wireless communications: a strong signal for a … communications: a strong signal for a stronger...

Wireless Communications: A Strong Signal for a Stronger CanadaCWTA Input to the Digital Economy StrategyJuly 2010

The wireless industry in Canada makes pro-found contributions to the economy and socialfabric of the country. The industry delivers aneconomic benefit of some $39 billion annually,creates nearly 300,000 high-value jobs, andcontributes numerous national social programsto enhance civic participation and public safetyin communities across the country.

The move to next generation wireless networksis already well underway in Canada, driven byCanadians’ heavy adoption and usage of wire-less technologies, and the convergence of thosetechnologies with high-speed broadband access.Globally, the mobile Internet is growing fasterthan the desktop Internet grew in the 1990s.i

Canadian wireless carriers invested $9.3 billionin wireless capital and spectrum costs in 2008and 2009. As a result, numerous independentstudies over recent months have noted Canada’scompetitive position in terms of broadband penetration (currently leading the G7 in thenumber of homes with access to multiple broadband providers) and wireless downloadspeeds. Key conclusions from these studies areoutlined below.

Data traffic on wireless networks is expected todouble every year through 2014, as moreCanadians use more devices that consume morebandwidth. To avoid network traffic jams thatwould otherwise compromise the economic andsocial benefits inherent in advanced wirelessbroadband networks, wireless carriers will beunder constant pressure to increase the alreadyheady pace of capital and spectrum investments.

As a critical element of its Digital EconomyStrategy, the Government must act immediatelyto make available additional spectrum to helpalleviate the impending network data crunch.Government can also play a key role in reducingand removing policy and regulatory disincen-tives to continued network investment. In thisregard, as part of its Digital Economy Strategy,the Government should:

• Immediately commence the licensing processfor the 700 MHz and 2500 MHz spectrumbands; and take all necessary steps to identifyat least 500 MHz of additional spectrumthat should be made available for commercialwireless services.

• At the very least, avoid any increase to alreadyexcessive spectrum licence fees (the mostexpensive in the G7) and other regulatoryfees and charges paid by wireless carriers.

• Eliminate the outdated condition of licencerequiring spectrum licensees to spend 2% of revenues on a pre-defined list ofR&D activities.

• Take steps to assure the public that thestandards and policies in place adequatelyaddress the concerns of citizens, includingtaking a more prominent role in explainingthe safeguards inherent in Health Canada’sSafety Code 6.

• Encourage public safety agencies to includea calculation of the opportunity cost of theuse of the spectrum and to incorporate spectrum valuations in investment decisions.

Executive Summary

C W T A I N P U T T O T H E D I G I T A L E C O N O M Y S T R A T E G Y — J U L Y 2 0 1 0

The Government must act immediately to make available additional spectrum to help alleviate theimpending network data crunch.

W I R E L E S S C O M M U N I C A T I O N S : A S T R O N G S I G N A L F O R A S T R O N G E R C A N A D A

2



At the same time, Government can implementmuch-needed policy reforms that wouldstrengthen the business case for further invest-ment in next generation wireless networks. In thisregard, as part of its Digital Economy Strategy,the Government should:

• Immediately begin consultations towards a21st-century spectrum policy framework(including seeking comments on the CaveReport commissioned by Industry Canadaover three years ago).

• Introduce an Accelerated Capital CostAllowance for broadband network equipment(scaled to encourage investment in underserved areas).

• Support the creation of a Wireless Centre of Excellence.

• Permit those officials regulating the wirelesssector to access the full range of wirelessapplications and services available in Canada.

• Encourage departments and agencies tomake full use of wireless technologies in theservices they deliver to Canadians.

• Review Canada’s cryptography policy toensure its application reflects the current stateof the marketplace for encryption-containingtechnologies, and does not hinder the efficientoperation of multi-national equipment manufacturers located in Canada.

• Encourage the adoption of standards-based,commercially available technologies by publicsafety agencies.

Introduction

CWTA is pleased to provide its comments as theGovernment embarks on this critical process todefine and refine those policy elements that willshape Canada’s Digital Economy Strategy forthe next five to seven years.

CWTA is the voice of the wireless industry inCanada. Its membership reflects the growingimprint of wireless technology on the Canadianeconomy and society: wireless carriers, domesticand international manufacturers of wirelesshandsets and equipment, content and applicationcreators, and business-to-business serviceproviders who combine to deliver a world-classwireless ecosystem that provides an increasinglyimportant technological backbone for allaspects of life in Canada.

The growth of the wireless industry in Canadasince its launch twenty-five years ago hasprompted a communications revolution thatimpacts all Canadians. In a country as vast asCanada, any technology that brings us closermakes us stronger. This has never been truer

than today, when Canada boasts some of themost advanced wireless networks in the world,including more of the fastest HSPA+ networksthan any other country in the G8.

Canada’s wireless industry makes a remarkablecontribution to the country’s economy. The totalvalue of direct GDP contribution, output multiplier and consumer surplus is a significanteconomic value of $39 billion. Roughly 300,000people are employed as a result of the wirelessindustry, based on 2008 data. ii

The macro-numbers alone give some measure of the breadth and reach of the wireless industry in Canada:

• There are currently 57 licensed wirelessoperators in Canada, some operating nationally, others regionally and locally.Together these providers cover 99% of theCanadian population with wireless service,offering 93% of the population high-speedmobile broadband on 3G networks.iii

• At the end of December 2009, Canadianwireless phone subscribers numbered 22.8 million. Seventy-five percent of Canadianhouseholds have at least one cell phone.iv

• Canadians are heavy users of wireless devices,consuming on average over 4000 minutesper subscriber per year – higher than theaverage in European countries where mobilepenetration rates are much higher.v

• Canadians sent more than 35 billion textmessages in 2009, over 1500 per subscriber.vi

• Twelve percent of households now use a cellphone as their only household telephone.vii

Between 2010 and 2017, Canada and the restof the world will experience the ubiquitous convergence of the two most important enabling technologies of the 21st century so far:wireless communications and broadbandInternet. The result will be – and is already – theenabling of significant productivity and prosper-ity gains across all aspects of the Canadianeconomy and society.

The move to next generation networks is alreadywell underway in Canada, the product of massiveand unprecedented private-sector investments inan infrastructure no less critical to Canada’sfuture than investments in railways, roads, bridges,airports and seaways in previous centuries.

A measure of the importance of the roleCanada’s wireless industry plays in theCanadian economy is the fact that as other sec-tors of the economy were retrenching during therecession, wireless carriers were investing: an

estimated $3.16 billion in 2009,viii on the heelsof $1.85 billion in 2008 (and in addition to$4.25 billion in 2008 AWS auction proceeds —proceeds that went straight to the Government’sconsolidated revenue fund). In other words, asother sectors were shedding jobs to stay afloat,the wireless industry was hiring in all regions ofthe country, while contributing billions directlyto Government coffers.

The Government’s Consultation Paper on a DigitalEconomy Strategy for Canada sets out a numberof key questions for stakeholders and policymakers to consider, including the central question“Should Canada focus on increasing innovationin some key sectors or focus on providing thefoundation for innovation across the country?”

CWTA submits that the latter option is the rightcourse: wireless broadband is already a founda-tional and enabling technology that providesproductivity and prosperity enhancements in allwalks of Canadian life. Despite immense geo-graphic challenges Canada is already a worldleader in the deployment of advanced wirelessbroadband networks.

The balance of this submission situatesCanada’s wireless industry within the economiclife of the country, outlines some key trends andpressures on the horizon, and recommends someconcrete steps the Government of Canada cantake to develop an environment that encouragescontinued investment in next generation wirelessnetworks in Canada thereby strengthening thefoundation for innovation across the country.


Canada boasts some of the most advanced wireless networks in the world, including more of the fastestHSPA+ networks than any other country in the G8.


