Search Results for: quality coverage price

The following commentary appears on National News Watch in the National Opinion Centre section.

In their letter of welcome to new CRTC Chair Ian Scott, Ministers Melanie Joly and Navdeep Bains wrote that the government’s objectives are to improve the quality, coverage and price of telecommunications services. This echoed remarks from Minister Bains earlier this year at The Canadian Telecom Summit.

There is a difficult tension in these objectives, seeking increased investment while maintaining, if not improving affordability. The Ministers wrote “All Canadians and Canadian businesses deserve high quality telecommunications services at affordable prices.”

It is a delicate balance. Quality and coverage require significant levels of capital investment, especially in a country like Canada.

How do we define and measure “affordable”? We all want lower prices for everything, but the modifier “high quality” makes low prices more of a challenge. That is why we should be careful not to equate “affordable” with rock bottom prices.

A number of recent speeches and announcements from the government have claimed Canadians pay more for entry-level cell service compared to residents of the US and the UK. There have historically been problems with the way the OECD and CRTC has collected communications pricing information. For example, the CRTC does not include flanker brands (such as Virgin, Koodo or Fido), or examine pre-paid plans, precisely the kinds of services that would be the most attractive choices by lower income consumers. Both OECD and CRTC do not account for the difference in the quality of networks nor for the difference in density of population for these comparisons. Further, the information collected is typically outdated by the time it is published and tough to verify.

A recent report by Wall Communications submitted to the CRTC observed that “an inherent problem in defining affordability is the need to invoke some benchmark for which there is no objective definition.” Canada’s Public Interest Advocacy Centre has suggested communications services are affordable when they make up no more than 4% to 6% of a household’s income.

The Wall report found “The lowest priced Smartphone service that is widely available across Canada constitutes roughly 1% or less of the low income cut-off.” Further, measured as a percentage of low income level, Canadian entry level prices for a voice, text and data plan is similar to Germany, Italy and Australia, and almost half the level of the US, where entry level voice, text and data plans cost 2% of American low income levels. So, while Canadian prices may not be the lowest, entry level plans are affordable when compared to our peers, consistent with a report from The Economist Intelligence Unit ranking Canada number 1 in communications services affordability.

What about coverage and quality?

A February 2017 report from the GSMA found that Canada had the highest spectrum cost measured on a per capita basis, roughly $350 (US) per person, as compared to $200 per person in the US and about $50 per person in the UK. Recent reports have shown that Canada led all G-7 countries in capital spending per subscriber. Measured as a percentage of revenue, Canadian capital spending was top in the G-7 and fourth in the OECD. All of that investment has been paying off, providing high quality network wireless coverage to most Canadians. In announcing the latest spectrum policy consultation, the government acknowledged that Canada’s networks rank second among G7 countries for average wireless connection speeds and 98% of Canadians have access to LTE wireless technology.

Canada is now setting the rules for the next multi-billion dollar auction of spectrum and the country has launched a consultation on what its spectrum policy should look like for the next 5 years. At the same time, the wireless industry is preparing for what has been called a “generational investment” in the latest 5G technology.

Lower prices won’t ensure Canadians have access to affordable options no matter where they live. Regulations, spectrum policy and auction rules have to preserve the delicate balance that enables mobile service affordability, while encouraging investment in high quality networks that are available from coast to coast to coast.

A week and a half ago, ISED released the latest edition of its series of telecom price studies. I’m going to look at that report over the course of a few posts.

It’s a real challenge to create meaningful international telecom price studies.

Remember when two dozen leading economists and academics said, “The Rewheel story is easy to understand. It is also completely wrong.” and “Rewheel’s rankings are of no value in comparing prices and assessing the level of competition in wireless markets.” Rewheel’s reports were characterized by ICLE as “a careless mish-mash of data points from which no reliable conclusions can be drawn.” Last week’s report [pdf, 1.2 MB] lives up to that billing.

I looked at a couple well publicized international telecom price studies about a year and a half ago. In that post, I write of my frustration with “the misinformation from pseudo-statistical studies being circulated with viral velocity”. I pointed out what should be easy to detect flaws with the methodology being used by Cable.co.uk.

Typical problems with telecom price studies arise from overly simplistic examination of the different countries. While most studies adjust for currency variations, very few make adjustments for PPP (purchasing power parity). If consumers are earning 80% less in one country, it doesn’t help for them to pay 25% less for their digital connections.

