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

3. 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 use and for ensuring effective management of radio frequency spectrum. Additionally, under the Radiocommunication Act, the Minister has authority to establish and amend conditions of licence.

4. 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.

5. In developing this Fee Framework, ISED was guided by the objectives in the Telecommunications Act and the Spectrum Policy Framework for Canada (SPFC), which states that the objective of the spectrum program is to maximize the economic and social benefits that Canadians derive from the use of the radio frequency spectrum resource.

6. Fees are an important part of the regulatory framework under the Radiocommunication Act. In Canada, all spectrum licences for commercial mobile services (CMS) may be subject to annual fees, unless otherwise specified. Fees may apply to licences assigned through a non-competitive process as well as through competitive processes. The Radiocommunication Act specifies that auction payments are paid in lieu of annual fees for the initial term of auctioned licences. The Framework for Spectrum Auctions in Canada states that fees would apply upon renewal, following consultation, and that these fees would reflect some measure of market value.

7. 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. When developing the proposed framework for spectrum licence fees for certain CMS and flexible-use spectrum licences below 10 GHz (in-scope licences), the Minister was guided by these 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.

8. 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.

9. Radio frequency spectrum is a scarce resource and a critical input for the telecommunications sector. Wireless communications, applications and devices rely on spectrum to transmit and receive information.

10. Fees can support ISED's spectrum management regulatory framework toward the benefit of Canadians by encouraging the efficient use of spectrum, incentivizing the provision of services and spectrum deployment. Similar to Canada, many other spectrum regulators use licence fees as a tool to support their policy objectives.

11. CMS provide the mobile connectivity that Canadians rely on daily. Both the number of subscribers and rate of data consumption continue to rise each year, driving increased demand for bands allocated to CMS. According to the Canadian Radio-television and Telecommunications Commission's Communications Market Reports, the Canadian mobile wireless sector generated revenues of $7.52 billion from 37.18 million subscribers in Q3 2024.

12. 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 are 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.

13. As outlined in the Consultation, 65% of the in-scope CMS licences currently 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.

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

15. In addition, the Consultation noted that ISED has previously indicated to stakeholders that it intends to address spectrum licence fees in a number of bands including through multiple decisions related to in-scope CMS bands.

Previous fee formulae

16. As per the Renewal Process for Cellular and Personal Communications Services (PCS), 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.

17. 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 Previous 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 2001 census data, which was derived from Statistics Canada's Census of Population.

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.

18. Non-auctioned BRS 2500 MHz band: 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 Previous 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 Statistics Canada 1996 census data

19. This section details decisions regarding the Fee Framework for in-scope licences. To ensure that fees are applied fairly and consistently across bands, ISED proposed a uniform fee structure for spectrum licences. Under this proposal, fees would apply to all applicable CMS bands, rather than establishing unique fees for individual bands. This will result in annual fees being applied to all in-scope licences.

5.1 Single-rate fee framework for all CMS licences

20. In the Consultation, ISED sought comments on whether a single-rate fee framework, with an annual fee rate between $0.018 and $0.022 / MHz / population and applied uniformly to all CMS spectrum licences in bands below 10 GHz, is sufficient to achieve its stated policy objectives.

Summary of comments

21. Most respondents did not support the introduction of fees. Bell, CTA, Eastlink, Québecor, and Rogers believed that ISED's stated policy objectives are already being met in the absence of a fee framework. However, CanWISP indicated that a fee framework would more accurately reflect the value of the spectrum and incentivize efficient use.

22. Bell, CTA, Québecor, Rogers, SSi and Terrestar submitted that any spectrum licence fees should be set on a cost-recovery basis.

23. Several stakeholders opposed ISED's proposal to adopt a single-rate fee framework, with a rate ranging between $0.018 and $0.022/MHz/population. These stakeholders included Bell, Eastlink, Québecor, Rogers, SaskTel, TELUS, and Terrestar. Several of these respondents suggested this rate was too high and would impact investment and consumer affordability.

24. Several stakeholders also suggested that ISED should not pursue a uniform fee structure, and instead differentiate the application of fees within the proposed in-scope bands. Bell and initially SSi, cautiously supported the use of a uniform fee structure for all CMS licences. While others, including Rogers and TELUS disagreed, noting geographic variation and technological differences between bands, and suggested ISED's approach represented a departure from peer regulators. In its reply comments, SSi advocated for an approach that recognizes differences between low-band and high-band spectrum.

