Search Results for: Canada's future depends on connectivity

A couple recent reports highlight policy considerations to drive investment in connectivity. The Canadian Telecommunications Association has a piece, “Canada’s Connectivity Future Depends on Sustaining Investment”, and CTIA released “Wireless & AI: Driving the Future of Innovation”.

For years, I have repeated the line “Canada’s future depends on connectivity.” There may be an increasing demand for investment in connectivity, but how does it get funded? What policies can create the right environment for such investments?

Over the past four decades, the wireless industry has evolved from voice to text to mobile broadband to 5G-enabled infrastructure. But the next decade will be defined an even more consequential evolution as it fuses (and infuses) wireless networks with artificial intelligence. CTIA’s report argues that AI and wireless are more than parallel innovation tracks; they are becoming a single, interdependent system, and policy must treat them as such.

Meanwhile, Canadian data shows that even as networks become more essential, the investment environment underpinning network investment is becoming more fragile.

Taken together, the reports demonstrate that North America’s digital future hinges on more than innovation. What policy frameworks will enable and encourage long-term capital investment?

CTIA warns that AI traffic will strain existing wireless networks before the decade ends, potentially creating a drag on the economy if spectrum and infrastructure gaps aren’t addressed.

The bottleneck emerges from AI’s migration out of the data centre and into devices, sensors, vehicles, and industrial systems. What began in research labs moved into hyperscale data centres. The next wave will be found in autonomous agents embedded in smartphones, robots, drones, and industrial equipment – systems relying on wireless networks for real-time sensing, coordination, and decision-making. CTIA projects AI-related wireless traffic to grow three times faster than overall wireless traffic, reaching nearly one-third of all broadband usage by 2034.

Not only is this more traffic, it’s structurally different traffic. For the past few decades, data networks were built for downstream consumption. AI flips that model. Devices will upload massive volumes of sensor data, telemetry, and video to the network, edge, or cloud. Machine-to-machine communication is expected to increase eightfold. Traffic may be bursty, event-driven, and unpredictable. Wireless networks will need to accommodate two-way, low-latency, high-reliability traffic, evolving from a consumer broadband platform into an intelligent, bidirectional, AI-native infrastructure.

The evolution of wireless networks – 6G – will be AI-native. 6G is more than a faster version of 5G. It will be built with intelligence embedded directly into the radio layer. Networks will dynamically allocate spectrum, anticipate congestion, authenticate devices autonomously, and coordinate edge-compute workloads at machine speed. Human operators cannot manage this complexity manually. A recent article in RCRTech looked at how TELUS is using its brownfield Open RAN transformation as a foundation for such a more intelligent network.

Every wireless generation has needed more spectrum, but the AI-era demands unprecedented amounts of wide, contiguous mid-band spectrum.

Beyond spectrum, an AI–wireless future requires towers, small cells, fiber backhaul, data centers, and edge compute — billions of dollars in new investment. Wireless carriers and AI companies are already among the largest investors in infrastructure, but government policy is failing to keep pace.

As the Canadian Telecommunications Association’s PwC report highlights, Canada’s wireless price index fell more than 45% between 2020 and 2026, even as prices for shelter, food, and transportation rose sharply. Canadians are enjoying the most affordable connectivity in the country’s history, while consuming more data and relying on digital services more than ever before.

Affordability has come with a cost. TD Cowen and RBC Capital Markets have both warned that Canada may have reached a point where regulatory pressure on prices is now disincentivizing investment. Public market investors are becoming less interested in Canadian telecom stocks, raising the cost of capital and increasing hurdle rates for infrastructure deployment. RBC goes further, arguing that telecom policy can no longer be viewed solely through a consumer pricing lens — not when connectivity has become one of the most important value propositions across all household spending categories.

Yesterday, National Bank issued a report entitled “Quis Custodiet Ipsos Custodes? Without Ottawa Resetting Regulatory Policy, Is Canada Investment A House of Cards.” Indeed, who will guard the guards themselves.

