Report to the Governor in Council

Report to the Governor in Council
Report to the
Governor in Council
Status of Competition in Canadian
Telecommunications Markets
Deployment/Accessibility of
Advanced Telecommunications
Infrastructure and Services
October 2005
For additional copies of the report, please contact:
Documentation Centre
Canadian Radio-television and
Telecommunications Commission (CRTC)
Les Terrasses de la Chaudière
Central Building
1 Promenade du Portage
Gatineau, Quebec
Mailing Address:
CRTC
Ottawa, Ontario
Canada
K1A 0N2
Telephone: 1 (819) 997-2429
1 (877) 249-2782 (toll-free)
TDD:
1 (877) 909-2782 (toll-free)
This publication is available electronically: http://www.crtc.gc.ca
This publication can be made available in alternative format upon request.
Ce document est également disponible en français.
Catalogue No. BC92-57/2005E
ISBN # 0-662-41273-7
Acknowledgements
The Commission wishes to thank all the entities that completed the CRTC Data Collection
forms, without which this report would not have been possible. The Commission would also
like to acknowledge the assistance provided by Industry Canada in the analysis of broadband
deployment as it related to the rural communities in Canada and to Statistics Canada for the
various economic data used throughout the report.
Executive Summary
This is the fifth and final report to the Governor in Council with respect to the status of
competition in Canadian telecommunications markets and on the deployment and accessibility of
advanced telecommunications infrastructure and services. These reports have evolved to become
a key component of the Commission's monitoring plan and are used by all stakeholders as
an authoritative source of information on the Canadian telecommunications industry. In
Monitoring the Canadian telecommunications industry, Telecom Public Notice CRTC 2005-15,
18 October 2005, the Commission announced that it would continue with its monitoring
activities and the issuance of monitoring reports.
Industry Overview
Over the past five years, there have been extensive changes in the telecommunications industry
encompassing the regulatory framework, technological developments, industry consolidation and
service and/or market developments. It would have been difficult to imagine five years ago that
in 2005 the Commission would be holding a proceeding to, among other things, establish a
framework for forbearance from regulation of residential and business local exchange telephone
services.
Internet and wireless services continue to be the engines of growth and innovation for the
Canadian telecommunications industry. The decline or minimal growth in revenues from local
and access, long distance and data and private line services, collectively, is evidence, not
necessarily of declining demand for telecommunications services, but rather, an indication of the
deployment of more efficient and effective technologies or platforms to deliver the services.
Technology continues to impact the industry, not only by reducing costs, but also by introducing
new means of providing telecommunications services which improve the business case of
industry participants. In the midst of these developments, Canada continues to have not only a
very high telephone penetration rate of 98.8 subscribers per 100 households but also a very high
Internet subscription rate of 59 subscribers per 100 households.
Many entities in the telecommunications industry, both incumbents and competitors, have
undergone a period of downsizing, restructuring or bankruptcy, and those that have emerged are
stronger and more focused. As a result of recent consolidations, by year end 2004, virtually all of
the larger incumbent telephone companies had either entered or expanded and solidified their
out-of-territory operations by acquiring some of the larger facilities-based competitors.
Cable distribution undertakings have not been idle. These companies are major providers of
Internet service. More recently, the larger cable undertakings started to provide local telephone
service by utilizing Voice over Internet Protocol (VoIP). Cable distribution undertakings also
participated in the consolidation activities in the industry, as one of the larger cable companies
acquired a national facilities-based telecommunications service provider.
i
In the midst of these activities, total telecommunications revenues displayed strong growth in
2004, increasing from $31.8 billion in 2003 to $33.3 billion, a 4.7% increase. Wireline revenues,
representing 72% of the total industry revenues, increased in 2004 from $23.8 billion in 2003 to
$23.9 billion, a 0.3% increase. Wireless revenues however, representing 28% of the industry
total, continued to display strong growth, increasing from $8.0 billion in 2003 to $9.5 billion in
2004 an increase of $1.5 billion or 18%.
