CWTA President and CEO, Robert Ghiz, Keynote Remarks at the 2019 Canadian Telecom Summit
Robert Ghiz, CWTA President & CEO
Keynote: The State of Wireless
The Canadian Telecom Summit, Toronto – June 4, 2019
2:15 to 2:45 p.m.
Thank you, and good afternoon, everyone. It is great to be back with you at the Canadian Telecom Summit. Today marks my third opportunity to address this event, and it is something that I look forward to each year.
Since joining CWTA in 2017, I have met with people from all over the world to discuss the many opportunities and issues present in the mobile wireless industry. Some of these meetings occur at industry events or formal meetings. But the most interesting discussions occur a bit randomly.
A few months ago my wife and I met another couple, both of whom are doctors in Quebec. The male doctor was originally from the UK, but after meeting his French Canadian wife at a medical conference, he learned French and moved to Canada. As we chatted, I learned that he is quite an interesting guy. For example, he told us the story of how he attempted to row solo across the Atlantic Ocean. He was making good progress, but having travelled about 3 quarters of the way; he had to call for a helicopter to pick him up from the middle of the ocean. It was not that he was in any physical trouble, nor was he experiencing mechanical difficulties. Rather, he was going to be late for a mountain climbing expedition he had planned, so he had to abort the rowing adventure.
After he told me all of this, he looked at me and asked, “So Rob, what do you do?” Needless to say, I couldn’t match his stories of adventure, but after telling him a bit about my time as Premier of P.E.I., I mentioned my role with CWTA. That led to a discussion about our industry, and some of the pushback or doubt I receive when I try to explain to people in Canada just how good Canada’s wireless networks and services are compared to wireless services in other countries. He couldn’t believe what I was saying and told me how he has travelled all over the world, and how happy he is when he gets back to Canada and is able to return to great wireless service.
Now, not many people I run into tell me stories about their rowing trip across the Atlantic Ocean. But the part about our wireless networks, I can assure you, that is not an isolated story. Time and time again, when I meet with people from outside Canada, whether they are industry representatives, members of government, or private citizens, one of the first things they tell me is how fortunate Canadians are to have such high quality and far-reaching mobile wireless services.
It isn’t just anecdotes. The statistics tell the same story.
Not only are Canada’s mobile wireless networks ranked 2nd in the world in terms of download speeds, they are 152% faster than the global average, and 91% faster than the United States. And while speed is important, consistency of speed is equally important. It is little comfort to have networks that are fast at 2am, but are dramatically slower during normal business hours. In a February 2019 report OpenSignal observed that Canada is 2nd in the world when it comes to having the smallest difference between the fastest and slowest network speeds during the course of the day. In the words of OpenSignal, Canada is “not only among the fastest countries in [their] analysis but also the most consistent”.
Equally impressive, the CRTC reports that as of 2018, LTE networks are available to 99 per cent of Canadians, while LTE-Advanced networks, which offer even higher speeds, are available to 92 per cent of Canadians. When you consider how large Canada is, and the great diversity of geography and topography that exists from coast to coast, the deployment of advanced networks to this many Canadians is a truly astounding and incredible achievement.
So why is this important? Why does it matter that Canada has some of the best performing and most far-reaching mobile wireless networks in the world? The answer is quite simple. Canada’s mobile wireless networks drive Canada’s economy. Businesses, governments, universities and colleges, hospitals, private citizens; they all depend on wireless telecommunications to do what they do every day. An economist would say they offer and consume innovative new services and, increase the nation’s productivity. For my part, I would just say that wireless is part of life in Canada.
You would be hard-pressed to find a sector of our economy that does not rely on wireless communications. Retail, banking, healthcare, transportation, mining, oil and gas, media – the list goes on. The fact that Canada has some of the best mobile wireless networks in the world, built by Canadian companies, employing thousands of highly-skilled Canadians, is vitally important, and should be a source of pride for all Canadians.