4



Since 1985, wireless technology in Canada hasbeen constantly evolving. There have been nofewer than 12 complete network builds and re-builds as new standards allowing improvednetwork performance have become commerciallyavailable. The following illustration captures thesteady progression along several unique tech-nology paths, as Canadian wireless networkshave been continually upgraded towards morerobust signal strengths and speeds.

The infrastructure required to deliver wirelessvoice and data service requires massive andcontinual investment. Canadian wireless serviceproviders have invested nearly $16 billion incapital expenditures since 2001, or more than

$21 billion when one includes the cost ofacquiring spectrum at auction.ix

As demand for increased access to advancedwireless services increases in coming years, sotoo will the demand for investment in spectrumand networks to ensure adequate bandwidth tomeet that demand. The following chart illus-trates the historic rate of capital investment byCanadian wireless carriers in network infra-structure and other assets. The red lines indicateadditional investments in spectrum licences.These cumulative investments have producedour current state of world-class network archi-tecture today.

The Move to Next Generation Wireless Networksis Already Well Underway in Canada

Wireless Technology Evolution in Canada 1985-2010

Source: Ovum



A recent study by Professor LeonardWaverman at the Haskayne School ofBusiness at University of Calgary looks atcomparative ICT investment (including wireless and wireline broadband) acrossdeveloped countries. According to this study,Canada currently leads the G7 in broadbandpenetration with a high proportion of house-holds with direct access to multiple broad-band providers, outperforms many Europeancountries in terms of download speeds, andscores highly in terms of “high quality broad-band” infrastructure.x

Where Canada compares less favourably in theWaverman study is in use of advanced networksby Canadian business. As this study suggests,Canadian wireless network operators havemade the investments in broadband infrastruc-ture that will propel the benefits of broadbandtechnology across Canadian society.

Despite this comparative gap in adoption ofadvanced broadband technology by Canadianbusinesses, investments in next generation networks have allowed the wireless sector inCanada to steadily increase its overall contribu-tion to the economic and social life of Canada.

Wireless CAPEX in Canada 1987-2009

Note: Spectrum auction payments are reflected in red.

Source: CWTA; IDC Canada estimate for 2009

Hardware andcomponentsuppliers

Other suppliers of capital items

Suppliers ofsupportservices

Terminalcomponentsuppliers

Content andapplications

providers

Application storesDealers

Terminal suppliers

Payments for applications and content

$123m$686m

$86m$727m

$21m

$2,550m

$2,294m$4,001m$622m$988m

$69m

$1,451m

$574m

Interconnect andLeased lines

Commission$526m

$14,346mPayments forvoice anddata services

$53mPayments forapplicationsand content

$1,116mPayments forterminals andaccessories

Wirelinenetworkoperators

Networkequipmentsuppliers

End users

Canadian Wireless Network Operators

The report also compares the relative positionof the wireless sector in Canada to other majorindustry sectors, in terms of direct economiccontribution to GDP, finding that the contribu-

tion of the wireless industry to Canadian GDP ispractically on par with the agricultural sector,and exceeds that of the mining industry (exclud-ing oil and gas extraction).



An April 2010 study by UK consulting firmOvum quantifies the economic impact of thewireless industry in terms of Canadian GDP, jobsand productivity gains for both the supply anddemand sides of the Canadian economy. xi

In terms of quantifiable economic benefits, thereport finds that wireless communications gen-erated a total economic value of $39 billion forthe Canadian economy in 2008, while deliveringsignificant employment benefits as well:

• Over $16 billion in terms of direct contributionto GDP through the sale of goods and services (comparable to the $20 billion GDPof Newfoundland and Labrador).

• An additional $14 billion benefit from economicflow-through to contributing suppliers in the

value chain (including content creators,accessory providers, independent retail partners etc.).

• Nearly $9 billion in ‘consumer surplus’ – theadditional benefit or value that Canadiansassign to wireless services, above andbeyond what they actually pay for them.

• Over 294,000 Canadian jobs as a result ofthe wireless industry, after taking into accountdirect, indirect and induced employment.These jobs have an average salary level of$59,000, compared to the national averageof $42,640.

• The value-added per employee in the wirelesssector is estimated at $195,000 per year,compared to national average of $71,000.

The Canadian Wireless Sector DeliversTremendous Value to the Canadian Economy and Society

Source: Ovum

The Value-Chain for Wireless Services in Canada

0

5

10

15

20

25

Bro

adca

stin

g

ICT

Man

ufac

turi

ng

Min

ing

excl

udin

gO

il an

d G

as

Pub

lishi

ng

Agr

icul

ture

-C

rop

Pro

duct

ion

Food

M

anuf

actu

ring

Aut

omot

ive

Man

ufac

turi

ng

Res

iden

tial

Con

stru

ctio

n

Wir

eles

sS

ervi

ces

$ bi

llion

s



In addition to significant economic benefits, thewireless industry also delivers numerous envi-ronmental, public safety and other charitableprograms that benefit Canadian society in allregions of the country.

Amber Alert – Working with public safety andAmber Alert coordinators across the country,CWTA spearheaded the May 2010 launch ofa free Wireless Amber Alert service in Canada.Customers of most Canadian wireless serviceproviders can now sign up to get alerts as textmessages on their wireless devices. See:www.wirelessamber.ca. The Minister ofPublic Safety issued a statement applaudingthe wireless industry for this initiative.

Recycle My Cell – Formally launched in 2009,Recycle My Cell is an umbrella programbringing together multiple corporate recyclingprograms operated by Canadian carriers andhandset manufacturers. Through the program,consumers can return end-of-life handsets tovirtually any wireless retail outlet, or by mail,completely free of charge. Over 1.2 millionend-of-life cell phones have been collectedthrough participating programs since 2006.The handsets are then purchased by ISO-cer-tified processors for refurbishment or recycling.Proceeds from those purchases directly support food banks, family and environmentalcharities across the country – over $500,000in charitable contributions in 2009 alone.See: www.recyclemycell.ca. The program

received statements of support and formalrecognition from 7 provincial EnvironmentMinisters in 2009.

E9-1-1 – More than half of all 9-1-1 calls arenow made via mobile phone. As of February2010, the wireless industry and the publicsafety community now provide further locationidentification information for Enhanced 9-1-1(E9-1-1) service for cell phone users.Previously, a 9-1-1 call taker would have receivedthe cellular phone number and the location ofthe nearest cell site or cell tower when a callwas placed to 9-1-1 from a cell phone. Now,in addition to the phone number, the call takerwill receive more precise information basedon the longitude and latitude coordinates ofwhere the handset is located. This service isnow available in most parts of the countrywhere landline 9-1-1 service exists. See:http://cwta.ca/CWTASite/english/E911P2.html

Mobile Giving – CWTA and Mobile GivingFoundation Canada work with Canadianwireless service providers to enable charita-ble donations via mobile devices. All of thefunds raised through these mobile campaignsflow to the recipient charity. For example,over $500,000 was raised in $5 and $10 mobile giving donations for Haitianearthquake relief, raising more in three daysthan the entire first year of mobile giving inthe United States. There are currently morethan 70 charities registered with this

Comparison of Contribution to GDP 2008 – Selected Sectors

Source: Ovum



program. The Minister of Industry issued apublic statement congratulating the wirelessindustry for the success of this initiative. See:http://www.mobilegiving.ca.

TextEd.ca – In January 2010, the CanadianCentre for Child Protection, with the supportof CWTA, launched the official pilot ofTextEd.ca, an innovative and interactive web-site designed to teach teens to be safe,responsible and respectful users of textingtechnologies. The program launched with the

objective of receiving 100 Canadian ordersfor classroom teacher’s kits during the pilotyear. The pilot was an overwhelming successwith more than 350 Grade 7 classes acrossCanada participating and it went internation-al with participation by schools in a numberof countries. The French-language version ofthe website won a 2010 cybercrime preven-tion award from Francopol, the internationalfrancophone network for police training. See:www.texted.ca.

