Search Results for: incentives to invest

Back in June 2009, the presidents of DAVE Wireless, Public Mobile and Globalive Communications were on a panel together at The Canadian Telecom Summit talking about how they planned to address an “underserved market” for mobile services.

Each company believed there was a sustainable business case for a carrier that focused on value-conscious mobile service clients, not needing the same levels of investment in the latest technologies, or the spectrum to support high throughput. In some cases, the initial networks were built without LTE, or used non-standard ranges of spectrum.

A variety of issues arose, but each of the carriers learned that value-conscious consumers still wanted to be able to access the latest devices, or bring their devices from their previous service provider. At least one service provider found that it was unable to get a hold of the hottest devices until its network was upgraded to LTE.

And that brings us to today, where most service providers are in the midst of massive levels of capital upgrades, some CEOs have termed it “generational levels of investment”, to implement 5G services.

What are the 5G apps that will capture our imaginations? From a consumer perspective, if I knew, I certainly wouldn’t share my ideas in a public forum.

But we know that 5G enables far higher density of connected devices, with far greater data speeds and throughput capacity, and significantly reduced latency. At the time mobile networks were being upgraded to LTE, we didn’t know which apps would be enabled. This next generation is no different.

For service providers that choose not to invest in 5G, there may be a small window of opportunity to simply go after a budget conscious consumer. The challenge will be in retaining the majority of customers who want to be able to access the newest apps and capabilities, and don’t understand why those don’t work on their legacy devices.

Some of those apps won’t be on their hand-held devices, but may be embedded in their car. Or, home appliances. Or, store shelves.

So, what will happen to service providers that are unable (or unwilling) to keep up with the investment required to upgrade networks to 5G? The transition to 5G can be a factor to drive consolidation in the marketplace, as service providers look at the need for more pervasive backhaul facilities to support the increased density of antennas. Recall, Brad Shaw told Canada’s Industry Committee in March that “it is clear that Shaw cannot build what Canada needs on our own.”

Reducing the number of competitors does not necessarily translate to a lessening in competitive intensity in the marketplace. For example, take a look at Manitoba and Saskatchewan, where Shaw currently operates as a cable TV provider, but not as a wireless service provider. Rogers offers mobile services in both provinces. What happens to the competitive intensity for consumer services in those two provinces when Rogers and Shaw combine forces?

The best way to encourage sustainable competition – not just in telecom but for the benefit of the economy at large – is by maintaining incentives to invest, enabling and encouraging the massive levels of investment necessary to upgrade networks to 5G.

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

Much has been written about the proposed Policy Direction released last week by ISED Minister Bains to the CRTC, and the Commission’s subsequent Mobile Wireless Services Notice of Consultation.

My regular readers know that I like to cover these kinds of things from paths that are less traveled, trying to bring a fresh perspective. As such, I’d like to examine last week’s releases from the perspective of incentives to invest.

The term “investment” appears 13 times in the CRTC’s notice of consultation; it appears just once in the proposed Policy Direction, and that instance is in relation to “stimulate investment in research and development and in other intangible assets that support the offer and provision of telecommunications services.” However, the proposed Policy Direction also speaks about “innovation in telecommunications services, including new technologies and differentiated service offerings” and ensuring “affordable access to high quality telecommunications services is available.”

That kind of language needs to be contrasted with the CRTC’s consultation that speaks in terms of the need “to make significant investments in network infrastructure” for 5G. The Commission’s concern about maintaining incentives for continued capital investment is set out in the core of the proclamation for this proceeding:

21. The Commission is hereby initiating a proceeding to review mobile wireless services in Canada. This proceeding will focus on three key areas:
    • Competition in the retail market
    • The current wholesale mobile wireless service regulatory framework, with a focus on wholesale MVNO access
    • The future of mobile wireless services in Canada, with a focus on reducing barriers to infrastructure deployment
22. The scope of each of these issues is described in detail below. In addition, parties may raise other matters, issues, or proposals that are relevant to and appropriate for a broad policy review of mobile wireless services. The Commission’s focus in this proceeding is to ensure that its mobile wireless service regulatory framework facilitates sustainable competition that provides reasonable prices and innovative services, as well as continued investment in high-quality mobile wireless networks in all regions of the country.