Discussion

25. Spectrum licence fees are part of ISED's overall spectrum management regulatory framework. Cost recovery for spectrum licences is not an objective of any ISED spectrum policy. ISED sets fees at levels that support the overall framework of spectrum management by encouraging efficient spectrum use and obtaining a fair return to Canadians.

26. Although some differences currently exist among CMS bands, ISED is of the view that applying a uniform fee structure to the proposed in-scope bands (see section 6) is appropriate. This is because all CMS bands are in high demand and provide significant value to all licensees. As reinforced by data from TELUS' submission, the difference in value between low and mid-band spectrum has narrowed over time as the wireless industry has shifted from 4G to 5G. ISED is of the view that carrier aggregations between low and mid-band spectrum will continue to evolve over time in future network generations. This will increase the value of licences through increased data rates and expanded coverage which will further narrow the differences in utility between CMS bands.

27. To determine the appropriate rate within the single fee rate framework, ISED proposed a rate range of $0.018 to $0.022/MHz/population. This range included the mean of licence fee rates ($CAD 0.022/MHz/population) set by international peer regulators with comparable objectives to ISED (further detail is outlined in Annex A). ISED expects that a rate at the top of this range could be sufficient to incentivize efficient spectrum use and obtain a fair return to Canadians for the use of spectrum. It also provides a significant reduction from the rate of $0.04212822/MHz/population currently applied to Cellular and PCS spectrum and reflects the observed downward trend in licence fees and the price of spectrum over time.

28. However, ISED also notes stakeholder concerns with the single-rate fee framework. While a single-rate fee framework is highly predictable for licensees, a rate that is set too low may not support efficient use while a rate which incents larger licensees to deploy could pose a barrier to investment for smaller licensees. Given the diversity among CMS licensees, ISED is of the view that a single-rate fee framework would not meet the objectives and principles outlined in Section 3.

Decision

5.2 Three-rate fee framework

29. In the Consultation, ISED considered whether a single-rate fee framework could align with its objective for fees of providing a fair return to Canadians. However, since the majority of spectrum licences are held by a few large licensees, there is a risk that a single-rate fee framework may not support the objectives and principles outlined in Section 3.

30. Recognizing this dynamic, and in line with ISED's policy objectives, ISED proposed a discount mechanism to minimize impacts on licensees. The three-rate fee framework would apply fees in three tiers, with discounts to the base rate of $0.022/MHz/pop applied to spectrum licences in the first and second tiers, based on a licensee's aggregate spectrum licence holdings. The Fee Framework would not include non-CMS spectrum licences, spectrum licences currently in their initial auction term or spectrum licences in bands above 10 GHz.

31. ISED sought comments on the following: i) the MHz-pop thresholds and, ii) rates within the three-rate framework, which are as follows:

• Rate 1 ($0.00050000/MHz/population) for the first 900 million MHz-Pop of in-scope aggregated spectrum licence holdings
• Rate 2 ($0.01100000/MHz/population) for in-scope aggregated spectrum licence holdings greater than 900 million MHz-Pop, up to and including 1800 million MHz-Pop
• Rate 3 ($0.02200000/MHz/population) for any in-scope aggregated spectrum licence holdings greater than 1800 million MHz-Pop

Summary of comments

32. The majority of stakeholders noted the merits of the three-rate framework or were willing to support the approach with caveats.

33. Bell indicated a willingness to support a three-rate fee framework if lower rates were adopted. Bell also recognized that the three-rate framework could account for differences in population across urban, rural, and remote areas. SaskTel also supported the three-rate framework, noting that it better aligned with ISED's stated objectives compared to the single-rate fee framework. However, SaskTel submitted that ISED should give further consideration to reducing fees in rural and remote areas, as in the Decision on a Non-Competitive Local Licensing Framework (NCLL).

34. TELUS argued for lower base rates, aligned with its own international benchmarking. Furthermore, TELUS proposed only two rates for the framework, and was of the view that also applying separate rates for low-band and mid-band spectrum would be appropriate. TELUS expressed concerns about potential long-term impacts on competition among national service providers which was reflected by Rogers and Bell.