The telecommunications industry's earnings before interest, taxes, depreciation and amortization
(EBITDA) increased from $10.9 billion to $11.5 billion, a $0.6 billion or 5% increase. The
increase was due to the wireless providers, whose EBITDA increased from $3.1 billion to
$3.7 billion, a $0.6 billion or 19.4% increase. The wireline EBITDA remained relatively
unchanged at $7.8 billion. The incumbents' (including their out-of-territory activities) EBITDA
increased from $7.2 billion in 2003 to $7.7 billion in 2004, a $0.5 billion or 7% increase. The
competitors (other) EBITDA decreased from $0.6 billion to $0.1 billion, a $0.5 billion or a
83% decrease mostly due to the industry consolidation. As a result, the wireline incumbents'
share of the industry EBITDA increased from 66% in 2003 to 67% in 2004, while that of the
wireless providers increased from 28% to 32% and the wireline competitors' share decreased
from 6% in 2003 to 1% in 2004.
The consolidation activities did not have a dampening effect on capital expenditures. Capital
expenditures increased from $5.2 billion in 2003 to $5.7 billion, a $0.5 billion or 9.6% increase.
Wireline providers increased their capital expenditures from $3.9 billion in 2003 to $4.7 billion
in 2004, a $0.8 billion or 21% increase; by contrast, wireless providers reduced capital
expenditures from $1.3 billion in 2003 to $1.1 billion in 2004, a decrease of $0.2 billion or 15%.
Long Distance
In the long distance market, revenues continued to decline, decreasing from $5.9 billion in 2003
to $5.6 billion in 2004, a $0.3 billion or 6.0% decline. The number of long distance minutes,
however, increased in 2004 by 6.0% when compared to the previous year. The incumbents'
share of long distance revenues remained unchanged in 2004 at 67%.
Local and Access
The local wireline market continued to be the largest segment of the telecommunications market,
accounting for 29% of the industry's revenues. Local revenues and the number of lines remained
unchanged at approximately $9.7 billion and 20.6 million lines in 2004. Overall, the incumbents'
share of local service revenues (excluding contribution) and lines declined from 95% in 2003 to
94% in 2004. Competition in the local and access market was primarily confined to the major
centres where competitors had approximately 90% of their lines.
Competitors' share of business local revenues increased from 11% in 2003 to 12% in 2004. In the
residential market, their revenue share increased from 2% in 2003 to 3% in 2004. In various
larger urban areas, competitors generally had between 0.1% and 23% of local business lines and
between 0.1% and 25% of local residential lines.
ii
The competitors remained heavily dependent on the incumbents' local facilities due, in part, to
their limited access to external funding and the high cost of building these facilities to support
a market share of approximately 7%.
Internet and Broadband Deployment
The Internet market continued to have strong growth and continued to be competitive. The
Internet market was again one of the fastest growing markets in the industry. Internet revenues
increased from $3.7 billion in 2003 to $4.2 billion in 2004, a $0.5 billion or 12.9% increase. The
incumbent telephone companies had 43% of the retail Internet access revenues in 2004, while the
competitors (cable) companies had 39% and all others had 18%. The four largest Internet service
providers accounted for 59% of the retail Internet revenues in 2004.
Broadband deployment continued to progress, with approximately 89% of Canadian households
having access to broadband services, of which 48% actually subscribe. Ninety-eight percent of
urban households can access broadband service versus 68% of the rural households. In 2004,
59% of Canadian households had an Internet subscription. There were more high-speed Internet
households (43%) than there were households with dial-up subscriptions (16%). Public funding
to help seed private sector investment in broadband deployment was also available at both the
federal and provincial levels based on a variety of funding models.
Wireless
The wireless market continued to display strong growth and continued to be competitive.
Wireless revenues increased from $8.0 billion in 2003 to $9.5 billion in 2004, a $1.5 billion or
17.6% increase. The wireless share of total telecommunications revenues continued to increase,
growing from 25% of total industry revenues in 2003 to 29% in 2004. Three major entities
accounted for over 90% of the wireless market, with no entity dominating in terms of either
revenues or subscribers. After several years of decline, the average monthly revenues per
subscriber increased from $48 in 2002 to $49 in 2003 and $52 in 2004.