I observed on Twitter last week that network investment frequently falls into 1 or more of the 3 C’s: Coverage, Capacity, or Capability.

Many carriers have focused their investments on coverage and capacity enhancements, adding reach to the networks to previously under-served regions and adding capacity to increase data connection speeds and relieve congestion. Most carriers have upgraded capabilities for most regions to enjoy access to advanced fourth generation technology and are readying to deploy 5G.

Mandated wholesale access has the potential to impact the business case for investment. Of course, in core urban areas, there are strong incentives to invest driven by competitive behaviour, where carriers will ensure that their networks are able to offer top speeds as part of their bragging rights. However, it is clear that the business case for such investments is not limitless, otherwise we would see 5 bars of LTE-Advanced everywhere in Canada.

So, we know that there are already certain areas with lower population densities that already cannot support a business case for some carriers to invest. Now, imagine that that the carrier will no longer be able assume the same level of retail revenues. What happens to the business case for those marginal areas? If potential revenues decrease, one would expect that fewer areas will be able to support a business case for enhanced levels of investment. People in under-served areas today should carefully consider whether mandated MVNO and lower retail prices will help or hinder their cause.

Recall that when the current CRTC Chair was welcomed to his job, he received a letter from the Ministers of Heritage and of Innovation, Science and Economic Development, saying, “All Canadians and Canadian businesses deserve high quality telecommunications services at affordable prices.” At the time, I wrote “It is a delicate balance. Quality and coverage require significant levels of capital investment, especially in a country like Canada.”

The proposed Policy Direction echoes that language in the clause suggesting that the CRTC should consider the extent its regulatory measures “ensure affordable access to high quality telecommunications services is available.”

The CRTC consultative process will most likely be informed by engineering economic analysis, assessing the potential impact on investment in marginal areas for coverage, capacity and enhanced capabilities.

Maintaining incentives for investment requires a delicate balance.

In a post last month, I referred to a recent policy statement released by Ofcom, “Promoting competition and investment in fibre networks: Telecoms Access Review 2026-31”.

I thought the 39-page Statement by the UK regulator deserved a more serious look, especially in view of a sharp contrast with Canada’s regulatory posture, as set out in its 2024 Telecom Regulatory Policy: “Competition in Canada’s Internet service markets.”

Like the UK and many countries, Canada has set a political objective to extend high-speed broadband service to rural and remote regions. Of course, what the UK considers rural and remote is very different from the challenges faced by Canadian carriers. Officially, Canada defines rural as “areas [that] have populations of less than 1,000, or fewer than 400 people per square kilometre.” Roughly 20% of Canadians live in rural Canada. The UK government defines areas as rural if they fall outside of settlements with more than 10,000 resident population. In Canada’s Far North, we have a population density of just 0.02 per square kilometre. Although the definitions differ, roughly 20% of the population of the UK and Canada live in rural areas.

By the end of 2024, the CRTC shows 90.6% of Canadian households had access to gigabit broadband; Ofcom shows 87% of UK premises by mid-year 2025.

In their policy documents, there are similar opening statements by Canada’s CRTC and the UK regulator, Ofcom:

• CRTC: “the Commission is working to increase competition while ensuring continued investments in high-quality networks.”
• Ofcom: “Our regulation is designed to promote competition and investment in high quality gigabit-capable networks – bringing faster, better broadband to people across the UK.”

The UK’s approach, as laid out in Ofcom’s statement, is an endorsement of facilities‑based competition, with regulations mandating access to passive infrastructure (eg. ducts and poles). Canada used to operate under the premise that facilities-based competition is the most sustainable form; in recent years the CRTC decided to experiment with a hybrid approach, seeking to ensure its wholesale framework “provides equitable regulatory treatment” (as it describes in TRP 2024-180). The divergence is more than just philosophical; it is producing different market structures, and different investment incentives. Canada’s ‘top-down’ regulated wholesale-access policy is applied on wireline and wireless, in sharp contrast to the market-led approach in many other jurisdictions.