Regulation by ideology is inherently sub-optimal given a myopic perspective that is out of balance for all stakeholders and for the net good of Canada. Government policy toward telecom, which once offered a dual objective of promoting facilities-based investment and competition, has of late skewed disproportionately to the latter. Beyond Ottawa advocating for this swing of the pendulum, regulators have been over-zealous in their adversarial approach to pressuring carriers on pricing strategies, wholesale access, and administration fees. This has triggered a reaction by carriers which have accelerated headcount reduction, rethought capital allocation priorities, and reduced spending on their networks. This report isn’t about outlining Canada’s next steps. It’s about missed opportunities in broadcasting regulation, unnecessary actions by the Competition Bureau, and over-reach in telecom regulation. Without a course correction from Ottawa and its regulators, declining network investment precludes a strong foundation on which to build.

Canadian policymakers need to recalibrate the balance between quality, coverage and price: affordability gains are meaningful, but long-term consumer outcomes depend on sustained investment, not just lower prices. As National Bank writes, “Pressuring telecom pricing down further won’t turn Canada’s networks into diamonds. To the contrary, the foundational layer of Canada’s economy is naturally destined to suffer in the absence of more balanced regulation.”

The next decade of digital innovation — AI, automation, robotics, smart cities, smart farming, advanced manufacturing — will be constrained or accelerated by the health of wireless investment. Spectrum availability, regulatory certainty, infrastructure deployment, and capital investment are issues impacting national competitiveness.

Sustaining world-class connectivity requires sustaining an investment environment for the network infrastructure that makes it possible.

The policy decisions made in the next few years will determine whether investment in Canada’s telecommunications networks accelerates AI innovation — or becomes the bottleneck that holds it back.

When the Canadian Radio-television and Telecommunications Commission (CRTC) reversed its own ill-conceived 2019 wholesale rates decision last month, the term “invest” shows up 56 times. “The Commission’s long-term objective in the wholesale HSA service market is to encourage competition and, in particular, facilities-based competition.”

And, when the federal Cabinet looked at that 2019 decision, it was also concerned about investment, warning:

On the basis of its review, the Governor in Council considers that the rates do not, in all instances, appropriately balance the policy objectives of the wholesale services framework and is concerned that these rates may undermine investment in high-quality networks, particularly in rural and remote areas.

Cabinet chose not to explicitly overturn the 2019 decision, saying “Given that the CRTC is already reviewing its decision, it is unnecessary to refer the decision back to the CRTC for reconsideration at this time.” But the message was clear in its August 2020 press release: “Canada’s future depends on connectivity”.

So, it should not have been a surprise that the Commission has continued nearly 30 years of support for facilities-based competition.

Since that May decision, there has been a steady stream of substantial investments announcements in major telecom infrastructure, for example:

• Bell: Bell’s biggest-ever network acceleration plan gets bigger with additional investment now up to $1.7 billion over the next 2 years;
• Rogers: When staying connected mattered most, Rogers enabled and enhanced connectivity to more than 1,000 communities across Canada, faster than at any time in company history;
• TELUS: TELUS unleashes Canada’s fastest Internet speeds and invests $2 billion to expand its fibre optic network in Calgary;
• SaskTel: SaskTel doubling its investment to bring advanced fibre optic broadband infrastructure to rural communities across Saskatchewan;
• among many, many more.

In its May 27, 2021 determination to vary its 2019 wholesale rates, the CRTC said “that making the interim rates final would further incent and foster investments and facilities-based competition.” Over the past month, Canada’s major facilities-based carriers have accelerated capital plans like never before.

The system is working.

Canada’s future depends on connectivity, and investment in connectivity is well underway.

Last week, an article in the Globe and Mail called for a reboot of Canada’s digital agenda.

On that headline point, I agree. A reboot may be needed.

As part of a typical reboot process, systems start fresh with clean data, clearing out faulty information. Some systems apply filters to improve the signal to noise ratios. As part of the reboot process, the government should ensure the information being loaded for processing passes error checks.

Unfortunately, I found a few points in the article that would fail error detection algorithms.

For example, in the second paragraph, we read:

The Liberals identified consumer telecom pricing, privacy protection and a modernized internet legal framework as priorities, but have struggled to develop an effective approach. Navdeep Bains, the Innovation, Science and Industry Minister, surprisingly backed a reversal on the affordability of communications services last month and has done little on privacy reform.

There is a little sleight of hand at work in those two sentences. Although affordability and prices are related, they are not the same and the terms should not have been used interchangeably. Indeed, recall from my post in January that a report from PwC found Canada’s telecom services to be the most affordable of all our G7 partners.

