If we’re going to invest in technology, in deep know-how, and bring drastic change, positive drastic change in Europe — like other large technological companies have done in the US or we’re seeing today in China — we need scale. To be able to get scale, we need to consolidate a fragmented market like the telecoms market in Europe. And for that, we need a regulation that allows us to consolidate. So what we do ask is: please unleash us. Let us gain scale. Let us invest in technology and bring upon productive change.
CNBC said a number of CEOs of European operators said they would be able to compete more effectively with only three main players per market. The article said three is the model that has “become the standard in places like the US, China and India.”
In a keynote address to MWC, Tim Höttges, CEO of German telco Deutsche Telekom said, “if we cannot increase our consumer prices, if we cannot charge the over-the-top players, we have to get efficiencies out of the scale which we created.”
If jumbo sized markets like the US, China and India have consolidated to 3 major players per market, and European operators are claiming they need to consolidate to build scale for investment, one has to ask whether Canadian policy makers can continue to hold onto a magic number of 4 players in each market.
As noted on the workshop’s website, telecommunications policy traditionally focuses on competition, affordability, digital divide and access. Far less attention has been spent on how telecom policy can be used to develop innovation and new technologies for economic growth.
It is crucial for Canada to be developing policies and strategies that support investment in digital infrastructure. Innovation and economic progress is crucial for Canada (and other countries) in the wake of global trade disruption and geopolitical challenges.
Frequent readers know that I have been calling for a refresh of Canada’s digital agenda for a long time. Late last year, when I was checking my scorecard against my 2024 policy agenda, I noticed that there was some overlap with what is planned for the workshop. I continue to have concerns about driving increased adoption. Not enough work is being done to identify (and solve) those factors that inhibit a subset of Canadians from getting online.
The half-day workshop will be held in downtown Toronto, starting with lunch at noon and running until approximately 6:00pm. Lunch will be provided and there will be a networking reception at the end of the day. In between there will be multiple keynote speakers and panel sessions looking at such questions as:
Will 6G be another “G” or just fizzle out?
How are AI and quantum communications shaping infrastructure needs?
How are big tech, application providers and telecom operators driving innovation?
Innovation, affordability and digital divide: are there trade-offs?
I’ll provide more details about the Ivey session as the agenda [download pdf] firms up. The last Ivey workshop was sold out, so be sure to make your plans to attend. I hope to see you May 21.
You may recall that last year, the CRTC released its Market report, labelled as “Annual highlights of the telecommunications sector 2022”, and as you will see, it can be found among the 2023 files on the CRTC website. This year’s edition is found among the 2025 files, but contains market data from 2023. Confused?
In the Executive Summary of the report, the CRTC recognized the importance of encouraging investment, but in some ways, it failed to draw a line between investment and the need for high EBITDA margins. The Commission wrote “A central challenge for the CRTC is to incentivize providers to invest, while allowing new competitors access to their networks to provide more affordable choices to Canadians.” The report observes that among comparator countries (Australia, France, Germany, Italy, Japan, and the United States), “Canada’s telecommunications service sector shows among the highest levels of capital expenditures.”
The CRTC’s Market Report could be more precise in its use of language to be more objective in its presentation of the data. For example, the Competition section of the Executive Summary leads with “Canada’s telecommunications industry has expanded to several Internet and cellphone service providers. However, a small group of large service providers maintain commanding market shares and continue to report high profit margins.”
What does this mean? How are we supposed to interpret this? Why start that sentence with “However”?
In Section 4.2 of the report, the CRTC states “Canadians benefit from competition when there is a range of service options and providers of various sizes competing in the market.” Can someone point me to an economics text that says an indicator of a markets level of competitiveness is the variety of size of service providers? Ted Woodhead suggests “It would appear that CRTC believes the ideal state would be to have a large group of small service providers with low market shares reporting low profit margins.”
Let’s look a little more closely at “a small group of large service providers maintain commanding market shares and continue to report high profit margins”. Later in the report, we see that “profit margins” are defined as EBITDA (earnings before interest, taxes, depreciation and amortization). The report leaves the reader with the impression that these EBITDA profit margins are too high, which ignores the actual financial challenges being faced by Canada’s facilities-based carriers. That is misleading. EBITDA, by definition, is a measure before taking into account interest, taxes, depreciation, and amortization. For capital-intensive businesses, EBITDA simply doesn’t reflect business profitability, especially in times of rising interest rates and high levels of investment.
The Executive Summary goes on to say “In the last two years, Internet and cellphone prices have declined nearly 10%, and roughly 25% respectively. However, Canadians have noted the opposite, with many seeing higher bills. This may be explained by some Canadians paying for more data and faster speeds.”
“May be explained”? Come on now. The phenomenon of higher bills is fully explained by customers choosing to buy higher value plans.
Let’s take a look at the data. In Figure 15, the CRTC shows some pretty significant changes in internet services prices between 2020 and 2024. In the case of 50 Mbps service, the monthly price dropped 27.4%; Gigabit per second services fell 35.6% during the same period. In Figure 16, the drop for the Internet Price Index over that same period is less dramatic, at 10.6%.
Prices for specific plans dropped more significantly than the Statistics Canada Internet Price Index. How do we account for the discrepancy?
Clearly, as the prices for various speeds fall, households are migrating to faster services, changing the norm. Figure 27 provides evidence of that migration. In 2020, only 1 in 12 households (8.3%) subscribed to gigabit internet service; just 3 years later, by 2023, more than a quarter of Canadian households (25.7%) subscribed to gig services.
On the wireless side, the same effect can be observed in Figure 43. The price for a 10 GB plan dropped nearly 60%, from $69.42 to $28.03. The 50 GB plan fell by more than two thirds, from $124.28 to $39.94. During the same period, Figure 55 shows a migration to higher capacity mobile plans.
