Search Results for: incentives

The Canadian Telecommunications Association released a new report from PwC, “Driving Canada’s productivity: The impact of the telecom sector and its role in improving productivity” [pdf, 5.6MB]. The report is the latest edition of a regular series examining the economic impact of the telecom sector in Canada.

As we have been reading in the news over the past year, Canada’s gross domestic product (GDP) per capita lags other advanced economies and this is part of a decades-long trend. For example, per capita GDP cumulatively grew just 6.8% between 2007 and 2023, compared with 21.4% in the US, 19.6% in Australia and 11.8% in Europe.

Last week, the former governor of the Bank of Canada, David Dodge said “The overriding objective of federal and provincial governments going forward has got to be to raise the productivity of workers.”

Against this backdrop, PwC’s new report predicts that Canada’s telecom sector will play an important role to enable productivity improvements in the economy, increasing Canada’s global competitiveness.

The telecommunications sector is an important part of the Canadian economy; in 2023, the sector contributed almost $81B in direct GDP and supported up to 782K jobs across industries. As the digital transformation of the Canadian economy progresses, the sector’s delivery of enhanced connectivity has the potential to contribute an additional $112B to Canada’s overall GDP by 2035.

In 2023, the Canadian telecom sector invested $11.4B in infrastructure. Capital intensity measures the proportion of revenues reinvested in capital spending. The Canadian telecom sector’s capital intensity (17.9%) is more than 20% higher than the United States average (14.6%), and 70% higher than Australia (11.7%).

PwC notes that the investments by Canada’s facilities-based service providers has led to 99.7% mobile wireless network coverage and 93.5% high-speed internet coverage.

A Bank of Canada discussion paper [pdf, 0.8MB] refers to a positive correlation between increased investment in digital infrastructure, the adoption of information and communications technologies, and productivity growth. As a corollary, PwC says “To realize productivity gains through increased digital infrastructure investment, Canada needs its telecom sector to continue investing capital.”

The report notes that the telecom sector is facing declining prices, high costs of borrowing, increased competition from foreign players (multinationals), increased operating costs and growing risks related to climate change. These challenges are not unique to Canada. PwC observed that worldwide telecom capital expenditures declined in 2023, for the first time since 2017.

Despite these headwinds, the telecom sector remains a key contributor to Canada’s prosperity through its impact on GDP, job creation and investments in digital infrastructure that drive productivity improvement. To sustain these contributions, Canada needs to maintain a regulatory environment that is predictable, transparent and equitable, with sufficient incentives to encourage investment in innovation, technology and infrastructure. This will ensure that network operators can continue to make the investments necessary for deploying advanced connectivity in digital infrastructure to support Canadian productivity and prosperity.

Maintaining incentives to invest is a common refrain on these pages.

Canada’s per capita GDP will benefit from continued investment in digital infrastructure. But, a healthy Canadian telecom industry is necessary in order to continue making those network investments, to provide connectivity through deployment of advanced digital infrastructure.

Investment in infrastructure will be key to driving Canada’s productivity gains, providing a catalyst for the economic recovery Canada so desperately needs.

Alan Borovoy, Canada’s great civil rights lawyer, used to say we should censure, not censor, those who spew hate speech.

He and I worked together on a committee many years ago. I would frequently give him a ride home afterwards which gave us opportunities to chat. His views continue to influence my perspectives on Bill C-63, Canada’s Online Harms Act. An editorial in the Toronto Star (written to mark his passing in 2015) should be mandatory reading for parliamentarians reviewing the Bill.

Alan was the long time general cousel of the Canadian Civil Liberties Association. The CCLA has called for “substantial amendments” to the Act.

Our preliminary read raises several serious concerns. While the CCLA endorses the declared purposes of upholding public safety, protecting children, and supporting marginalized communities, our initial assessment reveals that the bill includes overbroad violations of expressive freedom, privacy, protest rights, and liberty. These must be rectified before the bill is passed into law.

I referenced The Star’s tribute a couple years ago, writing about early proposals for the Online Harms Act. It is worth another look. As The Star notes, Borovoy’s view, that even the most offensive speech deserved protection, would lead him into “clashes with others on the left.”

