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4 May 2017May 4, 2017

The State of Competition in Canada’s Telecommunications Industry – 2017

Research Paper analyzing various aspects of the Canadian telecommunications industry related to competition

The State of Competition in Canada’s Telecommunications Industry – 2017

The advent of the Internet of Things (IoT), which will soon revolutionize every aspect of our economy and our lives, will force Ottawa to reconsider its telecommunications priorities and policies, argues the 2017 edition of The State of Competition in Canada’s Telecommunications Industry, published by the MEI.

Media release: Telecommunications: Ottawa must not hold back the 4th industrial revolution
 

Related Content

The CRTC is not ready for the Internet of Things (The Globe and Mail, May 22, 2017)    

 

The 2017 edition of The State of Competition in Canada’s Telecommunications Industry was prepared by Martin Masse, Senior Writer and Editor at the MEI, and Paul Beaudry, Associate Researcher at the MEI.

Highlights

The 2016 edition of this report argued, among other things, against the federal government and the CRTC intervening in the broadband sector as they have in the wireless sector. It also explained why facilities-based competition, as opposed to service-based competition, is the best way to spur innovation. Here are some highlights from this year’s edition.

Chapter 1 − How Does Canada Measure Up?

 

  • Canadians continue to enjoy competitive, quality telecommunications services, and are among the biggest consumers of telecommunications services in the world.
  • Penetration and usage rates for tablets, smartphones, and LTE connections are among the highest for industrialized countries.
  • Canadians continue to enjoy some of the most advanced and efficient wireless and broadband Inter-net services in the world.
  • The prices Canadians pay for wireless services remain generally higher than in Europe and in Australia, but comparable to or lower than in the United States and Japan. However, Canada ranks first in terms of affordability when taking into account income per capita and the state of competition in the market.
  • Considering the additional costs associated with the Canadian market’s low density of users per km2, Canada fares relatively well both in terms of prices and in terms of the quality of services offered.

Chapter 2 − Recent Developments in Canada’s Telecom Sector

  • The headline-grabber of the past year was undoubtedly the May 2016 announcement of BCE’s acquisition of Manitoba Telecom Services Inc. (MTS), the former provincial monopoly and dominant player in Manitoba.
  • As the transaction included the sale of about one-third of MTS’s Manitoba customer base to TELUS, it would allow both Bell and TELUS to become important wireless players in Manitoba. This could lead to more real competition in Manitoba, not less.
  • In February 2017, the Competition Bureau announced that it had cleared the transaction. As many had predicted, regulatory clearance was conditional on Bell’s divestiture of spectrum, stores, and subscribers to a fourth player.
  • However, the beneficiary of these divestitures was not Shaw, as expected, but Xplornet, a rural Internet provider with activities across Canada, yet with no previous involvement in the wireless market.
  • On March 1st, 2017, the CRTC issued another decision to sanction Ice Wireless for having “improperly allowed the end-users of [Sugar Mobile] to obtain permanent, rather than incidental, access to [the Rogers] cellular network.”
  • This is in line with its 2015 decision regarding the right of smaller carriers with less extensive infrastructure—but not of resellers—to access the Bell, TELUS, and Rogers networks.
  • Finally, the CRTC chose to release its much-awaited decision on basic telecommunications services a few days before Christmas 2016, setting a goal of giving all Canadians access to download speeds of at least 50 megabits per second (Mbps) and upload speeds of at least 10 Mbps.
  • To achieve this goal, the CRTC announced a fund of $750 million over five years to finance high-speed Internet infrastructure in rural and remote areas of the country where such services are not yet available. This fund will be paid for by Internet service providers, but the cost will ultimately be passed on to consumers.