Use of Advanced Wireless Devices in Canadawill Increase Exponentially in Coming Years

Experience has shown that the best way toencourage the use of advanced networks is tobuild them. Advances in network architectureencourage increased use of those networks, andvice versa. Various observers have forecast dra-matic increases in the use of advanced wirelesshandsets and other bandwidth-intensive wirelessdevices over the next five to seven years.

Advanced smartphone handsets represent thenear-future of personal computing. Globally,Deloitte estimates that in 2010, smartphoneswill continue to take marketshare from person-al computers. In 2009 smartphone sales out-stripped the sale of portable PCs. By 2011,smartphone sales will eclipse sales of bothportable and desktop PCs, and by 2012, manu-facturers could ship 500 million smartphonesinternationally.xii

Given the expected growth in smartphone salesrelative to PCs, it is not surprising that MorganStanley predicts that more users will connect tothe Internet via mobile phones then desktopcomputers by 2014, citing a current mobileInternet adoption rate faster than the desktopinternet adoption rate in the 1990s.xiii

Cisco estimates that in 2010, 31% of Canadiancell phone users were using a smartphone, a fig-ure it expects to see rise to 50% by 2014.xiv

Along similar lines, U.K.-based market researchfirm TNS Global Telecoms reports that 55% ofCanadians expected to buy a smartphone in thefirst half of 2010, up from 19% in the first halfof 2009. 21% of Canadians expected to buy awireless ‘netbook’ by June 2010, compared to22% who expected to buy a more traditionallaptop, and just 5% who expected to buy adesktop PC.xv

The number and types of devices that connect towireless networks is about to skyrocket. In addi-tion to smartphones, basic-feature cellphones,laptops, tablets, netbooks, e-readers, digital stillcameras, digital video cameras, and in-carentertainment and safety systems, the next waveof wireless-enabled devices is expected to includevirtually anything that contains a processor.

David Clark (a professor at the MassachusettsInstitute of Technology, and one of the originalarchitects of the internet), has predicted over 1 trillion networked devices within 20 years –ranging from children’s toys to golf balls. xvi

Measured against the projected world popula-tion at that time, we will be looking at morethan a thousand wireless connections per everyperson on earth.

This explosion in the use of advanced wirelessnetworks to connect both traditional and non-

traditional communications devices willundoubtedly bring additional economic andsocietal benefits to Canadians over the next 5 to7 years. As Canada approaches 100% wirelesspenetration, with more people using more

devices that consume more bandwidth, signifi-cant business and policy challenges will emergethat must be addressed under any comprehen-sive national digital strategy.



Canada Faces Data Traffic Jams

Globally, mobile data traffic increased 160%between December 2008 and December 2009,and will double every year between 2010 and2014, increasing 39 times between 2009-2014.xvii

Canadian networks are far from immune tothese pressures, given the exponential increasein Canadians’ adoption and usage of advancedwireless devices in the next few years.

These devices themselves pose a traffic-manage-ment challenge for wireless network operators.One device does not necessarily occupy the sameamount of bandwidth as another device.Generally speaking, the more advanced thefunctionality of the device, the more bandwidthit consumes, and the more it costs for carriersto service and support.

Where basic-feature cell phones were most oftenused for voice and text traffic, according to Cisco,by 2014, 66% of data traffic will be bandwidthintensive video delivered on a range of wireless-enabled devices, which are rapidly becomingmini-computers with voice capability rather thantelephones with computing capability.xviii The following comparison puts this into perspective:

• An e-reader, such as the Amazon Kindle,generates as much data traffic as two basic-feature cell phones.

• A smartphone generates as much data traffic as 10 basic-feature cell phones.

• A netbook (or wireless-enabled laptop) generates as much data traffic as 130smartphones, or 1300 basic-feature cell phones.

Comparative Data Traffic Generated by Everyday Wireless Devices

Source: Cisco

E-Reader

Smartphone

Laptop

If the volume of motor-vehicle traffic was expand-ing at the same rate as the volume of mobile datatraffic, Canada would need to expand theTransCanada Highway from 4 lanes in 2010 to64 lanes in 2014. This analogy gives some meas-ure of the financial challenge facing Canada’swireless network operators as they race to keepbandwidth supply ahead of bandwidth demand.

The Federal Communications Commission(FCC) Broadband Plan is calling for 500 MHzof additional spectrum.xix This is something thatthe US wireless industry endorses. The FCC planalso seeks to increase opportunities for unli-censed devices and innovative spectrum accessmodels; expand incentives and mechanisms toreallocate or repurpose spectrum to higher-valueduses; and improve the transparency of spectrumallocation and utilization.

President Obama has endorsed this recommen-dationxx and has directed executive departments,agencies, and offices of the US government tomove expeditiously to achieve this objective,ordering the National Telecommunications and

Information Administration to collaborate withthe FCC to a complete, by October 1, 2010, aspecific plan and timetable for identifying andmaking available 500 MHz of spectrum.

The International Telecommunications Union isalso actively pursuing the identification of addi-tional spectrum for mobile broadband.

Government should act expeditiously and imme-diately commence the much-anticipated licensingprocesses for the 700 MHz and 2500 MHzspectrum. In relation to the 700 MHz licensingprocess, CWTA would clearly be concerned withany delays to the DTV transition and is encour-aged by comments made by CRTC officials thatthe DTV transition date will not change.

More generally, following the lead establishedby the US, Government should take all neces-sary steps to identify additional spectrum thatcould be made available for commercial wirelessservices, especially spectrum that is currentlyunder utilized. This process should include acareful review of the Government’s own use ofspectrum resources.

Government Should be Looking for Ways toReduce and Remove Policy and RegulatoryDisincentives to Network Investment


Recommendation 1: Immediately commence the licensing process forthe 700 MHz and 2500 MHz spectrum bands; and take all necessarysteps to identify at least 500 MHz of additional spectrum that shouldbe made available for commercial wireless services.


11

Wireless carriers in Canada (and ultimatelytheir customers) have to absorb disproportion-ately high regulatory costs. These costs act as adrag on the amount of capital available forrequired network investment and innovation.Excessive spectrum licence fees, other regulato-ry charges, and outdated conditions of licence

make the business case for investment in nextgeneration networks in Canada harder than itneeds to be.

Spectrum Licence FeesWireless carriers currently hold licences for lessthan 2% of licensed radio spectrum in Canada,

0.000

0.005

0.010

0.015

0.020

0.025

0.030

0.035

Ger

man

y(A

vera

ge)

US

A -

CM

RS

UK

180

0 M

Hz

Fran

ce18

00 M

Hz

UK

900

MH

z

Ave

rage

Fran

ce90

0 M

Hz

Japa

n

Ital

y

Can

ada

G7 Countries — $/MHz/Pop

yet pay roughly half of all spectrum licence feescollected by the Government for use of radiospectrum – nearly $130 million in 2010, andmore than $1 billion since the current feeregime was established in 2003. The industryhas paid more than $2 billion in licence feessince the launch of cellular services in 1985. Noother spectrum user in Canada carries that kindof regulatory overhead simply to acquire thespectrum necessary to operate their networks.