Contrary to the article’s assertion, it isn’t true that Minister Bains “backed a reversal on the affordability of communications services last month.” That simply didn’t happen.

The article is apparently referring to last month’s Order in Council responding to a petition to review the CRTC’s wholesale rates Order of August 2019. Minister Bains explicitly said “Canada’s future depends on connectivity,” and indicated that Cabinet was concerned the CRTC had not balanced the objectives in a manner consistent with the government’s priorities. Minister Bains specifically chose not to act at this time, recognizing that the CRTC was already reviewing its decision. Instead, the Minister more clearly indicated the policy of the government. That is precisely what the government is supposed to be doing.

The government’s telecom policy has never had a single-minded focus on price. As I wrote a couple weeks ago, for years now, Minister Bains has consistently spoken of 3 priorities: Quality, Coverage, and Price. Price is just one element. Last month’s Order in Council should be recognized for helping guide the regulator through the challenges of balancing the policy objectives.

Look at the language of the Order in Council:

• “the Commission… is bound… to exercise its powers and perform its duties with a view to implementing the Canadian telecommunications policy objectives and in accordance with any orders made by the Governor in Council”
• “improved consumer choice and competition, further investment in high-quality networks, innovative service offerings and reasonable prices for consumers”
• “considers that the final rates set by the decision do not, in all instances, appropriately balance the objectives of the wholesale services framework… and that they will, in some instances, undermine investment in high-quality networks.”

The Order in Council sought to clarify the need for maintaining the balance.

Indeed, the Globe article itself acknowledges that “fast internet access is a must for all Canadians”, as we have all seen over the past 6 months of being home-bound. Unfortunately, the reader of the Globe article is left without an understanding of the tension between the objectives of quality, coverage and price.

Around the world, we can see what happens when low prices constrain investment, or what I have called the “high cost of low prices”.

The message from Cabinet was clear.

On the basis of its review, the Governor in Council considers that the rates do not, in all instances, appropriately balance the policy objectives of the wholesale services framework and is concerned that these rates may undermine investment in high-quality networks, particularly in rural and remote areas. Retroactive payments to affected wholesale clients are appropriate in principle and can foster cooperation in regulatory proceedings. However, these payments, which reflect the rates, must be balanced so as not to stifle network investments. Incentives for ongoing investment, particularly to foster enhanced connectivity for those who are unserved or underserved, are a critical objective of the overall policies governing telecommunications, including these wholesale rates.

This should not be viewed as a “reversal on the affordability of communications services.” Instead, as should be evident to most Canadians over the past 6 months, the pandemic has helped elevate awareness in the importance of Quality and Coverage, the other two legs of the Minister’s priorities. The government called for improving the balance to preserve incentives for investment, the key input to ensure Canadians have access to world leading network quality, covering urban and rural areas.

The vast majority of investment in networks – rural and urban, wireless and wireline – the overwhelming majority of capital investment in Canadian networks comes from the private sector, not government. While governments support and supplement network investment by carriers, large and small, governments do not (and generally should not) supplant private sector investment. An approach based on strategic, targeted support helps to ensure a greater reliance on market forces to achieve the objectives of Canada’s telecom policy.

As Cabinet understands, in many cases support for private sector investment does not require cash as much as it requires a policy environment that encourages investment. Cabinet more clearly understands the economics the drive network investment, as I discussed a few weeks ago in “The economics of broadband expansion”.

The Globe article also seems to be confused between judicial appeals and cabinet appeals of regulatory decisions. The article says “the government’s approach seems particularly troubling given that the Federal Court of Appeal last week upheld the CRTC decision.” In reality, this should not be troubling at all; there is no linkage between the two appeals.

In fact, the ruling of the Federal Court of Appeal itself answers the concerns that the article finds “troubling”. As stated by the Court at paragraph 23:

[23] Significantly, neither section 62 nor subsection 12(1) circumscribe the types of questions that may be raised before the CRTC or the Governor in Council. This stands in contradistinction to the prescription in subsection 64(1) that limits this Court to reviewing questions of law or jurisdiction.

The Court is limited to ruling only on “questions of law or jurisdiction” while there are no limits on the scope of issues that may be raised in appeals to Cabinet (the “Governor in Council”) or the CRTC. So, it is completely consistent for a Court to find no fault with questions of law or jurisdiction, but have Cabinet to take issue with a CRTC decision on the basis of matters of policy.

