Canada is the world’s second-largest country by land area and ranked among the top ten economies. By the end of 2021, global macro models and analysts expect Canada’s GDP to reach over $1 trillion dollars, a recovery signal from the pandemic shock.
As the world reopens and the Canadian economy returns to growth, the telecommunications industry is among one of the sectors anticipated to further enhance its economic contributions and fuel Canada’s digital evolution. This is mainly because true connectivity and broadband access have never been more in dire need than during the pandemic.
In fact, in 2020 – the peak of the COVID-19 outbreak – Canada’s telecommunications industry directly contributed $70.7 billion in GDP to Canada’s economy and supported 596,000 jobs. These include facilities-based network operators supplying wireless and wireline connectivity services such as Bell, Rogers, Telus, Shaw, and Quebecor.
Wireless services, powered by telecom services, have become an integral part of Canadians’ lives to stay in touch with family and friends, consume content, or work at home or while on the move. With lockdown restrictions and social distancing measures in place, staying connected digitally and accessing life-enhancing services are priorities.
With most Canadians shifting to digital-first behaviors, little or no access to connectivity limits their participation in the digital economy and social ecosystem. To resolve this, the public and private sectors must continue to prioritize investment in network infrastructure and next-generation technologies, promote healthy facilities-based competition and implement a regulatory framework that fosters infrastructure investment.
Regardless, making that digital future a continuous reality across Canada will take billions in investment in wireless networks and wireline broadband systems. This investment won’t happen all at once as it will require a steady policy environment and sustained incentives for investors.
Increasing the availability, affordability, and accessibility of connectivity services give CSPs a unique value proposition to propel the Canadian economy and society forward. Founded on connectivity expertise and trust, leveraged with technologies like cloud and 5G, CSPs can drive the digital economy to enable use cases that will deliver a range of economic, environmental, and societal benefits.
Healthy telecom industry amid crisis
First of all, an industry is considered to be healthy when it has competitive infrastructure investment, a sustainable value proposition, and financial capability to continue ventures in the future. The telecom industry, backed historically by tech and network quality, shows reliable measures for existing infrastructure. Coupled by top-line revenues and return on investments, incumbent and smaller players can have the strength to fulfill their duties for the next generations to come.
Having said that, PwC reported that the telecom industry will remain healthy if consumer and business needs are met at an affordable price; technologies of the future would be supported; employment opportunities are created; and positive returns are offered to shareholders, among other factors.
While investments in railroads and roads propelled Canada’s economic development in the 18th and 19th centuries, investments in connectivity technologies like 5G and next-generation networks will be critical for Canada’s economic growth and prosperity in the 21st century and beyond.
For a country as vast and sparsely populated as Canada, this is a greater challenge that needs strong Canadian companies to respond with. Recognizing that the telecommunications industry is a key enabler of the digital economy, a healthy telecommunications industry is needed in Canada where MNOs can handle higher costs of 5G networks, potentially increasing up to 70% in the total cost of ownership (TCO). The potential increase in TCO is driven by the need for greater capital investment to fund infrastructure and increased operational costs associated with the increased data traffic requirements.
There is no doubt that telecom services will continue to connect Canadians, businesses, and ecosystem partners, accelerating the growth of the digital economy. As the prerequisite to anything digital, Canada’s wireless and wireline infrastructures are critical to adapt to new digital ways of working and underpin telecom services that boost productivity and reach a more diverse pool of talent.
It is worthy to note that there were 32.4 million mobile phone (MP) subscribers in 2020, with mobile networks covering approximately one-fifth of Canada’s geographic land mass and reaching 99.7% of Canadians. In the same year, advanced wireless networks such as LTE-A continued to deliver higher speeds than previous generation networks, to approximately 97.4% of Canadians. 5G networks were also launched in 2020 and were available to 53.3% of Canadians. Moreover, the number of wholesale high-speed Internet access lines and revenues grew in 2020, with Ontario having the largest share of wholesale lines (59.4%) and revenues (63.0%).
In parallel, the telecom value chain influenced up to $42.6 billion in GDP and outperformed the Canadian economy as CSPs maintained a sense of urgency and rapidly invested $11 billion in infrastructure when COVID-19 hits.
Telcos allowed Canadians to stay connected as well as economically and socially empowered during COVID-19, supporting CRTC statistics that show roughly 87% of total revenues in 2020 is contributed by the five largest providers of telecommunications services in the country — Bell, Rogers, Telus, Shaw, and Quebecor.
