Department of Communications, Ottawa
(1980)
The level and structure of license fees in the microwave band: an investigation of economic and operational aspects of using license fee schedules in particular bands as part of radio spectrum management.
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Simon Fraser University, Department of Communication, Ottawa, Canada.
Abstract
The study examines the changing nature of radio spectrum management, noting that future tasks will increasingly de directed toward longer range policy problems of priority of spectrum allocation and assignment. I increased management activity will be required to actively stimulate technical and economic efficiency, to define and implement economic, social and political objectives and to incorporate economic factors such as license fees more directly as an integral part of the process. The economic basis for spectrum license fees in analysed, with reference to economic theory and the experience of Canada and the United States. License fees should cover full spectrum management costs as a minimum. I many instances, the case for recovering more than costs is compelling, but in the microwave bands it is weak because most users do not attempt to realize economic rent. The economic theory of common resources in found to be more relevant to spectrum management and worthy of further development in relation to spectrum problems. The experience of federal management of fisheries is not found to be useful for an analysis of spectrum license fees, but that of British Columbia provincial management of forest is instructive. More detailed study of the forestry analogy is recommended. The new DOC license fee schedule (1979) covers only about one-third of the direct costs of spectrum management for the microwave bands. Indirect costs represent, it is believed, approximately 50% of direct costs. DOC should undertake a detailed functional cost analysis as a more refined basis for fees in the future. The new fee structure, based in RF and voice channels is an improvement over the old one. But the use of bandwidth quantity would represent further improvement. Other important parameters are band location and geographical location. Because of data limitations, only aggregate bandwidth is employed in this study. A fee formula of Fi = $26.00 + aBi us recommended where Bi is bandwidth in MHz and "a" is calculated to achieve revenues that will cover full costs. Exemptions and reduced fees to governments and their agencies cannot be justified and should be eliminated. Bandwidth assignments in lightly used bands, in bands at the extensive margin and in rural, uncongested areas should pay only $26.00 license processing fee because their use is not creating congestion and related spectrum management problems. However, when the DBMS provides more detailed information, the formula can and should be applied by category of band and geographical location. On the basis of available information, the "a" value in the fee formula should be at least $4.00 and possibly as high as $8.00 or $9.00, if full spectrum management costs are to be recovered. Comparable increases in satellite fees should be set to cover costs. At present, the taxpayer is subsidizing the users of microwave bands. It should be eliminated as soon as possible.
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