Review of spectrum licence tax arrangements
Consultation paper
JANUARY 2014
Canberra
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acma | 1
Contents (Continued)
Introduction
Previous consultation and outcomes
Outcomes
Spectrum licence tax
Background
Indirect costs of spectrum management
Charging for an apparatus and spectrum licence
Purpose and operation of spectrum licence tax
Proposed regulatory and sunsetting arrangements
Remaking the determination
700 MHz and 2.5 GHz bands
2.5 GHz mid-band gap
2.3 GHz band
28/31 GHz band
2.1 GHz band
Other considerations
Invitation to comment
Making a submission
Appendix A—Draft Radiocommunications (Spectrum Licence Tax) Determination 2014
acma | 1Introduction
The Radiocommunications (Spectrum Licence Tax) Act 1997(the SLT Act) provides for the imposition and collection of spectrum licence tax. Section 7 of the SLT Act provides that the amount of tax for a spectrum licence is the amount ascertained in accordance with a written determination made by the ACMA.The methodology for calculating each licensee’s share of taxes is contained in the Radiocommunications (Spectrum Licence Tax) Determination 1999(the SLT Determination).
The tax allows the Commonwealthto recover from spectrum licensees the indirect costs of spectrum management activities, such as international coordination, domestic planning, interference investigation and policy development. The amount oftax that a licensee pays is calculated on the basis of the amount of ‘MHz-pop’ covered by each licence (that is, the number of megahertz associated with a licence and population of a licensee’s service area).
This consultation document seeks views on spectrum licence tax arrangements and proposed changes to the SLT Determination.
Previous consultation and outcomes
In the Proposed updates to the spectrum licence framework[1]consultation paper released in March 2012, several changes to the SLT Determination were proposedto:
update the base amounts for each listed band
remove the base amount for the 500 MHz band, which has reverted to apparatus licensing
replace references to the 2001 census with references to the 2011 census.
The ACMA also sought stakeholder views on proposed changes to the SLT Determination relating to the:
calculation of the tax amount
application of spectrum licence tax to the 2.3 GHz, 20 GHz and 30 GHz bands (noting that there is no spectrum licence tax applied in these bands at present)
amount of tax to be applied to the 28 GHz and 31 GHz bands.
Outcomes
Stakeholders generally agreed with the base amounts for working out spectrum licence tax. However, they sought clarification on the spectrum maintenance charge component and the value of the Australia-wide apparatus licence charge calculations as they relate to the calculation of the spectrum licence tax.
Stakeholders sought further explanation of the ACMA’s policy and intent in applying the tax to the 2.3 GHz, 20 GHz and 30 GHz bands when these bands are reissued or reallocated.
There was also some concern about the proposed increase in the spectrum licence tax applicable to the 28 GHz band.
Inits response to submissionsto the Proposed updates to the spectrum licence framework paper in August 2012, the ACMA noted that its policy intent was to provide consistency for licensees across the life of their licences, where appropriate. Accordingly, it was proposed that a base amount would be introduced and appliedfrom the commencement of the new (reissued or reallocated) licences in the 2.3 GHz band (2302–2400 MHz)closer to the expiry of these licences on 24 July 2015.
The ACMA also noted that spectrum licences in the 20GHz and 30 GHz bands are allocated to the Department of Defence and would be considered in a similar way as the 2.3 GHz band.
The ACMA further noted in its response to submissions that it would not make changes to the spectrum licence tax for the 28GHz and 31 GHz bandsbefore consultingfurther with affected stakeholders about the future planning for thosebands.
Spectrum licence tax
Background
Spectrum licences were first issued in early 1997 to authorise the use of radiocommunications devices, at a time when apparatus licences were already in use.The fee structure for an apparatus licence at the time was part tax and part cost recovery.The tax component was charged to reflect the amount and value of the spectrum used by a licensee.The cost recovery charges were designed to recover the Spectrum Management Agency’s (SMA’s)[2] direct costs and indirect costs.Direct costs (also known as administrative charges)are costs which are linked to a specific licence.Indirect costs, on the other hand, reflect each licensee’s share of the costs incurred on behalf of spectrum users generally, and on activities which are not attributable to any given licence.
Indirect costs of spectrum management
The ACMA’s predecessors previously referred to indirect costs in a radiocommunications context as the spectrum maintenance charge (SMC).Examples of the SMC include the costs associated with spectrum management activities, such as international coordination, ITU membership, domestic planning, interference investigation and policy development.These costs are not easily attributable to individual licensees, and the ACMA does not believe that it is practically possible to apportion these costs more accurately to a specific licensee or group of licensees.
Charging for an apparatus and spectrum licence
Until December 2001, the predecessor to the ACMA, the Australian Communications Authority (the ACA), went through the process of identifying the SMC amount in calculating apparatus licence fees.To ensure equity, spectrum licensees also paid their share of the ongoing indirect costs of spectrum management through a spectrum licence tax.Figure 1 below illustrateshow the SMA and the ACA identified and reported the SMC amountprior to 2001.
