Investing in Canada’s Future (en anglais seulement)
Robert Ghiz, Canadian Telecommunications Association
President & CEO
***Check Against Delivery***
The Canadian Telecom Summit 2023
November 6, 2023
2:00 to 2:30 p.m. Eastern
Good afternoon. It’s great to be back at the Canadian Telecom Summit.
The Canadian Telecommunications Association is proud of its longtime association with the Telecom Summit and I extend my congratulations to the organizers for the fantastic program they have put together this year.
Bonjour! C’est un véritable plaisir que de vous retrouver au Sommet canadien des télécommunications.
L’Association canadienne des télécommunications est fière d’être un partenaire de longue date du Sommet canadien des télécommunications. J’en profite d’ailleurs au passage pour féliciter les organisateurs pour la qualité du programme qu’ils proposent cette année.In case you haven’t noticed, our Association has made a few changes since last year’s Summit.
Previously known as the Canadian Wireless Telecommunications Association, we have dropped the “Wireless” from our name and are now simply the Canadian Telecommunications Association.
Au cas où cela vous aurait échappé, notre association a fait plusieurs changements depuis la dernière édition du Sommet.
L’Association canadienne des télécommunications sans fil a laissé tomber la référence au sans-fil dans son nom pour devenir simplement l’« Association canadienne des télécommunications ».
Why the change?
While telecommunications had traditionally been thought of as two distinct services – wireless and wireline – new technologies and consumer demands have blurred the lines between the capabilities and uses of wired and wireless technologies.
Mobile phones are no longer just for phone calls and texts, and laptops are not just for word processing and surfing the internet. Whether performing everyday tasks, streaming video, conducting business, learning online or accessing critical services, Canadians want a fast, reliable, and seamless experience when moving between wired and wireless connectivity.
And just as the uses of wired and wireless connectivity have converged, many of the policy priorities affecting wired and wireless telecommunications now overlap.
So, it became clear to us that we should expand our focus beyond wireless. We now promote the importance of both wireless and wireline telecommunications to Canada’s economic growth and social development, and advocate for policies that foster innovation, investment, and positive outcomes for consumers.
And just as we did under our previous name, we continue to support industry initiatives and programs, such as enhancing accessibility, charitable giving, consumer protection, and public safety.
For example, in September we ran a public awareness campaign to inform Canadians in Eastern Canada of steps they could take to prepare for potential power outages and other impacts from severe weather that can disrupt the use of telecommunications services.
We also publish industry data and commission research into telecom sector trends and developments. And we do all of what I’ve mentioned with less than twenty staff members.
As you can tell I’m very excited about our rebrand and the work that we do, so if you will indulge me, I will make one last plug and invite you to visit our new website at canadatelecoms.ca, follow us on X (which I still call Twitter) and LinkedIn, and also feel free to come talk to me or any of our Association staff who are here throughout the conference.
I recently came across an article in The New York Times Magazine with the subtitle: “The Costs of Not Investing in America”. The article contained the following statement:
“Investment, in simple terms, involves using today’s resources to make life better in the long term.” 1
Making life better in the long term: that’s why we are here today. Regardless of what company you work for or what government department you represent, you want to make life better for Canadians, not just for today, but for the long term.
This morning we released a new report prepared by PwC entitled, “Connecting Canadians through resilient networks: The impact of the telecom sector in 2022 and beyond”.
It is part of our annual series of reports examining the economic impact of the telecom sector in Canada and it helps explain how investments in telecommunications are making life better for Canadians, and how continued investment is necessary to ensure that these benefits are sustained for the long term. You can obtain a copy of this report at canadatelecoms.ca.
It will come as no surprise to those in this room today that PwC’s report confirms the importance of the telecom sector to Canada’s economy. In 2022, Canada’s telecom sector, which refers to the network operators that supply wireless and wireline service, contributed almost $77 billion in direct GDP and supported 724,000 jobs across industries.
As the broader economy continues to digitize, PwC further estimates that the adoption of use cases supported by the deployment of enhanced connectivity, such as 5G, has the potential to contribute an incremental $112 billion to Canada’s GDP by 2035.
Driving these contributions to Canada’s economy are the investments made by the telecom sector in expanding and enhancing its networks. In 2022, the largest six telecoms in Canada invested $13.3 billion in capital expenditures to fund the expansion and enhancement of broadband internet and wireless connectivity across the country.