Canadian wireless carriers pay some of thehighest spectrum licence fees in the world – byfar the highest in the G7, and second only toAustralia in the developed world (see Appendix

A for an international comparison of spectrumlicence fees). xxi In 2010, Canadian carriers willpay nearly $130 million in spectrum licencefees. If the 2009 U.S. fee model were applied inCanada, the industry would pay less than $4 million in licence fees. In this regard, CWTAnotes that the recent Plan for a Digital Canada,issued by the Senate Committee on Transportand Communications, recommends that “IndustryCanada, in establishing policies to allocateand price spectrum, consider pricing regimesin other countries, especially those in theUnited States.” xxii



Administrative Spectrum Licence Fees

Source: Ovum

Since the launch of cellular service in Canada in1985, Industry Canada has modified its objec-tives for spectrum licence fees a number oftimes. It has transitioned from a policy of “fullrecovery of spectrum management costs,” toone of generating revenue that exceeds costs to“meet the Government’s fiscal and social policyobjectives,” to one of reflecting the economic

value of the spectrum resource being consumed,and most recently, to one that will earn a “fairreturn” for the Canadian public.

In March 2009 Industry Canada initiated apublic consultation process around the renewalof PCS and cellular spectrum licences thatexpire on March 31, 2011.xxiii In that consulta-tion document, the Department clearly states its



intention to impose a fee that reflects “a fairreturn to the Canadian public.”

CWTA strongly submits that in seeking to deter-mine what constitutes a “fair return to the public”Industry Canada should take into full accountthe economic and social benefits that accrue to Canadians from wireless carriers’ use oflicensed spectrum (as it does for other spectrumlicensees, such as broadcasters).

For example, when the Government reached anagreement in October 2009 with private broad-casters to reduce the Part II fees paid by theindustry, the Minister of Canadian Heritagenoted that:

The broadcasting industry (including radio;conventional, pay and specialty television;and cable and satellite distributors) con-tributes approximately $20 billion annuallyto the Canadian economy. This agreement isanother example of our Government show-ing leadership and working together withindustry in the best interest of our country,our economy and all taxpayers.xxiv

In other words, recognizing that the broadcastingindustry contributes significantly to the Canadianeconomy, the government reduced the annuallicence fees paid by broadcasters. Furthermore,on the recommendation of the Minister ofCanadian Heritage and the Treasury Board, theGovernment chose “not to seek past amountsowing by the industry which amount to about$450 million” as they considered it not to be inthe public interest to do so.

Given that the wireless industry in Canada deliversan economic benefit of some $39 billion per yearfrom its use of publicly-owned spectrum – nearlytwice that of the broadcasting industry – onemight assume that the same ‘economic benefit’policy logic that applies to broadcasters wouldapply to wireless carriers as well. Economic andsocietal contributions to Canada are clearly afactor when the Government considers the feesit charges to broadcasters and should equally bea consideration in setting wireless carriers’licence fees.

Any proposal to implement “market based” feesfor the renewed PCS and cellular licences concerns not only wireless carriers, but theinvestment community as well. Bank of Americaand Merrill Lynch issued a bulletin in July 2009characterizing the proposal as “resetting annualfees to market levels” and cautioning, if implemented, that the new fees would effectivelyshave 3-4 basis points from the margins of wireless carriers, with commensurate reductionsin per-share value for investors.xxv Because shareprice is a reflection of return for shareholders,regulatory anchors on share prices ultimatelyraise the cost of capital and weaken the business case for continual investment in nextgeneration wireless networks.

Spectrum is the most fundamental input to anywireless network, and therefore to any futuredigital economy strategy. Raising taxes on spectrum at the outset of a digital economystrategy makes about as much sense as raisingtaxes on steel at the outset of the Government’srecently-announced National ShipbuildingStrategy,xxvi or applying a new levy to asphalt atthe outset of a national highway building strategy:it would be completely counterproductive relativeto the Government’s broader policy objectives.

CWTA notes that the wireless industry’s reactions to the Government’s Digital EconomyStrategy as a whole will be assessed through thelens of what happens with respect to cellularand PCS licence renewals. Proposals to raisespectrum licence fees from their already exces-sive levels will signal to the wireless industrythat the Government is not fully committed toachieving the policy objectives set out in itsDigital Economy Strategy discussion paper.

Runaway Regulatory Fees and ChargesIn addition to excessive annual spectrum licencefees currently paid, and the prospect of additional licence fees after March 2011,Canada’s wireless carriers also carry additionalregulatory fees and other compliance coststhat divert hundreds of millions of dollars

away from network investment annually, andthat ultimately must be absorbed byCanadian consumers. For example, theseinclude the local contribution subsidy for service in high-cost serving areas and theCRTC telecom fees assessed on wireline and wireless carriers to cover the cost ofCRTC operations.

At current rates, total regulatory fees andcharges (including spectrum licence fees) paidby Canadian wireless carriers between 2010and 2012 may approach $750 million, dwarfingthe $225 million that the Government pledgedin Budget 2009 to subsidize rural broadbandexpansion over the same timeframe. In fact, whileIndustry Canada allocates that $225 millionsubsidy over 36 months, it will collect during thesame timeframe approximately $390 million inspectrum licence fees absent any changes to thefee regime.

These fees and charges do not include the multiple billions that will be directed toGovernment’s Consolidated Revenue Fund as aresult of upcoming spectrum auctions. Every dollarof those fees, charges and auction proceeds is adollar that is unavailable for network expansionand improvement, and ultimately, a dollar thatmust be absorbed by Canadian consumers.

Outdated Research andDevelopment Conditions of LicenceSection 7(g) of the Telecommunications Actstates that one of the Act’s objectives is “tostimulate research and development in Canadain the field of telecommunications and toencourage innovation in the provision oftelecommunications services.” The Government’sConsultation Paper on a Digital Economy Strategyfor Canada asks whether “. . . our current invest-

ments in R&D effectively lead to innovation, andthe creation of new businesses, products andservices? Would changes to existing programsbetter expand our innovation capacity?”

CWTA notes that terrestrial commercial mobilespectrum licensees in Canada typically carry acondition of licence (COL) requiring them todedicate 2% of adjusted annual revenues to anarrow range of pre-defined R&D activities.To the best of CWTA’s knowledge, no otherjurisdiction in the world imposes this type ofcondition on spectrum licensees.

One key change the Government should make toits R&D framework is the elimination of thisCOL for wireless licensees, consistent with itselimination for satellite licensees, and morebroadly, consistent with the 2007 CabinetDirective on Streamlining Regulation. It would befurther reflective of a recent recommendationof the Senate Committee on Transportationand Communications.xxvii

This COL may have made sense when the wirelessindustry was in its infancy, and there was littleor no wireless R&D infrastructure in Canada –a situation far from reality today, with numerouswireless innovation clusters across the country.Today, wireless R&D investment is driven by highand growing levels of competitive intensity inthe industry, rather than by regulatory require-ment. In today’s marketplace, wireless carriersfacilitate innovation through “innovation clusters”or “innovation centres”, through wireless appli-cation and device development in research labs,and through testing of new applications andservices on the networks themselves, particularlytheir world-leading HSPA+ networks.

In today’s wireless marketplace, productivitygains through R&D are the result of commer-


Recommendation 2: At the very least, avoid any increase to thealready excessive spectrum licence fees (the most expensive in the G7)and other regulatory fees and charges paid by wireless carriers.


14

cializing innovation, more so than through theprescribed list of general R&D activities prescribedin the policy that underpins the R&D COL. Bycontinuing to prescribe the range of R&D activitiesin which the industry should invest, the currentCOL diverts wireless carriers’ R&D activityfrom where it can have the greatest overall contribution to productivity and innovation.

CWTA submits that this COL, which has longago run its course, is an artefact of the originalcellular licensing process, and should be eliminated in the interest of streamlining regulatory overheard for both industry and government. Elimination of that COL will notreduce wireless R&D spending in Canada, butwill allow those research dollars to flow towhere to where they are needed most – researchand development into enhancing and improvingthe efficiency and performance of next genera-tion networks in Canada.

