Empowering Canada’s Digital Future: The Role of Telecom Investments in Boosting Productivity

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The telecommunications sector in Canada is doing more than just keeping us connected. According to a new report by PricewaterhouseCoopers (PwC), commissioned by the Canadian Telecommunications Association, the telecom industry is a major contributor to Canada’s economy, directly adding nearly $81 billion in GDP to the Canadian economy and supporting almost 782,000 jobs across various industries in 2023. Looking forward, PwC estimates that enhanced connectivity, including the rollout of 5G networks, is poised to deliver an additional $112 billion to Canada’s GDP by 2035. The report further highlights the sector’s role in fighting inflation and its importance in improving Canada’s lagging labour productivity.

Declining Prices through Investment-Driven Competition

Telecom providers in Canada have been continuously investing in their networks, with $11.4 billion in capital expenditures in 2023 alone. This investment amounts to an average reinvestment of 17.9% of service revenues in 2023, exceeding the average reinvestment rates in the U.S. (14.6%), Australia (11.7%), and Europe (13.6%). It also represents 42.6% more per subscriber, on average, than the investments of Canadian service providers’ peers in the U.S., Japan, Australia, and Europe.

These investments are happening despite a steady decline in telecom prices. From March 2023 to March 2024, cellular and internet service prices fell by 26.2% and 15.5%, respectively. This trend is beneficial for consumers and underscores the sector’s commitment to providing increasing value while expanding coverage to more Canadians.

Boosting Canada’s Productivity

The Bank of Canada has sounded the alarm regarding Canada’s lack of productivity growth in recent years and its negative impacts on Canada’s economic growth and prosperity. Boosting Canada’s productivity requires continued capital investment to provide workers and businesses with the tools and technology they need to improve efficiency and output, improving workers’ skills, and using capital and labour more efficiently.

There is a positive correlation between investing in telecommunications infrastructure and growth in labour productivity. Telecommunications provide the foundation for the digitization of our economy, which allows industries to increase output more efficiently. To realize these productivity gains through increased digital infrastructure investment, it is important to maintain a healthy telecom sector that is capable of making the necessary investments to meet the economy’s connectivity demands and support the growth of the digital economy.

The Need for Supportive Regulation

Despite the telecom sector’s impressive contributions, challenges remain. Decreasing prices, high borrowing costs, higher network costs, increased competition from multinational OTT players, and climate-related risks are just a few of the headwinds that telecom providers face. To maintain the telecom sector’s capacity to make the level of investment necessary to continue to drive economic growth, increase Canada’s labour productivity and deliver positive consumer outcomes requires supportive regulatory policies. Regulatory frameworks must offer sufficient incentives to encourage private sector investment in innovation, foundational technology and infrastructure, and should be predicable, transparent and equitable.

Conclusion: A Call to Action

As the PwC report highlights, the Canadian telecommunications sector is integral to the country’s economic health and future productivity. Continued investment in digital infrastructure not only boosts connectivity but also underpins broader economic growth, increased productivity, and global competitiveness.

For Canada to fully realize its productivity potential and sustain economic growth, a regulatory environment that supports and encourages ongoing investment in telecom is crucial. By fostering such an environment, Canada can combat stagnating productivity and ensure that its economy remains dynamic and competitive in the years to come.

For more insights, read the full PwC report, Driving Canada’s Productivity: The Impact of the Telecom Sector and Its Role in Improving Productivity at https://canadatelecoms.ca/wp-content/uploads/2024/06/Driving-Canadas-Productivity.pdf.