35. CanWISP supported the proposed discount mechanism in the three-rate framework and the fee rates on the basis that they support ISED's stated policy objectives. Xplore also supported the three-rate framework, arguing that it supports providers with small and medium-sized spectrum holdings, as well as providers in rural and remote areas with lower population densities. Terrestar agreed that discounted rates should apply to carriers with small and medium-sized spectrum holdings. Electricity Canada also recognized ISED's efforts to foster competitiveness amongst operators with this approach.

36. Québecor preferred a three-rate framework to the single-rate fee framework but indicated the importance of raising the thresholds as additional spectrum holdings come into scope.

37. Rogers did not support the proposed framework, rates or thresholds and argued that ISED's proposal would penalize the "original national operators" (Bell, Rogers, and TELUS). Instead, Rogers proposed a fee rate structure which differentiated based on frequency and geographic location (e.g., metro-urban/rural/remote). SSi supported this proposal in its reply comments. Bell, CanWISP, Québecor, and Xplore did not support Rogers' alternative proposal, while TELUS supported the concept but opposed the rates. In reply comments, Rogers indicated a willingness to support other proposals which had the effect of lowering fee rates.

38. Eastlink expressed concerns that ISED's three-rate framework would significantly increase the costs of delivering mobile services and recommended reduced rates should ISED proceed. It also requested that regional mobile service providers (RMSPs) be exempted. In its reply comments, Bell opposed any exemptions stating that RMSPs have already received significant support through the use of pro-competitive measures in spectrum auctions.

Discussion

Alternative Proposals

39. Multiple stakeholders proposed alternative frameworks aimed at reflecting the different characteristics of spectrum licences. While there was some alignment regarding the need for the approach taken in the three-rate framework, no alternative proposal put forward by stakeholders was supported by consensus.

40. Many stakeholders called for further differentiation between urban and rural licences. However, as noted in the submissions from Bell and Xplore, fees based on $/MHz/pop already reflect some measure of difference across urban, rural, and remote areas. Some stakeholders called for an approach consistent with the fees set by ISED for NCLL, which included rural designations. ISED notes that a rural designation for NCLL was necessary as these fees are based on a MHz/km² basis for vector-based licences, which do not account for population. Furthermore, current CMS licences are issued at an area of Tier 4 or larger. As such, differentiation on this basis for CMS would likely require licences to be reissued at the Tier 5 level, significantly raising administrative burden and potential for disruption.

41. Bell proposed the use of a weighted average of opening bid auction prices to determine base rates. ISED notes that opening bid prices are set according to several criteria based on circumstances applicable at the time of the development of an auction framework and may not represent the prevailing value of the spectrum over time. Applying Bell's proposal risks undervaluing CMS spectrum and may not support ISED's policy objective of obtaining a fair return for Canadians.

Three-rate framework

42. A number of stakeholders, including Bell, Québecor, SaskTel, Terrestar, and Xplore, recognized the challenges associated with the single-rate fee framework and recognized the potential benefits of the proposed three-rate framework. Consistent with ISED's telecommunications policy objectives, ISED is of the view that lower rates for small and medium-sized licensees will reduce barriers to entry and encourage competition. Furthermore, lower rates will benefit the many small and medium-sized licensees which serve rural and remote areas, where connectivity may lag urban areas.

43. The three-rate framework was proposed to address the challenges of the single-rate fee framework by considering the value derived by licensees for use of spectrum while ensuring a fair return to Canadians:

1. As outlined in Section 5.1 and D1, the proposed Rate 3 ($0.02200000/MHz/population, for spectrum above 1800 million MHz-Pop) is intended to incentivize efficient use of spectrum, obtain a fair return to Canadians, and was derived using the mean of annual spectrum licence fees from peer jurisdictions (see Annex A).
2. The proposed Rate 2 ($0.01100000/MHz/population, for spectrum from 900 to 1800 million MHz-Pop) represents a 50% reduction to Rate 3 and provides a moderate discount and certainty that costs for this resource can be predictably anticipated as small licensees scale and grow.
3. The proposed Rate 1 ($0.00050000/MHz/population up to and including 900 million MHz-Pop) represents a nearly 98% reduction to Rate 3 and is intended to mitigate barriers to new market entrants and smaller licensees, and encourage growth and investment, often in rural and remote areas.

44. ISED notes that the discussion on the applicability of the uniform fee structure (i.e., the undifferentiated treatment of spectrum) as discussed in Section 5.1, is also applicable to the three-rate framework.