Chapter 3 − Assessing the 2006 Policy Direction: The Good, the Bad, and the Ugly

  • In 2006, the government issued a Policy Direction which, among other things, directed the CRTC to rely on market forces as much as possible in exercising its powers and performing its duties.
  • For a while, it seemed like the CRTC took the principles of the Policy Direction seriously, launching a comprehensive review of over 80 telecommunications regulations and subsequently removing or streamlining 60% of those regulations.
  • Furthermore, the CRTC accelerated the deregulation of retail telecom services when such services faced sufficient competition or when doing so was consistent with the Canadian telecommunications policy objectives.
  • Unfortunately, the CRTC has since then largely gone back to its old interventionist ways, as with its 2015 decision mandating the sharing of next-generation networks with market players who made little if any infrastructure investments.
  • Another noteworthy example is the Wireless Code’s ban on wireless contracts featuring a device subsidy spread over a period of more than 24 months, which limits consumer choices and can have a particularly negative effect on consumers with modest means.
  • The blame for the lax enforcement of the principles enshrined in the Policy Direction lies not only with the CRTC, but also with the Harper government, which embraced a more interventionist telecom policy agenda and sent mixed messages to the regulator.
  • The most blatant example of this interventionism may be the federal government’s reaction to the CRTC’s 2011 decision on usage-based billing (UBB), in which it pressured the regulator to allow small ISPs to continue to purchase unlimited amounts of data at a regulated fixed price, an unsustainable practice that interferes excessively with market forces.

Chapter 4 − The Internet of Things and the New Competitive Environment

  • The Internet of Things (IoT), which is now at a stage of development similar to that of the Internet itself in the early 1990s, is growing fast and is set to revolutionize every aspect of our economy and our lives within a few years.
  • The home of the future will have appliances, heating units, lights, security systems, etc., connected to a network that home owners will be able to control remotely. Patients will have body sensors that will monitor their blood pressure, heart rate, or sugar level in real time so that their physician can be alerted if their health deteriorates.
  • Studies about the development of the Internet of Things forecast extremely rapid growth in the years to come, with estimated worldwide IoT spending growing from US$737 billion in 2016 to US$1.29 trillion in 2020.
  • The rising importance of the Internet of Things reinforces arguments against measures designed to prop up small players at the expense of strong facilities-based providers.
  • The next generation of wireless networks, 5G, is expected to make all kinds of IoT solutions easier to implement because of much faster speeds, reduced latency, and more flexible protocols for connections. The deployment of this new technology in Canada over the coming years will once again require billions of dollars in investments.
  • Only large national (Bell, TELUS, Rogers) and regional (Videotron, Shaw, Eastlink, SaskTel) providers have the means to invest in the wireline and wireless infrastructure that will be required to keep up with IoT developments.
  • The development of the Internet of Things will bring to the fore a whole new set of situations in which it may be necessary to treat customers, devices, applications, or platforms differently, and only the carriers that own the infrastructure will be able to manage their networks so as to meet these complex needs.
  • If pursued going forward, policies aimed at propping up undercapitalized wireless players and broadband resellers may well slow down the development of the Internet of Things and harm the Canadian economy.

Introduction

For each of the past three years, The State of Competition in Canada’s Telecommunications Industry has assessed how Canada measured up with other jurisdictions regarding the quality and pricing of its telecommunications services. The report has also evaluated how competition was faring in key areas of the Canadian telecommunications market, and provided a critical assessment of Canada’s legislative and regulatory framework for this industry.

One of the primary motivations for the publication of the first three editions of this Research Paper was that many Canadians are, in our opinion, under the mistaken impression that Canada’s telecommunications industry compares poorly with that of other jurisdictions.

Our report has attempted to dispel the notion that Canadians pay uncompetitive prices for low quality services. It has also argued that the federal government’s and the CRTC’s interventions in the wireless and wireline sectors aiming to increase the number of players through indirect subsidies and mandated access were not likely to have the intended effects and might jeopardize investments and innovation. Instead of these interventions, the report has argued that the government should liberalize its policies on spectrum transfer and the mandatory sharing of broadband networks, and recognize the role of innovation in assessing the level of competition that exists in a dynamic market.

This fourth edition continues to explore these themes. Chapter 1 provides updated statistics regarding the performance of the Canadian telecommunications industry compared with other jurisdictions.

Chapter 2 describes some recent developments in Canada’s telecom sector, namely BCE’s acquisition of Manitoba Telecom Services, the CRTC’s decision to sanction Ice Wireless, and the CRTC’s decision on basic telecommunications services.

