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Speech
Notes for an address
by John Traversy
Executive Director, Telecommunications Canadian Radio-television and Telecommunications Commission
to the Standing Committee on Transport and Communications
Ottawa, Ontario
April 22, 2009
(This speech may have been altered during delivery)
Good evening, Madam Chair and Honourable Senators. Thank you for your invitation to contribute to your study on the Canadian wireless industry.
My name is John Traversy and I am the Executive Director of Telecommunications at the Canadian Radio-television and Telecommunications Commission (CRTC). With me today from the CRTC are Bill Mason, Manager of Competition, Implementation and Technology, and Michel Murray, Acting Director of Telecommunications Decisions and Operations.
The CRTC is an independent public authority charged with regulating and supervising the Canadian broadcasting and telecommunications industries. This means that we oversee more than 1,000 telecommunications service providers operating in Canada, including wireline and wireless telephone companies.
Since 2006, our approach to regulating the telecommunications industry has been consistent with the government’s policy direction. The direction requires us to rely on market forces to the maximum extent possible. As a result, we regulate only where market forces are not sufficient to achieve the objectives of the Telecommunications Act.
Today, I would like to focus on the two most dynamic segments of the telecommunications market: wireless services and broadband Internet services. I understand that Mr. Len St. Aubin, the Director General of Industry Canada’s Telecommunications Branch, appeared before you earlier this month and provided you with various figures and statistics.
I will do my best to avoid repeating the same information. However, we would be happy to provide any figures that may be of interest to you after our presentation.
Wireless services
In recent years, the pace of technological change in the telecommunications industry has increased dramatically. One of the more interesting developments has been the evolution of cellphones from the bulky and expensive devices of the 1980s to the sophisticated smartphones available today.
Wireless is now one of the major drivers of the industry. The number of subscribers has increased substantially: from 11.3 million in 2003 to 20.3 million in 2007, with an average annual growth rate of 11.1%. We expect that this trend will continue in the future, although the growth rate will likely slow as the market begins to mature.
Propelled by this growth in subscribers, as well as by the introduction of mobile devices with more features, wireless services generated $14.4 billion in revenues in 2007. When compared to other telecommunications services, wireless was easily the largest segment of the industry and accounted for 38% of all revenues, up from 25% in 2003.
According to the most recent figures, the three largest service providers serve approximately 92% of the market. However, the industry may well be headed for a major change with the arrival of new players. Further to the government’s spectrum auction, as many as seven new service providers could soon enter the market.
As we indicated in our 2008 Communications Monitoring Report, wireless penetration rates in Canada are behind many of the countries in the Organisation for Economic Co-Operation and Development (OECD). We are optimistic that the new entrants will be able to further expand the market and to attract subscribers.
Of course, the current state of the economy is one of the major obstacles new entrants must overcome. Just last week, Telus reported its results for the first quarter of 2009. They showed a drop in new wireless subscribers and in revenues from existing customers as compared to the previous year, suggesting that customers and businesses are cutting back on their usage. At the same time, Telus indicated that it still plans a major upgrade to its wireless network as part of a joint project with Bell Canada.
Some of the new entrants, such as Globalive and Videotron, have announced that they plan to launch services in late 2009 or early 2010. In order to do so, they will need to make significant investments to build their networks and to hire staff, which can only help stimulate the economy.
We will be watching closely to see what impact the new entrants will have on the industry. Our hope is that consumers will be the clear winners, with greater access to next-generation technologies that can provide more options to Canadians.
As you may know, the CRTC does not regulate the rates of wireless services. In fact, we haven’t done so for over a decade. In 1996, the Commission determined that market forces could reasonably be expected to ensure that consumers would benefit from competitive prices and service plans.
It’s worth noting that many wireless service providers currently offer plans that feature a high volume of minutes. This is one of the reasons why the average revenue per minute for local and long-distance calls in Canada is currently among the lowest of all the countries in the OECD. However, we have found that the rates for consumers who use fewer minutes tend to be higher in Canada than in other countries, with the exception of the United States.
While service providers are free to set their rates as they see fit, the Commission does regulate a few key aspects of the wireless sector.
To give you an example, we required service providers to implement wireless number portability to offer consumers greater convenience. Since March 2007, consumers have had the option of keeping the same telephone number when changing wireless service providers. They can also transfer their numbers between wireline and wireless service providers, and vice versa. Many Canadians, particularly the younger demographic, are starting to rely only on their wireless device for telephone service.
Another area of concern for the Commission is 911 services. Earlier this year we directed wireless service providers to upgrade their 911 services by February 1, 2010.
Emergency responders have had difficulty at times locating a person calling 911 from a wireless device, especially in emergency situations where the caller is unable to speak or provide specific landmarks. This is because current 911 services can only narrow down the location of the caller to a sector within the area served by the nearest cellphone tower.
We asked the industry to work with provincial and municipal representatives to find a solution to this problem. The enhanced 911 features that will be implemented over the coming months will use specialized technology, such as the Global Positioning System, to improve public safety. This will allow emergency responders to receive a caller’s location generally within a radius of 10 to 300 metres. Any new wireless service provider that enters the Canadian market after February 1, 2010, will be required to support the enhanced features.
Aside from wireless number portability and 911 services, the Commission has also established regulations that:
- protect the privacy of consumers
- govern the use of telephone numbers
- require that bills are made available in alternative formats, and
- ensure that Canadian ownership requirements, which are set out in the Telecommunications Act, are met.
It’s normal that disagreements may arise from time to time between consumers and their wireless service providers. When the disagreement concerns an area that is not regulated by the CRTC, consumers can turn to an independent agency headed by the Commissioner for Complaints for Telecommunications Services. The CRTC approved the agency’s structure and mandate in 2007, and today it helps resolve complaints in an impartial and timely manner.
In addition to wireless services, the agency also handles complaints related to long-distance telephone services, Internet access, Internet telephone services (VoIP), and local telephone services in markets that have been deregulated by the Commission.
Broadband Internet access
I would now like to turn to my second topic, broadband Internet access. Because there are many types of broadband services, it would be useful to start with a clarification. The Commission has defined broadband as a service that offers Internet access at speeds of at least 1.5 megabits per second. This is the same definition used by Industry Canada.
About 93% of all Canadian households already have access to broadband services, primarily through the facilities of a telephone or cable company. Outside of the major urban centres, many consumers can access the Internet through satellite or fixed-wireless technologies. Our research indicates that Canada has the highest proportion of households that subscribe to broadband services among all of the G7 countries.
Broadband Internet access is increasingly seen as a key element to maintaining a competitive edge in the global economy. Many countries, including the United States and Australia, have announced plans to expand broadband Internet access to rural and underserved areas, or to upgrade their existing infrastructure to enable higher speeds.
In Canada, all 10 provinces and 3 territories have recognized the importance of broadband access for remote communities. Each one has been developing its own initiatives to improve the availability of these services. Moreover, in the last federal budget, the government set aside $225 million for broadband deployment as part of its economic stimulus package.
When Mr. St. Aubin appeared before you, he explained that Industry Canada is in the initial stages of developing a program to allocate these funds. As part of this process, the Commission has been working with both Industry Canada and Indian and Northern Affairs Canada, as well as with various provinces and territories, to identify exactly where broadband services are available and where they are not. By sharing our resources, we can avoid duplicating work and costs, and minimize the burden on the industry.
Broadband Internet can provide Canada’s rural and remote communities with important educational and economic opportunities. We look forward to seeing the specifics of the government’s broadband-deployment program and we are ready to help in any way we can.
Thank you once again for your invitation. We would now be happy to answer your questions.
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