Why would the CRTC cast shade over the fact that prices have gone down? Its phrase “Canadians have noted the opposite” should have been written as “Canadians have incorrectly noted the opposite”. Why would the CRTC be peddling public opinion – urban legends – along side of hard data? The facts show prices have gone down significantly. Why isn’t the CRTC clearly dispelling misperceptions about prices instead of contributing to the confusion?
If you can read past the biased commentary, the Canadian Telecommunications Market Report 2025 is a valuable collection of authoritative data. Just be prepared to read a report that was written with a not-so-hidden agenda.
In Section 16(2)c), we see that there are no ownership restrictions if the company “has annual revenues from the provision of telecommunications services in Canada that represent less than 10% of the total annual revenues, as determined by the Commission, from the provision of telecommunications services in Canada.” In Section 16(6) we see that the company can grow beyond 10% of the telecom market, as long as it grows beyond that threshold organically (ie. not by acquisition).
Earlier this week, the CRTC released the 2023 market size as $59.6B, meaning the 10% threshold is just shy of $6B. There are only 3 companies in Canada with telecom revenues exceeding 10% of the total market: Bell, Rogers, and TELUS.
Number 4 player Quebecor (Videotron) reported revenues of just over $4.8B in 2024. Other than Bell, Rogers and TELUS, foreign acquisition is permissible. A foreign-owned service provider could be built or assembled by acquisitions (up to $5.96B in revenues) and then grown.
Keep in mind that broadcasting has its own restrictions, creating a “poisoned pill” for most converged communications companies, since broadcast distribution (cable or IPTV) is regulated under the Broadcasting Act. There are various creative corporate structures that could enable a competitor to work around the broadcast issues.
What are your thoughts? Would Canada’s communications infrastructure face increased risk of disruption with lightened foreign ownership restrictions? Benefits? Risks? Are concerns real?
Please leave a comment. You don’t have to use your real name, but I do require a real email address (which won’t be posted).
It is has been about 5 years since I last wrote about regulatory arbitrage. When I have written about the subject in the past, it was in the context of telecom, with arbitragers exploiting loopholes in certain mandated rates.
However, regulatory arbitrage also applies on the broadcast side of the CRTC and it isn’t just a Canadian problem.
The article talks about differences in regulating traditional broadcasters as contrasted with unregulated streaming services. “While consumers increasingly access video content through streaming platforms subject to minimal oversight, legacy media providers continue to operate under restrictive regulatory frameworks designed for a bygone era. This regulatory asymmetry creates economic inefficiencies and distorts competition.”
Sounds familiar, right? Canadians wouldn’t know that the author, Eric Fruits of the International Center for Law and Economics, was talking about FCC regulations in this article, rather than the CRTC.
“The inefficiencies of regulatory arbitrage multiply when different services that serve similar functions—such as broadcast, cable, and streaming—are regulated under different frameworks. As technologies converge, disparities among the regimes erected to regulate those technologies become increasingly problematic.”
There are two ways to address the regulatory imbalance: one could lessen the regulatory burden on legacy broadcasters now that streaming services are in a position to discipline the market; or, one could increase the level of regulation on the streaming services. Canada has been moving toward option two – adding fees and content regulations to streaming services.
Of course, increased regulation of streaming services is bound to have a deleterious impact on innovation.
Dr. Fruits writes that regulatory arbitrage won’t improve economic welfare if it shifts investments based on regulatory considerations, rather than marketplace conditions. As an example, he cites the migration of certain premium content from broadcast and cable to streaming services being driven only partly by consumer preferences. He says it’s being influenced by the advantages of operating in the less-regulated online space.
ICLE is participating in the CRTC’s public notice, “The Path Forward – Working towards a sustainable Canadian broadcasting system” [2025-2], with a public hearing scheduled for May 12. Its submission sets out a belief that a framework emphasizing “market efficiency, competition, and regulatory proportionality supports the need for deregulation and light-touch solutions.”
As an example, ICLE looks at the 1:1 rule, which requires BDUs to distribute an independent programming service for each affiliated service carried.
With near-guaranteed carriage, independent services have less incentive to invest in marketing, production quality, or audience analytics—factors critical to organic growth. Furthermore, BDUs often pass the costs of mandatory carriage on to consumers through bundled pricing. This results in cross-subsidization, whereby popular services indirectly fund niche offerings that might otherwise fail in a competitive market.
ICLE’s “Strategic Recommendations for the CRTC” within its submission in the 2025-2 proceeding ties back to the theme of regulatory arbitrage. “The history of video-market regulation suggests that static regulatory frameworks often struggle to keep pace with dynamic markets, leading to unintended consequences. Regulations that might be appropriate given current technology and market conditions can quickly become obsolete or counterproductive as markets evolve.”
The submission concludes: “As the CRTC works toward a sustainable Canadian broadcasting system, it should take a light-touch and modest approach that acknowledges the existing dynamic and competitive video-distribution environment, and the nearly impossible task of predicting and responding to ongoing rapid technological and market advancements.”
The Truth on the Market article talks about technology bringing the end of “scarcity” in the video services business. “Policymakers and regulators evaluating competition in video markets face a seeming paradox: so many monopolies, or near-monopolies, but so much competition.” From a consumer perspective, the video services market is no longer limited to TV channels. This will clearly confound simplistic analysis by those seeking government intervention to disrupt so-called monopoly or duopoly service providers.
So many monopolies, or near-monopolies, yet so much competition.
Will the CRTC exhibit the kind of confidence required to let the system and the marketplace work with a lighter regulatory touch?