But Canada did not become a world leader in wireless by accident or by luck. Our world-class networks are the result of the hard work and ingenuity of Canadians, and the billions of dollars invested by Canadian facilities-based wireless operators.
Canada’s facilities-based wireless carriers have invested over $50 billion in building, expanding and upgrading Canada’s wireless networks. Just last year, they invested approximately $3 billion in wireless infrastructure, an increase of 7.7% compared to 2017.
In addition to infrastructure, our facilities-based carriers have made massive investments in acquiring the rights to use radio spectrum. To date, they have spent over $17 billion dollars in acquiring spectrum licenses from the Government of Canada, and hundreds of millions more in annual spectrum license fees.
And finally, Canada’s wireless industry continues to invest heavily in research and development. In addition to the R&D spending by equipment and technology vendors, Canada’s facilities-based carriers make significant investments in innovation each year. In 2017, the 3 largest facilities-based telecommunications companies invested approximately $1.2 billion on research and development. That represents almost 10% of the total amount of R&D spending by the top 100 corporate R&D spenders in Canada.
And while these investments have resulted in Canada having world-class wireless services, our work is far from over. First, while the vast majority of Canadians have access to LTE networks, there remain some who are underserved. That is why Canada’s facilities-based carriers continue to invest heavily in expanding the reach of their networks.
Second, the exciting world of 5G is upon us. Much has been said and written about 5G. In fact, some people may be getting a bit tired of hearing about 5G and are beginning to wonder if 5G will live up to the hype. We hear about 5G and autonomous vehicles or downloading movies in seconds, but these examples are not the real drivers of 5G. 5G is coming because 5G is necessary.
While 4G will be with us for many more years, we are fast approaching its technical limits. For example, let’s look at network capacity demands. As of the end of Q1 2019, there were over 33 million mobile subscribers in Canada; almost 2 million more subscribers than we had at the beginning of 2018. According to the CRTC, in 2017 Canadian mobile subscribers consumed 37.6% more data per month than in 2016 – this was 163% more monthly data than 2014.
Cisco estimates that mobile data traffic in Canada will grow 4-fold from 2017 to 2022; a compound annual growth rate of 34%. Cisco also predicts that by 2022, mobile data traffic in Canada will be equivalent to 2x the volume of what the entire Canadian internet was in 2005.
These growth rates are incredible. What other industry today can forecast a 400 per cent increase in demand out to 2022? Canada’s wireless networks are powerful, and they are resilient, but in future years, without new technologies LTE networks in some of parts of the country may struggle to keep up with demand.
Fortunately, our wireless providers and equipment vendors have some tricks up of their sleeves. By investing in innovative spectrum management techniques and equipment, such as LTE tuning and massive MIMO, our facilities-based operators will be able to obtain even more capacity and performance from their 4G networks.
But even with all of the innovation and the skills of our talented engineers and planners, upgrades to 4G will only get us so far. If we were to do nothing else, we would eventually hit a ceiling. Fortunately, we have 5G. 5G will utilize low, mid, and high-band spectrum to provide a range of network services, including greater throughput, or capacity. It will do so by using the higher capacity mid-band spectrum and the even higher capacity millimeter Wave spectrum.
Another limitation of 4G is that it cannot be used for mission-critical applications that require single-digit millisecond latency. For example, using a live video feed to maneuver a drone requires real-time and ultra-reliable connectivity. The same is true if a doctor were to perform a medical procedure on a patient from a remote location. In these cases, we would not only need high capacity spectrum, we would also need ultra-low latency, which will be a key benefit of 5G networks.
These are just examples of why we need 5G. But I hope my point is made. 5G is not an option. It is something we need. It is crucial to meet the needs of Canadians; not only in terms of data consumption, but also to enable new ways to do business, provide services, and increase our nation’s overall productivity and economic prosperity.
