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CRTC Communications Monitoring Report

2010

Previous Table of Contents

Appendix 1 - Data collection and analysis

Data collection

Broadcasting

Data collection is conducted jointly by Statistics Canada and the CRTC under the authority of the Statistics Act and the Broadcasting Act. Statistics Canada uses the data to construct industry accounts, and the CRTC uses it to monitor the industry’s performance and adherence to regulations.

Data collected through the data collection process is used to measure financial performance of broadcasters and their contribution to the Canadian economy. The data collection process targets all broadcasting service providers licensed by the Commission to operate private, public and non-commercial radio, television, broadcasting distribution and pay, pay-per-view, video-on-demand and specialty services. Broadcasting licensees file annual returns outlining financial and statistical information for each broadcast year. The key results of the data collection process are used to produce annual financial and statistical summaries of  revenues, expenditures and key operating statistics including such information as expenditures on Canadian and international programming. These annual financial and statistical summaries are published on the CRTC website at http://www.crtc.gc.ca/eng/stats.htm

The broadcasting regulations require broadcasting service providers to complete broadcasting survey forms. Most broadcasting service providers access and submit the forms electronically using the Commission’s secure web-based data collection system (DCS). Forms are mailed to broadcasting service providers that do not have access to DCS, in mid-October of each year. These forms cover the twelve-month period ending 31 August of that year. All licensees have until 30 November to complete and submit their respective annual returns.

As part of the annual return process, commercial radio broadcasters must also report on Contributions to the CTD or Contributions to CCD.  Broadcast distribution undertakings must also submit information regarding the Financial Contributions to the Creation and Production of Canadian Programming. This information enables the CRTC to ensure that the radio licensees are complying with their conditions of licence or regulatory requirements relating to CTD/CCD contributions and that broadcast distribution licensees fulfil their obligations regarding contributions to the creation and production of Canadian programming including the Canadian Television Fund, independent funds and local expression.

Telecommunications

The data collection process is also used to maintain and update the data on (i) the TSPs registration lists, (ii) the contribution regime, (iii) telecommunications fees and (iv) the telecommunications service industry as part of the CRTC’s monitoring activities.16

All TSPs are classified into one of two groups. Group 1 service providers generally (i) have significant telecommunications revenues, (ii) file tariffs, or (iii) have international licences. Group 2 service providers generally have lower revenues.

Each TSP is required to complete and submit annually to the CRTC a registration form, which is used to update certain basic information about the service provider and determine what additional forms, if any, are to be issued to the service provider. Group 1 TSPs access and submit the registration form electronically using the CRTC’s secure web-based DCS. Each year these TSPs are notified by e-mail at the start of the data collection process and are provided with (i) the due dates for submission of the registration form and the subsequent data forms, and (ii) the information needed to access DCS. Group 2 service providers, on the other hand, are mailed a registration form for completion. Once submitted, this generally marks the end of the data collection process for the Group 2 service providers.

Group 1 TSPs are required to submit a range of company-specific information, including financial data (e.g., income statement, balance sheet and capital expenditures), along with detailed telecommunications information focusing on products and on geographic markets. Geographic markets are defined on a national, provincial/territorial, regional, local exchange or city basis. The data submitted is as of 31 December of each year.

Data Analysis

Broadcasting

A compliance analysis is performed by the CRTC on the financial data from the annual returns submitted by all broadcasting service providers. The objectives of this analysis are as follows:

• to ensure that the summary of financial data for operations connected to the licensee, included in the annual return, corresponds to the data presented in the financial statements required of the licensees in accordance with Circular No. 404;
• to reconcile the actual expenditures on Canadian programming with the expenditures required by licensees’ conditions of licence;
• to reconcile the actual contributions to CTD or CCD with the contributions required by licensees’ conditions of licence; and
• to proceed with a percentage or ratio analysis of the trends in the major categories of revenue and expenditures presented in the annual forms over a five-year period, particularly with reference to the previous year.  

Financial and statistical summaries are then published by the CRTC for the four major broadcasting categories, (i.e. commercial radio, conventional television, broadcast distribution, and pay, pay-per-view, video-on-demand and specialty services). The data is also used in the preparation of the CRTC Communications Monitoring Report.