There are valid concerns raised about delays in launching new broadband funding programs and we have unfortunately squandered 3 months of prime broadband construction season in failing to implement what I described as “An easy way to increase rural broadband speeds”.

Looking forward, we need serious discussions on the role of government in implementing the recommendations of the Broadcast and Telecom Legislative Review and updates to other areas impacting the digital economy.

But we need to make sure that when the government does its reboot, it carefully examines the data being input for processing. Much of it needs error-checking.

“Canada’s future depends on connectivity.” Those were the opening words in the statement issued by Innovation, Science and Industry Minister Navdeep Bains in discussing Cabinet’s decision not to formally intervene in last summer’s wholesale internet Order by the CRTC. While declining to take action, Cabinet sent a clear message that it expects significant changes to those rates in the pending outcome of the Commission’s own review of the Order.

The CRTC’s Order was issued August 15, 2019. Under Section 12(1) the Telecom Act, subsequent to a ‘petition’, “within one year after a decision by the Commission”, Cabinet (the Governor in Council) could “vary or rescind the decision or refer it back to the Commission”.

Exactly one year later, Cabinet decided not to take any of those actions, at this time.

The statement from Minister Bains explicitly acknowledges that the original CRTC Order got the rates wrong and says that the Commission did not strike the appropriate balance between the competing objectives of the Telecom Act, failing to apply sufficient weight to Section 7(b): “to render reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada”. Cabinet recognized that wholesale rates got set so low that carriers were unable to continue expanding their networks into unserved and under-served regions.

On the basis of its review, the Governor in Council considers that the rates do not, in all instances, appropriately balance the policy objectives of the wholesale services framework and is concerned that these rates may undermine investment in high-quality networks, particularly in rural and remote areas. Retroactive payments to affected wholesale clients are appropriate in principle and can foster cooperation in regulatory proceedings. However, these payments, which reflect the rates, must be balanced so as not to stifle network investments. Incentives for ongoing investment, particularly to foster enhanced connectivity for those who are unserved or underserved, are a critical objective of the overall policies governing telecommunications, including these wholesale rates. Given that the CRTC is already reviewing its decision, it is unnecessary to refer the decision back to the CRTC for reconsideration at this time.

With such strong views about the CRTC’s Order, some may ask why Cabinet didn’t exercise its power to formally “refer it back to the Commission.”

The better question is “Why would it bother referring it back to the CRTC?” All that would do is cause a delay.

The CRTC already has its own review of the Decision underway. That process began last November and submissions have already been received. Had Cabinet chosen to exercise its option to “refer it back to the Commission”, the resultant process might have to start over.

By setting forth a statement outlining its expectations for the Commission’s own review process, Cabinet is expediting the process that will ultimately release wholesale rates that balance the competing objectives. Although it declined to act, Cabinet is sending a signal to the Commission for what could trigger a subsequent review of the CRTC’s reconsideration proceeding.

[The CRTC’s Order was also the subject of a judicial process that was heard by the Federal Court of Appeal this past June. The Court imposed a stay of the Order, saying “the implementation of the CRTC Order that could result in a permanent market distortion which would be difficult to remedy posteriori.”]

A little over a week ago, I wrote that there are “other regulatory or policy levers that don’t require direct subsidies to improve the business cases for rural expansion”. In today’s release, we see Cabinet pulling a powerful policy lever that will significantly improve the business case for network investment including rural expansion.

Sometimes, the best decision is choosing not to make a decision at all.

A few months ago, in “A key to recovery? Communications leadership”, I wrote “Set clear objectives; Align activities with the achievement of those objectives; Stop doing things that are contrary to the objectives.”

Canada’s future depends on connectivity.

That is a strong statement, around which we can build objectives.

Last month, in “The COVID wild card”, I wrote about the supplementary comments filed in the CRTC’s mobile services review. “The importance of maintaining incentives for investment figures prominently in the final comments submitted last week.” On the subject of mandated resale of mobile services, I noted that Bell wrote “It would be particularly destructive now, during a period of unprecedented economic turmoil brought on by the COVID-19 pandemic and at a time when large investments of private capital are required to support rapidly expanding usage, the roll-out of 5G, and the continued extension of access to underserved rural and remote communities.”