If we pull back the lens and look over the last five years, we see that the Canadian telecom sector has invested, on average, $12.1 billion of capital in network infrastructure per year.
This represents approximately 18.6% of average revenue, which is higher than the 14.2% average across peer telecoms in the U.S., Japan, Australia and Europe. Notably, this capital intensity is 4.6 percentage points higher than the U.S. and 7.1 percentage points higher than Australia.
And if we look back even further, the four largest telecom providers in Canada have invested $147 billion in capital expenditures and spectrum between 2010 and 2022.
These consistently high levels of annual capital investment are the result of two main factors: the high cost of building networks in Canada and competition.
We all know that Canada is a large country with a relatively small population. Even when we remove 80% of Canada’s land mass to account for uninhabited areas of the country, Canada has a very low population density of 19.3 people per square kilometer.
The result is a widely dispersed network infrastructure that is more expensive to deploy and service than smaller and more densely populated countries that require fewer towers and less fibre. For example, even though Australia also has a low population density, we have a higher dispersion of population, resulting in Canadian telecom operators building approximately 50% more cell towers per capita than operators in Australia.
In addition to a vast and rugged terrain, Canada also has extreme cold winter weather, which limits laying of underground fibre to the warmer months of the year. Telecom infrastructure also must be built to withstand cold temperatures and account for ice buildup and other cold weather phenomena. Maintaining and servicing telecom equipment in the winter season is also more difficult and expensive.
Canada also has the highest spectrum costs across peer countries as well as rising labour costs.
And while our largest telecom operators are big in the context of the Canadian economy, on a subscriber and revenue basis the largest Canadian service providers are much smaller than those in peer countries. For example, Rogers is 13.5 times smaller on an annual revenue basis than AT&T. This means that Canadian telecom companies have less bargaining power with suppliers.
But the level of investment being made by the Canadian telecom sector is not attributable only to higher cost factors. High levels of investment are also driven by competition. Specifically, facilities-based competition.
Compared to most other countries, Canada has a more diverse blend of national and regional facilities-based service providers who compete for customers not only on price but also on service quality and coverage. As the Competition Bureau stated in its 2019 study of competition in Canada’s broadband industry, “facilities-based competitors engage in a dynamic form of competition to successfully introduce better networks over time through investment in new technologies.”2
As the Bureau further observed, this dynamic form of competition not only results in better networks and better customer experience, “once the investment in new networking equipment and physical lines has been made, companies have a strong incentive to compete hard and win customers to generate revenues sufficient to recoup those investments.”
So, how are these investments and facilities-based competition creating long-term benefits for Canadians? I have already discussed the contributions made by the telecom sector in terms of GDP and jobs, but when we look at the performance of the telecom market itself, we must look at other metrics, such as coverage, quality, and price.
According to the CRTC, as of 2021, 99.7% of the Canadian population has mobile wireless coverage, while the latest federal government data shows that 93.5% of Canadian households have access to high-speed internet, defined as 50/10 megabits per second service with unlimited data.
When it comes to quality, according to Opensignal, the average mobile download speed experienced by Canadian consumers is faster than that experienced by consumers in all other G7 countries plus Australia.
Opensignal also reports that rural users in Canada experience faster download speeds than rural users in comparable countries such as Australia, Germany, the U.S., and Brazil.
With respect to high-speed internet, Canada’s fixed broadband networks consistently rank among the best performing in the world, with the median download speed experienced by Canadian households being 60% faster than the average of all other G20 countries and 85.6% faster than the global median.
Now let’s look at everyone’s favourite topic: prices. There is so much written about telecom prices in Canada and unfortunately much of it is wrong. So let me set the record straight.
I don’t have to remind you that, in the last few years, Canadians have been living through a period of heightened inflation. Whether it is housing, groceries, energy or other consumer items, the cost of almost everything has been going up. But there is a notable exception: the price of telecom services.
According to Statistics Canada, the prices for internet access services have declined in the last year by almost 8%, while the overall cost of consumer items has risen by almost 4%.
The difference between cellular service prices and overall inflation is even more dramatic, with cellular prices declining by over 17% over the last twelve months.
And it is not just that cellular service prices are dropping, StatCan cites telephone services, which consist of landline and cellular services, as one of the main downward contributors to the overall consumer price index.
