Search Results for: incentives

Too many are confusing ‘affordability’ with a desire to pay lower prices. Don’t we all want lower prices for everything we buy?

In reality, millions of Canadians are finding mobile data plans that they can afford, as evidenced by Rogers third quarter 2019 financial results. More than a million subscribers signed up for its unlimited data plans, “adopting these ‘no more overage’ plans at three times the pace anticipated”. More than 100,000 net new customers, despite an increase in churn.

Rogers indicated that “Approximately 60% of our existing customers that have migrated to these plans have upgraded to higher price plans.” It is an interesting data point. Clearly, those customers have found that the new plans are delivering much better value, with far more data for just a little more money.

Rogers’ financial results provide evidence that most Canadians are finding mobile plans to be affordable. While we all want to pay less, at the same time, we need to ensure our policies preserve incentives for investment in network expansion for capacity and coverage, maintaining leadership in the delivery of advanced speeds and services.

We should be exploring more creative approaches that deal with the small minority of Canadians who cannot afford the mobile devices and service plans they need to participate in the economy. I have often written about the need to understand all of the factors that have inhibited universal adoption of broadband and mobile services, such as in “Understanding the digital divide”. In “Do we know what we don’t know?”, I asked, “Is Canada doing enough research to explore the nature of its digital divide?”

The price of connectivity is just one of the elements. How can we find solutions for a problem that we may not fully understand?

I have also written frequently about the challenges associated with producing international price comparisons for telecommunications services. Each year, Innovation, Science and Economic Development produces a mobile price comparison study [2018 study | pdf | 1.35MB], examining trends in prices in Canada and how those prices compare to selected trading partners. The annual study looks at 6 baskets of services for mobile:

• Level 1: 150 voice minutes;
• Level 2: 450 voice minutes and 300 SMS (texts);
• Level 3: 1,200 voice minutes, 300 texts and 1 GB of data usage per month;
• Level 4: unlimited nationwide talk and text along with 2 GB of data;
• Level 5: unlimited nationwide talk and text along with 5 GB of data; and
• Level 6: Shared plan with 3 phones lines and unlimited nationwide talk and text along with 10 to 49 GB of data.

A problem arises when those baskets are no longer representative of the types of services that people are buying. For example, the average price for a level 4 plan from 2018’s study was $75.44 which included just 2GB of data. New ‘unlimited’ plans are available from most carriers for less than that price, with at least 5 times the full speed data. However, these new popular plans with no overage charges simply don’t fit into any of the survey’s arbitrary baskets.

As Statistics Canada writes about its updates to the Consumer Price Index, “If the fixed-quantity basket of goods and services was kept unchanged for an extensive period of time, it would gradually lose accuracy and relevance as a reflection of consumer spending.” The report continues, “New products and services are introduced to the market and existing ones may be modified or become obsolete. As a result, the basket needs to be revised periodically to reflect changes in consumers’ spending patterns.”

Over time, we have seen significant changes to consumers’ spending patterns for mobile equipment and services. Regulatory changes have led to a restructuring of device subsidies for many plans; new unlimited plans have caught on faster than anticipated. How will these get captured meaningfully in the annual study?

Consumers were promised lower telecommunications prices as part of the political campaign. Will the government’s annual price comparison study accurately “reflect changes in consumers’ spending patterns” and show that mobile plan prices are already much lower than last year?

The CRTC’s decision earlier this week set final wholesale rates for broadband internet access services, a proceeding that has been dragging on since interim rates were set in 2016. The CRTC’s final rates are up to 77% lower than the interim rates, and retroactive adjustments could cost carriers close to a third of a billion dollars.

Bell responded, indicating that the retroactive payments will have impacts of up to $100M and will result in cutting back on capital investment in rural markets. A news story in Cartt.ca indicates that Minister Bains is “‘disappointed’ but believes others will step up as incumbents pull back from network investment”.

Bell’s announcement referred specifically to its plans for Wireless Home Internet, a program that had aimed to offer wireless broadband to up to 1.2M households. As a result of the CRTC’s decision, Bell said it needed “to scale back Wireless Home Internet rollout in smaller towns and rural communities by approximately 20%”. As Cartt.ca observed, other carriers have similarly indicated that there would be impacts on capital investment programs.

Although the Minister may be disappointed, one has to wonder where people thought the money would come from. With a material impact on cash, there has to be a reassessment of budgets inside all of the companies. Put yourself in the shoes of the Chief Financial Officer and you have to find $100M. What choices do you have? You would look at various lines in the budget and find projects with the lowest return on investment.

There are always some projects with better returns on investment than others; some areas that have more marginal business cases. Bell’s announcement appears to be indicating that 20% of its Wireless Home Internet program had lower potential returns and that it would be the best source for funding the CRTC order.