Revisions may be made to the financial and statistical summaries. These generally follow late receipt of data, modifications made by the licensees to previously filed data, or errors detected following publication of the data. They generally do not have a major impact on the results of the data collection process.

Telecommunications

The returns are analyzed to ensure that the coverage of telecommunications service providers is as anticipated and that a complete response has been provided. Follow-up is initiated at this stage to resolve or obtain explanations of anomalies identified in the data submitted. The data is then subjected to computerized edits designed to ensure accuracy and internal consistency. For larger enterprises, the reported data is compared to audited financial information, and major discrepancies are investigated. A year over year comparison is made to identify any radical or unexplained changes. If necessary, follow-up is initiated with the TSP. Finally, the data is analysed to determine the validity of the submissions by performing a time series analysis or by comparing the data or its derivatives (such as average revenues per line or minute) against other established benchmarks.

Certain figures published in the monitoring report from previous years may be restated to be consistent with data displayed in this report. Other figures may change as a result of some companies resubmitting previous years’ data. In addition, certain data may be reclassified to better reflect the market segments or industry developments. These restatements are identified by means of a number sign (#).

Most of the tables and figures included in the report are derived from data submitted via the DCS while others are derived using Statistics Canada and Department of Industry information. Inconsistencies may arise between the data derived from these sources, given that the companies surveyed, the definitions used and the level of detail requested may be different for each source. The data source is therefore identified for each table and figure contained in the report.

Appendix 2 - Classification of Canadian telecommunications service providers

Telecommunications service providers (TSPs) operating in Canada are classified into two broad categories, incumbent TSPs and alternative TSPs, as outlined below. The category into which a given TSP falls may change from one year to the next as a result of consolidation in the industry.

1) Incumbent TSPs are the telephone companies that provided telecommunications services on a monopoly basis prior to the introduction of competition. For the purpose of this report, these companies’ operations outside their traditional operating territory are included with the alternative TSPs group discussed below. Incumbent TSPs are subdivided as follows:

1. Large incumbent TSPs are incumbent telephone companies serving relatively large areas, usually including both rural and urban populations, and providing local, long distance, wireless, Internet, data, private line, and other services. The large incumbent TSPs include Bell Aliant Regional Communications, Limited Partnership; Bell Canada; MTS Allstream Inc.; Saskatchewan Telecommunications; and TELUS Communications Company (TCC); as well as Northwestel Inc. andTélébec, Limited Partnership.
   
   
2. Small incumbent TSPs are incumbent telephone companies serving relatively small geographical areas (mostly municipal areas generally located in less densely populated areas) in Ontario, Quebec, and, in one instance, British Columbia. Due to the limited size of their serving areas, they typically do not provide facilities-based long distance services. However, they do provide a range of local voice, data, Internet, and wireless services. Examples of small incumbent TSPs are NorthernTel, Limited Partnership; and TBayTel.

2) Alternative TSPs are TSPs that are not incumbent telephone companies as described in 1) above. However, this group includes incumbent TSPs conducting out-of-territory operations, such as Bell Canada’s operations in Alberta and British Columbia. Alternative TSPs are subdivided as follows:

a) Facilities-based alternative TSPs are alternative TSPs that own and operate a telecommunications network. These include cable BDUs and utility companies. This group is further subdivided into:

1. incumbent TSPs (out-of-territory)
2. facilities-based non-incumbent TSPs

Facilities-based non-incumbent TSPs are further subdivided into:

• Cable BDUs include the former cable monopolies that also provide telecommunications services (e.g. Internet, wireless, and voice services). These include such companies as Rogers Communications Inc., Shaw Communications Inc., Le Groupe Vidéotron ltée, Cogeco Inc. and Bragg Communications Inc.
• Utility telcos and other carriers encompass two smaller groups of TSPs: utility telcos whose market entry into telecommunications services, or whose corporate group’s market entry into telecommunications services, was preceded by a group-member company’s operations in the electricity, gas or other utility business; and other carriers that own physical transmission facilities (e.g. intercity, intra-city, or local). These service providers include such companies as Hydro One Telecom Inc., Atria Networks LP and Barrett Xplore Inc.

b) Non-facilities-based TSPs do not own and operate a telecommunications network. These companies are referred to as resellers since they generally acquire telecommunications services from another TSP to either resell the service or create their own network from which to provide service to their customers. Examples include Primus Telecommunications Canada Inc., Distributel Communications Limited, YAK Communications (Canada) Corp., and independent ISPs.

