We frequently hear the term affordability used interchangeably with lower prices. That’s a mistake.

Certainly, there is a relationship between the terms. Lower prices make items more affordable, but stable prices with rising incomes can have the same effect. As I have previously written, mobile services prices have been coming down over the past few years, more than 25% in two years. So mobile services are certainly more affordable than before.

There is some interesting monthly household spending data on the Statistics Canada “Telecommunications: Connecting Canadians” portal. Mobile phone service is different from wireline services, like TV and home phones. Mobile phones are a personal service. We can expect a household with two adults to have two mobile phone subscriptions. It would be unusual for that same household to have more than one TV subscription. As it turns out, there is considerable variability in household size based on income.

The first three rows of data can be found on the portal itself.

The bottom row is from my calculations, based on Statistics Canada household size data, to derive average monthly spending for cell and pager per household member:

Monthly spending on cell phone services as a percent of total expenditures after tax, by income quintile, 2019

	All quintiles	Lowest quintile	Second quintile	Third quintile	Fourth quintile	Highest quintile
Monthly expenditure after tax	6,379.75	3,069.33	4,288.92	5,822.17	7,674.33	11,024.08
Monthly cell phone and pager services	$111.92	$56.08	$79.92	$109.67	$140.50	$173.42
Percentage of expenditure on cell service	1.8%	1.8%	1.9%	1.9%	1.8%	1.6%
Average size of household	2.48	1.49	2.11	2.49	2.95	3.34
Monthly cell and pager per household member	$45.12	$37.63	$37.88	$44.04	$47.63	$51.92

I thought it was interesting to see relatively little variation between the income quintiles in cell service spending as a percentage of total household after tax expenditures. As my calculations indicate, most of the variation in actual spending per household is explained by the difference in size of households; on average, with 1.49 members, lower income households are less than half the size of high income households (3.34 members).

What leads to the remaining difference? There is most likely a variability in adoption rates, and in spending per subscription. Interestingly, lower income households have typically been more likely to be “mobile only”, but we might want to take a further look at per capita mobile adoption rates by income. As the price of smartphones continues to climb above the $2000, we may need to re-examine the CRTC’s 24-month limit on device amortization as an inhibitor for low income Canadians.

In other jurisdictions, there are targeted subsidies, funded by the government, to encourage adoption of mobile and fixed broadband services. For example, in the US, the FCC’s Lifeline Support for Affordable Communications “provides up to a $9.25 monthly discount on service for eligible low-income subscribers and up to $34.25 per month for those on Tribal lands.”

In Canada, affordable broadband programs, such as the recently enhanced Connecting Families, have been completely funded by participating service providers. Last week, Connecting Families 2.0 was launched, significantly enhancing the original $10 residential broadband program with additional options and increased eligibility. These programs target residential fixed broadband service.

A number of service providers have an even wider array of options for targeted disadvantaged communities.

Mobility for Good from TELUS was first launched in 2017 as a youth focused program in BC. Mobility for Good has now grown to support youth nationally. TELUS extended the program to seniors in 2020, and to at risk Indigenous women in 2021. The program offers a free refurbished smartphone and mobile plan for youth leaving foster care, and for Indigenous women at risk or surviving violence. In addition, Mobility for Good offers low-income seniors subsidized plans and the option to buy a discounted device.

The CRTC’s Review of mobile wireless services last April established certain retail price regulations, establishing what the Commission calls “low-cost and occasional-use plans”, not tied to income qualification. As such, the plans, with specific characteristics, are not necessarily geared to meet the requirements of low-income users or help increase subscriptions among user groups with lower rates of adoption. It is not known whether these plans are actually filling a significant market void.

Lower prices are not enough.

As I wrote last year, “Unfortunately, after introducing Connected for Success, Internet for Good, Connecting Families and other targeted programs, we have learned that getting people online isn’t just a matter of price.”

There are a number of questions and issues that come to mind from all of this. There is a need to look beyond price. In addition, we know that seeking lower pricing is not the same as affordability. The consumer interest needs to balance value, affordability and investment, a corollary to the mantra of “Canada’s future depends on connectivity”.

Should the government be directly funding programs to encourage adoption of mobile and residential broadband, akin to Lifeline Support in the US?

That can be the subject of future posts. Your comments are encouraged.

How do you measure the competitiveness of a market?

Is pricing the best measure of rivalry?

An article in the Globe and Mail last week looked at a potential buyer of some of the assets expected to divested as part of the Rogers / Shaw transaction. In “Xplornet eyes Freedom, but experts skeptical deal will lead to greater competition”, we read “Consumer advocates and researchers say BCE’s wireless divestitures did little to stimulate competition in Manitoba’s mobile market.” Reading further, we only see academics questioning whether lower prices would emerge.