I have frequently cited Aaron Sorkin’s version of that perspective from the film The American President: “You want free speech? Let’s see you acknowledge a man whose words make your blood boil, who’s standing center stage and advocating at the top of his lungs that which you would spend a lifetime opposing at the top of yours.”

There are a number of recent articles highly critical of portions of the proposed Online Harms Act, especially as related to Part 2, amendments to the Criminal Code and the Canadian Human Rights Act. Michael Geist writes about why those provisions should be removes from the Act. Christine Van Geyn writes in the National Post that the proposed process creates financial incentives for filing complaints. Individuals face no costs in bringing a complaint — not even the costs of a lawyer — and could receive a $20,000 civil award if successful. “The process becomes the punishment even if the case does not proceed past an investigation.”

Last week, Andrew Coyne wrote “Canada’s Online Harms Act is revealing itself to be staggeringly reckless”, saying, “the more closely it was examined, the worse it appeared.”

There is, first, the proposal to increase the maximum penalty for promoting genocide from its current five years to life imprisonment. Say that again: life in prison, not for any act you or others might have committed, not even for incitement of it, but for such abstractions as “advocacy” or “promotion.”

The most remarkable part of this is the timing. At the very moment when everyone and his dog is accusing someone else of genocide, or of promoting it – as Israel’s defenders say of Hamas’s supporters, as the Palestinians’ say of Israel’s, as Ukraine’s say of Russia’s – the government proposes that the penalty for being on the losing side of such controversies should be life in prison? I have my views on these questions, and you have yours, but I would not throw you in jail for your opinions, and I hope you would not do the same to me – not for five years, and certainly not for life.

Earlier this week, writing in the Toronto Star, Rosie DiManno says “Bill C-63 is a mess of a bill, a fatally flawed piece of overreaching legislation that has drawn scorn from, and made weird allies of, Margaret Atwood and Elon Musk. So maladroit that it can’t possibly be fixed — apart from the obvious correction of severing the child protection part from everything else”.

Finally, a commentary by David Thomas, former chief of the Canadian Human Rights Tribunal, says Bill C-63 is “terrible law that will unduly impose restrictions on Canadians’ sacred Charter right to freedom of expression”.

I have also said that there are limits to our speech freedoms. As the (oft misattributed) expression says, “one’s right to swing their fist ends precisely where the other one’s nose begins.” As CIJA said in its statement on March 6, “We cannot allow mob-driven demonstrations to obstruct our right to participate fully in society.”

There are lines that may not be crossed. Intimidation, threats of physical harm, go beyond the bounds of protected speech. But, we should be able to find a better balance than what has been proposed in Bill C-63.

As Alan Borovoy espoused, censure, not censor.

Many of us have come to expect constant connectivity.

I don’t mean we necessarily want to be online 24/7, with a screen in front of our face around-the-clock. But, we want to be able to be connected whenever we want, wherever we happen to be.

Constant connectivity.

Most of us have phones that are effectively able to serve as mobile offices, equipped with word processing and other business apps. Personally, I find spreadsheets painful to navigate on my 5-inch screen, but I frequently edit blog posts and documents from waiting rooms or restaurants. We have tablets, computers, smart TVs, smart speakers, thermostats all connected to our home internet. As I write this, my home router reports 33 devices are connected. (I don’t have many of the “smart home” devices that are increasingly commonplace).

On our mobile networks, in addition to our smartphones, we have metering and other forms of telemetry. With home security and health applications, we increase the need for reliability, often using wireless backup for wireline connections. There are many working groups talking about connected autonomous vehicles.

This state of constant connectivity carries with it a variety of implications.

Many applications can be designed to tolerate hiccups in their connections. For example, by their very nature, email messages are transmitted on a ‘store and forward’ basis. A delay measured in tens of seconds or even minutes or hours is somewhat meaningless for most messages. It is silly to be concerned about a sub-second delay for emails or most text messaging. Most streaming video applications are designed to buffer the signal, storing multiple seconds of content on your device in anticipation of possible interruptions. But, what about voice and two way video calling? Delays (latency) of more than a few hundred milliseconds can be challenging for many who are used to virtually instantaneous responses in a normal conversation. We can witness the uncomfortable user experience when foreign news correspondents are having on-air communications with anchors using satellite connections.

What about performance issues with applications requiring non-stop high performance connectivity, such as remote surgery?