Wireless TSPs are classified in the above structure based on their affiliate relationship with one of the TSPs.

Appendix 3

Status of local forbearance - Residential and business exchanges
(as of 30 June 2010)

Appendix 4 - International pricing assumptions

Below is a summary of the assumptions and methodology used in developing aggregate pricing indices for the international price comparisons shown in Table 6.1.1.

Table A.4.1   Service providers surveyed

Prices were collected from the three or four largest service providers in each country, and then weighted by the market share of each provider. Sales taxes [provincial sales tax (PST), goods and services tax (GST), value-added tax (VAT)], and one-time service installation charges have been excluded. Recurring charges (such as 9-1-1 fees, universal service and regulatory charges in the United States, and television licence fees in the United Kingdom) have been included. Prices were converted into Canadian dollars using average February 2010 market exchange rates, and also were adjusted for purchasing power parity using February 2010 comparative price level indices published by the OECD.

Canadian prices were compared to those in the United States, the United Kingdom, France, Australia, and Japan for wireline, mobile wireless, and broadband Internet services at three separate service levels, designed to reflect typical basic, standard, and high-end Canadian service consumption patterns (service basket Levels 1, 2, and 3). International prices for mobile Internet access service, based on 3G wireless technology, at a monthly data usage level of 2 GB, were also compared. As well, prices for three service bundles were compared: Bundle 1 (wireline, mobile wireless, and broadband Internet), Bundle 2 (wireline, broadband Internet, and a basic digital television package), and Bundle 3 (wireline, mobile wireless, broadband Internet, and basic digital TV).  Level 2 consumption baskets were used in each of the bundles.

Table A.4.2  Wireline service baskets

Note: Wireline pricing reflects flat-rate unlimited local calling in Canada and the U.S.; in the U.K. and France, wireline is priced on a per-minute metered basis; in Australia, wireline local calling is priced on a per-call basis, but is otherwise unmetered.

Table A.4.3 Wireless service baskets

Note:    For Level 1, both prepaid and post-paid service offerings were considered, with the selected price reflecting the least expensive option of the two. For Levels 2 and 3, post-paid plans (generally based on two-year contract rates) are assumed to be more economical. Handset costs are not reflected in these price comparisons.

Table A.4.4 Mobile Internet service basket

≥1.5 Mbps

Table A.4.5 Broadband (Internet access) service baskets

Note:  Usage caps (common among providers in Canada and Australia, and some providers in the United Kingdom) have been taken into account; i.e. overage charge rates would apply when a monthly usage cap is exceeded.

Table A.4.6 Bundled service baskets

Appendix 5 - Telecommunications market sector description

A) Local and access

The local and access sector is comprised of wireline services relating to access and connectivity to the PSTN and includes services used by both retail and wholesale customers.

Local wireline telephone service enables customers to place unlimited calls within a defined local calling area for a basic monthly fee. This service is either access-dependent or access-independent. Access-dependent telephone services include managed wireline access from the TSP to the customer, a connection to the PSTN, and a telephone number. Access-independent telephone services do not include the managed wireline access component. In addition, customers of access-independent telephone services must have broadband Internet service, which serves as the access component.

Local service also includes automated call answering services, business Centrex, ISDN services, and other ancillary services such as inside wiring, installation and repair, teleconferencing, and miscellaneous local services.

Local and access revenues includes those from the sale of local services on a wholesale basis and, with the introduction of local competition, those from access services for interconnection between carriers and other service providers, including switching and aggregation, and unbundled network components.

B) Long distance

Retail long distance service encompasses wireline voice traffic to locations outside the local service calling area. Long distance services are sold in a variety of ways such as a standard per-minute charge, a monthly subscription plan, calling cards, or through a bundle with other services.

