Proceedings of the Standing Senate Committee on
Transport and Communications

Issue 4 - Third Report of the Committee

Thursday, February 7, 2008

The Standing Senate Committee on Transport and Communications has the honour to present its

THIRD REPORT

Your Committee, to which was referred the document "Department of Industry User Fee Proposal for a Spectrum Licence Fee for Broadband Public Safety Communications in the Frequency Band 4940-4990 MHz'' has, in obedience to the Order of Reference of Wednesday, January 30, 2008, examined the proposed new user fee and, in accordance with section 5 of the User Fees Act, recommends that it be approved. Your Committee appends to this report certain observations relating to the proposal.

Respectfully submitted,

LISE BACON

Chair

Observations
of the Standing Senate Committee on Transport
and Communications on a Proposal for a Spectrum Licence
Fee for Broadband Public Safety Communications
in the Frequency Band
4940-4990 MHz

Your Committee supports the philosophy behind the proposal, namely that the radio spectrum is a valuable asset that should be well-managed for the benefit of all Canadians. The proposed fee, chosen to reflect the economic value of the spectrum band, is an attempt to use the price system for the efficient allocation of a scarce resource. This is commendable, but your committee has several concerns with the proposal.

Your committee's first concern is that the users of this spectrum band are public safety entities (police departments, fire departments, ambulance services, et cetera.). These are generally non-commercial entities, often financed by some level of government and often engaged in emergency services. Many would argue that public safety entities should not pay fees that reflect the alternative use of spectrum by commercial users.

Your committee's second concern is that the fee proposed is, at best, an imprecise reflection of the economic value of the 4940-4990 MHz spectrum band. Industry Canada looked at other countries but did not find a useful model, so they took fees for commercial (and exclusive) use of spectrum in Canada and adjusted downward because the public safety spectrum would be shared. In practice, the department chose the lower end of the range for commercial-use fees and divided by four. The proposed fee is thus based on several subjective elements.

Your committee's third concern is that the quest for a fee that reflected "economic value'' led the department to reject a fee based on cost recovery. In the U.S. fees for the 4940-4990 MHz spectrum band will not be chosen to reflect economic value; non-auctioned spectrum in the U.S. may only reflect the cost recovery for the management of the spectrum.

Your committee accepts the current proposal but urges Industry Canada to revisit its policy for the pricing of spectrum to be used by public safety entities. In particular, the department should consider the efficiency issues associated with fees based on cost recovery.