In its Policy determination, the CRTC said “Consumers have fewer choices when buying Internet services: in recent years, competition has been declining. By the end of 2022, independent ISPs served significantly fewer customers than they did at the start of 2020. At the same time, several of the largest independent ISPs have been purchased by incumbents.”

This formed part of the rationale for the CRTC’s shift. But there are some strange disconnects in the Commission’s logic. “These facts suggest that the Commission’s prior regulatory approach, which prioritized facilities-based competition, has not brought about sustainable competition that delivers more choice and more affordable services to Canadians, nor has it resulted in universal access to higher-speed Internet services.”

There were two different concepts there. On the first, I would actually argue that there had been greater competitive intensity today among the facilities-based service providers, as evidenced by levels of investment, lower prices, and marketplace rivalry. The fact that independent ISPs – those depending on wholesale access – hold a diminishing share of the market should have been expected as a confirmation that facilities-based service providers were always seen as the most sustainable.

What did the Commission think was meant by sustainable competition? The level of competition should never have been measured by the number of competitors.

As to the second concept (universal access to higher-speed Internet services), coverage cannot be extended by way of wholesale access. Extending coverage requires construction of new facilities, which would seem to imply the need to focus on promoting investment.

The CRTC noted that it had received evidence that “demonstrated how [a decision to mandate wholesale access] could decrease network upgrades and prevent future network deployment. The Commission recognizes that regulatory measures that reduce the incumbents’ revenues can challenge the business case for the incumbents to deploy networks.”

So, the CRTC set up a 5-year “head start” provision as an incentive for telephone companies to extend the reach of their fibre networks. “While the Commission notes that its rate-setting process is designed to be compensatory, it considers that a five-year head start would provide additional incentive for the incumbents to invest in areas where they have not yet built FTTP by giving them an opportunity to more rapidly recoup their initial investments.” At the same time, the CRTC excused cable companies from the obligation to wholesale its fibre, since it only has about 5% of homes with fibre to the premises (as contrasted with 60% of telephone companies).

As it turns out, that 5-year head start isn’t proving to be enough of an incentive. Over the past couple of months, I have written frequently [such as here and here] that capital expenditures are down, measurably down, with carriers pointing blame at the CRTC framework. The Commission’s own monitoring report shows annual drops in capital spending in 2023 and 2024 since levels peaked in 2022. Public company reports are pointing to nearly 10% lower capex in 2025, and projections to fall another 15% lower in 2026.

That should be no surprise to the Commission. The CRTC was warned, as it acknowledged in the Policy determination at ¶34: “The incumbents submitted that a Commission decision to mandate aggregated HSA is likely to reduce investment in high-speed networks.”

Investment impacts quality and coverage – factors that are important for consumers. Contrast sharply falling investment in Canada with Ookla’s latest report on the US market, “Aggressive U.S. Broadband Expansion in 2H2025 Narrows Digital Divide”. “The U.S. broadband landscape underwent a big shift in the latter half of 2025. Thanks to record-breaking new fiber builds, the aggressive expansion of SpaceX’s Starlink, and the growth in fixed wireless access (FWA), broadband availability achieved some new milestones.”

The Commission’s decision to exempt cable companies from mandated fibre wholesale due to low share might also serve as a disincentive for cable companies to invest in fibre. In the Policy, the CRTC said that it was excusing cable from mandated fibre wholesale because the cable companies had such a low percentage of premises with fibre: “by the end of 2022, the cable carriers’ FTTP reached just 5% of the homes they pass nationally, compared to over 60% for the ILECs… Mandating the cable carriers to provide aggregated FTTP services would be costly to implement relative to the benefits it may bring to Canadians. It may also result in a loss of cable carriers investment.”

The Commission warned, “A significant increase in the percentage of homes passed by the cable carriers’ FTTP may prompt a Commission review of whether the cable carriers should begin providing aggregated FTTP services.” This was very strange wording in my view – effectively threatening increased regulation if the cable companies invest too much in fibre.

In his speech at the Scotiabank TMT Investor Conference, CRTC Vice Chair Adam Scott described the Commission’s decision-making process as “we take the evidence on the record and use it to form a regulatory hypothesis — that by taking a certain course, we will see a certain type of outcome.”

In the case of capital investment levels arising from its fibre wholesale policy, the CRTC is clearly not seeing its anticipated outcome. How should the Commission respond?

