The Telecom Sector’s Contributions to Canada’s Economy and Social Fabric (en anglais seulement)
Eric Smith, CWTA Senior Vice President
Keynote Address: The Telecom Sector’s Contributions to Canada’s Economy and Social Fabric
***Check Against Delivery***
2022 Canadian Telecom Summit
Monday, November 21, 2022
2:30 to 3:00 p.m. Eastern
Good afternoon, everyone. It’s a privilege for CWTA to be asked to speak at the Canadian Telecom Summit. Not only do we get to talk about our world-class telecom industry, we get to see many familiar faces while also making new acquaintances.
It has not been easy to organize events like this over the last few years but, despite the challenges, the organizers of the Telecom Summit have once again done a great job in pulling this year’s event together and I want to thank them for all the hard work they do.
For any of you not familiar with the Canadian Wireless Telecommunications Association, or CWTA, we are an industry association that represents companies that provide services and products across the wireless communications sector in Canada.
Our primary role is to advocate on behalf of the sector and to inform Canadians about the contributions that the wireless sector makes to Canada, including innovation, economic growth, social well-being, and sustainability. We also facilitate industry initiatives, such as enhancing accessibility, charitable giving, and consumer protection.
CWTA has been a long-standing sponsor of Telecom Summit because it serves a vital role in bringing stakeholders together to highlight the contributions the telecom industry makes to Canada’s social and economic fabric, discuss current issues and challenges, and chart a path for the future.
As many of you know, each year, CWTA commissions a study on the contributions that our industry makes to the Canadian economy. When we began producing these studies over ten years ago, we initially focused only on the wireless industry. But in recent years, our reports have looked at the economic contributions of both the wireless and wireline industry.
Why did we make this change? Because, unlike many countries, Canada is fortunate to have both world-class mobile and high-speed internet networks. Most Canadian households and businesses utilize both forms of connectivity, and to get a true picture of the role of connectivity in Canada we decided it is important to look at the contributions of both wireless and wireline services.
This year we asked PwC to study the economic impact of the telecommunications industry in Canada in 2021. More specifically, we asked them to look at the contributions of the facilities-based network operators – the companies that invest billions each year to expand and enhance Canada’s digital infrastructure.
And instead of just looking at macro-economic figures, we also asked PwC to look at the outcomes resulting from these investments.
You can find a copy of PwC’s report on our website at cwta.ca.
In its report, PwC estimates that the total direct GDP contribution of the telecommunications industry in 2021 was nearly $75 billion. PwC also estimates that during 2021 the direct impacts of the telecommunications industry supported over 650,000 Canadian jobs.
You’ll often hear us say that telecommunications is the enabler for economic growth, and the evidence bears this out. Of the $75 billion in direct GDP contribution, over $50 billion is attributable to increased sales and output in other industries through the addition of incremental wireline and wireless connections.
This economic contribution was fueled by years of investments made by the industry in expanding and enhancing its digital networks.
In 2021, though still dealing with the challenges caused by COVID-19, facilities-based operators invested more than $12 billion in capital expenditures, not to mention an additional $8.9 billion in the 3500 MHz spectrum auction.
These 2021 investments were not an outlier, every year the sector invests billions in capital expenditures, with over $11 billion being invested in each of the previous five years. In making these investments, the Canadian telecom sector outpaces its international peers.
In 2021, the Canadian telecom sector’s capital investments represented an average of 19% of annual sector revenue, also known as capital intensity. This level of capital intensity is higher than that of other G7 countries and Australia where the average in 2021 was 14%.
On a per subscriber basis, Canada’s telecom sector invested $168 in capital expenditure per subscriber compared to an average for the same benchmark countries of $87 per subscriber.
To add more context, consider the differences in country and market attributes between Canada and these peer countries. On a revenue basis, Canadian operators are smaller than most of their global peers, with the revenue of the largest U.S. operator being 10 times greater than revenues of the largest operator in Canada.
Yet with a lower population that is widely dispersed across a large geographical footprint, the building costs are higher in Canada. In the case of wireless infrastructure, it has been estimated that compared to its G20 peers, Canadian wireless operators have 2 times higher capital expenditures per subscriber, and on top of that face 3 times higher spectrum costs.
So, when some industry observers note that Canada’s telecom sector maintains higher EBITDA margins, or earnings before interest, taxes, depreciation, and amortization, compared to many global peers, keep in mind that EBITDA does not consider the build costs that Canadian operators face. As PwC points out in its report, when you adjust for capital investment, Canadian operators’ Free Cash Flow ratio, in other words the amount of cash left over after a company pays its operating expenses and capital expenditures, is in line with their global peers.
While the capital investment numbers are impressive, it not the dollar amounts but the outcomes they produce that are important.