What does this increased productivity and economic prosperity look like? Last year we asked Accenture to assess the economic impact of 5G in Canada. The results were eye-opening. Accenture estimates that by 2026, 5G will contribute an additional $40 billion to Canada’s GDP. During that same time it will result in the creation of approximately 250,000 permanent full-time jobs, and approximately 150,000 non-permanent jobs. 5G will make Canadian businesses more productive, while allowing Canadians to do much more with wireless.
But 5G and the resulting benefits will not happen on their own. Accenture estimates that the capex requirement for the initial roll-out of 5G will be $26 billion between 2020 and 2026. This does not include the cost of acquiring spectrum.
We saw in March of this year nearly $3.5 billion spent by our facilities-based carriers in the 600 Mhz spectrum auction. Next year we will see the very important 3500 Mhz spectrum go to auction; then in 2021 there will be an auction for millimetre wave spectrum. When you include the cost of this spectrum to the estimated capital investment to deploy 5G networks, plus the capital investment required to extend network coverage to more Canadians, we are looking at a massive amount of money.
Fortunately, our Canadian facilities-based carriers are up to the task. They have done it before. I’ve already listed the investments they have made to build our existing world-class networks. But they did not do it in a vacuum. They were able to make these investments because successive governments recognized the importance of having policies that encourage investment in wireless infrastructure.
During this same period, some countries took a different approach. Instead of prioritizing the long term health of their telecom markets, they required network operators to give companies that do not invest in network infrastructure access to their networks at discounted prices. The results should have been predicted. The investment capacity of the facilities-based carriers declined, network building slowed, and network quality did not keep pace with that of their global counterparts.
Now many of these countries are desperately reversing course and are eagerly trying to find ways to encourage spending on network infrastructure, so that they do not fall further behind as 5G is being introduced elsewhere.
Despite the clear evidence here and afar of the importance of having policies that encourage investment in network infrastructure, policymakers in Canada are now considering changes to the regulatory framework for mobile wireless services that would follow the failed examples in other countries I just cited.
I want to be clear: we all want all Canadians to have access to advanced telecommunication services at reasonable prices. Or put more simply: quality, coverage and reasonable prices. Who would question these objectives? I don’t. What I do question is the idea that we need a radical change to our regulatory framework to achieve these outcomes.
In Canada, our policy has been based on facilities-based competition. This approach was built on the understanding that facilities-based competition is the only market structure capable of delivering sustainable competition and encouraging the level of investment in network infrastructure that is necessary to achieve quality, coverage and reasonable prices in a country with our unique attributes. This policy has served Canada well.
As I have said, policies that encourage investment have made Canada a leader in quality and coverage, and that they will be needed to further the expansion of Canada’s networks and the introduction of 5G. But these policies have done more than give us great networks and great coverage. They have also been instrumental in the development of sustainable competition that has led to lower prices.
In Canada, we have 3 national providers. But we also have regional facilities-based new entrants. All have been encouraged by Government policies that recognize the importance of facilities-based competition. They have made, and continue to make, significant investments in acquiring spectrum and building and expanding their wireless networks. A very recent example is the significant sum that the regional providers spent acquiring spectrum licenses in the 600Mhz spectrum auction. Having this spectrum will allow regional providers to expand their networks into new markets, reaching an even greater number of Canadians.
In building out their own independent networks, regional providers have entered markets with lower prices and innovative service offerings, which in turn have been aggressively matched by offers from the national providers. These activities have led to a significant downward trend in prices, including – according to Statistics Canada – a 53.6% decline in mobile wireless prices from Q1 2014 to Q2 2018.
On most any given day you can look at one of the websites that tracks wireless plan offerings and see over 70 different market promotions from at least 17 different providers and brands; each offering some type of bonus data, discount, or other promotion.
For more evidence of choice and competition, look at the growing success the regional providers have found in attracting subscribers. In fact, in Q1 of 2019, Freedom and Videotron attracted the majority, 84 per cent, of all net new wireless subscribers in Canada.