45. While the majority of respondents advocated for lower rates, ISED notes that all licensees are eligible to benefit from the heavily discounted Rate 1. ISED is of the view that the approach mitigates the potential impact of any increase in fees on any one licensee or class of licensees, given the disparities in holdings between licensees by CMS bands which will be subject to updated fees.

46. Furthermore, ISED is of the view that the three-rate framework (that is, the use of appropriate thresholds and discounts) adequately addresses the potential drawbacks of the single-rate fee framework, and supports the objectives and principles outlined in Section 3.

For additional clarity, example calculations for annual licence fees utilizing the three-rate framework can be found in Annex B.

Decision

5.3 New condition of licence to determine CMS spectrum licence holdings

47. In order to accurately calculate the fees within a three-rate framework, ISED sought comments on its proposal that affiliate licence holdings in applicable CMS bands should count towards the aggregate spectrum licence holdings of a CMS licensee.

48. Additionally, ISED sought comments on the introduction of a new condition of licence. In order to accurately assess total holdings, licensees would be required to provide information on their affiliations prior to the entry into force of the new Fee Framework. Licensees would also have an ongoing obligation to update this information where there is a new affiliate or where there is a significant change in the ownership and control of the licensee.

49. ISED also sought feedback on the requirement to provide ownership details for jointly owned licensees when the ownership structure involves two or more other licensees.

Summary of comments

50. Bell, Québecor, Rogers, and Terrestar supported ISED's proposal that affiliate licence holdings in applicable CMS bands should count towards the aggregate spectrum licence holdings of a CMS licensee. TELUS noted that commercial mobile licence holdings of affiliates could be included in aggregate when calculating the blended annual fee under the proposed three-rate framework. TELUS also argued that ISED must remain consistent in its application and definition of affiliated entities in all matters related to spectrum management.

51. While Rogers supported ISED's proposal to require the submission of affiliate data, it noted that this requirement alone would not eliminate fee evasion concerns. Rogers noted that licensees could exploit fee rules through commercial arrangements with small licensees via spectrum pooling.

52. Bell and Terrestar also supported ISED's proposal to create a new condition of licence requiring the submission of affiliate data. Terrestar added that the implementation of the condition of licence is necessary and reasonable to implement the proposal. While not opposed, Québecor and SaskTel questioned the utility of the condition of licence and suggested ISED rely on information from previous filings. Québecor noted that the proposed condition of licence would add unnecessary administrative burden to licensees. Rogers, SaskTel, and TELUS called for ISED to minimize administrative burden and align information requests with other spectrum regulatory processes (e.g., spectrum auction applications).

53. Bell, Rogers and Terrestar also supported ISED's proposal to require that ownership details for jointly owned licensees be submitted when the ownership structure involves two or more other licensees.

Discussion

54. ISED notes that most stakeholders were not opposed to its proposed approach regarding the calculation of aggregate spectrum licence holdings.

55. The majority of respondents considered the new condition of licence a reasonable requirement to implement the three-rate framework. While ISED recognizes that some of this information has been provided through other means, it may not provide an accurate picture of the most up-to-date affiliations or capture all licensees affected by the Fee Framework. Moreover, a condition of licence is necessary to establish an ongoing obligation to maintain accurate information with ISED as to affiliate holdings.

56. The purpose of the new condition of licence is to provide the most up-to-date data to accurately calculate aggregate spectrum licence holdings within the initial year. After this initial filing, stakeholders must only inform ISED upon any change in affiliate status. The requirement to provide affiliate data and the associated condition of licence are expected to apply to all in-scope licences.

57. ISED recognizes the importance of alignment, as such, definitions proposed were based on those from the existing auction process. Additionally, where a licensee is affiliated with more than one CMS licensee, the licensee must declare to ISED what portion of its total spectrum licence holdings should be attributed to each affiliate for the purposes of calculating annual licence fees. See Annex C for examples of calculating fees for a licensee partially owned by two licensees.

Decision

5.3.1 Affiliated entities

58. Definition of "affiliated entities": As proposed in the Consultation, the definition of affiliated entities will be adopted as follows:

• 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.

59. 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.

5.3.2 Process for providing data to ISED – year 1: 2025

60. Information requested in D4 and D5 must be provided in MS Word format (.docx) and in an Excel spreadsheet (.xlsx). This information is to be provided by May 15, 2025 or the subsequent business day, and is to be sent to: spectrumauctions-encheresduspectre@ised-isde.gc.ca.