Modernize Export Control Policies for Cryptography Products and TechnologyEncryption is a critical element of the digitaleconomy. It permits the safe and reliable transmission of data, protects the integrity ofinformation and communication systems, and isindispensable when it comes to protecting consumers’ privacy. While encryption technologywas historically the closely-held domain of military and intelligence agencies, today theInternet Engineering Task Force has identifiedmore than 370 internet standards that use someform of encryption technology, and the Israeligovernment maintains a list of 7,000 commodity-level products that make use of encryption software and hardware.xxviii These include virtually every type of device that accesses a

wireless network, from handsets to tablets towireless-enabled laptops.

Canada’s 1998 Cryptography policy states thatCanada will continue to implement cryptographyexport controls in keeping with the frameworkof the international Wassenaar Arrangement,that Canada will take into consideration theexport controls of other countries and the avail-ability of comparable products when renderingexport permit decisions and that the export permit application process will be made moretransparent and procedures will be streamlinedto ensure the least regulatory intervention necessary. CWTA encourages the Canadian government to ensure it adheres to this statedpolicy and to review and update the currentCanadian framework and licensing practices asnecessary to meet this policy.

This is particularly urgent given the recentreforms announced by the US government to itsexport-control regime for cryptography productsand technology.xxix Controls on some exports ofcryptography products will be relaxed, meaningthat the wait time for shipments of some prod-ucts “with encryption capabilities” (e.g., a cellphone or a network storage system) will bereduced from 30-60 days, to a 30-minutenotice-and-ship regime. This significant relaxationof the former pre-shipment review framework isin addition to the US export controls systemthat already operates at a far faster pace thanin Canada.

This means that American-based manufacturersof smartphones and other advanced wirelessdevices will now be able to ship parts, compo-nents, software and finished products to foreignsubsidiaries and partners with virtually no pre-clearance restrictions, while Canadian-based manufacturers remain, in some cases,


Recommendation 3: Eliminate the outdated condition of licencerequiring spectrum licensees to spend 2% of adjusted revenues on a pre-defined list of R&D activities.


15

unable to ship parts between Canada and overseas assembly plants without undergoinglengthy bureaucratic delays. This clearly placesCanadian-based wireless equipment manufac-turers at a significant disadvantage relative totheir counterparts in the US and elsewhere.

CWTA urges the Government to coordinate theefforts of relevant departments and agencies toimplement changes and streamline Canada’sexport-control practices for cryptographic products, to align better with Canada’s statedpolicy in this regard.

Along these lines, there is room for considerableimprovement in a number of areas to ensurethat Canadian researchers, developers andexporters of cryptography products and tech-nology are not at a competitive disadvantage.

• Ensuring that interpretations of internationaltreaty obligations are not more stringent inCanada than in other countries;

• Ensuring that Canada’s licensing practicesand processes are streamlined to the greatestextent possible, so that requirements inCanada are not more onerous and processingtimes not longer than those elsewhere;

• Introducing general export permits for commercial cryptography products; and

• Ensuring expeditious implementation of anychanges to the Wassenaar Export ControlList so that Canadian companies can quicklytake advantage of any new decontrolsagreed upon at the international level.

These steps would go a long way towards reducing unnecessary bureaucratic delays andensuring that Canadian-based wireless manufacturers and exporters are not subject toGovernment-imposed disadvantages relative totheir competitors in other countries.

To summarize, excessive spectrum licence fees,mounting regulatory charges, and outdated carrier conditions of licence and manufacturerexport-control regulations combine to siphonmuch needed revenues away from capitalinvestment in next generation networks.

CWTA submits that the Government shouldclearly be seeking ways to streamline andreduce this mounting regulatory overhead tofree up network investment funds as part of itsnational Digital Economy Strategy. Also, as partof this process, Government should also be lookingfor ways to incent the investment of new dollarsinto next generation networks.


Recommendation 4: Review Canada’s cryptography policy to ensureits application reflects the current state of the marketplace for encryption-containing technologies, and does not hinder the efficient operation of multi-national wireless equipment manufacturers located in Canada.


16



There are a number of concrete measures theGovernment could take to incent and accelerateinvestment in Canada’s digital infrastructure. A more modern spectrum policy framework,targeted fiscal policy measures, investments intraining and commercialization, and wider useof advanced wireless technologies by keyGovernment officials would go a long waytowards improving the business case for capitalinvestments in next generation networks.

A 21st-Century Spectrum PolicyFrameworkThe Consultation Paper on a Digital EconomyStrategy for Canada asks “what steps can betaken to ensure there is sufficient radio spectrum available to support advanced infra-structure development?”

CWTA submits that as a first step to addressingthis question, the Government should update itsspectrum policy framework to better maximizethe net benefits of spectrum use to Canadianeconomy and society, by enabling the migrationof spectrum to its highest valued economic use.

CWTA notes that the 2007 report Study ofMarket-based and Exclusive Spectrum Rights, pre-pared for Industry Canada by a number of leadingexperts in the field (the Cave Report),xxx providesan international overview of the significantadvances in the application of economic principlesto spectrum policy. The report, which IndustryCanada released in 2009, recommends a numberof reforms to Canada’s spectrum framework.Many of the recommendations and principlescanvassed in the report identify steps theGovernment could take to enhance the businesscase for network investment in Canada.

Given that the Cave Report was delivered toIndustry Canada over three years ago, CWTA

submits that the Government should initiate afull public consultation on the report’s recom-mendations as soon as possible. In CWTA’sview, these consultations are particularly important as other jurisdictions, including theUS, UK, Australia and New Zealand are activelyimplementing these policies already.

CWTA also submits the Government shouldbegin consultations on the following spectrumpolicy reforms as soon as possible, to improve thebusiness case for network investment in Canada:

• Encourage full spectrum trading in secondarymarkets: The Cave Report provides aroadmap to implementing a system of spectrum trading and market-based exclusivespectrum rights that would apply to all commercial and public sector spectrum users.Moving away from the current centralizedcommand-and-control model of spectrumallocation and redistribution would ensurethat greater amounts of spectrum find theirhighest valued use, eliminating inefficienciesthat leave much need spectrum unused and undervalued.

• Provide for longer-term licences with higherexpectations of renewal: In the 2009 consultation paper,xxxi Industry Canadasought comments regarding the renewalprocess of long-licences, including whetherlicences should continue to be issued for 10 years or longer. CWTA believes stronglythat wireless spectrum licences should beissued with a high expectation of renewal,and that this principle should be explicitlystated in both spectrum policy documentsand in the conditions placed on individualspectrum licences.

Moreover, CWTA notes that the current 10-year licence term is shorter than the

Government Should be Looking for Ways to Strengthen and Create Incentives forNetwork Investment



comparable terms in other countries. AsIndustry Canada noted, 15-year terms arethe norm in Guatemala, France and Australia;New Zealand provides cellular spectrumlicences for 20 year terms, as does theUnited Kingdom for 3G licences, along withunlimited terms for auctioned spectrum.

CWTA agrees with the statement in theConsultation Paper on a Digital EconomyStrategy for Canada to the effect that longer-term licences provide a more stableinvestment climate for licensees, while recognizing the long-term investmentrequired to build the physical infrastructureto support use of the spectrum being licensed,and the need to recover those costs over time.

Any future wireless spectrum licences awardedor renewed in Canada should carry longerlicence terms and/or explicit statements pertaining to higher expectations of licencerenewal. Such prescriptions would go a longway towards strengthening the business casefor long-term network investment in Canada.

• Permit greater predictability and longer-rangeplanning on allocations and auctions: CWTAnotes that Industry Canada has made severalreferences in recent months, and in pastyears, to releasing a schedule of spectrumallocations and auctions. CWTA commendsthis far-sighted and long-overdue initiative.Industry Canada first issued a SpectrumRelease Plan in 1999 with the intention toupdate the document “on an annual basis”. xxxii

The intent of the Spectrum Release Plan wasto provide a forecast of the types of spectrumto be released and the timing for initiatingfuture competitive licensing. The SpectrumRelease Plan was last updated in 2001.