Each year more Canadians rely on connectivity services to stay in touch with family and friends, work remotely, consume content, and participate in the global economy. To keep up with this demand, telecom operators invest these billions of dollars to increase network capacity and performance and expand coverage, while continuing to offer service plans that fit consumers’ needs and budgets.
Closing the rural/urban digital divide is an important priority for our members. On the wireline side, according to the CRTC the number of rural households that had access to at least 50/10 Mbps internet speeds with unlimited data rose from 37.2% in 2017 to 54.4% in 2020, an increase of 46%.
Over that same period, the percentage of rural households with at least 50 Mbps download speed was 74.6%, an increase of 90% from 2017 when only 39.2% of rural households had access to such speeds. Not considered in these figures are the many broadband expansion projects that commenced since 2020 and that have brought high-speed internet service to more Canadian households.
While the vast majority of capital investments come from the private sector, our industry also partners with different levels of government to expand connectivity to underserved areas. For example, in 2021, internet service providers in Quebec partnered with the Governments of Canada and Quebec to launch Operation High Speed, a project that will connect nearly 150,000 homes in Quebec to high-speed internet.
Also in 2021, service providers partnered with the federal government and the Government of Ontario as part of the “Ontario Connects” program to connect every region of Ontario with high-speed internet by 2025. Similar projects have been announced in other provinces and territories.
Comparing high-speed internet access in Canada to access in other countries is difficult because each country uses its own standard to define high-speed. For example, while the Government of Canada defines high-speed as a minimum of 50 Mbps download speed and 10 Mbps upload speed, the U.S. high-speed standard is set much lower at 25 Mbps download speed and 3 Mbps upload speed. In the U.K., internet services that offer at least 30 Mbps download speed are considered “super fast”.
However, available data shows that Canada, despite its large geographic footprint and low population density, compares favourably to its international peers. For example, according to ISED, internet services with speeds of 100 Mbps and 1 Gbps are available to 87% and 76% of Canadian households, while only 76% and 51% of homes in EU countries have access to similar services.
For mobile wireless coverage, as of the end of 2021, 99.7% of homes, businesses, and major transportation roads had access to mobile services, with 99.4% having access to the latest generally deployed mobile wireless technology, LTE. The CRTC has also stated that the wireless industry is on target to provide coverage to 100% of the population by 2026.
With respect to the mobile experience, the investments by Canada’s mobile operators have ensured that Canadians continue to enjoy world-class mobile services. Mobile network experience reports published by Opensignal show that the average mobile download speed in Canada exceeds the average speeds in the other G7 countries plus Australia.
And according to PwC, in a mobile network quality index that considers networks speed, quality, availability and video experience, Canada again comes out on top.
This performance advantage is not restricted to urban areas. A recent Opensignal report found that the overall download speed experienced by mobile users in rural Canada is 16% to 27% faster than speeds experienced in Australia, Germany, and the U.S. and is 2.5 times faster than users in rural Brazil.
Canada’s telecom industry is also investing heavily in 5G. Opensignal’s 2022 global benchmarking ranked all of Canada’s national operators as “Global High Performers” for 5G reach with customers on average connecting to a 5G network in a given location approximately half of the time. South Korea, Taiwan, and Saudi Arabia, all much smaller countries and with more concentrated populations than Canada, were the only other countries that had three network operators with as high a ranking.
As already mentioned, mobile operators invested about $8.9 billion in 2021 to acquire licenses to the 3500 MHz spectrum band. While this spectrum is being released by the government in phases, results from the early deployments are impressive.
In its annual Fastest Mobile Networks Canada tests for 2022, PCMag found that this mid-band spectrum contributed to maximum download speeds over 1Gbps and average speeds in communities surveyed of more than 300 Mbps.
Expanded coverage and increased performance are not the only ways in which facilities-based competition is delivering more value to Canadian consumers. While the price of most consumer goods and services are rising significantly due to global inflation, and in some cases even “shrinkflation”, where the consumer gets less than before but at a higher price, consumers of telecom services are receiving more value for their hard-earned dollar.
For example, contrary to inaccurate statements that are often repeated and rarely questioned, prices of mobile wireless plans across a range of service offerings have been steadily decreasing.
For example, the lowest average price of plans offering 5GB of data declined 44% between 2016 and 2021. These declines saw the telecom sector achieve ahead of schedule the Government of Canada’s desire for a 25% reduction in the price of mid-range wireless plans within two years.
In addition, while most of you are familiar with Statistics Canada’s All-items Consumer Price Index, Statistics Canada also publishes a monthly Cellular Services Price Index. Over the last three years, the Cellular Services Price Index has declined by over 27% while the All-items Consumer Price Index has risen by over 12% during the same period.
Internet service plan prices are also trending below inflation while the average data downloaded per internet service subscriber increased by 77% from the end of 2019 to the end of 2021 – going from an average of 228 GB per month to 404 GB per month.