Fewer still account for variances in quality of the products and services, such as speeds, coverage, costs of building networks. That can be like comparing prices for bicycles and motorcycles. A recent PwC study [pdf, 660 KB] compared Canada to the rest of the G7 plus Australia. Canadian carriers invest almost double the amount capital measured on a per subscriber basis ($168 vs $87), with capital intensity 35% more (19% versus 14%).

There are hundreds (or thousands) of price plans available in each country. It is virtually impossible for telecom price studies to look at which plans are the most popular in each market. And then, how would a study start to compare those to the plans in other countries? Arithmetic averages (means or medians) are somewhat meaningless. Are the plans that most consumers are buying are weighted more heavily than those on extreme ends of the menu? In countries with 150 to 200% mobile penetration rates, does the study account for people paying multiple bills?

Let’s consider the telecom price study released earlier this month by Innovation, Science and Economic Development: “Price Comparisons of Wireline, Wireless and Internet Services in Canada and with Foreign Jurisdictions: 2022 Edition” [pdf version, 1.8MB]. Wall Communications prepared the report for ISED.

As in some other recent years, the 2022 edition is missing a section on caveats to the interpretation of the findings. Those notes used to be an important part of the study. For example, in 2016, the ISED study included a page of notes, including these two paragraphs:

Prices in Canada and international jurisdictions are driven by a complex mix of a number of factors: cost of service, competitive positioning, technological advances, consumer behaviour and regulatory frameworks. As wireless technology is constantly improving and consumers demand ever more bandwidth and data caps, service providers are constantly increasing features. In the Study, these changes are reflected by the need to regularly update the definition of service baskets. Hence, price increases in those baskets may in part, simply reflect better service levels offered to consumers.

This Study did not take into account the network technologies deployed in the networks nor the speed or quality of service of those networks. Finally, this Study did not account for any cost of service or socio-economic factors that may be relevant for price differences across different domestic and international jurisdictions. Thus, factors such as population density, terrain and climate have significant impacts on the cost of service. Similarly, socio-economic factors such as affordability indicators (i.e. mobile prices in relation to disposable income), number of handsets per subscriber, number of minutes of usage per subscriber and other factors were not within the scope of this Study.

The 2022 edition includes a few caveats in its Introduction, but it would benefit from a separate “reader’s notes” section.

I’ll look at the results of ISED’s 2022 price report in another post later this week.

A recent article in “The Connexion” highlights the cost of deep discount mobile service prices. “Internet in rural France: New study shows how bad it really can be” cites a study showing that mobile speeds can be 66% lower in rural areas than in urban areas. Recall that a recent Opensignal study found that Canadian rural speeds were just 10-20% lower than urban speeds. Studies have also found that mobile customers in rural Canada experienced faster connection speeds than the average speeds received in any of the rest of the G7 or Australia.

It is also important to recognize that the French study considered communities of less than 10,000 to be rural; that is a full order of magnitude greater than Statistics Canada’s definition of rural as “the population outside settlements with 1,000 or more population”.

A couple of years ago, “When low prices constrain investment” talked about issues arising in Finland. That article referenced the situation in Israel that I discussed in “Low prices, high cost”.

Consumers want low prices. Of course we do, especially as we face rapidly rising prices for so many essentials.

But, consumers also want quality phone service wherever we are, including rural Canada. Remember the Quality, Coverage and Affordable Prices balance that has been at the heart of Canadian telecom policy for the past few years? The most recent Statistics Canada Consumer Price Index data showed that overall prices increased by 7.7% year over year while mobile services dropped 5.2% over the same period.

Once again, in rural France we see evidence of the high cost of a singular focus on low prices.

Service providers invest billions of dollars in capital to provide the coverage and quality of service that Canadians often take for granted.

The consumer interest is multi-dimensional, needing a balance of quality, coverage, and affordable prices.

Balance.

As I have discussed before, the government’s telecom policy priorities have been for quality, coverage and affordable prices.

Mobile prices have fallen more than the benchmark of 25% over two years set by the current government.

A new study from independent mobile analytics firm Opensignal indicates strong performance and service availability, even outside urban areas.

As a CWTA press release states, the Opensignal report “shows that mobile video, gaming, and voice app experience in cottage country is on par with the national experience.”

Opensignal reports that users in cottage country have strong network access across Canada, being connected to 4G or 5G 93.3% of the time (just 1.4% lower than the national average).