Wholesale long distance service refers to service provided under connection arrangements between facilities-based carriers to transit traffic on behalf of other service providers, as well as the sale of wholesale bulk minutes to resellers of long distance service.

C) Internet

Internet-related telecommunications services can be divided into two broad market segments: (i) Internet access and transport; and (ii) Internet applications and other Internet-related services.

i. Internet access and transport

Internet access is the provision of an IP connection to an end-user, allowing the end-user to exchange applications traffic with Internet hosts and other end-users. Internet access service consists of three major components.

1. a data connection between a modem at the end-user location (such as a residential dwelling) and the ISP;
   
   
2. ISP facilities, which include
   • routers, to switch traffic between ISP end-users and the Internet at large;
   • servers, to provide in-house ISP services, such as e-mail;
   • network management elements; and
3. a connection from the ISP to the Internet.

Internet access services are available a variety of speeds. Low-speed, or narrowband access services, operate at speeds of up to 64 kilobits per second (kbps), and are typically provided using dial-up access lines. High-speed access services, including wideband (up to 1.5 megabits per second (mbps)) and broadband (faster than 1.5 mbps), generally operate using DSL, coaxial cables, terrestrial wireless technologies, satellites, and fibre optic cables.

Internet transport service is a type of Internet connectivity typically sold to ISPs and some larger business customers. Internet transport capacity is provided over Internet backbone facilities that carry aggregated traffic across domestic and international links between Internet traffic switches or routers. In addition, it provides partial control over the movement of customers’ Internet traffic. In some cases, peering arrangements between Internet backbone service providers substitute for the outright purchase of Internet transport by one ISP from another.

ii. Internet applications and other Internet- related services

Internet applications include a growing number of services that piggyback on Internet connectivity services. They include e-mail and Web hosting. Typically, many Internet application services are bundled together with Internet access services. However, TSPs also participate in emerging stand-alone business Internet applications markets, which include services such as premium Web hosting, Internet data centres and off-site data storage, as well as security and firewall services.

D) Data and private line

Data services provide managed LAN and WAN services for data, video, and voice networks within a metropolitan area or on a national or international scale. Data services include legacy protocols such as X.25 (packet switched network); ATM; frame relay; newer protocols such as Ethernet and IP-VPN; and the provisioning and management of networks and related equipment.

Private line services provide the capability to link two or more locations over dedicated facilities for the purpose of transporting data, video, or voice traffic. Private line services include high-capacity digital transmission services (at speeds ranging up to gigabit speeds over fibre) and digital data systems, as well as voice-grade and other analog services. Transmission facilities include copper wire, fibre optic cable, and satellite.

E) Wireless

The wireless market sector comprises telecommunications services provided via mobile wireless access facilities. These services include mobile telephony, mobile data such as text messaging, roaming, wireless Internet access, and paging services. While satellite private line services are included in the data and private line section of this report, the satellite services associated with mobile telephones are included in the wireless section of this report.

In addition to voice communications over wireless networks, new wireless technologies are enabling users to send text messages from one device to another, as well as multi-media messages including photos, graphics, videos, and audio clips. Inter-carrier text messaging and data sharing between users has been in place for several years and is expected to continue to grow as existing and new carriers forge network agreements, and terminal equipment makers introduce new devices.

Mobile wireless services are generally billed on a usage basis for both voice and data services. Subscribers have a choice of two payment options: prepaid and post-paid. Prepaid plans require subscribers to purchase the wireless service prior to use, while post-paid plans require payment on a monthly basis after using the service. Customers typically pay a per-minute rate for prepaid plans, while those subscribing to post-paid plans pay for a service package that includes defined minutes of use, an overage minute rate, data features, and other optional services such as voice mail, call display, and call waiting.

Appendix 6 - List of acronyms used in the report

Appendix 7 - List of decisions, notices, orders and circulars referenced in the report

[16] This number is comprised of approximately 121 systems with 20,000 subscribers or more and approximately 1,825 systems with fewer than 20,000 subscribers. Most systems with fewer than 20,000 subscribers are eligible for exemption from licensing requirements.