Data and Private Line
In the data and private line market, total revenues in 2004 decreased from $4.5 billion in 2003 to
$4.4 billion in 2004, a $0.1 billion or 1.6% decrease. This decline was the result of private line
service revenues that declined by 9.7%, more than offsetting the 6.9% revenue growth displayed
by data services.
iii
The competitors', including the competitive (ILEC out-of-territory) service providers', share of
the data and private line market, increased from 26% in 2003 to 27% in 2004. Aggressive pricing
and reduced demand continued to be major contributors to the decline in private line service
revenues. The industry is continuing to benefit from the growth of the newer data services that
meet customer requirements for increased speed, functionality and cost efficiency. Service
providers promoted these newer data services such as Ethernet and Internet Protocol based
Virtual Private Network which had revenue growth of 18% and 68%, respectively, and which
may, in part, account for some of the reduced demand for private lines and legacy data services
such as X.25.
Consumer Survey
Based on the results of the consumer survey performed by Decima in 2005 on behalf of the
Commission, more than half of the households (52%) indicated that they spend more than $75
a month on telecommunications services. Sixty-four percent of Canadians believe that they
have benefited from the availability of competition. Canadians welcome competition, as 42%
indicated that they had at some time subscribed to an alternative provider of long distance service.
iv
Table of Contents
1.0
Introduction........................................................................................................................................ 1
1.1
1.2
2.0
The Role of Market Information ........................................................................................................ 5
2.1
2.2
3.0
Financial Review of Markets ............................................................................................... 16
Long Distance ...................................................................................................................... 27
Local and Access.................................................................................................................. 39
Internet Services................................................................................................................... 56
Wireless................................................................................................................................ 69
Data and Private Line........................................................................................................... 80
Broadband Availability and Promising Means for Accelerated Broadband Deployment ............... 91
5.1
5.2
5.3
5.4
5.5
6.0
Regulatory Oversight of Canadian Telecommunications Markets ........................................ 6
The Commission and Competition......................................................................................... 6
Overview of the Telecommunications Services Industry ...................................................... 9
Penetration Rates.................................................................................................................. 11
Market Participants .............................................................................................................. 12
Status of Competition....................................................................................................................... 16
4.1
4.2
4.3
4.4
4.5
4.6
5.0
Overview................................................................................................................................ 5
Competition and Monitoring.................................................................................................. 5
Overview of the Telecommunications Industry and Regulation........................................................ 6
3.1
3.2
3.3
3.4
3.5
4.0
Purpose of the Report............................................................................................................. 1
Data Collection and Outline of the Report............................................................................. 2
Introduction.......................................................................................................................... 91
Geographic Broadband Deployment in Urban and Rural Areas.......................................... 91
Promising Means for Accelerated Broadband Deployment................................................. 94
Progress under Existing Initiatives..................................................................................... 101
Summary ............................................................................................................................ 102
Users of Telecommunications Services ......................................................................................... 103
6.1
6.2
6.3
Appendix 1
Appendix 2
Appendix 3
Appendix 4
Introduction........................................................................................................................ 103
Residential Consumers....................................................................................................... 103
Business Customers ........................................................................................................... 117
Summary of Canadian Telecommunications Milestones to Competition
Summary of Canadian Telecommunications Markets Subject to CRTC Forbearance Rulings
Summary of Certain Recent CRTC Rulings Relevant to Telecommunications Competition
Glossary of Terms and Acronyms
v
List of Tables
Table 3.3.1
Table 3.3.2
Table 3.4.1
Table 3.5.1
Telecommunications Services Employment.......................................................................................10
Total Telecommunications Services Revenues ..................................................................................11
Canadian Penetration Rates - Wireline Access Lines and Wireless Subscribers................................12
Total Telecommunications Services Revenues by Type of Market Participant .................................15
Table 4.1.1
Table 4.1.2
Table 4.1.3
Table 4.2.1
Table 4.2.2
Table 4.2.3
Table 4.2.4
Table 4.2.5
Table 4.2.6
Table 4.2.7
Table 4.2.8
Table 4.3.1
Table 4.3.2
Table 4.3.3
Table 4.3.4
Table 4.3.5
Table 4.3.6
Table 4.3.7
Table 4.3.8
Table 4.3.9
Table 4.3.10
Table 4.3.11
Table 4.3.12
Table 4.3.13
Table 4.4.1
Table 4.4.2
Table 4.4.3
Table 4.4.4
Table 4.4.5
Table 4.4.6
Table 4.4.7
Table 4.4.8
Table 4.5.1
Table 4.5.2
Table 4.5.3
Table 4.6.1
Table 4.6.2
Table 4.6.3
Table 4.6.4
Table 4.6.5
Total Telecommunications Service Revenues ....................................................................................16
Segmented Telecommunications Service Revenues...........................................................................18