Wireless network operators require the maximum possible lead-time to raise the billions in capital required to acquire spectrum at auction. Network operators’capital expenditure decisions are typicallymade 24 to 36 months in advance. Yet networkoperators typically receive only a fewmonths’ notice of the precise timeframe for spectrum allocations.

As Industry Canada has said itself:

An auction will be most successful whenall pertinent information regarding thelicences being auctioned is readily availableat the beginning of the process. This shouldinclude information on spectrum theDepartment plans to release in the future,the timing of its release, and the assignment mechanism. This informationwill enable participants to more accuratelyassess the current and future marketplacewhen developing their business plans, andhelp them prepare a reasonable valuationfor the spectrum in question. By reducinguncertainty, this information will givebidders greater confidence in determiningan appropriate strategy.xxxiii

CWTA strongly submits that IndustryCanada should release an updated SpectrumRelease Plan as soon as possible. A ten-yearIndustry Canada spectrum blueprint identifying which frequency bands will bereleased, when and how, would allow operators and capital markets a greatermeasure of certainty and predictability. This would in turn reduce perceived levels of investor risk that lead to higher capitaland operating costs for network operators,and ultimately, higher costs for businessesand consumers.

The need for additional spectrum is notrestricted to mobile services. As subscriberdata consumption grows, so does therequirement for backhaul capacity connecting each cell site to the core network. As a general matter, adequate suitable spectrum for microwave backhaulcapacity is required wherever mobile networks have been built. This spectrum is required in major urban centers and suburban areas, as well as rural and remoteareas. The expansion of microwave backhaulsystems is underway, and will continue tokeep pace with consumer demand for dataservices, provided additional spectrum ismade available on a predictable and expeditious basis.

• Encourage maximum efficient use of licensedspectrum by all users, including public sectorusers: As outlined above, exponential increasesin data traffic on Canada’s networks meanthat more spectrum will need to be madeavailable in the near future to support theexponential growth of bandwidth intensivemobile services. CWTA believes the challengeof impending capacity constraints must beaddressed through smarter, more efficientengineering of hardware, software, applicationsand services; as well as through the applicationof comprehensive and focussed spectrumplanning and allocations policies.

Efficient engineering can conserve networkbandwidth and defer the capacity crunch ifthe cost of carrying data-rich applications isconsidered and incentives are created to makeapplications and services more efficient. Theuse of efficient, energy-conserving hardwareand software technologies is also crucial.

Even with greater engineering efficiencies,the industry will remain dependent on thegovernment making more spectrum availablein order to satisfy the growing consumerdemand for rich mobile products and services.However simply allocating more spectrumwill only go part of the way towardsaddressing this challenge. Future band-planning exercises should encourage themaximum possible use of the spectrum in

question by all users – including public sector users. Interference managementshould strive for optimum precision, spectrum in popular bands must be utilizedfully and, where necessary, the re-allocationprocess must allow for the expedited priorclearance of bands. Along these lines, CWTAnotes the recent recommendation of theSenate Committee on Transport andCommunication that “Industry Canada, inestablishing policies to allocate and pricespectrum, provide incentives for the efficientuse of spectrum.” xxxiv

To summarize, there are a number of concretesteps the Government could take in the short-term that would improve, in the long-term, thebusiness case for investment in next generationwireless networks.

These spectrum policy measures have been triedand tested in numerous comparable marketsaround the world. Industry Canada has receivedmultiple reports and recommendations endors-ing them in recent years, and has endorsed manyof the recommendations itself, at least in principle, in various policy statements in recentyears. The time is now to move expeditiously inlaunching and/or finalizing the processes necessaryto formalize these recommendations. The successof the Government’s Digital Economy strategywill hinge on increased and more flexible accessto spectrum, and to substantial amounts of


Recommendation 5: Issue an updated Spectrum Release Plan, andimplement consultations – as soon as possible – on the recommendationscontained in the 2007 Cave Report to determine whether the followingchanges would advance the Government’s Digital Economy Strategy:

• Full spectrum trading in secondary markets

• Longer licence terms with higher expectations of renewal

• Greater predictability and longer-term planning for future auctionsand allocations

• Measures to encourage efficient use of spectrum by all users –including the public sector.


19

private sector capital to turn that spectrum intouseable bandwidth. The wireless industry cannotafford additional delay when it comes to much-needed and over-due spectrum planning and policy decisions.

Accelerated Capital Cost Allowance (ACCA) for Broadband Network EquipmentUnder the Income Tax Regulations there are several classes of depreciable assets that relateto telecom network equipment, including broad-band networks, each with different capital costallowance (CCA) rates:

• Class 8: radiocommunication equipment(CCA rate is 20%)

• Class 42: fibre optics (CCA rate is 12%)

• Class 46: data network infrastructure equipment and systems software (CCA rate is 30%)

CWTA recommends that Budget 2011 include atemporary (24-36 month) Accelerated CapitalCost Allowance for these classes of assets: fromcurrent rates to 50% for capital investments inmost areas, and 100% in those areas identifiedby Industry Canada as “underserved” during itsbroadband availability survey conducted as partof the $225 million Broadband Canada initia-tive. Moreover, the current “half-year” ruleshould be suspended during the period of accel-erated depreciation for these classes, to affectmaximum benefit of the measure during the pro-posed incentive period.xxxv

As noted above, much of the success of theGovernment’s Digital Economy Strategy willdepend on extending and improving Canada’sbroadband networks to handle increased use of

bandwidth-intensive devices and services. Thistemporary fiscal measure would prioritize limitedcapital budget spending to broadband spendingin underserved areas and would draw forwardseveral years’ worth of planned capital upgradesinto a shorter, more strategic timeframe. Thismeasure would be revenue-neutral to governmentover the long term, as these assets eventuallyfully depreciate anyhow.

Mobility and advanced wireless services arean undeniable driver for business innovation.International studies have demonstrated thatsmall companies that embrace wireless technol-ogy have higher product turnover, higher profitsand higher staffing levels.xxxvi

By scaling the ACCA in favour of rural andremote areas, the Government would be creatingan incentive for more rapid, and incremental,investment in the areas whose residents andsmall businesses stand to benefit most fromaccess to advanced wireless services. Theseinvestments would enable small business opera-tors in rural and remote parts of Canada tomore rapidly adopt the next generation of pro-ductivity-enhancing networked services andapplications, such as the expected surge in‘cloud computing’ and other time and money-saving advances.

Wireless Centre of ExcellenceThe Government’s Consultation Paper on a DigitalEconomy Strategy for Canada puts emphasis onboth skills development and digital content cre-ation. CWTA notes that these two objectives canbe self-reinforcing, and can be achieved largelyby way of market forces, as opposed to complexredistribution schemes (such as the content production community’s proposed tax on wirelessconsumers to subsidize online content production).


Recommendation 6: Introduce in Budget 2011 a temporary acceleratedcapital cost allowance for broadband-network related assets, increasingthe current CCA rates of depreciation to 50% for most areas, and to100% for the hardest and most expensive to serve areas of the country(as identified by Industry Canada).


20

Specifically, CWTA recommends that theGovernment leverage its Network of Centres ofExcellence (NCE) program, creating a ‘WirelessCentre of Excellence’ (such as it has for otherstrategic sectors of the economy).

A Wireless Centre of Excellence will be a criticalelement of any national digital economy strategy.It will bring together private-sector applicationand content creators, investors and buyers, platform designers, training institutions and network operators. It will lead to an updraft ofnew opportunity for young professionals and the commercialization of Canadian expertiseabroad. Ultimately it will create new companies,increase employment, build revenues and stimulateeconomic growth in the Canadian wireless sectorby harnessing innovation from Canadian smalland medium enterprises (SMEs) and academia.