I noticed an interesting phrasing in the Ofcom document with respect to capital expenditures: “We also recognised that the long-term nature of network investments requires regulatory stability and therefore set expectations about future regulation to 2031 and beyond.”

No one wants to see a return to Canada’s Calvinball approach to regulation. “The only permanent rule in Calvinball is that you can’t play it the same way twice.”

If we want to create appropriate incentives for private sector investment in telecom, we can’t keep changing the rules. But first, we need rules that actually encourage investment.

For years, I have talked about policy and regulatory impacts on capital spending by telecom carriers. As we have come to learn in the Twitter/X era, government action can enhance or destroy incentives for investment with the simplicity of a late-night Ministerial tweet, or the potential global economic impact of late-night Presidential social media musings.

Last week’s release of the CRTC’s “Canadian Telecommunications Market Report 2026” (CTMR) provides quantitative evidence of a pull-back in telecom investment – reductions that are attributable to regulatory policy. It is notable that the CRTC also released its 2026-27 Strategic Plan last week.

While the facts are laid out clearly in the CTMR, there is only a subtle acknowledgement in the text that regulatory decisions could be influencing capital spending. The report notes reduced investment in landline networks due to “a large pullback by one of Canada’s major operators” — an allusion clearly referring to Bell, which has not been shy in attributing its CAPEX reductions to 2023 and 2025 CRTC decisions.

The CTMR demonstrates how Canada’s largest operators are weighing returns on incremental network investment, resulting in 10% lower capital investment in wireline networks in 2024 compared to 2022. A $500M decline in total 2023 capital investment first noted in last year’s CTMR continued, and it accelerated to a $600M reduction in 2024 versus 2023.

The Monitoring Report says, “Already, operators have signalled that they are moderating their investments in telecommunications networks. This is partly a response to pressure on their revenues and partly because wired and wireless networks now reach virtually the entire population.”

I think a little more introspection by the CRTC is warranted. For years, the regulatory framework — particularly a hands‑off approach to fibre and wireless — created strong incentives to build. Policy favoured the primacy of facilities-based competition.

But that environment is changing. The CRTC’s new wholesale fibre access regime, combined with a more interventionist stance on pricing and competition, introduced uncertainty into the investment calculus. Scotiabank’s Maher Yaghi recently wrote a report asking, “Why continue to heavily invest in infrastructure?”

In an environment where 1) the regulator forces operators to rent their infrastructure to competitors both on the wireline and wireless sides at rates set by the same regulator and not on a commercial basis as seen in the US, 2) any investment in network technology made by an operator provides the same advantage to its competitors, and 3) given the high leverage of companies like Rogers, BCE and TELUS, wouldn’t it make more sense for incumbents to materially reduce capex to levels closer to challengers like Quebecor? Obviously this was not the choice made by either BCE nor Rogers when setting their capex guidelines for 2026, but we believe it is a fair question to ask in the current Canadian regulatory context.

Capital flows toward environments where returns are predictable and policy signals are stable. When those signals become ambiguous, investment pauses, recalibrates, or shifts to lower‑risk categories. Bell framed its CAPEX reduction as a direct response to regulatory headwinds, arguing that mandated access and pricing constraints erode the business case for continued fibre expansion. Whether or not one agrees with that interpretation, the CTMR’s acknowledgement that investment levels are dropping – and the regulator’s potential role – is significant. It states “As the CRTC continues to monitor the market, it will be mindful of the balance between increased competition in Internet services, and ongoing investment in high-quality networks.”

The Commission’s Strategic Plan says it will “Promote competition for Internet and cellphone services while supporting continued investment in reliable, high-quality networks by allowing competitors to access telecommunications infrastructure at fair rates and on fair terms.”

The CTMR stopped short of drawing explicit conclusions, but we need to be concerned about the tangible impact on investment behaviour from regulatory decisions. The market is indicating that what the CRTC considers “fair rates” is unable to support the same levels of “continued investment in reliable, high-quality networks”.