Chapter 3 looks back, ten years later, at the 2006 Policy Direction which, among other things, directed the CRTC to rely on market forces as much as possible in exercising its powers and performing its duties.

Finally, Chapter 4 argues that only large, facilities-based competitors will be able to make the necessary investments in networks required by the burgeoning Internet of Things, and that only they will be able to manage those networks to answer the complex needs of this new sector.

Read the Research Paper in PDF format only...

The 2017 edition of The State of Competition in Canada’s Telecommunications Industry was prepared by Martin Masse, Senior Writer and Editor at the MEI, and Paul Beaudry, Associate Researcher at the MEI.

Highlights

The 2016 edition of this report argued, among other things, against the federal government and the CRTC intervening in the broadband sector as they have in the wireless sector. It also explained why facilities-based competition, as opposed to service-based competition, is the best way to spur innovation. Here are some highlights from this year’s edition.

Chapter 1 − How Does Canada Measure Up?

  • Canadians continue to enjoy competitive, quality telecommunications services, and are among the biggest consumers of telecommunications services in the world.
  • Penetration and usage rates for tablets, smartphones, and LTE connections are among the highest for industrialized countries.
  • Canadians continue to enjoy some of the most advanced and efficient wireless and broadband Inter-net services in the world.
  • The prices Canadians pay for wireless services remain generally higher than in Europe and in Australia, but comparable to or lower than in the United States and Japan. However, Canada ranks first in terms of affordability when taking into account income per capita and the state of competition in the market.
  • Considering the additional costs associated with the Canadian market’s low density of users per km2, Canada fares relatively well both in terms of prices and in terms of the quality of services offered.

Chapter 2 − Recent Developments in Canada’s Telecom Sector

  • The headline-grabber of the past year was undoubtedly the May 2016 announcement of BCE’s acquisition of Manitoba Telecom Services Inc. (MTS), the former provincial monopoly and dominant player in Manitoba.
  • As the transaction included the sale of about one-third of MTS’s Manitoba customer base to TELUS, it would allow both Bell and TELUS to become important wireless players in Manitoba. This could lead to more real competition in Manitoba, not less.
  • In February 2017, the Competition Bureau announced that it had cleared the transaction. As many had predicted, regulatory clearance was conditional on Bell’s divestiture of spectrum, stores, and subscribers to a fourth player.
  • However, the beneficiary of these divestitures was not Shaw, as expected, but Xplornet, a rural Internet provider with activities across Canada, yet with no previous involvement in the wireless market.
  • On March 1st, 2017, the CRTC issued another decision to sanction Ice Wireless for having “improperly allowed the end-users of [Sugar Mobile] to obtain permanent, rather than incidental, access to [the Rogers] cellular network.”
  • This is in line with its 2015 decision regarding the right of smaller carriers with less extensive infrastructure—but not of resellers—to access the Bell, TELUS, and Rogers networks.
  • Finally, the CRTC chose to release its much-awaited decision on basic telecommunications services a few days before Christmas 2016, setting a goal of giving all Canadians access to download speeds of at least 50 megabits per second (Mbps) and upload speeds of at least 10 Mbps.
  • To achieve this goal, the CRTC announced a fund of $750 million over five years to finance high-speed Internet infrastructure in rural and remote areas of the country where such services are not yet available. This fund will be paid for by Internet service providers, but the cost will ultimately be passed on to consumers.

Chapter 3 − Assessing the 2006 Policy Direction: The Good, the Bad, and the Ugly

  • In 2006, the government issued a Policy Direction which, among other things, directed the CRTC to rely on market forces as much as possible in exercising its powers and performing its duties.
  • For a while, it seemed like the CRTC took the principles of the Policy Direction seriously, launching a comprehensive review of over 80 telecommunications regulations and subsequently removing or streamlining 60% of those regulations.
  • Furthermore, the CRTC accelerated the deregulation of retail telecom services when such services faced sufficient competition or when doing so was consistent with the Canadian telecommunications policy objectives.
  • Unfortunately, the CRTC has since then largely gone back to its old interventionist ways, as with its 2015 decision mandating the sharing of next-generation networks with market players who made little if any infrastructure investments.
  • Another noteworthy example is the Wireless Code’s ban on wireless contracts featuring a device subsidy spread over a period of more than 24 months, which limits consumer choices and can have a particularly negative effect on consumers with modest means.
  • The blame for the lax enforcement of the principles enshrined in the Policy Direction lies not only with the CRTC, but also with the Harper government, which embraced a more interventionist telecom policy agenda and sent mixed messages to the regulator.
  • The most blatant example of this interventionism may be the federal government’s reaction to the CRTC’s 2011 decision on usage-based billing (UBB), in which it pressured the regulator to allow small ISPs to continue to purchase unlimited amounts of data at a regulated fixed price, an unsustainable practice that interferes excessively with market forces.

