Renewing Canada’s approach to Telecommunications Policy: Context for Action
The proposed Order Issuing a Direction to the CRTC for a Renewed Approach to Telecommunications Policy was developed with a view to building on the strengths and addressing the challenges faced in Canada’s telecommunications sector. This backgrounder summarizes key aspects of the sector’s performance concerning fixed broadband Internet services to homes and businesses as well as for mobile wireless (cell) services.
Investment in Networks and High Quality Services
Canada has benefited from very high investment levels over time, with the private sector investing $11.4 billion in 2020. Canada has consistently been above the Organisation for Economic Co-operation and Development (OECD) average. For example, in Canada the share of telecommunications revenues invested in capital expenditures over time was 30-50% above the OECD average.Footnote 1 This has led to high quality telecommunications networks. For example, according to Ookla's March 2022 Global SpeedTest, Canada ranked 16th out of 142 countries for median mobile speeds, ahead of all members of the G7, and 17th out of 182 countries for median fixed broadband speeds ahead of all members of the G7, except the USA and Japan.Footnote 2
When it comes to the household availability of full fibre networks, in 2020 the household coverage in Canada (49%) was ahead of the US (42%), Australia (16%), UK (18%), Germany (11%), and Italy (34%) and the EU average of 43%. Similarly, when factoring in cable networks, coverage of the faster speeds of 100 Mbps and 1 Gbps are available to 87% and 76% of homes compared to 76% and 51% in European Union countries.Footnote 3 Data from OpenSignal shows strong speeds for new Fifth generation (5G) services with Canada ranking 4th in 2021, strong historical coverage of 4G services, and for more specialized application metrics Canadian operators were not among global leaders but above the sample average.Footnote 4 Fibre and new 5G services continue to roll out and ongoing investments will ensure Canadians benefit from these and future technologies as they are introduced and deployed.
The situation is different in lower density or more remote areas where the challenging business case can often limit private sector deployment. This is also a common problem across peer countries, but is particularly important in Canada given our broad geography.Footnote 5 Footnote 6 Canada has an ambitious set of initiatives to address this issue and meet or exceed the targets set out in Canada's Connectivity Strategy.Footnote 7 Measures include historic new public investments, new spectrum frequency measures, and other actions to help improve deployment.
Service Adoption and Prices
With respect to fixed broadband adoption, Canada ranks in the top third of OECD countries in the number of subscriptions per capita.Footnote 8 Similarly Canada shows high levels of data usage at 386 gigabytes per month (GB/month)Footnote 9 comparable to peers such as the UK (274 GB/month) and Australia (361 GB/month).Footnote 10 However, for mobile wireless, Canadian adoption in terms of subscription rates and data usage has been growing but is still lower than many peers and below the OECD average.Footnote 11 Concerning prices, Canada has made important progress in reducing prices for mobile wireless service plans, but recent studies conclude that more progress can still be made and prices are still high compared to international peers. For Internet, while there are typically a variety of service plans and prices available to consumers, prices for mid-range and top-range services also remain high relative to international peers.Footnote 12 Competition in the sector is a foundational element that puts downward pressure on prices, and there is more work to be done, as outlined below. For example, while it is not practical to expect the same prices as in smaller countries, Australia has high quality mobile wireless networks and lower prices, despite its large size.
Competition and Consumer Issues
The sector is subject to barriers to entry and concentration. For example, the Competition Bureau has found evidence of market power and coordinated conduct among providers of mobile wireless services.Footnote 13 Similarly, it is clear that having only two options in retail Internet providers would not be sufficient – otherwise, prices would be higher and usage lower. New competitors having entered the market using regulated wholesale access to the networks of the large players have had a positive impact.Footnote 14
Similarly, alternative wireless competitors have been driving down prices enabled by pro-competition spectrum measures and CRTC regulation. Profitability of wireless services is relatively high, though less so for wireline Internet and when capital investments are taken into consideration. A Boston Consulting Group analysis of return on capital employed across an international sample found that, as a whole, Canadian operators tended toward the upper half of the distribution though there was variability throughout.Footnote 15 Overall, the barriers to entry and evidence of coordinated conduct persist. Further action on competition is essential.
Similarly, there are aspects of the market where consumers need support to be better empowered in their dealings with service providers. For example, there are information asymmetries between consumers and service providers given changing technology as well as challenges switching service providers. Despite the strengthening of the Wireless Code and introduction of the Internet Code, more work remains. For example, in 2020, a CRTC-commissioned study found 1 in 5 Canadians reported inappropriate sales tactics when shopping for telecommunications services.Footnote 16 The CRTC has also found evidence that only 30% of Canadians were aware of the Commission for Complaints for Telecom-television Services (CCTS), which resolves a great number of disputes for consumers.Footnote 17
The proposed policy direction takes into account this market context in Canada and is part of a range of actions promoting more competition, universal access and a more consumer-oriented telecommunications sector in Canada.
Proposed policy direction to the CRTC for competition, affordability, consumer rights and universal access
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