Fighting inflation one gigabyte at a time

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It is no secret that Canadians have been feeling a pinch in their wallets. According to Statistics Canada, the overall Consumer Price Index has surged by 18.5% over the past five years, while categories like food, shelter, and vehicles have seen even steeper price hikes of 26%, 25%, and 20% respectively. Yet in this period of heightened inflation, there is a notable exception – the price of telecommunications services.

Statistics Canada reports that cellular service prices in Canada have plummeted by a staggering 47% over the past five years. The agency also cites telephone services (comprised of landline and cellular service) as one of the main downward contributors to inflation. Prices for internet access services have dropped by almost 8% during this period.

Some skeptics might raise an eyebrow and argue that these price drops are too good to be true, but the evidence is clear. You only have to return to 2019, when a 1GB mobile data plan cost nearly $65 a month. Fast-forward to today, and many providers offer $65 wireless plans with 75GB of 5G data. Among many other options on the market, plans for 50GB to 60GB range from about $34 to $50 at the time of publication. Any way you look at it, telecom prices are lower than in previous years—and not just by a little.

In contrast to declining prices in Canada, respective government statistics show that prices for wireless services in the U.S. and the U.K. have increased by 1.5% and 24.4% over the same period.

Why this disconnect? Why do some Canadians, including politicians, have difficulty believing that telecom prices in Canada have declined? For some, it is merely a case of political convenience. For others, it is easier to cling to the stories they are used to, even when the stories no longer match the evidence.

However, to enact policies that benefit Canadians, we must first acknowledge the facts and understand which approaches helped produce these results. The answer can be found in investment-driven competition.

Canadian policymakers’ longstanding preference for promoting competition among network operators, also known as facilities-based competition, has fostered the high level of investment required to make Canada’s telecommunications networks among the best in the world while also driving competition among network operators to offer Canadians more value for their dollar.

The Competition Bureau has described the benefits of facilities-based competition as follows: “This type of dynamic competition benefits competition in at least two ways. First, it is logical that better networks provide better results for consumers…. Second, … companies have a strong incentive to compete hard and win customers in order to generate revenues sufficient to recoup those investments.”

In other words, facilities-based competition has resulted in better networks and lower prices. Over the last five years, while prices have been declining, calculations by the Canadian Telecommunications Association—based on data from international network analyst firm Opensignal and the CRTC—found that average mobile download speeds have increased by 90% and average download speeds for fixed internet access services have grown by 162%.

These are remarkable feats considering Canada’s challenging terrain and large size, which make network infrastructure development costly and complex.

But the need for investment is ongoing. While most Canadians can access mobile wireless and high-speed broadband services, some communities remain unconnected or require enhancements to existing services. Even more investment is needed to expand networks and implement new ways of connecting, like cellphone-to-satellite communications.

Significant investments must also be made to strengthen networks against an increase in severe weather events to ensure Canadians can access services when they need them most.

Ensuring these investments are made is, in large part, the responsibility of telecom policymakers, who must maintain a regulatory environment that fosters private-sector investment. The evidence shows that policies acknowledging the importance of facilities-based competition deliver investment-driven positive outcomes, such as coverage, quality, and lower prices.

Ignoring the facts because they don’t match a preferred narrative or outdated beliefs increases the chances of policies being enacted that will discourage investment, deprive Canadians of access to advanced telecom services, and harm the Canadian economy. Canadians deserve a thoughtful and evidence-based approach to telecom policymaking. Let’s start with the facts.

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, March 18, 2024]