Rural broadband, even using wireless technology, has a lower return on investment, almost by definition. After all, if it had a strong business case, then we would see all sorts of service providers fighting over that space. Instead, the business case is typically so poor that the government has had to give away billions of dollars in incentives to get service providers to build and operate rural networks.

In the case of the projects that are being impacted by this week’s CRTC decision, there was no direct government money other than an accelerated investment incentive – basically a faster capital tax write-off. So, the Minister may be hopeful that “others will step up as the ‘incumbents’ pull back from network investment,” but it is far more likely that the business cases for many communities won’t work any better for smaller players than for the major carriers. If there was a strong business case for smaller players to build in these communities, wouldn’t those networks have been built already?

Those rural areas may find that they have to wait for the next wave of government broadband funding programs. At the end of the day, that may end up being the answer to where the money comes from.

Earlier this month, I wrote about “Maintaining incentives to invest,” asking how a change in regulatory framework might impact investment levels by incumbents and the regional carriers. What are the broader economic impacts of Canada’s mobile industry?

Earlier today, the Canadian Wireless Telecommunications Association (CWTA) released a report [pdf, 0.5MB] prepared by Nordicity that examines “The Benefits of the Wireless Telecommunications Industry to the Canadian Economy in 2017”. This is the 10th annual version of the report.

Nordicity found:

• In 2017, Canada’s wireless industry contributed $27.5 billion to the Canadian GDP, an increase of 9.1% from $25.21 billion 2016.
• The major contributor to this overall GDP increase was the $1.22 billion increase in the contribution of wireless network operators to the GDP.
• The wireless sector generated 151,550 full-time equivalents (FTE) jobs in 2017, including direct, indirect and induced effects — an increase of 13,500 FTEs or 9.8% from 2016.
• Canadian facilities-based network operators made capital investments in Canada’s wireless infrastructure totaling $2.92 billion in 2017 — an increase of $0.34 billion or 13.2% from 2016.

Robert Ghiz, President & CEO of CWTA, will be speaking at The 2019 Canadian Telecom Summit, taking place June 3-5 in Toronto. Have you registered yet?

On Friday, Innovation Minister Navdeep Bains announced agreement had been reached with his provincial and territorial counterparts on the principles for a national broadband strategy.

The strategy is based on 3 key principles: Access, Collaboration and Effective Investment. These form what could be a “table of contents” of a more complete strategy document.

As we move forward and engage in this work, we will be guided by the following connectivity principles:

Access

• Access to reliable, high quality and affordable services are necessary for Canada’s success in a digital world, to allow all Canadian businesses, households, and public institutions to realize the economic and social benefits of connectivity through the use of advanced technologies and applications
• Work towards establishing universal access of at least 50 Mbps download / 10 Mbps upload taking into context scalability and longer-term growth.
• Businesses should have access to networks that support their ability to utilize technology, compete, and contribute to the economy.
• Mobile connectivity on major highways and roads is an important need, including for safety.

Collaboration

• Collaboration is essential to address the scope of the challenge and maximize the effect of our actions.
• Shared objectives and priorities will lead to better outcomes.
• Gathering, having access to, and sharing reliable data can significantly improve analysis and deployment strategies, as well as enable public reporting on progress.
• Recognize the unique circumstances of Indigenous communities, especially in remote and isolated locations.

Effective Investments

• Targeting market failures allows governments to direct support to where it is needed most.
• Coordination of regulatory and spending levers helps ensure effective implementation.
• Open access requirements can promote competition, affordability, and greater choice and should therefore be considered.
• Addressing deployment barriers can significantly reduce constructions costs of digital infrastructure.

Improving broadband adoption is predicated on two key elements: an effective strategy needs to be concerned with increasing the availability of high speed services (supply), as well as ensuring that all Canadian households are able to get on-line (demand).

The elements in Friday’s announcement set out a framework that needs to reach beyond the various levels of government and encourage increased private sector investment, potentially unlocking billions of dollars per year in capital spending.

There are many ways that government can help, especially in improving access to rights of way and access to existing government infrastructure, as well as providing faster processes for investment approvals. The recent court decision striking down a bylaw from the City of Calgary shines a light on how some policies have restricted telecommunications industry access to rights of way and municipal infrastructure, creating disincentives for investment. I have written before “How smarter policy can create smarter cities.” And more than 11 years ago, I wrote that a “city would be better off with a declaration that it will no longer fight carriers looking to invest and it will get out of the way of service providers that want to improve fibre access to their customers. The best way to support industry may be for the city to just get out of the way.”

Canada should examine the rules recently put in place by the FCC that require accelerated timelines for municipalities to approve or reject construction projects and the federal regulator also imposed limits on the fees that municipalities could extract for communications infrastructure projects.