Facilities-based service providers have also expanded and enhanced their low-cost internet plans that were first introduced by the industry in 2013. These programs provide high-speed internet access to low-income families and seniors for $20 per month. Some operators offer additional plans with prices starting as low as $9.99 per month. While these plans are promoted under the federal Government’s Connecting Families program, they are provided by participating service providers without government subsidy.
The economic contributions I’ve mentioned, including the importance of investments made by facilities-based service providers in expanding coverage and enhancing performance, are undeniable. But the impact of Canada’s telecom sector extends beyond the economy. Equally important is the impact our industry has on the social fabric of our country.
The investments made in connecting Canadians are about more than increasing GDP. They are about giving Canadians opportunities. Expanding connectivity allows residents and businesses to connect to the rest of the world, enabling individuals to work remotely from within their community, access virtual health care, and learn online.
Telecom investments are also helping protect the environment. Along with installing more energy efficiency telecom equipment, service providers are increasingly using renewable energy sources and reducing their water use intensity. Connectivity services also enable the use of technologies that reduce green house emissions across other industries.
Service providers have also implemented measures to reduce waste and promote a more circular economy, including reduction in product packaging, making paperless billing available, and utilizing programs that recover and recycle e-waste from old devices.
Giving back to communities is also a key focus for our industry. Our network operator members employ approximately 120,000 Canadians across all regions of the country and contributing to local communities is an important part of their operations.
Telecom providers make hundreds of millions of dollars in charitable donations every year, supporting causes that range from health and recreation to arts and education.
They have donated devices and service plans to survivors of domestic violence, low-income students and other populations facing barriers to getting online.
In addition to corporate donations, service providers run employee giving programs, with employees involved in selecting the causes being supported and employers offering full or partial matching of employee donations. They have also launched their own in-house initiatives, such as hosting blood drives, creating scholarship funds, and creating widescale projects in support of mental health and other causes.
Employee-led teams participate in local neighbourhood and water-way cleanups, holiday gift drives, and backpack filling programs for local school children. Employee teams also volunteer at non-profit organizations such as food banks and animal shelters.
Building stronger relationships with Indigenous communities is also a priority for our industry. Members of our sector have declared their commitment to the United Nations Declaration on the Rights of Indigenous People and the Truth and Reconciliation Commission of Canada’s Calls to Action and have implemented reconciliation plans to support their commitments.
In that same spirit of reconciliation, service providers have engaged in relationship-building with lndigenous communities to support a range of activities including sustainable land and resource use, education funding, employee recruitment, and community-led infrastructure projects.
While many of us in the industry focus on the latest technological advancements and business trends, these examples of community building and collaboration are at the heart of everything that our industry does.
Finally, I want to acknowledge the work of telecom employees and contractors during the last few years.
When the COVID-19 pandemic reached Canada in early 2020 we were quickly reminded of the importance of having resilient telecommunications networks. But those of us fortunate enough to participate in the industry also witnessed the incredible ingenuity and dedication that telecom workers employed to ensure that our networks could cope with the sudden surge of online traffic, and that Canadians could remain in contact with one another despite physical distancing and travel restrictions.
More recently, we witnessed the dedication and perseverance of our telecom workers when Atlantic Canada was hit by an unprecedented natural disaster in the form of Hurricane Fiona.
In Prince Edward Island, where CWTA’s President resides, and where I had the pleasure of visiting a few weeks after the storm, homes were lifted off their foundations and wind tore roofs off buildings. Trees and utility poles were uprooted while others snapped in half, leaving over 80,000 electricity customers, or 95% of the island, without power. Many were without power for days, and even weeks. Gas and diesel fuel was in short supply.
Despite these obstacles, and because of careful planning and tireless work, our members were able to keep their networks up and running. Cell service, while not operating at 100% in the hours immediately after the storm, remained operational and, once power was restored, most Islander’s internet and home phone services were automatically restored.
But with a storm of this magnitude, it was unavoidable that some customers lost internet and home phone services due to downed lines and cut cables.
As soon as it was safe to do so, repair and restoration efforts began based on public safety priorities and the ability to safely access impacted locations. This work was aided by an unprecedented degree of cooperation across the industry, with service providers who are usually competitors assisting each other in making repairs and enabling workarounds. Additional personnel and resources were also brought in from other parts of Canada, with many out-of-province workers raising their hands to volunteer to assist with the restoration work before they could even be asked.
Our members worked flat-out to prepare for this storm and worked tirelessly to reconnect Atlantic Canada. Not just because it was their job, but because their friends and neighbours were in need. They performed this work, under difficult and dangerous conditions, while many of them were also having to deal with their own family’s post-storm recovery. Their efforts should be commended.
Thanks once again for inviting me to speak with you today. While most of you are already aware of the importance of our industry, I hope I was able to provide you with additional insights into the many positive contributions that our industry makes to Canada.
Let’s work together to ensure that Canada remains a leader in telecommunications.
Thank you very much.