By Ahmad Hathout
The Federal Court of Appeal on Tuesday ruled that the CRTC made no error in determining that revenue from leased spectrum is eligible for the purpose of determining the amount collected for the National Contribution Fund, which subsidizes telecom builds.
In 2022, Terrestar wanted to deduct from its regulatory fee obligations the revenue it collected from subordinating its spectrum, but the CRTC said in 2023 that it couldn’t do that because that revenue was an incidental part of its business, per section 23 of the Telecommunications Act, which defines a “telecommunications service.”
The Montreal-based mobile satellite and cell services provider argued that spectrum is not a “facility or apparatus” to qualify as a telecommunications service under the law, and that the subordination of spectrum cannot be an incidental part of its business because it is not an essential element of providing telecommunications services.
Having its review-and-vary application turned down, Terrestar turned to the Federal Court of Appeal. It argued that the CRTC failed to address whether a connection existed between the monetization of unused spectrum and the company’s business of providing mobile satellite service to its customers with the spectrum it was using.
The court, however, sided with the CRTC on Tuesday, finding that the commission addressed that connection by stating spectrum is “allocated specifically to provide telecommunications services, and that, in this context, the monetization of spectrum was a key element to that business.” The court also found that the regulator has been consistent on this matter in past decisions.
“The point that the Commission is making was that, although TerreStar provided mobile-satellite service to its customers, it is in the ‘business of providing telecommunications service’ through the utilization of spectrum allocated for that purpose—a finding TerreStar does not dispute,” the court said in the decision.
“Consequently, the Commission concluded that the company’s use of the spectrum by way of sale and subordination was incidental to that business in accordance with section 23 of the Act … the Commission did not accept TerreStar’s narrow characterization of its telecommunications business as solely a provider of mobile satellite service and determined, as a question of fact, that the generation of revenue from spectrum sale and subordination was a key element of the company’s business.
“TerreStar accepts that had it chosen to use the spectrum itself, rather than assigning it for a fee to a third party, the resulting revenues would necessarily be contribution-eligible revenues for its contribution to the Fund,” the court added.
Terrestar did not respond to a request for comment in time for publishing.