The strategy appears to endorse the CRTC’s pragmatic approach for implementing its new Broadband fund. “Work towards establishing universal access of at least 50 Mbps download / 10 Mbps upload taking into context scalability and longer-term growth.” As I have written recently, the Commission recognized the challenges of extending broadband to some remote area, even when it set its ambitious national broadband target. “In some underserved areas, achieving the objective will likely need to be accomplished in incremental steps due to many factors, such as geography, the cost of transport capacity, the distance to points of presence, and the technology used.”

How do we increase demand?

This past June, Minister Bains announced the coming launch of “Connecting Families“, a project in collaboration with most of Canada’s major telephone and cable companies, that is designed to help hundreds of thousands of low income Canadian households get affordable internet services. It is a major step in the right direction. While Rogers and TELUS have been offering similar services for a number of years, the national program is supposed to be launched very soon.

As the Federal and Provincial ministers agreed, “Gathering, having access to, and sharing reliable data can significantly improve analysis” to improve our understanding of other factors that are inhibiting increased adoption, as I wrote in “Building a broadband research agenda.”

The new national broadband strategy, based on the principles of Access, Collaboration and Effective Investments, will help drive supply of advanced broadband infrastructure. The launch of Connecting Families will be an important step in helping to increase subscriber adoption.

With far less fanfare than the previous government’s widely ridiculed national digital strategy – perhaps better characterized as a national digital pamphlet – Minister Bains has put forward a more actionable broadband strategy. Digital issues have moved higher on the national agenda evidenced by the multi-stakeholder broadband strategy, the Broadcast and Telecom Legislative Review and the CRTC’s Broadband Fund.

These are encouraging signals. We will continue to watch the file as greater detail is released.

Delayed for a day by storm clean-up, the Broadcasting and Telecommunications Panel launched its consultations earlier today, releasing “Responding to the New Environment: A Call for Comments“.

In its call for comments, the Panel identified four broad themes intended to help guide its work. Each of these themes is accompanied by a number of paragraphs that provide some context for the discussion papers and submissions, as I have attempted to summarize below.

1. Reducing barriers to access by all Canadians to advanced telecommunications networks;

   Much is packed into this heading, including access to, and adoption of, advanced telecommunications “to connect, communicate, innovate, consume, study, work, and participate in Canadian society and in an increasingly global digital economy.” The consultation mentions both network facilities and digital literacy under this heading.

   In addition, the consultation speaks of facilities based carriers, and incentives and opportunities for investment, while mentioning the contribution of “a number of new entrants… to the rollout of new services and facilities, enhancing both the availability and affordability of services.”

   The section looks at access to spectrum, access to poles and support structures and security. “While openness and ‘net neutrality’—a concept related to the long-standing principle of ‘common carriage’—will continue as key elements of Canada’s legislative and regulatory frameworks, there may be other principles that should be applied in order to balance the need for an open internet with security in the digital context.”

2. Supporting creation, production and discoverability of Canadian content;

   The panel has apparently already concluded “For Canadian content programming to succeed both domestically and in the international marketplace, there must be clear policies that support quality creation, production and discoverability.”

   Importantly, the call for comments asks “how the legislative and regulatory framework may be modified to ensure that all players, including online players that garner revenue in Canada [empasis added], play a role in the creation, production, and distribution of Canadian content.”

   Further, the role of CBC/Radio-Canada has been added as part of the Panel’s review to consider how its contribution as a local and Canadian source of news and information should be adapted to a global, digital environment.

3. Improving the rights of the digital consumer;

   Under this heading, the Panel anticipates consideration of affordable access to services, assessing terms of service, “exercising meaningful control” over consumers’ personal information and examining the exploitation of personal information in exchange for services.

   I am still trying to unpack the meaning of a line in this section: “It is challenging to balance the neutrality and openness of the Internet with the protection of privacy and personal security for digital consumers.”

   Another paragraph in this section is certain to attract a lot of commentary, dealing with “the proliferation of false or misleading information presents new challenges. In this context, independent, trusted, accurate, diverse, as well as local and Canadian sources of news and information are essential for an informed citizenry, civic participation, and democratic process.”

4. Renewing the institutional framework for the communications sector.

   A review of the institutional framework should include the allocation of regulatory responsibilities between the government and the regulator – among other items, this will likely include examining the unimplemented recommendation from the 2006 Telecom Policy Review Panel to move spectrum management to the CRTC.

   The panel will also consider whether new or different legal powers or regulatory tools are needed “to improve the effectiveness and efficiency of the system and the governance of the communications sector in the digital environment.”

I encourage you to refer to the Call for Comments for the full description of each of these themes.

The Panel is chaired by Janet Yale, and it includes Peter Grant, Hank Intven, Marina Pavlović, Monique Simard, Monica Song and Pierre Trudel.

The first round of submissions are due November 30, 2018.