Now if you think that the decline in cellular service prices is just a recent phenomenon, you’d be wrong.
This chart tracks StatCan’s All-items Consumer Price Index, in orange, and its Cellular Services Index, in blue, since December 2019.
If we look at the last three years starting in September 2020, StatCan data shows that overall inflation rose by almost 16% while cellular service prices fell by over 33%.
How does that compare to other goods and services that are most important to Canadians?
Here we can see items like gas, energy, food and shelter whose prices have increased significantly over the last few years, while prices for internet services and cellular services, which are the green and blue lines at the bottom, have declined.
I’ve also read some commentators claim that while wireless prices have declined in Canada they are not declining as fast as in other countries. But as you can see in this chart, that is clearly not the case. Over the last several years, prices in the UK have increased by over 25% and in the U.S., after an initial decline, the wireless service index has remained fairly constant. Compare that to Canada where, over the last five years, the cellular service index has declined by 47%.
Broad coverage, high quality networks, and declining prices – all the result of national and regional network operators competing against one another to deliver the best services and gain subscribers by offering a wide range of service plans that are delivering higher speeds and larger data allotments at lower prices.
But our work is not complete, and the need for continuing investment in telecommunications infrastructure is as clear as ever.
The fact that 93% of Canadian households have access to high-speed internet services means little to Canadians that have lower quality of service or no service at all. This is especially the case in rural communities where, as of 2021, 50/10 speed and unlimited data service was accessible to only 62% of rural households; the North where such services were available to only 49% of households; and First Nation reserve areas where only 43% of households had such service.
Of these rural and remote communities, I’d like to highlight efforts to improve service in Indigenous communities. We know that expanding and enhancing network coverage is key to the economic prosperity and social well-being of remote and Indigenous communities. That is why our members are working with Indigenous communities, together with different levels of government and Indigenous-led businesses, to build and improve telecommunications infrastructure.
While only a small sample, the following are the kinds of projects and collaborations taking place across our country.
Through the industry-funded CRTC Broadband Fund, together with its own investments, NorthwesTel has embarked on a three-year plan to bring high-speed unlimited internet access to every community in the Northwest Territories and Yukon.
As part of this project, NorthwesTel has partnered with thirteen Yukon First Nations development corporations to bring fibre-to-the-home service to eighteen Yukon communities. Under this model, the fibre assets that connect thousands of homes across the territory will be Indigenous-owned and will result in a guaranteed return on investment for Yukon First Nations over the next two decades.
In 2021, SaskTel launched its Rural Broadband Partnership Program, with the goal of partnering with smaller internet providers to bring advanced broadband connectivity to underserved areas of the province, including Indigenous communities.
Through this program, SaskTel has partnered with a new majority Indigenous-owned internet service provider, Beaver River Broadband, under which Beaver River Broadband will utilize portions of SaskTel’s network to deliver high quality internet service to underserved Indigenous and rural communities.
In British Columbia, Rogers is building new cell towers that will service the highway and communities along the route between Prince Rupert and Prince George, which has sadly become known as the Highway of Tears, and in doing so is fulfilling one of the recommendations of the 2006 Highway of Tears Symposium report to enhance safety for Indigenous women and girls.
These are just a few examples of the numerous projects underway by Association members to improve connectivity in Indigenous and other communities across Canada, and in doing so delivering financial benefits, job creation and safer communities.
But as PwC highlights in its new report, network expansion is not the only reason we need continued investment in network infrastructure.
Extreme weather events such as hurricanes, wildfires, and snow and ice storms are becoming more commonplace, endangering Canadians, damaging property, and posing a risk to critical infrastructure, including telecommunications networks.
Whether it is floods or drought affecting tower stability, high winds bringing down aerial lines, high temperatures putting strain on base station cooling systems, or fires burning telephone poles, severe weather events and other disasters present an increasing risk to telecom infrastructure, increasing total cost of ownership and overall capital expenditures.
For example, after Hurricane Fiona made landfall in 2022, Bell recorded $30 million of damages and 2,500 hours of overtime to respond to the disaster, as the hurricane damaged 1,500 telephone poles, thousands of kilometers of cable and 50 cellphone towers.
But it is not just the repair and recovery costs that are resulting in increased capital expenditure. The telecom sector is also making significant investments in strengthening their networks and operations to better withstand the once-in-a-century events that now seem to occur every year.
