Telecom’s Role in Solving Canada’s Productivity Crisis (en anglais seulement)

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BY ROBERT GHIZ

Canada is experiencing a productivity crisis. The wealth gap between Canada and the U.S. has widened, and Canada’s GDP per capita has dropped below the OECD average. Carolyn Rogers, Senior Deputy Governor of the Bank of Canada, recently highlighted this issue, calling it a “productivity emergency.”

A key contributor to our lagging productivity is Canada’s weak record of business investment. Boosting productivity requires Canadian industries to increase their investments in the latest tools and technologies that will make their workforce more productive and their businesses more competitive.

Increasingly, this involves adopting digital technologies and data to increase productivity by streamlining processes, automating operations, and using data to drive continuous improvement in efficiency and sustainability. A recent Statistics Canada report shows that industries heavily reliant on digital technologies saw productivity gains during the post-COVID recovery period.

Despite the benefits of digital transformation, too few Canadian businesses are embracing it. More must be done to understand the reasons behind this reluctance. Governments at all levels should also consider policies and programs that encourage the adoption of productivity-enhancing technology.

However, encouraging the adoption of digital technologies by industries is only part of the solution to Canada’s productivity crisis. The telecom sector provides the critical infrastructure and services that new digital technologies, such as the Internet of Things (IoT), artificial intelligence, cloud computing and robotics, depend upon. Only through sustained private sector investment in expanding and enhancing high-speed and high-capacity wireless and wireline technologies can Canadian industries fully realize the productivity benefits of digital transformation.

Telecom: The Backbone of Economic Growth

Telecom networks provide more than faster home internet or better mobile phone service—they are the critical infrastructure underpinning the digital economy and the foundation for Canada’s future economic growth. In 2023 alone, the telecom industry contributed nearly $81 billion to Canada’s GDP and supported over 780,000 jobs across industries. The expansion of the digital economy, particularly through advanced connectivity solutions is projected to add an additional $112 billion to Canada’s GDP by 2035, according to consulting firm PwC.

These contributions to the Canadian economy are fueled by the investments made by the telecom sector to expand and enhance its network infrastructure and services.

Since 2010, the sector has invested more than $177 billion in capital expenditures, including $29 billion in payments to the Government of Canada for radio frequency spectrum licenses. In comparison to peers in the U.S., Japan, Australia and Europe, Canadian telecom providers invested, on average, 42% more in capital expenditures per subscriber in 2023.

But there is more work to be done. Demands on telecommunications networks are increasing rapidly. Businesses adopting the latest digital technologies need faster data speeds, reduced latency and more coverage. This will require continued private sector investment in networks that deliver high-bandwidth and speed, support a massive number of connected devices, and can deliver services tailored to each business’ connectivity requirements.

The need for sustained investment comes at a time when the telecom sector is encountering several challenges, including high borrowing costs, increased network building costs, heightened climate-change risks, and declining service prices. For instance, while telecom operators were increasing their investments in expanding and enhancing their wireless networks, Statistics Canada’s Cellular Services Index revealed a nearly 50% decline in cell service prices in the five years ending September 2024, while the overall consumer price index increased by over 18% during the same period.

That is why it is crucial for policymakers to ensure that telecom regulations provide sufficient incentives to promote continuous investment in innovation and network infrastructure. Policies that discourage investment in telecom infrastructure put Canada at risk of falling behind in network performance, service quality, and reliability, thereby prolonging Canada’s productivity crisis.

Canada’s telecom sector is renowned for delivering world-class services, thanks to substantial investments made by service providers in network infrastructure and services. These networks enable Canadian industries to leverage the latest digital innovations to modernize their operations, increase their productivity and contribute to the growth of Canada’s economy. Maintaining a healthy telecom sector that has the continuous capacity to invest in its network infrastructure and services, as well as encouraging Canadian industries to adopt digital transformation, is critical to increasing productivity in Canada.

Robert Ghiz is the President and CEO of the Canadian Telecommunications Association and was previously Premier of Prince Edward Island.

[Op-Ed originally published by The Hill Times, October 30, 2024]