In January 2010, CWTA lent its support to anapplication for support for a Wireless Centre ofExcellence, submitted to the NCE Secretariatby the Wavefront Wireless CommercializationCentre, based in Vancouver. CWTA reiteratesthat the Government should support this appli-cation under its NCE program, as a critical ele-ment of any National Digital Economy Strategy.

Facilitating Wireless Antenna SitingWireless networks rely on base station anten-nas, associated equipment and supporting structures to operate. Without them, none of theservices that Canadian individuals and businesseshave come to depend on would exist. A numberof factors contribute to the continued need foradditional antenna sites: new wireless networksare being deployed; existing wireless networksare being expanded; and capacity requirementsfor voice and data traffic are growing significantly.

Wireless carriers do all they can to unobtrusivelyintegrate their facilities into communities and tofollow all requirements and conditions regardingthe antenna siting process. In CWTA’s view,Government should actively assure the publicthat the standards and policies in place alreadyaddress the concerns of citizens, including takinga more prominent role in explaining to the publicthe safeguards inherent in Health Canada’sSafety Code 6, and how the industry complieswith these standards.

Better Use of Wireless Technologyby GovernmentAlthough the Government of Canada makeswidespread use of basic wireless communicationsservices, it makes virtually no use of advancedwireless applications or services, such as the typeof advanced applications associated with thecurrent generation of 3G/HSPA+ smartphones.

To the best of CWTA’s knowledge, virtually allGovernment employees are prevented fromusing their Government-issued wireless devicesto access social networking, streamed video, orany of the other thousands of applications commonly used by plugged-in Canadians.

While it is not uncommon for employers to restrictemployees’ access to non work-related onlineapplications and services, CWTA notes that thisrestriction applies even to those officials directlyinvolved in monitoring and regulating the wire-less sector. In some cases, officials’ devices haveeven had picture-taking functions disabled. Thisis akin to preventing financial regulators from usingthe full range of commercial banking servicesavailable to the public – it obviously impairs theirability to achieve their mandate and to supportthe Government’s broader policy objectives.


Recommendation 7: Support the creation of a Wireless Centre ofExcellence through the Network Centres of Excellence program.

Recommendation 8: Take steps to assure the public that the standardsand policies in place adequately address the concerns of citizens,including taking a more prominent role in explaining the safeguardsinherent in Health Canada’s Safety Code 6.


21

CWTA submits that relevant officials at IndustryCanada, the CRTC, Canadian Heritage, the CopyrightBoard, the Competition Bureau, and the Office ofthe Privacy Commissioner (who are all involvedin monitoring and regulating the wireless sectorin one respect or another) should have a clearand up-to-date understanding of developmentsin the wireless marketplace they oversee.

Accordingly, CWTA recommends that theGovernment undertake an assessment of the needsof those officials whose mandates would be betterachieved by allowing them to access the advancedwireless services that have already become animportant feature of the Canadian digital mar-ketplace, and that will only become more centralto the economic life of the country as theGovernment’s Digital Economy Strategy takes hold.

The Government should also be encouragingdepartments and agencies to make full use ofavailable wireless technologies in the servicesthey deliver to Canadians. In this respect, CWTAagrees with the statement in the ConsultationPaper on a Digital Economy Strategy for Canadathat “Governments can play an important rolein acting as model users of ICT and leading byexample.” Governments should make muchmore use of available wireless networks,devices, and applications to connect with themore than 23 million Canadians already usingthem on a daily basis.

Adoption of Standards-Based,Commercially Available Technologiesfor Public Safety NetworksCanadian public safety agencies continue tomake individual decisions with respect to theircommunications networks. This results in a

patchwork of different technology standardsand platforms for their wireless communica-tions operations. This in turn reduces the level oftechnical interoperability between agencies andhampers their ability to work together.

Industry Canada has established a set of policyprinciples intended to facilitate a more coordi-nated approach to achieve spectrum efficiency,promote radio interoperability and ensure theorderly development of radio facilities for publicsafety. CWTA submits that the governmentshould go further and encourage the use of bothstandards-based equipment and commercialnetworks in public safety communications systems.

In the US, the 15 public safety organizations ofthe National Public Safety TelecommunicationsCouncil (NPSTC) voted unanimously in June 2009to endorse LTE as the favoured technologystandard most suited to the development of anationwide interoperable wireless network forpublic safety officials and agencies, as has theBoard of Officers of the Association of PublicSafety Officials and the Executive Committee ofthe National Emergency Number Association.

Economies of scale and scope mean thatdeploying a common standard for public safetycommunications will enable more cost-effectivedeployment of interoperable communicationsplatforms. The use standards-based equipmentensures that a variety of equipment is availableat reasonable cost on a timely basis. It alsoreduces time and effort required for networkdeployment. Similar benefits can be realizedthrough the use of commercial networks.

The use of common spectrum and air interfacesthroughout commercial networks ensures thatthese systems can effectively deal with any


Recommendation 9: Permit those officials with a mandate to monitorand regulate the wireless sector to access the full range of wirelessapplications and services available to Canadians.

Recommendation 10: Encourage departments and agencies to makefull use of available wireless technologies in the services they deliverto Canadians.


22

Public Safety requirement or event and thatsubscriber equipment that may need to bedeployed in a given area is immediately capableof operating on the assigned channels with no need for any programming or other network modifications.

Presently the cost of spectrum for public sectorusers, such as Public Safety Agencies, is notgenerally taken into account when making pro-curement decisions. The Cave Report addressesthe issue of managing public sector use of

spectrum and describes an incremental approachto improving efficiency in spectrum use by thepublic sector, including calculating the opportu-nity cost of its use of the spectrum, and incorpo-ration of spectrum valuations in investment decisions so that those engaged in procurementare able to examine the scope for substitutionbetween spectrum and other costs. As previouslynoted, CWTA believes Industry Canada shouldinitiate consultations on implementing the CaveReport’s recommendations as soon as possible.


Recommendation 11: Encourage the adoption of international standards-based, commercially-available technology for use by public safety officials and agencies.

Recommendation 12: Encourage public safety agencies to include acalculation of the opportunity cost of use of the spectrum, and toincorporate spectrum valuations in investment decisions.


23

The wireless industry in Canada makes an unde-niable contribution to the economic and sociallife of Canada. On the strength of 25 years ofinvestment in wireless networks – including$9.3 billion in capital investment in 2008-2009– Canada now boasts some of the mostadvanced and fastest wireless networks in theworld, covering 99% of the population withwireless service, and 93% of the populationwith 3G service.

Within the timeframe contemplated in theGovernment’s Digital Economy Strategy, Canada’swireless industry will be under constant pressure to step up the already heavy pace ofnetwork investment to accommodate the doubling of bandwidth-intensive data trafficevery year between 2010 and 2014.

At the same time, excessive and arbitrary fees,levies and other regulatory charges will onlyserve to redirect funding that could otherwise bespent on further network investment. Canadianconsumers already absorb the highest spectrumlicence fees in the G7 – fees that are significantlyhigher than in the US. These fees are on top ofthe hundreds of millions of dollars that wirelesscarriers expect to pay in other regulatory feesand charges between 2010 and 2012, and ontop of the billions they will need to raise to participate in upcoming spectrum auctions overthe next 12 to 24 months.