5.3.3 Process for providing data to ISED – future years beyond 2025

61. In future years, licensees are to advise of any changes to their affiliates as specified in a future Client Procedures Circular (CPC). A list of the changes must be provided in MS Word format (.docx) and in an Excel spreadsheet (.xlsx). This information is to be sent to: spectrumauctions-encheresduspectre@ised-isde.gc.ca.

5.4 Minimum fee

62. ISED sought comments on its proposal to apply a minimum annual fee of $250 to in-scope licences.

Summary of comments

63. Most respondents either supported or did not object to ISED's proposal to implement a minimum annual fee of $250 to in-scope licences. Supportive comments included those from Bell, Québecor, Rogers, SaskTel, SSi, and TELUS.

64. Both Eastlink and Xplore expressed opposition to minimum fees. Xplore argued that the adoption of a minimum fee would disproportionately impact rural, and remote Canadians and increase the costs of serving customers in hard-to-serve areas. To further support rural and remote providers, Xplore argued that ISED should instead exempt licences that would incur annual fees of less than $250 from fees. Similarly, Eastlink expressed that there is a lack of justification for a minimum fee and reiterated its argument that the application of an annual fee after the initial licence term does not support ISED's policy objectives.

Discussion

65. As discussed in Section 3, ISED is of the view that fees support its policy objectives. As such, ISED remains of a view that a minimum fee is required. ISED also notes that the $250 minimum fee is a significant reduction from the prevailing rate of $1199.43 that is currently charged for other CMS bands.

Decision

5.5 Pro-rated fees

66. 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 1 will be calculated using either the minimum fee, Fee Rate 1 multiplied by MHz-Pop or the most recent blended fee rate multiplied by MHz-Pop (whichever is higher) before the calculation of monthly fees. Any portion of a calendar month shall count as a full month, and for licences expiring in 30 days or less, 1/12th of the total applicable annual fee will apply.

5.6 Annual adjustments

67. 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.

Summary of comments on CPI

68. ISED did not seek comments on the use of CPI as an inflationary factor for fee rates and minimum fees. However, some respondents provided comments on this approach. TELUS argued that the application of CPI adjustments compounded with every additional MHz-pop would cause fees to be decoupled from underlying spectrum utility. TELUS suggested that ISED should instead use the most recent Statistics Canada's Census of Population data as an alternative to using CPI adjustments annually when adjusting fees for spectrum licences. Rogers' submission argued that CPI should only be applied to reflect an increase broadly in line with administrative costs in order to minimize annual increases.

69. In reply comments, many respondents including Bell, Québecor and Rogers expressed support for TELUS' proposal to shift away from the use of CPI as an annual adjustor and instead implement a population-based mechanism.

Discussion

70. ISED recognizes the concerns raised by some stakeholders regarding the use of CPI as an annual adjustor for fee rates, and potential decoupling with spectrum valuations over time. However, ISED notes that inflation must be accounted for as mandated by the Service Fees Act. The use of CPI will ensure that annual fee adjustments reflect monetary inflation.

71. For the purposes of this Decision, ISED will maintain the use of CPI as an inflationary factor for fee rates as mandated by the Service Fees Act. However, ISED may pursue alternative approaches that fulfill the requirements of the Service Fees Act as part of a future consultation.

5.7 Population

72. ISED sought comments on its proposal to use Statistics Canada's 2021 Census of Population as the basis for the population when calculating CMS licensees' annual fees for in-scope licences.

Summary of comments

73. Bell, Québecor, Rogers, SSi, TELUS, Terrestar supported ISED's proposal.

Discussion

74. ISED notes that respondents did not oppose the use of Statistics Canada's 2021 Census of Population as the basis for the population used in the calculation of annual CMS licence fees.

Decision

75. In the Consultation, ISED sought comments on applying the Fee Framework to CMS licences in the following bands:

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

Summary of comments

76. Respondents provided mixed views regarding in-scope bands. While some were supportive of the proposed in-scope bands, many respondents suggested caveats and alternative proposals. A few respondents opposed the inclusion of certain proposed bands.

77. In initial comments, TELUS and Québecor both supported the inclusion of the proposed bands should the Fee Framework be adopted. In reply comments, Bell, Rogers, and TELUS supported the exclusion of AWS-4, certain portions of WCS 2300 MHz, and BRS 2500 MHz non-auctioned.