Inter-carrier Payments per Revenue Dollar by Wireline Market Sector.............................................24
Total Long Distance Revenues and Minutes ......................................................................................27
Long Distance Revenues by Market Segment ....................................................................................30
Incumbent Telephone Companies' Long Distance Retail Revenue Market Share by Region ............32
Business Long Distance Revenues .....................................................................................................33
Business Long Distance Minutes........................................................................................................33
Residential Long Distance Revenues .................................................................................................35
Residential Long Distance Minutes....................................................................................................35
Wholesale Long Distance Revenues...................................................................................................37
Total Local and Access Revenues and Lines......................................................................................40
Local and Access Revenues by Market Segment ...............................................................................43
Local Lines by Market Segment.........................................................................................................44
Total Retail Revenues and Lines ........................................................................................................44
Incumbent Local Retail Market Share by Province (lines).................................................................45
Market Share (Local Lines) in Major Centres ....................................................................................46
Local Residential Revenues................................................................................................................48
Local Residential Lines ......................................................................................................................49
Local Business Revenues ...................................................................................................................50
Local Business Lines ..........................................................................................................................50
Local Wholesale Revenues by Major Component..............................................................................51
Local Wholesale Revenues.................................................................................................................53
Local Wholesale Lines .......................................................................................................................54
Internet Revenues ...............................................................................................................................57
Residential and Business Internet Access Service Revenues .............................................................60
Internet Access Service Revenues by Market Participant Group .......................................................61
Top Four Retail Internet Companies' Revenues .................................................................................61
Business Internet Access Revenues by Market Participant ................................................................62
Residential Internet Access Revenues by Market Participant ............................................................63
Residential and Business Internet Access Revenues and
Revenue Market Share by Access Technology .................................................................................64
Residential Internet Subscribers by Market Participant......................................................................67
Wireless Revenues..............................................................................................................................70
Wireless Subscriber Share By Province (2004)..................................................................................76
Average Monthly Churn Rates ...........................................................................................................76
Data and Private Line Revenues.........................................................................................................81
Data Service Retail and Wholesale Revenues by Service Category...................................................83
Market Share by Data Service Category.............................................................................................85
Private Line Service Retail and Wholesale Revenues by Service Category.......................................86
Private Line Service Revenues - Short-Haul and Long-Haul Market Share.......................................88
Table 5.3.1
Summary of Provincial Broadband Deployment Initiatives .............................................................100
Table 6.2.1
Table 6.2.2
Table 6.2.3
Table 6.2.4
Table 6.2.5
Table 6.2.6
Table 6.2.7
Table 6.3.1
Service Improvement Program Status ..............................................................................................104
Monthly Household Telecommunications Expenditures (Percent of Households) ..........................107
Wireless Subscriptions (Percent of Households)..............................................................................107
Importance of Keeping Existing Wireless Telephone Number When Changing Suppliers .............111
Comparison of Wireline and Wireless Service.................................................................................113
Consumers' Ability to Compare Service Offerings ..........................................................................115
Consumers' Ever Subscribing to Alternate Company Long Distance Services ................................115
Business Accounts and Revenues Distribution (2004) .....................................................................117
vi
List of Figures
Figure 3.5.1
Distribution of Telecommunications Service Providers..................................................................14
Figure 4.1.1
Figure 4.1.2
Figure 4.1.3
Figure 4.1.4
Figure 4.1.5
Figure 4.1.6
Figure 4.1.7
Figure 4.1.8
Figure 4.1.9
Figure 4.2.1
Figure 4.2.2
Figure 4.2.3
Figure 4.2.4
Figure 4.2.5
Figure 4.2.6
Figure 4.3.1
Figure 4.3.2
Figure 4.3.3
Figure 4.4.1
Figure 4.4.2
Figure 4.4.3
Figure 4.5.1
Figure 4.5.2
Figure 4.5.3
Figure 4.5.4
Figure 4.5.5
Figure 4.6.1
Figure 4.6.2
Figure 4.6.3
Figure 4.6.4
Figure 4.6.5
Wireline and Wireless Annual Revenue Growth Rates (%) ...........................................................17