Is price a sufficient sufficient measure of market competitiveness?

A recent report from the OECD appears to agree. In “Methodologies to Measure Market Competition” [pdf, 1.85GB], we read “There is not a unique indicator of competition that can unequivocally detect changes in competition intensity”, and cautions that measurements like market concentration can be imperfect indicators. “The purpose here is not to create a comprehensive checklist, but instead to discuss enough measures to enable a discussion on the key issues for competition authorities to consider when using such measures to measure the intensity of competition.”

As I have written before, “You just cannot compare prices without consideration of the quality of the products or services. And you cannot draw conclusions on level of competitiveness in a market based solely on prices.”

Nationwide, Canada is home to some of the world’s best mobile networks, with all industry participants continually making substantial investments in spectrum and new technology, in urban and rural communities. According to OpenSignal, rural mobile users in Canada experience download speeds surpassing those for users in most countries around the world. That 2020 OpenSignal report continued, saying “rural Canadian users have far better download speeds than users in five of the seven G7 countries in the world.”

As Dr. Christian Dippon of NERA has said in the past “Quite simply, a market cannot both be noncompetitive and offer some of the best mobile wireless services in the world.”

The timing is running out for the Cabinet appeals of Telecom Decision CRTC 2021-130: Review of wireless services that was released April 15, 2021. Some people refer to this as the “MVNO decision”.

According to Section 12(1) of the Telecom Act:

Within one year after a decision by the Commission, the Governor in Council may, on petition in writing presented to the Governor in Council within ninety days after the decision, or on the Governor in Council’s own motion, by order, vary or rescind the decision or refer it back to the Commission for reconsideration of all or a portion of it.

So, time is ticking. If Cabinet is going to vary or rescind the decision, or send it back to the CRTC for another look, it has to do so by April 15, 2022. For those keeping score of Cabinet appeals, the anniversary date for Telecom Decision CRTC 2021-181 is 6 weeks later, May 27, 2022.

On April 4, the mid-year report for CCTS (the Commission for Complaints for Telecom-television Services) indicated that complaints are down 26% over the past year. Mobile price reductions beat the government’s objective. A recent CRTC press release indicated that 53.4% of rural Canadians had access to the 50/10/unlimited broadband objective in 2020, up 7.8 percentage points (or a substantial 17%) from 2019’s 45.6%. The current regulatory framework is succeeding in delivering better service, at lower prices, with enhanced technologies and services available to even more rural and remote areas.

Will the government maintain its policies to encourage investment in communications infrastructure through facilities-based competition?

For nearly two years, Canadian government policy has said “Canada’s Future Depends On Connectivity”. Will Cabinet choose to stay the course?

Please forgive the amount of time that I have been spending looking at a proposal for the City of Toronto to build a municipal broadband network. I do not subscribe to the view that the world revolves around Toronto (how many Torontonians does it take to change a lightbulb?). There are some important issues being discussed concerning the role of government ownership of digital infrastructure that have broader application beyond the greater Toronto area.

As you read in my post last week, on March 30, the Executive Committee of Toronto City Council reviewed an update of plans for ConnectTO, a project that I have criticized considerably over the past year.

Fortunately, members of the Executive Committee shared my concerns and paused for what Councillor Pasternak called a “sober second look”, seeking a more comprehensive business case before allowing ConnectTO to move forward. Consideration of the project has been deferred to the May meeting of the Executive Committee.

While we all agree that internet connectivity is important in the twenty-first century, not every household will choose to subscribe. Councillors recognized that broadband connections are only one part of the equation; some people still need devices.

Through the Connecting Families initiative, as well as research from other countries, we have learned that price is not the only inhibitor for adoption of the internet in disadvantaged communities. It is worth noting that Connecting Families was enhanced yesterday to add higher speed options. Rogers Connected for Success offers a wider range of options starting at $10 per month for 25 Mbps, and Rogers includes unlimited downloads in each of its options.

The Executive Committee asked for more information, passing this motion:

That Executive Committee defer Item EX31.8 to the May 4, 2022 Executive Committee Meeting, to permit the Deputy City Manager, Corporate Services, and the Chief Technology Officer, Technology Services to submit a supplementary report on:

1. the further questions and issues raised at the Executive Committee meeting on March 30, 2022.
2. a time frame for developing a ConnectTO Business Plan, which will include:

   a. the short, medium and long term costs of building and maintaining the proposed networks;
   b. the end-user price and download/upload capacity that will be available through the City’s Municipal Broadband Network;
   c. proof of the City’s ability to create better access and pricing for high speed internet than established Internet Service Providers, when the city does not have existing infrastructure or funding;
   d. address how ConnectTO will gain access to apartment buildings that already have contracts with other Internet Service Providers;
   e. the number of Full Time Equivalent (FTE) staff required for the planning, implementation, and on-going operations and management of this project, in addition to the 1000+ existing Technology Services FTEs;
   f. evidence that price is the main factor that challenges the use of internet services in priority neighbourhoods, and not lack of computers, computer literacy, or other fears or concerns about internet use; and
   g. a statement of the metrics for success, including the anticipated number of new internet subscriptions from residents who previously could not afford and/or lacked access to high speed internet.