These include investments in network diversification, structural mitigations such as raising offices in flood prone areas and brush clearing, more on-site generators, applying fire retardant to cell towers, enhancing disaster-recovery protocols, and using AI to help identify potential network risks.
And while I’ve already highlighted the benefits of facilities-based competition in terms of coverage, quality and declining prices, having multiple network operators and multiple networks is also an important advantage when it comes to resiliency.
As this slide illustrates, Canada is a world leader when it comes to the number of wireless networks in the country. This means that when there is a critical failure in one network, traffic can often be moved to an alternate network.
To help facilitate the movement of such traffic in emergency situations, the main national and regional network operators entered a memorandum of understanding in September 2022, under which they agreed to establish protocols for emergency roaming, mutual assistance and communication to the public and government authorities in the event of major network outages.
The telecom industry has also convened a Network Resiliency Working Group to develop recommendations directed at reducing severe network outages and mitigating impacts.
And finally, while climate change is fueling the kind of severe weather that threatens telecom infrastructure, investments in telecom infrastructure provide the foundation for Canada’s digital transformation which, in addition to growing the Canadian economy, will enable the kind of digital solutions that are key to Canada achieving its sustainability objectives.
Canada is a signatory of the 2015 Paris Agreement on climate change and is aiming to get to net zero emissions by 2050 and 40-50% reductions from 2005 levels by 2030. While progress has been made towards these goals, emissions have only reduced by 9%, and Canada remains a large consumer of natural resources and produces more industrial waste per capita than any other nation.
The current policy approach to climate change mitigation and sustainability focuses largely on renewable energy and clean technologies. While these are important, a recent report by Accenture argues that Canada must expand its approach.
In its report, Accenture3 concludes that the digital transformation of Canada’s industrial and agricultural sectors has been an underutilized tool in our efforts towards achieving our sustainability goals.
Accenture illustrates how the use of connected devices and sensors in industries such as oil and gas, mining, and agriculture, along with technologies such as digital twins, artificial intelligence, and cloud computing can be used by businesses to operate more efficiently and safely, and in turn reduce energy and fuel consumption as well as produce less waste.
For example, in oil and gas, predicting failure of equipment before it can occur can drive 20 per cent energy efficiency. In mining, real-time sensors that monitor tailing ponds (where waste is collected) can deliver 15-20 per cent in preventative maintenance savings. The higher accuracy of these sensors means that clean water can be recycled into the environment quicker, reducing environmental safety incidents by up to 90 per cent. In agriculture, using sensors and drones to monitor crops can reduce water and fertilizer use by 20-40 per cent.
Critically, each of these use cases requires advanced wireless and wireline networks to support the exponential growth in bandwidth, speed, simultaneous connections, and reliability needed to power the devices and technologies that enable digital transformation and greater sustainability.
I’ve already illustrated how Canada, when it comes to having world-class networks, is well-positioned to support digital transformation. But realizing the full benefits of this intersection of connectivity, digital transformation, and sustainability will not happen without the right policies and collaboration.
Accenture provides several conditions that must be met to achieve sustainability through digital transformation, and you can read the full list by downloading the Accenture report from our website. I am just going to highlight the first condition listed by Accenture; namely, telecom policies that maintain incentives for Canada’s communications service providers to continue to invest in the expansion and enhancement of their networks.
Again, it all comes back to investment. Investment that is driven by facilities-based operators competing on network coverage, quality, and resiliency, and competing on price and other service plan attributes to attract customers.
These investments, in turn, provide the foundation for Canada’s economic growth, as industries transform their operations to become more productive and more sustainable using connectivity-powered digital technologies.
So, when you participate in policy discussions here at the Telecom Summit, and in the months and years to come, it is important to ensure that decision-makers recognize the importance of continuing private sector investment to achieving the outcomes that we all want for Canadians. That is, making a better life for all Canadians and for the long term.
Thank you again for the opportunity to speak to you today.
I remain very optimistic about the future of our industry and the contributions that it will continue to make to Canada. As I have said before, Canada’s future depends on connectivity, and with the right policies the future will be bright.
Thank you very much for your time today.
Merci de votre attention.
2 Competition Bureau, Delivering Choice: A Study of Competition in Canada’s Broadband Industry, p.45 (Delivering Choice)