Figure 1Representation of direct and indirect costup to 2001However, this process ofidentifying the SMC amount foran apparatus licence was discontinued at the end of 2001 to make way for a less complex tax that was adjusted annually for changes in inflation. This is illustrated in Figure 2.[3]
Figure 2Discontinuation of SMC reporting post 2001Purpose and operation of spectrum licence tax
The spectrum licence tax is separate from the value of a spectrum licence, which is captured in the spectrum access charge that each licensee pays for its licence.
It allows the ACMA to recover, from spectrum licensees, the indirect costs of spectrum management activities, such as international coordination, domestic planning, interference investigation and policy development.The amount of tax that a licensee pays is based on the spectrum holdings and population covered by the licence.
The spectrum licence tax formula used in the SLT Determination is as follows:
Area population (A) SL bandwidth (C)
______X______X Base amount (E)
Australia population (B) Total specified spectrum (D)
- Population defined by the area covered in a spectrum licence
- Australia-wide population as per most recent available census
- Bandwidth covered in the spectrum licence
- Total bandwidth covered in a band
- Share of indirect cost for a particular band
Even though the SMC component is no longer an obvious part of the apparatus licence tax calculation, a SMC rate is still calculated for spectrum licensees.
The SMC rate (currently 20.6 percent) is derived from the proportion of total radiocommunications indirect coststo total apparatus licence tax revenues. This rate is used to calculate the tax base that an apparatus licensee would have paid for an Australia-wide, generallyassigned licence in a spectrum-licensed band. The base amount,therefore,is equivalent to the indirect costs that a spectrum licensee wouldpay, if it owned the total bandwidth of an Australia-wide spectrum licence in a given band.
The tax base is then used as aninput to the tax formula(above) to calculate the spectrum licence taxpayable by a licensee.
Proposed regulatory and sunsetting arrangements
Under Part 6 of the Legislative Instruments Act 2003(theLIA), most legislative instruments ‘sunset’ (that is, they are automatically repealed) on the 1 April or 1 October that first occurs 10 years after they are registered on the Federal Register of Legislative Instruments.This is an automatic process applying to most legislative instruments, regardless of their content.
The SLT Determination is one of many legislative instruments made by the ACMA due to sunset on 1 April 2015, in the absence of any intervention.
The ACMA has evaluated that there is a continued requirement to have a spectrum licence tax imposed on licensees by virtue of the existence of the SLT Act.It has also formed the preliminary view that the SLT Determination is operating effectively and efficiently and, as such, continues to form a necessary and useful part of the legislative framework.
Accordingly, the ACMA proposes to remake the existing SLT Determination in a new instrument prior to the sunset date to preserve its ongoing effect. There will be some incremental changes to reflect the current radiocommunications environment.
Remaking the determination
The SLT Determination will be remade to:
Set base amounts for:
new issues of spectrum licences in the digital dividends bands (for example,the 700 MHz and 2.5 GHz bands)
converted spectrum licences in the 2.5 GHz mid-band gap
the 2.3 GHz band (one of the expiring spectrum licence bands) where no base amount had previously been set.
Allocate the spectrum licence tax within the 2.5 GHz mid-band gap, based on the ‘usable’ spectrum, by excluding the guard bands.
Remove certain bands from the SLT Determination such as:
the 28/31 GHz band, as spectrum licences revert to apparatus licences on 1February 2014
part of the 2.1 GHz band (that is 2010–2025 MHz), as this part reverted to apparatus licensing on 1 January 2007.
Keep the other base amounts for spectrum licences that are already included in the SLT Determination.
700 MHz and 2.5 GHz bands
The ACMA recently auctioned spectrum in the 700 MHz (the ‘digital dividend’) and
2.5 GHz bands.Both bands will be used for wireless access services.The 2.5 GHz spectrum licence start date is 1 October 2014, while the 700 MHz band licence start date is 1 January 2015.
Based on a SMC percentage of 20.6 per cent, the base amount is $45,653 for 90 MHz of spectrum in the 700 MHz band and about $71,016 for 140 MHz of spectrum.
2.5 GHz mid-band gap
In its review of the 2.5 GHz band and long-term arrangements for electronic news gathering (ENG), the ACMA found that the highest total value use of the mid-band gap (the 2570–2620 MHz band) was television outside broadcast (TOB) services, and that this spectrum should be retained by the free-to-air commercial broadcasters and the Australian Broadcasting Corporation (ABC).
In planning for the mid-band gap, the ACMA recognises that the utility of the channels around the ‘edges’ of the mid-band gap may be reduced due to the potential for interference from adjacent wireless access services in the future.Therefore, incumbents in the band will have guard bands on either side of the mid-band gap to reduce the potential for interference between the Frequency Division Duplex (FDD) and ENG/Time Division Duplex (TDD) allocations.
