Pretending you believe in investment while seemingly giving up on investment

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I have recently been struggling to understand what Key Performance Indicators the government, and its departments and agencies, are using to track unsubsidized investment trends in the telecom infrastructure sector in Canada. Part of my confusion is that even if you use a fairly visible metric like capital expenditure, which shows a decline in capital investment amongst all of the major network builders, the broader government keeps perpetuating the fabulists' message that "we are doing everything in our power to get shovels in the ground and ensure that Canadian companies invest in expanding coverage". As much as I would like to confirm that that is the case, I am afraid that I cannot.

One example of this disconnect came in the address by Vice Chair Scott of the Canadian Radio-television and Telecommunications Commission (CRTC) to the Canadian Telecom Summit on June 3rd. Before I get into what I believe is the disconnect, let me say that Adam Scott delivered these remarks straight from the government handbook and did it very well with his usual self-effacing style and wit. Vice Chair Scott happens to be celebrating his 25 year service award in the public service so we should all thank him for his service, which has been significant. With that behind me however, it was the message and not the messenger with which I took issue.

Vice Chair Scott used his long service milestone to make the point that, "the health of Canada's telecommunications industry and the services it offers Canadians have been top of mind for the Canadian government for a very long time". The statement may be correct but government policy and radical changes to the regulatory frameworks which govern the industry have done a very great deal to destabilize the industry and reduce its overall health. Rogers is the country's largest wireless and cable operator. At the group level, its capital expenditures for the three months ended on March 31, 2025 were down 8%. Rogers Media reported capital expenditures were down 70% for the same period. Rogers Cable reported that capital expenditures were down 7% and Rogers Wireless remained relatively flat with a 1% gain for that period. BCE, at a group level, for the first quarter of 2025 posted a year over year reduction in capital expenditures of 27.2%. Finally, Telus similarly posted that capital expenditures were down by over 5%. To those who would respond that capital expenditures fluctuate, I would simply recommend that they review the overall financial results of the biggest carriers because they do not disclose the results that a healthy industry-focused policy would generate. In fact, they disclose quite the opposite result.

Vice Chair Scott used the device of a public policy triangle to provide an update on the CRTC's recent accomplishments against objectives as they relate to coverage, quality and affordability. In order to improve two of these objectives, coverage and quality, we would expect to see at the very least a sustained amount of capital expenditures in both the wireless and wireline segments. As noted above, we are not. On coverage, Vice Chair Scott outlined progress to date in meeting the universal service objective of having 50/10 Mbps fixed internet service available to 100% of homes by 2030. The CRTC has helped connect 270 communities, supported projects to improve wireless service along 100 kilometres of roads and helped build 2700 kilometres of transport fibre. Vice Chair Scott didn't highlight, but it remains the fact that the funds the CRTC directed to these projects are from the larger carriers. None of these projects would likely be economically feasible to cover without a subsidy. Make no mistake, the subsidy is from carrier revenues as the CRTC is quick to remind us on its web site:

Funding does NOT come from tax revenues.

The funding comes directly from contributions made by large Canadian telecommunications service providers whose total annual Canadian revenues are $10 million or greater.

The result of that is that the CRTC is making a choice to provide or improve service in some locations. I do not take issue with the end result but we should all be clear that these choices divert funds that, at least in part, would have otherwise been invested in expanding or improving services nearer to the network areas.

On quality of service, there was an update on the CRTC's efforts with respect to network reliability and resilience, as well as an update on certain rules and guidelines for network operators the CRTC has mandated they implement. The most credulous aspect of the Vice Chair's speech however came with statements that asserted that "companies are continuing to make network investments to provide the telecommunications services that Canadians need" and a claim that the "regulatory regime supports ongoing investment in modern networks". As much as I may regret having to say it, I don't believe that one can confidently assert that either of those claims are borne out by reality and the facts.

For example, Rogers recently announced that Blackstone will acquire a non-controlling interest in a new Canadian subsidiary of Rogers that will own a minor part of its wireless network. Both Bell and Telus, it is reported, are also considering divesting various elements of their network assets, with the speculation being that the proceeds of all of these various transactions will be used to reduce debt. I am not as confident as the CRTC that these are indications of companies committed to continuing network investments and expansion. I would characterize this period, at best, as one of prudent caution in a broadly uncertain environment made more uncertain by the CRTC's own decisions.

Which brings me to the implications of a decision that the CRTC indicates that it anticipates releasing this week related to Competition in Canada's Internet service market, Telecom Regulatory Policy 2024-180. For those who have not been following along, the CRTC has been on a drive to not only open up access to the network builders' fibre optic access networks for resale to service competitors but, in a moment of regulatory over exuberance, also permitted the incumbent network builders (Bell, Rogers and Telus) to resell each others networks with some minor exceptions. The cumulative effect of these decisions has had negative implications thus far on Bell and perhaps Rogers and almost certainly the smaller competitors like Vidéotron, Cogeco and even the long time resellers. Telus, it would appear, is the only major network operator who has responded to the CRTC's invitation to - resell rather than build - with any vigour, at least in Ontario and Québec. The network building carriers are giving up on building because they have been invited to by the Regulator. I noticed in his speech at the Canadian Telecom Summit that the President of the Canadian Telecommunications Association declared, for the first time in its existence by my recollection:

...we should reject policies that encourage the largest

telecom providers in Canada to become resellers instead of builders. Canada

has world-class networks because of the long-standing recognition that facilities-

based competition provides the strongest incentives for investment and

innovation, while also delivering positive outcomes for consumers. Quite simply,

Bell, Rogers, TELUS and their affiliates should not be permitted to take

advantage of mandated wholesale high speed access (HSA) anywhere in the

country over any technology. Instead, they should be encouraged to do what they

have always done well, continue to build, expand and enhance their networks.

All of this has led to a difficult period of transition for domestic carriers and network builders. More and more they are looking elsewhere to invest outside the regulated telecom sector or outside Canada where the regulatory ambit of the CRTC does not reach. Since January 2020, retail prices for internet access have decreased 6.0%. Over the same period, other items in the Consumer Price Index (CPI) increased 11.0%. One can hardly criticize them when it also becomes clear that, for example, wireless prices declined 46.3% since January 2020 versus an overall increase in the CPI of 17.9%, all according to the Canadian Telecommunications Association.

It isn't a pretty picture. It is not good for Canadian jobs. It is not good for Canadian innovation. It is not good for improving connectivity along Canadian roads and highways or improving internet access in towns and hamlets. So, when we say that Canada's telecommunications sector is healthy and that Canadian companies are continuing to invest, or that the regulatory regime supports ongoing investment, I say you need to know your numbers. Those assertions just simply don't appear to me to be true.

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