Canada Bearing the Fruit of Wireless Investment, but Government Proposal Threatens Growth
The CRTC’s 2017 Communications Monitoring Report1 has confirmed what most Canadians already know: consumer demand for wireless communications and Internet access continues to grow. Coupled with this demand is the expectation that Canada’s wireless networks will reach further, support faster speeds and carry more data, while at the same time be available at decreasing prices. As evidenced by the CRTC report, Canada’s wireless operators are delivering on all counts. Despite this success, some are suggesting that the Government of Canada deviate from its long-standing policies that have been instrumental in bringing these benefits to Canadian consumers. Now is the time for continued government support.
Increased Demand for Wireless
In 2016, Canada’s wireless networks served over 30.7 million Canadian wireless subscribers, an increase of 3.3%, or just over 1 million subscribers, from 2015. Mobile device penetration, and the resulting demand for wireless network capacity, also continues to increase, with the percentage of adults who own cellphones, smartphones and tablets increasing to 87% (1% increase), 77% (4% increase) and 54% (2% increase), respectively.
Not only were more Canadians using wireless networks, they were also consuming more data, with the average data usage per subscriber increasing by an impressive 24.9% from 2015 to 2016 (981MB to 1,225MB, respectively).
Broader Reach and Faster Networks
Despite the country’s large land mass, Canada’s wireless network operators have been able to build one of the best wireless infrastructures in the world. Our wireless networks reach 99% of Canadians, with the higher speeds of advanced wireless networks such as long-term evolution (LTE) and LTE-advanced (LTE-A) available to approximately 98.5% and 83% of Canadians, respectively. The number of publicly available Wi-Fi hotspot locations (free and for-pay) provided by wireless service providers also increased from 14,000 in 2014 to 27,900 in 2016. That is nearly six times the number of Tim Hortons locations in Canada, and does not include Wi-Fi hotspots made available by private businesses, such as shops and restaurants.
To meet the needs of Canadians’ increasing demand for wireless services, Canada’s facilities-based wireless operators – the national and regional service providers that pay for, build, upgrade and maintain the wireless networks –¬ have continued to invest in expanding and improving their network infrastructure. Not counting the costs of acquiring access to wireless spectrum, investments increased from $2.1 billion to $2.3 billion, an increase of 8.7%, from 2015 to 2016.
These investments are part of the close to $45 billion invested by wireless networks operators over the years to build Canada’s wireless infrastructure. And even with 99% of Canadians having access to wireless services, the demand for further investment does not end. Facilities-based wireless operators continue to invest to deliver wireless services to the remaining 1% of Canadians, to update networks to the most current and fastest technologies, and to prepare Canada for the revolutionary impact of the next generation of wireless networks known as 5G.
Despite the fact that Canada’s wireless network operators invest billions of dollars each year into expanding and improving their services, the CRTC report shows that prices for service offerings are decreasing. For example, in its review of four progressively larger “baskets” of service offerings, the CRTC found that the average price in urban and rural areas for the mobile service plans in baskets 1, 2 and 3 declined by 15% from 2013 to 2015, while the price for the largest 4th basket increased slightly by 2% from 2014 to 2015 (or roughly the rate of inflation).
The Importance of Facilities-Based Competition and the Looming Threat
The increasing use and adoption of wireless communications and Internet use by Canadians show that the Canadian government’s long-standing policy of encouraging facilities-based competition is working. Only through significant investment by both incumbent network operators and new entrants have Canadians been able to enjoy some of the world’s best wireless networks, and only through continued investment will Canadians’ increasing demands for wireless communications and Internet use be met. Yet despite the success of its facilities-based competition policies, the Government of Canada is considering steps that would give resellers, which are companies that do not own or invest in building or improving wireless networks, mandated access to the networks of the facilities-based wireless operators.
As Martin Masse and Paul Beaudry of the Montreal Economic Institute (MEI) state in their Economic Note2 issued the same day as the CRTC report, such a measure would create “a new category of privileged players protected from competitive pressure”, who are not required to invest in building and maintaining Canada’s important wireless networks. Doing so would provide a disincentive to facilities-based operators when considering future investments. New entrant operators, who have been encouraged by the government’s current policies to make significant investments in wireless infrastructure in order to enhance competition in the marketplace, would especially be impacted. They are continuing to establish themselves in their markets and would be faced by an onslaught of resellers who are not required to make any investment in infrastructure and against whom they would have to compete.
As Masse and Beaudry conclude, the alleged need for the proposed change is based on misleading international comparisons and is not justified. As evidenced by the CRTC report, facilities-based competition is working. More Canadians are using wireless, consuming more data and on the fastest networks. Deviating from its long-standing policies to favour a special class of company that will not contribute to the continuing success of Canadian wireless networks risks slowing investment in innovation and negatively impacting Canadians’ access to the best wireless networks.
2Wireless Services: Should Regulation Favour Resellers? by Martin Masse and Paul Beaudry – https://www.iedm.org/75615-wireless-services-should-regulation-favour-resellers