With the ability to declare victory on falling prices for mobile services, the government is rightly turning its focus on maintaining incentives for investment in advanced facilities and expansion in unserved and under-served markets. What implications can we extract from today’s Cabinet release that may guide the outcome of the CRTC’s review of mobile services?

After all, Canada’s future depends on connectivity.

Every grocery shopper has experienced shrinkflation. Headline prices for asparagus, previously quoted by the pound, are now often listed for 325g bundles – you end up with 25% less for the money. Boxes of cookies and snacks are smaller; cereal boxes shrank. Prices for items may appear to hold constant, but the packaging is smaller. The headline price disguises the fact you are getting less.

Last month, I wrote “Statscan says cellphone prices are plunging – and they are”. In that post, I used a purely hypothetical apartment metaphor to describe how Canadians might choose to lower their monthly bill for a similar size apartment, or pay the same amount and get a bigger place with better quality. That might be the case if the cost of accommodations happened to be falling. If only!

But, despite these inflationary times, Canadian telecom – especially Canadian mobile wireless service – is actually delivering more value for less money.

A recent post by the Canadian Telecommunications Association talks about this effect in terms of grocery shrinkflation.

In a world of shrinkflation, Canada’s telecom sector stands apart.

• Lower prices – more data

  While prices for most things have increased, prices for both home internet and wireless services are declining. According to Statistics Canada, overall consumer price inflation has risen by 18.5% over the last five years, but prices for cellular services have decreased by an average of over 47% and prices for internet access services have decreased by an average of nearly 8% during the same period.

  For example, according to the Government of Canada’s annual telecom price study, in 2019 the average price of a wireless plan that offered 1GB of data (and 1200 call minutes and 300 texts) was approximately $65 per month (or approximately $75 in today’s dollars). Today, for $65, a consumer can get a plan that offers 75GB of 5G data and unlimited talk and text Canada-wide, with no overage fees. This amounts to a 98.6% decline in price per GB (without factoring in additional savings attributable to unlimited talk and text and zero overage charges). Smaller data plans are also available, like 30GB wireless plans for $34 and $50 for 60GB, which offer more data at lower prices than what was available just a few years ago.

• Faster Speeds

  If you check the label on your favourite packaged good you may find that one or more ingredients have been switched for a cheaper and lower quality ingredient. The opposite is the case in telecom. Though prices are declining, the quality of service has steadily increased. For example, the average mobile data download speeds in Canada have increased by 90% over 5 years¹ and fixed broadband download speeds by nearly 400%². With faster speeds, Canadians can stream movies, play games online, and join video conferences while on the go.

• More coverage.

  While other industries are shrinking the size of their products, Canada’s telecom providers are steadily expanding the coverage of their wireless and fixed networks, with the vast majority of Canadians now having access to mobile wireless and high-speed internet services. And with investments being made in new innovations like cellular-to-satellite communications, Canadians will soon be able to connect from even the most remote parts of Canada.

…
While other industries are shrinking their products, the telecom sector is giving more, not less. By investing billions each year, it is providing Canadians with more data, faster speeds, and wider coverage, all at lower prices.

I shamelessly stole the shrinkflation metaphor last week when I was quoted by Canadian Press talking about the latest Statistics Canada consumer price index report. In February, the cellular price index was down more than 25% compared to a year ago.

Price declines in the national inflation report could indicate that consumers are getting more bang for their buck through new offers, such as bigger data packages, international roaming perks, or voice-to-text voicemail services.

“They’re either getting more for the same price or they’re paying less for the same thing,” said Goldberg, who likened it to “the opposite of shrinkflation.”

“If you go into a grocery store and the box of cereal on the shelf is $3.99, but last month it was a 500-gram box and this month it’s a 400-gram box … you’d say prices went up 25 per cent. In this case, it’s the opposite.”

For years, Canadian telecom policy has recognized the value of investment in telecommunications infrastrucutre. In approving the merger of Orange and MasMovil, I noticed that Spain has recently adopted a similar view, with Digital Transformation Minister José Luis Escrivá saying “the competitiveness of a country partly depends upon its digital infrastructure and its connectivity.”

Here, we phrase it simply. “Canada’s future depends on connectivity”.