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  • Ted Woodhead

Annual Highlights of the Telecommunications Sector, 2022 and nobody cared to listen at INDU

Late last month the CRTC issued its "Annual highlights of the telecommunications sector 2022" report. You may not have seen it unless you went looking because it really isn't highlighted on the CRTC's website and apparently did not justify a media release and was mentioned but once in a tweet I read from @CRTCeng on February 27th. At the very least an important tool to show trends one would have thought merited a bit more effort in promotion. This could of course be for a variety of reasons, but it struck me that perhaps the CRTC did not think the data it shows was really what the political class wants to hear. We will never know.


You don't need to read far into the Overview to happen upon an important observation. The CRTC writes, "Total revenues in 2022 grew by 5.4% compared to their 2019 pre-COVID-19 level, while overall inflation in the Canadian economy was 12.6% over the same period". A couple of things are going on in this statement. First, revenues reportedly went up over the pre-Covid level in 2019 (they went down during Covid) and second, this increase was substantially below the inflation in the Canadian economy generally. To me when taken together, this is an indicator that the industry is exhibiting substantial over-performance when compared with other industries in delivering consumer welfare.


The report overview then moves on to a product line or segment review starting with retail fixed internet. Revenues grew 4.9% over 2021 (why the CRTC did not choose the same pre-Covid baseline one can only speculate, but the reasons given for this are interesting. The CRTC writes, "This growth was driven by continued residential subscriber movement towards higher speed packages and increased usage by business Internet customers following the end of pandemic-related restrictions". To me, it is interesting to look at what this is saying very carefully. Again, to me, it seems to indicate that there is a desire from consumers for bigger data buckets in their plan and faster speeds (these two go together like Thelma and Louise) and that the industry is delivering. In other words the demand and supply sides are getting along famously in an elegant dance. It's another indicator of a well performing market. I would also suggest that this is exactly what the CRTC desired when it reset the broadband objective nearly eight years ago. Well done all. Bravo!


The CRTC turns next to the mobile services segment where, no surprise, revenues rose in the sector's biggest segment by 5.7% between 2021 and 2022. Also it is no surprise that the CRTC writes that, "...the average mobile subscriber consumed more data than ever; from 2021 to 2022, data usage grew by 21.3%". So, consumer behaviour (a seemingly insatiable demand for data) outstripped what the consumers paid for it, by a considerable margin. Here as well I see a well performing market delivering consumer benefits that should be acknowledged.


The CRTC concludes the overview saying, "Along with increasing revenues from their mobile services, wireless carriers reported higher margins in their earnings before interest, taxes, depreciation, and amortization (EBITDA), stable churn rates, and higher capital expenditures (CAPEX)". The way I would interpret this conclusion is that the data shows significant consumer demand being met by the industry, along with comparatively modest increases in revenues and EBITDA associated with higher demand and strong consumer usage trends, stable churn (the rate at which consumers switch providers or leave one for another) and importantly higher CAPEX (meaning the amount of shareholder capital the companies are investing in their networks) that underpin it all. The CRTC modestly does not illustrate this by posting a picture of itself taking a victory lap by the progress made and the resiliency of the industry as a whole.


I commend to the reader the CRTC's full report which thereafter is replete with Figures and explanatory notes illustrating the data the CRTC was able to analyze to draw its observations in the overview. It can be found here on the CRTC's web site: https://crtc.gc.ca/pubs/cmr_telecom_2023-en.pdf.


It was with anticipation then that I tuned in as the Parliamentary Standing Committee on Industry and Technology (INDU) met the next day (February 28th) in its ongoing study into the "Accessibility and Affordability of Wireless and Broadband Services in Canada" to question representatives of the three largest incumbent providers. I expected some reflection on the CRTC report and thoughtful questions for these knowledgable industry representatives. Oh, how wrong I was.


The meeting began with a motion to demand that the CEO's of the three companies who had been summoned appear personally and not delegate to their direct reports. The outrage exhibited at this by the gathered members bordered on comical. CEOs do not regularly appear at these things because, you know, they have other things to do like build networks, employ tens of thousands of employees each, manage the stocks upon which virtually every Canadian relies in their pension plans and RRSPs and generally run the strategic networks upon which Canada relies as an advanced economy. No, the MPs on the Committee didn't like that at all passing the motion unanimously and presumably threatening to hold these CEOs in contempt of Parliament if they don't appear later this month for a good old public shellacking.


The representatives of Bell, Rogers and Telus all of whom I know personally and professionally, in their opening statements demonstrated a thorough and comprehensive grasp of all the data underpinning their businesses. Believe me these people review daily their own businesses performance. To me, it seemed like these were just the kind of experts the Committee members would want to question and just possibly learn from.


Suffice to say I was gravely disappointed but sadly, not surprised. Most of the MPs on the Committee clearly didn't care or listen to anything they heard. They engaged with none of it, they speechified, interrupted, some insulted, derided and lectured the witnesses with fact free questions. Good stuff I guess to highlight in their MP Householders and videos to constituents to demonstrate their fearless defence of something or other they were scripted to say. They may find that their constituents aren't as witless and approving of any of this when the election cycle begins in earnest. Oh, Canada.


For more on this, my friend and often quoted industry expert Mark Goldberg has written about it in his blog Telecom Trends available here: https://mhgoldberg.com/blog2/?page_id=14528


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