Despite this momentum, the regional providers are still in the process of establishing themselves in their markets. Important milestones, like the finalization of the wholesale roaming tariffs and the 600Mhz spectrum auction have just recently been completed. Auctions of mid and high band spectrum are approaching. We are just starting to see the power and impact of our regional providers. After they’ve invested billions, now is not the time to, basically, pull the rug out from under them.
This brings to mind my doctor friend again, and something doctors like to tell you – the importance of taking your medication until it is finished. You have all probably heard that from a doctor at one time or another. I know I have – you know, you have a sore throat, here are seven days’ worth of antibiotics. You take the medication. But you feel better after four days, so you stop taking the pills…and you get sick again.
Nobody wants to see Canada fall backwards because we didn’t finish the treatment. Deviating from policies that prefer facilities-based competition, policies that have enabled world-class wireless quality and coverage, as well as a significant downward trend in prices, will interrupt this positive momentum.
Introducing policies that force the national wireless providers to sell access to their networks at discounted rates to companies that do not invest at all will negatively impact all facilities-based providers’ capacity to invest in the expansion and upgrading of Canada’s wireless network infrastructure. How much would you spend to improve your business when you know you will be forced to share the improvements with your competitors?
If we go down this road, Canada’s regional providers would be hit the hardest; the very companies that governments have been trying to encourage, and who have made important contributions to sustainable competition and lowering prices in Canada.
Having invested significant sums to build their networks, Canada’s regional providers would be forced to compete with companies that do not have to make any investments. This would make it harder to recover the investments they have already made and force them to reconsider their plans for future investments in network infrastructure. Their ability to continue to contribute as a sustainable alternative to the national providers would be threatened.
This would harm Canadians who live in urban areas, but hit Canadians who live in rural areas even more. Canada is a vast and diverse country. The rural regions of this country are a cornerstone of our economy and our social fabric. Our thriving, growing urban centres are built in no small part on the foundation of rural economic activities, from food and agriculture to resource and tourism. Providing advanced wireless services to Canadians in rural areas is important today, and will be just as critical in the future 5G wireless world.
A policy change that strangles investment will have a major impact on Canadians who live in rural areas. The investments necessary to bring connectivity to many less-populated areas would not be viable if the companies that build the networks are forced to turn around and give access, at discounted prices, to companies who make no network investment.
At a time when governments at all levels are seeking ways they can help address the urban/rural digital divide, it is astounding to me that we would consider implementing policies that will only make the problem worse. Who will tell Canadians who do not yet have connectivity, or that are waiting for network upgrades, that their needs were sacrificed for the hope that a change in policy might deliver marginally lower prices to Canadians in major urban centres?
This is a crucial time for Canada and Canada’s wireless industry. Canadians are being told by policy makers that if we do not take the right measures to compete in the digital economy Canada will be left behind. We are being told that connecting all Canadians, whether through wired or wireless technologies, is a priority of the highest order. Canada has an ambitious innovation agenda to be leaders in areas like artificial intelligence and 5G.
CWTA and its members want the same things. But to reach these goals, our nation needs investment, not short-cuts.
I have served in public office. I understand the pressures involved, and I know first-hand how those pressures can build when election-time comes. As an elected leader, you want long-term success for the citizens you represent. But you also want to help them as quickly as you can. Sometimes, that leads to you towards a “quick-fix”, something that will just get you through the next little while. A short-cut.
We cannot let that happen in Canadian wireless. We need to let the policies that are already working keep working. Canada’s facilities-based wireless providers must be able to continue to invest in Canada’s wireless infrastructure; the backbone of our digital economy. And in order to do that we need to continue policies that make such investments possible. We have come a long way. We have found great success. And it’s getting even better. Let’s work together. Let’s invest in Canada’s future.
– End of Remarks –