Connected vehicles is a category that enables us to understand a wide range of performance requirements, just in connecting a car. What kind of network performance should be anticipated by developers of connected car applications? The performance characteristics will vary based on whether the connectivity is used for navigation, entertainment, diagnostics, accident avoidance, or telemetry for vehicle maintenance (among other applications).

For many applications, constant connectivity may not have to be quite so constant.

Over the past few years, I have frequently referred to the tension between quality, coverage and price in architecting networks. Increases in coverage, or improvements in performance are always possible, but there is a cost associated with each. That cost ultimately would need to be recovered.

Do regulation and policy recognize that not all bits need to be treated the same?

How should variances in technical requirements receive consideration when examining network resilience from a regulatory perspective?

How do we ensure that appropriate incentives are in place to encourage continued investment in networks for improved reach, robust network resilience, increased capacity and more advanced capabilities?

In 2022, Canadian carriers were investing in telecom infrastructure at an accelerated pace.

That is one of the findings of a new report prepared by PwC. “Connecting Canadians through resilient networks: The impact of the telecom sector in 2022 and beyond” [pdf, 4.5MB] found that Canada’s six largest telecom companies invested $13.3 billion in capital expenditures in 2022. Over the past five years, the Canadian telecom sector has invested an annual average of $12.1 billion in capital on network infrastructure, expanding, enhancing, and strengthening Canada’s wireless and broadband networks. This represents approximately 18.6% of average revenues, which is 30% higher than the 14.2% average across peer telecom carriers in the US, Japan, Australia, and Europe. Canada’s elevated capital intensity is similar to what was found in another recent study.

As I have reported in my monthly analysis of Statistics Canada data, PwC confirmed that for the year ending September 2023, cellular and internet access service prices declined by 17.2% and 7.8%, respectively, while the Consumer Price Index for All-Items increased by 3.8% over the same period.

PwC says the telecom sector contributed nearly $77B to Canada’s GDP, and supported nearly three quarters of a million Canadian jobs in 2022. It estimates that by 2035, the telecom sector’s delivery of enhanced connectivity, including 5G, has the potential to contribute an additional $112B to Canada’s GDP.

Key findings:

• Direct GDP contribution and jobs supported by the telecommunications sector in 2022 is estimated to be $76.7 billion and 724,000 jobs (versus $74.9 billion (+2.4%) and 650,000 jobs in 2021 (+11.3%)*);
• Enhanced connectivity, including 5G, has the potential to contribute an additional $112 billion to Canada’s GDP by 2035
• Telecom’s direct GDP contribution includes $24.7 billion from the sector’s value chain and up to $52 billion in direct impact from increased sales and other outputs from other Canadian industries through the incremental addition of additional wireless and broadband connections;
• The six largest Canadian telecommunications operators invested $13.3 billion in capital expenditures in 2022 to continue expanding and enhancing their wireless and broadband internet networks;
• Over the past five years, Canada’s telecom sector has invested an average of $12.1 billion annually on network expansion and enhancements. This represents a capital intensity that is approximately 18.6% of average revenues. That is higher than the 14.2% average across peer telecom operators in the US, Japan, Australia and Europe;
• Continued investments in Canada’s telecom sector connect more Canadians to advanced wireless and broadband internet networks, supporting increased data consumption, powering the digital economy, and providing a range of other social and environmental benefits:
  • 99.7% of Canadians had access to mobile network coverage where they lived or conducted business in 2021, including 87.8% who had access to 5G connectivity;
  • 93.5% of households had access to high-speed internet with speeds meeting the CRTC’s 50/10 Mbps targets in 2022. The CRTC estimates that services providers are on track to meet its broadband targets for 98% of households to have access to 50/10 Mbps unlimited services in 2026, and 100% by 2030;
• The price of telecommunications in Canada has fallen over the past year, with cellular service prices down 17.2% and internet access service prices down 7.8% between September 2022 and September 2023, while the all-items Consumer Price Index increased by 3.8%;
• The telecommunications sector has already suffered millions of dollars in damages to Canadian network infrastructure as a result of severe weather events and other natural disasters. Canadian service providers are investing in building resilient networks to manage future risks.

The bottom line? Maintaining incentives for investing in telecom infrastructure is key to Canadian economic growth.