78. Rogers initially agreed with the inclusion of the proposed bands, but with the caveat that ISED adopt a competitively neutral approach to setting base rates. Rogers subsequently argued that portions of BRS 2500 MHz non-auctioned, AWS-4, and WCS 2300 MHz bands are licensed but unusable due to technical restrictions to protect adjacent services or licensees. Rogers stated that spectrum with some level of impairment should be subject to fees as pro-rating the licence would be too subjective, but that when spectrum is unusable (rather than impaired) it should not be subject to fees.

79. Bell argued that the WCS 2300 MHz band should be excluded from the Fee Framework due to technical restrictions currently in place to protect satellite digital audio radio service which severely limits the ability to use this spectrum for CMS. CanWISP disagreed with this assertion.

80. Terrestar also opposed the inclusion of AWS-4, noting that it includes a condition that Ancillary Terrestrial Component use must not cause harmful interference with mobile satellite services (MSS) deployments in the band. Additionally, Terrestar argued that as MSS licence fees are already paid for the use of the spectrum, an additional fee on the same basis as other CMS licences would be unfair. Terrestar argued that AWS-4 should be excluded or at minimum included using a 50% inclusion rate. Xplore agreed with the exemption of AWS-4 in reply comments.

81. Xplore proposed delaying the application of the Fee Framework to non-auctioned 3500 MHz licences until 2041, to align with the timing of fee application to auctioned 3500 MHz licences. It suggested that the imposition of fees before 2041 is inconsistent with the Fee Framework's guiding principles due to the significant change in market conditions and high costs that were imposed on these licensees through the Decision on Revisions to the 3500 MHz Band to Accommodate Flexible Use and Preliminary Decisions on Changes to the 3800 MHz Band. CanWISP disagreed, arguing that Xplore's position seemed based on pre-existing licences which were subject to the 2019 repurposing process and that this spectrum was originally auctioned in 2004 with a 10-year term. In reply comments, Xplore also sought an exemption for 3500 MHz and 3800 MHz or, at minimum, a reduction of fees by 75% for both bands.

82. TELUS submitted that ISED should specify that any bands not currently contemplated for CMS fees would need to go through their own rigorous process for determining fees. Furthermore, it argued that ISED should wait until CMS in 4-10 GHz has been made available and conduct another benchmarking exercise prior to reconsulting on this Fee Framework. In reply comments, Rogers agreed with the proposal.

Discussion

83. ISED believes that the proposed bands should be considered within the scope of the 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.

84. ISED is aware that there may be limitations on the use of some in-scope bands. However, these may be localized to specific licence areas and in many cases are temporary. All proposed in-scope bands have been in use by mobile service providers for decades to provide service to Canadians and requiring adjustments on fees on a licence-by-licence basis is both an onerous and unpredictable process. If a licence is deemed unusable such that a licensee is not able to meet its deployment requirements, the licence should be returned to ISED.

85. A few respondents suggested that both WCS 2300 MHz and AWS-4 should be exempt due to technical constraints or, in the case of AWS-4, due to the requirement that CMS not constrain MSS deployment. Both WCS 2300 MHz and AWS-4 bands have been designated as commercial mobile spectrum through previous ISED decisions, and licensees and subordinate licensees in both bands are actively using this spectrum to provide wireless services to Canadian consumers.

86. As outlined in the Consultation, ISED has previously informed stakeholders of its intention to address spectrum licence fees in these bands. In addition, through the 2014 Decision on a Policy, Technical Framework for MSS and AWS-4 licences, ISED indicated that spectrum licence fees would be applicable (pending consultation) on top of the MSS fees adopted in 1999. ISED also indicated its intent to address these fees through the Outlook.

87. ISED's goal is to establish a unified CMS Fee Framework. As indicated in the Consultation, ISED will consult on applying this Fee Framework to additional CMS bands below 10 GHz at a future date (e.g., through a renewal process for an auctioned band that is nearing the end of its licence term or in the licensing framework for a CMS band), unless otherwise specified in a separate decision. In recognition of stakeholder concerns regarding the potential long-term sustainability of the Fee Framework, ISED may also use this opportunity to review the rates, thresholds and annual adjustments as required.

88. Any spectrum licences issued under the Decision on New Access Licensing Framework, Changes to Subordinate Licensing and White Space to Support Rural and Remote Deployment that are in the in-scope bands listed below will be subject to this Fee Framework.