Based on a SMC percentage of 20.6 per cent, the base amount for the 2.5 GHz mid-band gap is $25,363.However, the spectrum licence tax for licensees in the 2.5 GHz mid-band gap will be adjusted to calculate taxes based only on the usable bandwidth.
2.3 GHz band
Licences in the 2.3 GHz band were converted to spectrum licences in 2000 and residual lots were allocated in the band in 2011.However, no spectrum licence tax was applied on both occasions.In 2012, as part of the Proposed updates to the spectrum licence framework paper, the ACMA noted that the date of reissue or reallocation of spectrum licences in the 2.3 GHz band was considered the appropriate time to introduce the spectrum licence tax to this band. Consequently, as spectrum licences expire on 24 July 2015, the ACMA believes that it is timely to include the base amount when remaking the SLT Determination.
The new base amount applicable for 98 MHz in this band is approximately $49,711.Special arrangements have been made to ensure that the 2.3 GHz band is subject to spectrum licence taxes on the 11 October following the reissue date.
28/31 GHz band
On 2 July 2013, the ACMA announced that licences in the 28/31 GHz band (that is 27.5–28.35 GHz and 31–31.3 GHz) will change from spectrum to apparatus licence from 1 February 2014. Therefore, a base amount is no longer required and must be removed from the SLT Determination to reflect the new arrangements.
2.1GHz band
Part of the 2.1 GHz band, that is, 2010–2025 MHz,was allocated as spectrum licence lots for sale in 2006.However, as no spectrum licences were issued, the band reverted to apparatus licensing on 1 January 2007.For this reason, the new instrument seeks to exclude sub-band 2010–2025 MHzand the related base amount.
The new base amount relates to the 140 MHz of spectrum for the frequency ranges 1900–1980 MHz and 2110–2170 MHz only.
A summary of base amounts for each spectrum-licensed band for which new base amounts are being proposed is shown in Table 1.
Table 1 New base amountsSpectrum-licensed band / Total specified spectrum / New base amount ($)
700 MHz / 90 MHz / $45,653
2.1 GHz / 140 MHz / $71,016
2.3 GHz / 98 MHz / $49,711
2.5 GHz / 140 MHz / $71,016
2.5 GHz (mid-band gap) / 50 MHz / $25,363
Other considerations
The defence bands, 20 and 30 GHz, remain out of scope.The application of spectrum licence taxes in these bands will be considered closer to the expiry of the spectrum licences in April 2021.
As the SLT Determination was reviewed in 2012, the ACMA has decided to keep the SMC rate at 20.6 percent,because this percentage remains appropriate and provides certainty to spectrum licensees.Another aspect of the SLT Determination is the census year that was recently updated to 2011.To keep it current, the ACMA plans to review the SLT Determination after each census year.
Adraft of the proposedRadiocommunications (Spectrum Licence Tax) Determination 2014 is available in Appendix A.
Invitation to comment
Making a submission
The ACMA invites comments on the issues set out in this consultationpaper or any other issues relevant to the review of the spectrum licence tax arrangements. Submissions should be made:
By email:
By mail:The Manager
Spectrum Pricing Section
Radiocommunications Policy Branch
Australian Communications and Media Authority
PO Box 13112
Law Courts
Melbourne VIC 8010
The closing date for submissions is 28 February 2014.
Electronic submissions in Microsoft Word or Rich Text Format are preferred.
Media enquiries should be directed to Emma Rossi on 02 9334 7719 or by email to . Any other enquiries may be directed by email to .
Effective consultation
The ACMA is working to enhance the effectiveness of its stakeholder consultation processes, which are an important source of evidence for its regulatory development activities. To assist stakeholders in formulating submissions to its formal, written consultation processes, it has developed Effective consultation—a guide to making a submission. This guide provides information about the ACMA’s formal written public consultation processes and practical guidance on how to make a submission.
Publication of submissions
In general, the ACMA publishes all submissions it receives. The ACMA prefers to receive submissions that are not claimed to be confidential. However, the ACMA accepts that a submitter may sometimes wish to provide information in confidence. In these circumstances, submitters are asked to identify the material over which confidentiality is claimed and provide a written explanation for the claim.
The ACMA will consider each confidentiality claim on a case-by-case basis. If the ACMA accepts a claim, it will not publish the confidential information unless authorised or required by law to do so.
Release of submissions where authorised or required by law
Any submissions provided to the ACMA may be released under the Freedom of Information Act 1982 (unless an exemption applies) or shared with other Commonwealth Government agencies under Part 7A of the Australian Communications and Media Authority Act 2005. The ACMA may also be required to release submissions for other reasons including for the purpose of parliamentary processes or where otherwise required by law (for example, under a court subpoena). While the ACMA seeks to consult submitters of confidential information before that information is provided to another party, the ACMA cannot guarantee that confidential information will not be released through these or other legal means.