Are regulators losing sight of the target objectives? Are we sometimes confusing the means with the end? Do we even know where we are aiming?

Big questions. What do I mean?

When Navdeep Bains was Minister of Innovation, Science and Economic Development, there was a very clear statement summarizing his communications policy objective: “Canada’s future depends on connectivity”. It was clear, concise, and measurable. The telecom sector was told that there was an understanding of the tension that exists as we balance affordability, quality, and coverage in the achievement of those objectives.

Sometimes, it can be easy to lose sight of the target when we don’t pause for a moment to surveille the situation.

Earlier this week, I wrote “Regulators regulate”. If the only tool you have is a hammer, it is tempting to treat everything as if it were a nail.

Take a look at what is going on south of the border with the FCC seeking to resurrect network neutrality regulations. As Professor Daniel Lyons of Boston College writes (quoting Justice Scalia), “Like some ghoul in a late-night horror movie that repeatedly sits up in its grave and shuffles abroad, after being repeatedly killed and buried…”

After three years of quietly effective telecom regulation, the Federal Communications Commission has roared back to life with a new Democratic majority and an obsession to reimpose 2015’s Title II order on broadband providers. Back then, the AEI Tech Policy blog argued that these rules were, at best, unnecessary and, at worst, harmful to consumers and innovation. America’s experience since then has vindicated the decision to repeal net neutrality, leading one to wonder why this has become the Commission’s most pressing concern.

He rhetorically asks (and then answers), “if broadband providers have voluntarily adopted net-neutral practices, what’s the harm in enacting them into law?”

One concern is the chilling effect such rules have on innovation. For example, network slicing, which many providers have implemented since the original net neutrality overturn, can enhance 5G network productivity. This allows wireless providers to dedicate a portion of their capacity for specific services rather than general network packet delivery, thus improving the consumer experience for latency-dependent services.

He argues that net neutrality proponents have strayed from their roots, losing sight of the target. “When Professor Tim Wu first coined the phrase, he was concerned in part that without a neutrality principle, broadband providers would block disfavored speech online.”

Unsurprisingly, allegations that net neutrality’s repeal would mean consumers couldn’t get abortion information or receive the internet “one…word…at…a…time” were unfounded. This is because, as Wu himself notes, broadband providers also have incentives not to block content: the more content a consumer can reach, the more they’re willing to pay for access.

So why is the FCC seeking to re-introduce Net Neutrality? Regulators regulate. There is always the potential for regulatory creep. And, therein we find the concern. According to Professor Lyons, FCC Chair Jessica Rosenworcel has stated she has no intention of regulating broadband rates, despite those power being part of the proposed regulations. While this might be so, what happens with the next administration? Poorly drafted legislation – or trying to apply one set of regulations for something else – can lead to unintended consequences.

That is what I meant about being more concerned with the ‘means’ than the ‘end’. What problem are they trying to solve?

This is a problem that I think we have come to appreciate in Canada. The government is trying to apply Broadcasting Act legislation to internet content, expanding the role of the CRTC to act as an arbiter of new media.

What are we trying to achieve? How will we measure success?

Let’s look at how the government’s describes the legislation.

• C-11: “The Online Streaming Act modernizes the Broadcasting Act and helps ensure Canadian stories and music are widely available on streaming platforms to the benefit of future generations of artists and creators in Canada.”
• C-18: “The Online News Act aims to ensure that dominant platforms compensate news businesses when their content is made available on their services.”

In the government’s own words, these are the objectives of these Acts. Reading the legislation, one might be justified asking if we might have gotten lost along the way. As the government and the CRTC move forward with development of regulations that implement the Acts, how do we ensure we aren’t losing sight of the target?

When I load an address into my GPS, the system calculates a route and tells me how far the system expects me to travel. I’m told how long it expects the journey to take. Along the way, the system makes mid-course adjustments, considering traffic, routing around unexpected roadblocks along the way.

The Online News Act, and the Online Streaming Act are the first parts of Canada moving to regulate internet platforms and content.

What are the real objectives? Where are we trying to go? How will we know when we successfully reach our target? How do we know we are making progress toward the ultimate objective? Are these pieces of legislation still the best route?

When driving, we find alternate routes to avoid traffic jams and roadblocks. Is it time for the government to pause, reboot the system and recalculate?