Decision

7.1 Annual date for calculation of aggregate fee-holdings

89. In the Consultation, ISED sought comments on its proposal to use June 15 or the subsequent business day as the annual date to calculate MHz-Pop holdings for each licensee for the purpose of applying the three-rate fee structure.

Summary of comments

90. Responses to ISED's proposal to use June 15, or the subsequent business day, as the annual date on which to calculate MHz-Pop holdings, were either supportive or did not oppose the proposal.

91. In its support, TELUS argued that ISED should publish what the MHz-Pop and new blended rate will be for each licensee, well in advance of the next licence invoice cycle to enhance transparency.

Discussion

92. ISED notes that responses to the proposed date for calculation of aggregate spectrum licence holdings, either supported or did not oppose the Consultation proposal. As such, ISED will calculate the MHz-Pop holdings annually on June 15 or the subsequent business day.

93. In cases where a licensee has spectrum holdings above the 900 million MHz-Pop threshold, ISED will calculate a unique "blended fee rate" for these licensees and will privately notify these licensees of their MHz-pop holdings and blended rate. Annex E contains details on calculating blended fee rates. This will assist licensees with spectrum in more than one tier rate to calculate annual fees for individual licences. ISED will require licensees to identify any discrepancies with their blended rate within thirty days of notification of their blended rate.

Decision

7.2 Invoicing

94. In the Consultation, ISED did not propose any changes to the current invoicing process for annual spectrum licence fees. ISED noted its intention to implement the new Fee Framework effective for the 2026-2027 licence year. As such, annual fee invoices, issued for payment by March 31, 2026, would be based on the proposed new Fee Framework.

95. ISED sought comments on its proposal to implement the new Fee Framework for in-scope licences for invoices issued for payment by March 31, 2026.

Summary of comments

96. ISED heard opposing views on its proposal to issue invoices for payment by March 31, 2026. Québecor, TELUS and Terrestar did not oppose the proposal. Bell argued that the timeframes are overly compressed and that the new Fee Framework should apply only to invoices issued for payment beginning March 31, 2028. In the reply comments, Eastlink and Rogers agreed with Bell's position of a 2028 implementation. Xplore urged ISED to delay implementing the new fees until at least 2030, and 2041 for non-auctioned 3500 MHz licences.

97. Additionally, Rogers argued that ISED should use a two-year phased implementation similar to Radio Authorization Fees for Wireless Telecommunications Systems that Operate in the Radio Frequency Bands 824.040 MHz to 848.970 MHz, 869.040 MHz to 893.970 MHz or 1850 MHz to 1990 MHz.

Discussion

98. ISED notes that it signalled its intent to apply licence fees in the Outlook, and through multiple other publications noted in the Consultation. This provided licensees with sufficient advance notice of impending changes to this Fee Framework.

Decision

99. ISED has set service standards for each of its fees (see: Spectrum and Telecommunications Service Standards). Under "Terrestrial: Other non-auctioned licences" ISED has a service standard of 28 days. ISED sought comments on its proposal to maintain a service standard of 28 days for the issuance of in-scope licences.

Summary of comments

100. While most respondents did not comment on ISED's proposal to set a 28-day service standard, those who did either supported, or did not oppose the proposal. These respondents included Bell, Québecor, Rogers, TELUS, and Terrestar.

Discussion

101. ISED has set service standards for each of its fees. ISED views a 28-day service standard as appropriate to allow for the review and evaluation of licences issued for in-scope bands and will adopt said service standard for the fee framework. This period would begin the date the licence applicant has submitted all relevant material required in order for ISED to make a licensing determination. ISED additionally noted that licence applications would be subject to remissions as per ISED's Service Fees Remission Policy and the Spectrum and Telecommunications Sector (STS) program annex.

Decision

102. A Ministerial Fee Order under the Department of Industry Act will be issued in accordance with this decision and published in Part I of the Canada Gazette.

103. ISED will publish a CPC specifying further guidance for stakeholders regarding the application of the new Fee Framework and will amend the in-scope licences with conditions of licence outlined in Annexes D and F.

104. ISED will consult on the application of the Fee Framework to additional CMS bands below 10 GHz as needed in the future (e.g. through a renewal process for an auctioned band that is nearing the end of its licence term or in the licensing framework for a CMS band), unless otherwise specified in a separate decision. ISED will also consult before applying Statistics Canada Census of Population updates, and may review the rates, thresholds, or CPI annual adjustments, at its discretion.

