Mark Goldberg


www.mhgoldberg.com





#CTS20

When low prices constrain investment

What happens when mobile services prices get to be too low to support carriers’ investment?

Last May, I wrote about the situation in Israel with “Low prices, high cost”.

Last week, in an article written by Finland’s public broadcaster, Yle, we see indications that “4G connections are slower than a few years ago and the local differences are huge”.

According to Yle, mobile data volumes increased sharply over the past decade, but the network has been been unable to keep up. Nationally, the average peak speed of 4G connections in Finland was virtually unchanged between 2018 and 2019. “However, looking further back, speeds have fallen sharply” from 30 Mbps in 2015, to just 23 Mbps in 2019, a 25% collapse.

The source data for the report was Finland’s own Netradar. Open Signal seems to confirm these results, showing Finland at 25.19 Mbps in 1H2017, rising barely 7% to 27.0 Mbps in 2019.

By way of comparison, over the same period, Canada went from 30.58 Mbps in 2017 to 42.5 Mbps, nearly a 40% increase and moving Canada from 13th place to 3rd fastest download experience in the world.

These speeds aren’t just found in Canada’s cities; Open Signal published a report last September that said “If rural Canada were a country, it would rank 12th in our Download Speed Experience ranking, with our rural Canadian users on average seeing faster 4G download speeds than our users in Sweden, New Zealand, France, and 73 of the other countries we reported on”. Rural Canada would rank higher than Finland.

There is a cost to low prices.

Take a look at this December 2019 report from BCG’s Centre for Canada’s Future: “In the Balance: Future-proofing Canada‚Äôs digital infrastructure to unlock benefits for all” [pdf, 16.3MB].

There is a need to balance the short term voter appeal of low prices with Canada’s bigger picture economic future that needs continued investment. Canada’s communications industry have been recognized leaders at investment per capita and capital as a proportion of revenue. As seen in in my post about Israel last May and now seen with Finland, there can be a high cost to low prices.

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