Total Service Revenues - Wireline v. Wireless...............................................................................18
Segmented Telecommunications Service Revenues .......................................................................19
Average Monthly Revenue per Line/Subscriber .............................................................................19
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
by Provider Type............................................................................................................................21
Capital Expenditures by Provider Type ..........................................................................................22
Capital Expenditure per Revenue Dollar ........................................................................................23
Wireline EBITDA v. Wireline Capital Expenditures (CAPEX) .....................................................23
Competitors (ILEC out-of-territory) Revenues v. The Incumbents Wireline Revenues (2004) .....25
Long Distance Revenues by Component ........................................................................................28
Long Distance Revenue Market Share............................................................................................31
Retail Average Revenue per Minute (ARPM) ................................................................................32
Business Long Distance Revenue Market Share.............................................................................34
Residential Long Distance Revenue Share .....................................................................................36
Wholesale Long Distance Revenue Share ......................................................................................37
Local Residential Revenues by Component....................................................................................48
Competitor Local Retail Lines by Type of Facility ........................................................................52
Competitor Local Residential and Business Lines - By Type of Facility .......................................53
Business Internet Access Revenues Market Share by Market Participant ......................................62
Residential Internet Access Revenues Market Share by Market Participant ..................................63
Residential Internet Access Technology Mix (2000 v. 2004) .........................................................66
Wireless Revenues, Subscribers and Revenues per Subscriber ......................................................72
Mobile Subscriber Growth..............................................................................................................73
Percent of Pre-Paid & Post-Paid Subscribers..................................................................................73
Wireless Revenues by Major Component (excluding Basic Voice) ...............................................74
Wireless Players' Market Share.......................................................................................................75
Data Protocol Services - Revenue Distribution by Service Category .............................................84
Total Private Line Service Revenue Distribution - Incumbents v. Competitors .............................87
Long-Haul Private Line Services - Satellite v. Terrestrial Facilities...............................................88
Retail Private Line Service Revenues - Competitors' Revenue Share.............................................89
Wholesale Private Line Service Revenues - Competitors' Revenue Share .....................................89
Figure 5.2.1
Figure 5.2.2
Figure 5.2.3
Figure 5.2.4
Figure 5.4.1
Broadband Availability (2003 v. 2004)...........................................................................................92
Broadband Availability (Urban v. Rural)........................................................................................93
Broadband Availability v. Subscriptions ........................................................................................93
Broadband Access in OECD Countries per 100 Inhabitants (December 2004) ..............................94
Communities With and Without Broadband Access - Broadband Pilot Program.........................102
Figure 6.2.1
Figure 6.3.1
Telephone Services Price Changes as Compared to Inflation.......................................................105
Total Revenue Distribution Incumbents, Competitors (Out-of-Territory) and
Competitors (Other) - 2004..........................................................................................................118
Local Service Revenue Distribution Incumbents, Competitors (Out-of-Territory)
and Competitors (Other) - 2004 ...................................................................................................118
Long Distance Service Revenue Distribution Incumbents, Competitors (Out-of-Territory)
and Competitors (Other) - 2004 ...................................................................................................119
Data and Private Line Service Revenue Distribution, Incumbents,
Competitors (Out-of-Territory) and Competitors (Other) - 2004..................................................120
Figure 6.3.2
Figure 6.3.3
Figure 6.3.4
List of Maps
National Mobile Coverage (Digital and Analog Service)............................................................................................78
Presence of Mobile Service Providers .........................................................................................................................79
vii
1.0
Introduction
1.1
Purpose of the Report
This is the fifth and final annual report of the Canadian Radio-television and Telecommunications
Commission (Commission) to the Governor in Council on the status of competition in Canadian
telecommunications markets and the deployment and accessibility of broadband services and
facilities across the country (GIC Monitoring Report).1
These reports have evolved to become a key component of the Commission's ongoing
monitoring plan and an authoritative source of information on the Canadian telecommunications
industry for use by all stakeholders. Although this is the Commission's final report to the
Governor in Council on the status of competition in Canadian telecommunications markets and
the deployment and accessibility of broadband services and facilities, the Commission will
continue with its monitoring activities and will continue to produce reports on competition in
telecommunications markets. In Monitoring the Canadian telecommunications industry,
Telecom Public Notice CRTC 2005-15, 18 October 2005, the Commission notified the industry
that it found the reports useful in meeting its obligations under the Telecommunications Act
(the Act) and that it would therefore continue with its monitoring activities and the issuance of
monitoring reports.
