At what point does a policy framework designed to lower prices undermine the telecom investment upon which it ultimately depends? Has Canada crossed that line?
I continue to ask such questions in light of data that continues to show a sharp decline in capital investment by Canadian telecommunications providers, as well as the recent GSMA report (which was the subject of a Telecom Trends post last week).
For years, Canadian telecom policy has been guided by an objective to make communications services more affordable. By many measures, regulators and policymakers have succeeded. Wireless prices are down, competition has intensified, consumers enjoy more choice.
Affordability is only one measure of success. Nearly a decade ago, I wrote about the need to balance “quality, coverage, and price.”
Telecommunications is a capital-intensive industry. Networks don’t improve on their own. Networks don’t expand on their own. Networks are built with telecom investment.
Expanding fibre coverage, deploying 5G, increasing capacity, strengthening resilience, and building next-generation networks all require billions of dollars of ongoing investment. Capital spending is how we pay for “quality”, and “coverage” in the telecom policy balancing act.
That is why the pattern of declining telecom investment should be raising alarm bells.
The CRTC’s own data shows that capital investment has been falling. The question is “why”.
To be sure, regulation is not the only factor. Interest rates, economic uncertainty, market maturity, the completion of major fibre and 5G buildouts, and broader business conditions all impact investment decisions. But, it would be surprising if regulatory policy played no role.
Over the past several years, governments and regulators have consistently prioritized lower prices and expanded wholesale access to existing networks. Those objectives are understandable and politically popular. Yet policies that make it easier for competitors to use infrastructure built by others can also reduce the incentives for facilities-based investment.
Investors pay close attention to those signals from government policy makers and regulators. If expected returns decline, investment tends to decline as well.
This creates an uncomfortable paradox. Those policies intended to help consumers today may inadvertently weaken those incentives needed to build the networks upon which consumers will depend tomorrow.
The consequences may not be immediately felt. Canada continues to benefit from extensive fibre deployment, widespread 5G coverage, and generally high-performing networks. But, the impact will become more apparent over time.
The consequences will be seen in slower upgrades, delayed rural expansion, lower network resilience, and diminished competitiveness in the years ahead. When demand for connectivity continues to grow, driven by cloud computing, streaming, artificial intelligence, and connected devices, sustained declines in investment should not be dismissed as a footnote to the Communications Monitoring Reports.
Too often, investment incentives and disincentives disappear from the policy conversation, or are paid lip service.
At last week’s Canadian Chapter of the International Institute of Communication’s annual conference, the CRTC Chair said:
The infrastructure matters. The rules governing access and competition matter. But ultimately, what matters is whether the system works — whether it connects Canadians, supports businesses and communities, and delivers reliable, affordable services that people can depend on.
The CRTC will continue to do its part: listening to Canadians and industry, making evidence-based decisions, and assessing whether those decisions are achieving their intended results.
The challenge is not to choose between strong networks and strong consumer outcomes. It is to create the conditions for both.
Unfortunately, the CRTC has not responded to a number of years of evidence demonstrating sharp declines in telecom investment.
Price reductions generate headlines; reductions in telecom investment rarely does, despite its role as the foundation upon which future affordability, innovation, and network performance ultimately depend.
Canadians deserve affordable telecommunications services. That should never be in dispute. But, if capital spending continues to fall, policymakers may need to ask whether their dogged pursuit of lower prices has weakened the incentives for telecom investment that made Canada’s world-class networks possible in the first place.
Competition can be mandated. Investment cannot.