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

106. 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 St
Ottawa ON K1A 0H5
Email: spectrumauctions-encheresduspectre@ised-isde.gc.ca

International benchmarking of annual fees was one of the tools used to inform ISED's fee rates.

This benchmarking acted as a guide to ensure that Canadian licence fee rates are generally aligned with international norms, taking into account the Canadian context.

Methodology

ISED sourced publicly available annual fee information from peer regulators, as well as available data for CMS bands in low and mid-band frequencies from comparable jurisdictions in the past five years. This included G7 countries and others where data was available. Figures were then adjusted to $ CAD and divided by the applicable national population in order to provide comparable $/MHz/pop figures.

ISED considered peer jurisdictions to be those with similar policy objectives to ISED. For example, peer objectives could include estimating the forward-looking market value of spectrum, accounting for a portion of turnover earned by operators and incentivizing the efficient use of spectrum.

Fees set to recover costs (such as those in the United States) were not considered in ISED's international benchmarking analysis. ISED's view is that the use of auctions to assign commercial mobile bands across the world has demonstrated, at a macro level, that the market value of these bands exceeds the costs of their management and that ensuring a fair return for Canadians will allow for annual fee amounts in excess of cost recovery levels.

Due to differences in policy objectives, licensing approaches, and other domestic requirements, directly comparing across spectrum regulatory regimes can be challenging. To address this ISED identified 28 relevant data points across eight different countries, ranging from CAD $0.0018/MHz/population to CAD $0.11/MHz/population. ISED elected to take an averaging approach to these rates. ISED did not apply inflation adjustments to the data points gathered from past years, as regulators did not appear to adjust their rates annually. To ensure the average was not dominated by countries with many data points, country averages were also calculated. After calculating country averages, the highest data point was excluded as an outlier as it was greater than two standard deviations above the mean. Table A1 includes all 28 data points as well as the calculated country averages (right-most column). Additional information concerning exchange rates and population used in calculations can be found in table A2 and table A3. Exchange rates used in table A2 were referenced from the Bank of Canada. Populations used in table A3 were referenced from World Bank, Population DataBank.

ISED notes that cross-jurisdictional comparisons inherently include some margin of error and will require careful interpretation of assumptions and methodology. For example, inaccuracies may be introduced when regularizing the $/MHz/pop into a consistent format by using current population figures rather than those at the time that licences were issued. A similar concern exists when converting currencies.

Results

Of the data points included in ISED's analysis, ISED found an average fee rate of CAD $0.022/MHz/population. ISED also reviewed prices paid at auction, but this data did not directly influence fee benchmarks given the influence external factors can have on auction results.

Since ISED conducted its benchmarking exercise, additional international benchmarking exercises have been made publicly available, most recently from Ofcom in the United Kingdom. Studies were also submitted by stakeholders to ISED through the consultation. ISED is of the view that its international benchmarking exercise remains broadly consistent with these findings when considering ISED's policy objectives.

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:

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, 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 its 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

As per the Decision on a Fee Framework and Amendments to Conditions of Licence for Certain Spectrum Licences Used to Provide Commercial Mobile Services (CMS) Below 10 GHz (the Framework), the licensee must provide ISED with information related to all affiliated entities holding spectrum licences in Canada by May 15, 2025.

Furthermore, it is the responsibility of the licensee to inform and maintain up-to-date information related to any change in affiliate status in a timely manner, as per the definitions, criteria and timelines specified in a future Client Procedures Circular, to be published following the issuance of the Decision, as amended from time to time, for the entirety of the licence term.

Where a licensee is affiliated with more than one CMS licensee, the licensee must declare to ISED what portion of its total spectrum holdings should be attributed to each affiliate for the purposes of calculating annual licence fees.

Information shall be provided to ISED as set in the above noted Client Procedures Circular.

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.

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.

Note the licensee in example 2 in Annex B, 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 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 B) / 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 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).

The licensee must pay the applicable licence fees. In the case of annual fees, payment must be made before March 31 of each year for the subsequent year (April 1 to March 31). Fees will be applied as per Notice No. SPB-004-25, Fee Order for Certain Spectrum Licences Used to Provide Commercial Mobile Services Below 10 GHz.