The next few years will test whether Canada can maintain its infrastructure leadership while pursuing competition policy based on government intervention. The Monitoring Report states up front:

Telecommunications – especially high-speed Internet and cellphone services – have never been as central to Canadians’ daily lives and livelihoods as they are now. Canadian telecommunications networks have never been as extensive or advanced as they are today. These are undeniable successes, attesting to Canadians’ embrace of digital technology, to innovation and investment by the telecommunications industry, and to policy frameworks that support better network quality, coverage, and service. As we look ahead, however, the market is shifting, and the Canadian industry is facing significant challenges.

Through the years, government policy has promoted a focus on Quality, Coverage, and Affordable Prices. The CTMR acknowledges that “Canadians believe telecommunications services have become more affordable, or that they have the opportunity to switch to more affordable or suitable options.” With the drive toward affordability in hand, more attention is needed on the regulatory impacts on investment – investment that drives quality and coverage.

The CTMR shows that 96.4% of Canadian households had access to the national objective broadband service (50/10 Mbps unlimited) by year-end 2024. But there is work to be done to provide coverage for one in six rural households, a third of households on First Nations reserves, and 30% of residences in the Territories. The report shows wireless networks covered 99.5% of Canadians by the end of 2024, but that needle hasn’t moved much since the capital investment peak in 2022, leaving 10% of those on First Nations Reserves.

Speaking at the 2011 Canadian Telecom Summit, former TELUS CFO Robert McFarlane warned attendees that nothing changes the profitability of a carrier faster than the stroke of a regulator’s pen. Going forward, will the regulatory framework provide enough certainty to keep investment flowing into Canada’s networks?

How should telecom policy evolve to improve the incentives for investment in infrastructure?

A recent Policy Briefing from Hill Times focused on telecom. At least two of the articles addressed the question of whether government policies will support investment in telecom infrastructure, or constrain it.

In “Major projects? Not without telecom”, Canadian Telecommunications Association CEO Robert Ghiz emphasized that none of the transformative projects under discussion (such as liquefied natural gas expansion, tide water pipelines, or the proposed high-speed rail link between Toronto and Quebec City) can succeed without investment in world-leading telecommunications networks.

Canada’s telecommunications providers have a strong record of investing in the networks that make these projects possible. Over the past decade, the industry has poured more than $130 billion into building and upgrading wireless and wireline infrastructure. That investment has delivered among the fastest and farthest-reaching networks in the world.
…
In short, the industry has shown it can invest at scale, drive innovation, and deliver lower prices and more value. But sustaining that record depends on the right policy environment.

When governments establish rules that discourage investment—whether through wholesale internet access frameworks that undercut incentives to build, or consumer policies that pile on compliance costs without improving outcomes—they risk diverting resources away from the very networks that Canada’s major projects will depend on.

Writing in the same edition of Policy Briefing, Erik Bohlin, the Ivey Chair in Telecommunication Economics, Policy and Regulation at Western University’s Ivey Business School, observes that investment resources are currently flowing outward from Canada, rather than attracting foreign direct investment. Why?

“Among others, Canada’s existing inventory of regulatory measures—including spectrum set-aside policies, roaming policies, mobile virtual network operator measures and more—may need to be questioned whether they may run counter to broader resilience goals.” He asks, “What are the resilience impacts of network-based competition vs. service competition?”

Both articles speak to the need to support investment in resilient, world-class telecommunications networks, aligning telecom policy with our overall national industrial policy.

Supporting investment for network resilience has been a frequent theme on these pages. As Robert Ghiz writes, “Just as governments are designing policies to reward building of other critical infrastructure, they must ensure that their policies and regulations encourage continued capital investment by facilities-based network providers.”

Last week, Brian Lilley wrote in the Sun papers, “In the United States business investment is up as they cut useless regulations and welcome companies. In Canada, we won’t cut regulation and the PM puts out a list of preferred projects that still may not happen.” In linking to that article, Senator Leo Housakos tweeted, “Canada’s challenge has been attracting foreign investment and keeping capital from fleeing. Lilley is absolutely right that the lack of investment into Canada is largely due to bureaucracy and government interventionism.”

At the very least, government policy should not discourage investment – a theme explored in my post last week.

Ideally, in Canada’s current economic climate, seeking to stimulate national infrastructure projects, there should be better support for digital infrastructure.