage, which is 50% - 50% in this example.

Calculate 50% of Company C's holdings:

• 370,000,000 MHz-Pop x 50% = 185,000,000 MHz-Pop

Next add 50% of the MHz-Pop holdings of Company C to Owner A and Owner B and re-calculate annual licence fees for this scenario:

Owner A annual licence fees, including 50% of the holdings of Company C:

• Rate 1 : 900,000,000 MHz-Pop x $0.0005 / MHz / population = $450,000.00
• Rate 2 : 900,000,000 MHz-Pop x $0.011 / MHz / population = $9,900,000.00
• Rate 3 : 3,700,000,000 MHz-Pop x $0.022 / MHz / population = $81,400,000.00
• Rate 3 : 185,000,000 MHz-Pop x $0.022 / MHz / population = $4,070,000.00

Total Fees = $95,820,000.00

Owner B annual licence fees, including 50% of the holdings of Company C:

• Rate 1 : 900,000,000 MHz-Pop x $0.0005 / MHz / population = $450,000.00
• Rate 2 : 900,000,000 MHz-Pop x $0.011 / MHz / population = $9,900,000.00
• Rate 3 : 1,700,000,000 MHz-Pop x $0.022 / MHz / population = $37,400,000.00
• Rate 3 : 185,000,000 MHz-Pop x $0.022 / MHz / population = $4,070,000.00

Total Fees = $51,820,000.00

Calculate Company C annual licence fees:

Company C annual fees are the sum of additional fees for Owner A and Owner B, when Company C holdings are included:

Additional annual fees under Owner A:

• $95,820,000.00 - $91,750,000.00 = $4,070,000.00

Additional annual fees under Owner B:

• $51,820,000.00 - $47,750,000.00 = $4,070,000.00

Total Company C annual licence fees:

• $4,070,000.00 + $4,070,000.00 = $8,140,000.00

Thus, ISED would invoice the following for licence renewal fees:

• Owner A invoice: $91,750,000.00
• Owner B invoice: $47,750,000.00
• Company C invoice: $8,140,000.00