An analysis by CWTA of recent Opensignal Market Insights reports shows the average 4G download speed for Canada’s cottage country (52.9 Mpbs) is faster than the national average download speeds across all network connections for each of the other G7 countries, plus Australia.

Despite the challenges of deploying world-class mobile networks across Canada’s large geography, harsh terrain and low population density, the wireless industry continues to invest billions of dollars to expand and enhance mobile services across the country, including rural communities, as reported by Opensignal.

That investment continues to move the yardsticks ahead on the policy priorities: quality, coverage and affordable prices.

The following article, by Robert Ghiz, CEO of the Canadian Wireless Telecommunications Association, appeared earlier today as an OpEd in Hill Times [“Price decline shows Canadian wireless on the right track”].

It is reproduced here with the permission of the author:

Price decline shows Canadian wireless on the right track
Recent headlines have been filled with news of the rising cost of housing, food, gas, and most other consumer items. So, it may have come as a surprise to some when the Minister of Innovation, Science and Industry, Francois-Philippe Champagne, recently announced that the price of mid-level mobile wireless plans have decreased by 25% over the 21-month period ending December 2021, and that the price of larger 10GB data plans decreased between 22-26% during this same period; after having already fallen 31% in 2019 and also eliminating overage fees.

For those of us who watch the wireless industry closely, the announcement merely confirms what we already knew. The cost of mobile wireless plans has been on a steady decline while the quality-of-service and network coverage of mobile services keep getting better.

How did this happen? Did government regulate the price of wireless plans? Did they force telecom operators to allow resellers, companies that are not willing to risk investing in building their own networks, to sell network operators’ services at fixed wholesale prices? They did not. The government did what most countries have now done; it recognized that the best way to stimulate investment in connecting more Canadians with high-quality services while also reducing prices is to promote competition amongst the companies that build and operate Canada’s digital infrastructure.

By having to compete not only on price but also on quality and coverage, Canada’s national and regional wireless operators have invested over $100 billion in capital expenditures and radio frequency spectrum licenses to build, maintain, and expand some of the best performing wireless networks in the world. This is no small feat given Canada’s large land mass, low population density, high spectrum costs, and short building season. In fact, consulting firm PwC has ranked Canada as having the highest network building costs among G20 countries. It is no wonder that Canadian network operators have spent more per wireless subscriber in building their networks than their G7 country peers, and over 60% more than the OECD country average.

The impact of these investments is measurable. Canada’s wireless networks reach 97% of the Canadian population, with average download speeds that have increased 116% over the last five years; speeds which exceed those of most other countries including the United States. By investing in both wireless and wireline networks, the telecommunications industry directly contributes over $70 billion in GDP to Canada’s economy and supports nearly 600,000 jobs across industries.

But there is much more work to be done. As the COVID-19 pandemic has shown, the industry’s investments in digital infrastructure have been critical to maintaining economic and social activity. As Canadian businesses and governments continue to accelerate the digitization of their products and services, ongoing investment in expanding and enhancing our digital networks will be key to Canada’s economic recovery.

For example, Accenture has estimated that investing in the deployment of 5G wireless networks in Canada will contribute an additional $40 billion in GDP to Canada’s economy by 2026 and add up to 250,000 new full-time jobs in the same period. The increased capabilities of 5G technology will not only enable innovative new products and services and help bring connectivity to underserved communities, it will also help Canada reach its greenhouse gas reduction objectives. Accenture has estimated that the use of 5G and other mobile technologies have the potential to address 23% of Canada’s total 2030 emission reduction target by 2025.

Canada’s future depends on connectivity. But it can only achieve these results by ensuring that policies and regulations continue to encourage investment in digital infrastructure. Accenture estimates that the initial roll-out of 5G will require $26 billion in capital expenditures by 2026, plus billions more in acquiring radiofrequency spectrum rights. Achieving this high level of investment requires continued recognition by policy makers that competition among network builders, also known as facilities-based competition, is the only way to continue to deliver on the three key objectives of coverage, quality, and affordability.

Canada’s future depends on it.

Each month, Statistics Canada tracks a large number of components in creating its Consumer Price Index. I track those related to the telecommunications sector, including the cellular price index. Over the past two years, Statistics Canada’s Cellular Price Index has fallen 27.45% as can be seen in the figure below.