In light of these factors, CWTA recommendsthat the Government take the following steps ascritical elements of its Digital Economy Strategy:

1. Immediately commence the licensingprocess for the 700 MHz and 2500 MHzspectrum bands; and take all necessarysteps to identify 500MHz of additionalspectrum that should be made available forcommercial wireless services;

2. At the very least, avoid any increase to thealready-excessive spectrum licence fees(the most expensive in the G7) and otherregulatory fees and charges paid by wireless carriers;

3. Eliminate the outdated condition of licencerequiring spectrum licensees to spend 2%of adjusted revenues on a pre-defined listof R&D activities;

4. Review Canada’s cryptography policy toensure its application reflects the currentstate of the marketplace for encryption-containing technologies, and does not hinderthe efficient operation of multi-nationalwireless equipment manufacturers locatedin Canada;

5. Issue an updated Spectrum Release Plan,and implement consultations on the recommendations contained in the 2007Cave Report to determine whether the following changes would advance theGovernment’s Digital Economy Strategy:

a. Full spectrum trading in secondary markets;

b. Longer licence terms with higher expectations of renewal;

c. Greater predictability and longer-termplanning for future auctions and allocations; and

d. Measures to encourage efficient use ofspectrum by all users – including the public sector.

6. Introduce in Budget 2011 a temporaryaccelerated capital cost allowance forbroadband-network related assets, increasingthe current CCA rates of depreciation to 50%for most areas, and to 100% for the hardestand most expensive to serve areas of thecountry (as identified by Industry Canada);

Conclusion





7. Support the creation of a Wireless Centreof Excellence through the Network Centresof Excellence program;

8. Take steps to assure the public that thestandards and policies in place adequatelyaddress the concerns of citizens, includingtaking a more prominent role in explainingthe safeguards inherent in Health Canada’sSafety Code 6;

9. Permit those officials with a mandate tomonitor and regulate the wireless sector toaccess the full range of wireless applicationsand services available to Canadians;

10. Encourage departments and agencies tomake full use of available wireless technologies in the services they deliver to Canadians;

11. Encourage the adoption of internationalstandards-based, commercially-availabletechnology for use by public safety officialsand agencies; and

12. Encourage public safety agencies toinclude a calculation of the opportunitycost of use of the spectrum, and to incorporate spectrum valuations in investment decisions.



Appendix A: Comparison of Spectrum Feesamong developed countries (note: data unavailable for some G20 countries)

Country Date Revised $/MHz/pop $/SubAustralia 900 MHz n/a 0.0528 n/a G20

Belgium (Average) 2010 0.0315 0.0270 G20

Canada 2003 0.0351 6.6873 G7 G20

Denmark 900 MHz 2010 0.0044 0.2301

Denmark 1800 MHz 2010 0.0022 0.2656

Finland 900 MHz 2004 0.0084 0.0555 G20

France 900 MHz 2009 0.0132 4.3513 G7 G20

France 1800 MHz 2009 0.0070 2.3264

France Pre 2009 no longer in force 0.0229 7.5666

Germany (Average) n/a 0.0002 0.0288 G7 G20

Ireland (Average) 2000 0.0210 0.0000

Italy n/a 0.0195 2.4438 G7 G20

Japan 2005 0.0163 3.0541 G7 G20

Korea – KT Corp 2005 0.0272 3.5305 G20

Korea – LGT 2005 0.0310 3.4819

Korea – SKT 2005 0.0636 5.7418

New Zealand 2007 0.0158 0.7595

Spain (Average) n/a 0.0245 0.0206

Sweden 2010 0.0017 0.2828

UK 900 MHz 2005 0.0089 0.4869 G7 G20

UK 1800 MHz 2006 0.0069 0.7682

USA – CMRS 2009 0.0006 0.1943 G7 G20

i Morgan Stanley Mobile Internet Report 2010:http://www.morganstanley.com/institutional/techresearch/mobile_internet_report122009.html

ii The Benefit of the WirelessTelecommunications Industry to theCanadian Economy. Ovum, April 2010.http://cwta.ca/CWTASite/english/pdf/OVUM_Study.pdf. Note that this reportdraws on empirical data from 2008, andthat economic benefits as of 2010 canbe assumed to be greater than reportedin this study, as wireless investment,deployment, employment, penetrationand usage have increased in the intervening period.

iii CRTC 2009 Communications Monitoring Report

iv CWTA member company reports.

v Ovum, ibid.

vi CWTA member company reports.

vii International Data Corporation (IDC)Cutting the Cord: Canadian ConsumerIntentions to Switch to Wireless for Phoneand Internet Services. April 2010.

viii IDC Canada, Canadian TelecommunicationsCapex Budgets, 2008 – 2009, Table 7.Wireless Capex totals exclude Inukshukventure, exclude one-time spectrum auction fees and use mid-points of guidance ranges. The auction proceedsfrom the 2001 PCS Spectrum Auctionwas $1.5 billion and the proceeds fromthe 2008 AWS Spectrum Auction were$4.3 billion.

ix IDC Canada, ibid.

x Connectivity Scorecard Study - created by Professor Leonard Waverman(Haskayne School of Business,University of Calgary), London BusinessSchool, and economic consulting firmLECG. Commissioned by Nokia SiemensNetwork. Excerpted in presentation byProfessor Waverman to CanadianTelecom Summit June 8, 2010. See:http://www.connectivityscorecard.org/

xi Ovum, ibid.

xii Deloitte Telecommunications Predictions2010: http://www.deloitte.com/view/en_GX/global/industries/technology-media-telecommunications/tmt-predictions-2010/telecommunications/index.htm

xiii Morgan Stanley, ibid.

xiv Cisco Visual Networking Index 2010:http://newsroom.cisco.com/dlls/2010/prod_020910b.html

xv TNS Global Telecoms Study.http://www.newswire.ca/en/releases/archive/January2010/12/c7597.html

xvi http://www.accenture.com/Global/Research_and_Insights/Outlook/By_Industry/Communications/LivingDeviceCentricWorld.htm

xvii Cisco, ibid.

xviii Cisco, ibid.

xix FCC National Broadband Plan –Connecting America, Recommendation 5.8

xx Presidential Memorandum: Unleashingthe Wireless Broadband Revolution,June 28, 2010

xxi Ovum, Comparative Analysis of SpectrumFees. June 2010; http://www.cwta.ca/CWTASite/english/pdf/Ovum_SpectrumFees.pdf



Endnotes

xxii See Recommendation 17,http://www.PlanforadigitalCanada.com

xxiii Gazette Notice DGRB-002-09Consultation on the Renewal of Cellularand Personal Communications Services(PCS) Spectrum Licences

xxiv Canadian Heritage press release October7 2009 Settlement Reached between theGovernment of Canada and Members ofthe Broadcasting Industry

xxv Bank of America Merrill Lynch Telecomand Cable Weekly Spectrum: it’s rentednot owned, July 31, 2009

xxvi http://news.gc.ca/web/article-eng.do?m=/index&nid=537299

xxvii See Recommendation 15:http://www.PlanforadigitalCanada.com

xxviii http://www.techamerica.org/Docs/fileManager.cfm?f=techamerica2009encryptionpolicypaperfinal.pdf

xxix http://www.whitehouse.gov/the-press-office/president-obama-details-administration-efforts-support-two-million-new-jobs-promoti%20

http://www.defense.gov/transcripts/transcript.aspx?transcriptid=4613

xxx Study of Market-based Exclusive SpectrumRights, McLean Foster & Co., in collaboration with Prof. Martin Cave,Robert W. Jones, and Dr. William Lehr,for Industry Canada, 2007.

xxxi Canada Gazette Notice DGRB-001-09Consultations on Revisions to the Frameworkfor Spectrum Auctions for Canada

xxxii Canada Gazette Notice No. DGTP-004-99

xxxiii Framework for Spectrum Auctions inCanada October 2001http://www.ic.gc.ca/eic/site/smt-gst.nsf/eng/sf01626.html

xxxiv See Recommendation 18,http://www.PlanforadigitalCanada.com

xxxv The half-year rule requires assets disposed of during the year to be subtracted from the year’s additions,and one-half of that net amount is thensubtracted from the undepreciated capital cost balance at the end of theyear before calculating the year’s CCA.

xxxvi Accelerating Global Development with MobileBroadband. Ericsson. February 2009.



wireless communications: a strong signal for a … communications: a strong signal for a stronger...

Documents