3. the justification for creating this new internet infrastructure, given that most buildings already have high speed internet, and affordable high speed internet plans are available to low income families with sufficient download/upload capacity for video streaming for classroom use.
4. a comparative analysis of short and long term costs, capital and operating, of existing service versus the proposed service; such cost analysis should separate the costs for service to city properties from service to residential communities and should also show the cost differences between using private sector providers for internet service versus City-owned and managed assets.

As I have said before, Toronto is certainly not a broadband backwater. It is one of the world’s most connected cities. Every single one of the buildings that were proposed for Toronto’s initial phase of a municipal broadband network already had high-speed internet available, and 41 of the 42 buildings had more than one facilities-based service provider offering those connections. As such, it will be a challenge for proponents of the municipal network to answer point 3 from the motion, “the justification for creating this new internet infrastructure, given that most buildings already have high speed internet, and affordable high speed internet plans are available to low income families with sufficient download/upload capacity for video streaming for classroom use.”

Those providers offer a range of heavily discounted services – as low as $10 per month – to households that need assistance. The issue of broadband adoption in Toronto isn’t a question of service availability; and, it isn’t a matter of service affordability. As an aside, contrary to what some speakers at the Executive Committee meeting said, the CRTC did not say that the minimum service for broadband connections should be 50 Mbps down, 10 Mbps up with unlimited data. The CRTC’s objective is for all Canadians to have such a service available to them, not necessarily for them to subscribe to such a service. In Toronto, there are no known gaps in meeting this objective.

As such, simply building a municipal network is not going to help get internet to more people in Toronto. Increasing adoption in Toronto cannot be addressed by investing in technology to build a redundant, municipally owned fibre network.

Toronto should focus more on the social service aspects, understanding the factors that inhibit adoption, and dealing with them on a case-by-case basis.

Point 2f of the Executive Committee motion alludes to factors other than price challenging the adoption of internet services in Toronto’s priority neighbourhoods, thanks the availability of affordable internet programs in those areas from Rogers and Bell. These programs also help make computers available at affordable prices.

Although training may be available to help with computer literacy, how do we tackle the fears or concerns about internet use, and help people gain a better appreciation for the opportunities enabled by a home broadband connection? This is a key area of understanding for all level of governments to improve.

Applying less technology and more social research is an area where the city and its academic partners could show real leadership moving forward.

Some technology problems just might be handled better without more technology.

Robert Ghiz, President and CEO of the Canadian Wireless Telecommunications Association (CWTA) was the closing keynote speaker for STAC2022, the annual conference of Canada’s Structure, Tower and Antenna Council, held online again this year.

Rob’s talks are usually packed with statistics and topical information about the wireless industry and its impact on Canadians and Canada’s economy, and today’s address did not disappoint.

He also spoke about the success of the Structure, Towers and Antenna Council as a relatively new organization, growing from 10 organizations at its inception in 2016 to more than 130 now. “What started as a small group of about 40 people is now a community of over 700 like-minded individuals who have a shared committed to tower safety.”

He discussed the transformative impact of 5G, and the role played by those specialized workers actually implementing these technology changes.

Why spend so much on 5G?

5G is not just an upgrade to 4G. It is whole new telecommunications system that will transform the way that Canadians conduct business, receive critical services like healthcare, and interact with one another. 5G will be the foundation for the digital economy and will be a key enabler for Canada’s economic recovery.
…
As the demand for mobile data increases, we need to adopt technologies that allow wireless networks to operate more efficiency. Equally important, our wireless networks must support other industries’ desire to use wireless technologies to make their operations and products more environmentally friendly.

As always, Rob provided an overview of the Canadian wireless industry, its positioning in the world, the importance of wireless infrastructure, and he looked at the current political situation in Ottawa.

In his talk, he spoke of the drive, commitment and passion of Canada’s telecommunications industry workers. I encourage you to watch it in its entirety.

Indeed, speaking of passion, it is worth mentioning that Rob is arguably the most passionate promoter of Prince Edward Island as an idyllic tourist destination as you start to venture out of your COVID-induced isolation. Since Rob only made a passing reference to some “colleagues from PEI” in the context of an answer to a question, I was left wondering if someone changed the colour of the gables on Anne’s house.

Hoping someone will visit the Island and send along a photo to reassure me.