Chapter 4 − The Internet of Things and the New Competitive Environment

  • The Internet of Things (IoT), which is now at a stage of development similar to that of the Internet itself in the early 1990s, is growing fast and is set to revolutionize every aspect of our economy and our lives within a few years.
  • The home of the future will have appliances, heating units, lights, security systems, etc., connected to a network that home owners will be able to control remotely. Patients will have body sensors that will monitor their blood pressure, heart rate, or sugar level in real time so that their physician can be alerted if their health deteriorates.
  • Studies about the development of the Internet of Things forecast extremely rapid growth in the years to come, with estimated worldwide IoT spending growing from US$737 billion in 2016 to US$1.29 trillion in 2020.
  • The rising importance of the Internet of Things reinforces arguments against measures designed to prop up small players at the expense of strong facilities-based providers.
  • The next generation of wireless networks, 5G, is expected to make all kinds of IoT solutions easier to implement because of much faster speeds, reduced latency, and more flexible protocols for connections. The deployment of this new technology in Canada over the coming years will once again require billions of dollars in investments.
  • Only large national (Bell, TELUS, Rogers) and regional (Videotron, Shaw, Eastlink, SaskTel) providers have the means to invest in the wireline and wireless infrastructure that will be required to keep up with IoT developments.
  • The development of the Internet of Things will bring to the fore a whole new set of situations in which it may be necessary to treat customers, devices, applications, or platforms differently, and only the carriers that own the infrastructure will be able to manage their networks so as to meet these complex needs.
  • If pursued going forward, policies aimed at propping up undercapitalized wireless players and broadband resellers may well slow down the development of the Internet of Things and harm the Canadian economy.

Introduction

For each of the past three years, The State of Competition in Canada’s Telecommunications Industry has assessed how Canada measured up with other jurisdictions regarding the quality and pricing of its telecommunications services. The report has also evaluated how competition was faring in key areas of the Canadian telecommunications market, and provided a critical assessment of Canada’s legislative and regulatory framework for this industry.

One of the primary motivations for the publication of the first three editions of this Research Paper was that many Canadians are, in our opinion, under the mistaken impression that Canada’s telecommunications industry compares poorly with that of other jurisdictions.

Our report has attempted to dispel the notion that Canadians pay uncompetitive prices for low quality services. It has also argued that the federal government’s and the CRTC’s interventions in the wireless and wireline sectors aiming to increase the number of players through indirect subsidies and mandated access were not likely to have the intended effects and might jeopardize investments and innovation. Instead of these interventions, the report has argued that the government should liberalize its policies on spectrum transfer and the mandatory sharing of broadband networks, and recognize the role of innovation in assessing the level of competition that exists in a dynamic market.

This fourth edition continues to explore these themes. Chapter 1 provides updated statistics regarding the performance of the Canadian telecommunications industry compared with other jurisdictions.

Chapter 2 describes some recent developments in Canada’s telecom sector, namely BCE’s acquisition of Manitoba Telecom Services, the CRTC’s decision to sanction Ice Wireless, and the CRTC’s decision on basic telecommunications services.

Chapter 3 looks back, ten years later, at the 2006 Policy Direction which, among other things, directed the CRTC to rely on market forces as much as possible in exercising its powers and performing its duties.

Finally, Chapter 4 argues that only large, facilities-based competitors will be able to make the necessary investments in networks required by the burgeoning Internet of Things, and that only they will be able to manage those networks to answer the complex needs of this new sector.

Read the Research Paper in PDF format only...


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