Overview: Impact of telecom industry
The $70.7 billion dollar contribution of the telecom industry in 2020 includes $42.6 billion in GDP impact through service provider revenues, supply chain, infrastructure, and employees. The Canadian Wireless Telecommunications Association (CWTA) said that the private sector continues to spearhead dedicated contributions towards infrastructure expansion.
For example, Bell announced that it would accelerate its fiber investment, wireless home internet, and 5G by an additional $1.5 billion to $1.7 billion over 2 years. Meanwhile, Rogers has invested over $30 billion to build Canada’s most trusted and reliable wireless network over the past 35 years and announced enhanced and enabled connectivity to nearly 2,000 communities across Canada. TELUS is also investing an additional $54 billion in infrastructure and operations across the country through 2024 to further support Canadians through the Covid-19 pandemic and the country’s economic recovery.
Moreover, the most-awaited Rogers-Shaw merger is also expected to do more for the future prosperity of Canada than either company could achieve on its own. Together, Rogers and Shaw can build a national network that can bridge Canada’s digital divide and offer robust and effective competition over the long term. It would be the biggest deal in Canadian telecoms history since BCE completed the spinoff of its stake in Nortel Networks in a transaction valued at $88.7 billion in 2000, according to Refinitiv data.
Along with this, the government must increase co-investment with the private sector and foster a regulatory environment that incentivizes continued CSP investment into infrastructure and innovation. Impressively, private investment in digital infrastructure in Canada is well over $10 billion per year.
Canadian networks regularly outperform their global peers, ranking among the top G20 countries for mobile download speed and LTE availability. Since 1987, Canada’s facilities-based wireless carriers have invested over $83.6 billion in building Canada’s wireless networks and since 1996, Canadian facilities-based communications service providers have further invested at least $157 billion in wireline CAPEX.
Amounting to over $26 billion in spectrum auctions, Canada’s current national wireless infrastructure has been invested in since 1999 by facilities-based operators. As a matter of fact, the government dished out 1,495 licenses to 15 Canadian companies and raised approximately $9 billion in 2021’s 3,500 MHz spectrum license auction. This is more than double the $3.5 billion raised in 2019 for the sale of 104 licenses.
Between 2010 and 2018, Canada’s telecom industry outpaced its global peers and ranked first in the G7 for investment, spending $255 per capita on telecom investment and reinvesting 23¢ for every dollar of revenue. In an independent study of NERA Consulting, Canada is ranked first for value proposition, a measurement that considers price, service plan attributes, network quality and coverage, and country attributes, letting Canadians receive “more bang for the buck”.
In contrast, Canada's telecoms industry came under the spotlight during the last federal election because of having the highest cell phone bills that result in Prime Minister Justin Trudeau ordering Canada’s top three telecom operators (Bell, Telus, and Rogers) which together control 89.2% of the market, to cut prices on their mid-range wireless service plans by 25% within two years or face regulatory action.
5G in the digital economy
2020 was indeed a formidable year, with many facilities-based network operators investing in upgrading backbone infrastructure and densifying wireless cell sites to enable 5G deployment. Accenture estimated that by 2026, the annual GDP impact of 5G in Canada will be $40 billion and 250,000 permanent new jobs will be created. With regards to this, $26 billion will be spent until 2026 in deploying 5G infrastructure.
Canada stands at the cusp of a new digital revolution with key stakeholders optimistic for a 5G-centric digital economy where Canadians will enjoy the benefits of remote healthcare, autonomous vehicles, virtual reality experiences, etc. Businesses will also unlock massive productivity improvements from Canada’s Industry 4.0 solutions.
5G networks have already lit up across the country, with use cases and applications continuing to be launched. Canadian wireless networks consistently rank among the fastest in the world, making the country well-positioned to benefit from the wave of economic and societal benefits that 5G will unleash. The 5G download speeds up to 98.2% faster in Canada than in US mobile networks are testimony to this.
By and large, 5G success demands investments, which can cost Canadian telecom operators anywhere over 20-70% more than 4G networks, largely driven by radio access network (RAN) and energy requirements. Opensignal describes Canada as a 4G superpower, with “few other countries better prepared than Canada to deploy 5G networks”. More so, as the wireless industry evolves to 5G, energy used by a general 5G cell site will only be 8-15% of a similar 4G cell site, forecasting 5G to support a thousand-fold traffic increase in the next 10 years, while the full network’s energy consumption will be half the current levels.
Among the global leaders in 5G adoption, for Canada to maintain economic competitiveness against major trading partners, all stakeholders in the 5G ecosystem will need to cooperate. As of December 2021, Canada has ten LTE networks, seven LTE-A networks, and five 5G networks. In 2021, Canadian 5G users also consumed 2.2x more data than 4G users, which was a higher ratio than any country besides Japan.