These reports have been prepared in response to the Governor in Council's June 2000
Direction which:
(a) requires the Commission to submit, once in each year for the next five years, a report
to the Governor in Council on the status of competition in Canadian telecommunications
markets and on the deployment and accessibility of advanced telecommunications
infrastructure and services in urban and rural areas in all regions of Canada,
(b) requires that the report include
(i) an examination of promising means for accelerating private sector investment
in rural broadband infrastructure, such as initiatives to aggregate local demand for
advanced telecommunications services, and
(ii) relevant data and analyses.2
The information gathered as part of its monitoring activities enables the Commission to
determine more effectively (a) the state of competition, (b) the effect of competition on services
to consumers and business customers, and (c) service providers' compliance with legal and
regulatory requirements.
1
2
The previous four reports on the Status of Competition in Canadian Telecommunications Markets
- Deployment/Accessibility of Advanced Telecommunications Infrastructure and Services were issued
in September 2001, December 2002, November 2003, and November 2004.
Order in Council P.C. 2000-1053, June 26, 2000 issued pursuant to section 14 of the Telecommunications Act.
1
The telecommunications entities covered in this report include not only the companies that are
primarily involved in the provision of telecommunications services, but also other companies
such as utility companies and broadcast distribution undertakings (e.g., cable companies) that
provide telecommunications services such as Internet access or other telecommunications
services, either directly or indirectly, through affiliated companies. For the purposes of this
report, only telecommunications services and operations are taken into account in the case of
cable companies3 as well as other companies whose primary line of business lies outside of
telecommunications (e.g., as in the case of utility companies involved in the provision
of telecommunications services).
1.2
Data Collection and Outline of the Report
This report is based on the responses to the Commission's data collection forms which have been
issued annually since 2001 (referenced as CRTC Data Collection), internal analyses, data
collected from other sources, including Statistics Canada, Industry Canada, and company-specific
financial reports and information previously filed with the Commission.
In 2004, the Commission implemented a number of administrative changes to the data collection
process in order to better coordinate and streamline the activities that it undertakes to monitor
and regulate the Canadian telecommunications industry. These activities include information
collected for telecommunications entity registration lists, international licences,
telecommunications fees and the contribution regime.4
In 2004, the Commission introduced a secure web-based platform, the Data Collection System or
DCS, for collection of 2003 data which was in keeping with the Canadian Government Online
(GOL) initiative. In addition to the administration changes noted above, DCS helps to improve
the quality and timeliness of the data collected, and reduces the overall effort required to produce
the monitoring report.
In order to increase security of the data submitted online via DCS, the Commission, in 2005,
introduced the Government of Canada epass security package, a unique electronic credential that
is now used to communicate securely with on-line Government services. All entities that access
DCS have been assigned this security package for submission of data.
In 2005, further changes were introduced to streamline the data collection process. In order to
reduce the reporting burden on smaller entities, the Commission stratified the industry into two
broad groups (Group 1 and Group 2) for data collection purposes. Group 1 includes entities who
(i) have significant telecommunications revenues, (ii) file tariffs or (iii) have international
licences. Group 2 includes the remaining entities that generally have few revenues.
3
4
The Commission's annual Broadcasting Policy Monitoring Report provides more comprehensive data on
broadcasting distribution undertakings as well as radio and television broadcasters, and Internet use in Canada.
Telecommunications industry data collection: updating of CRTC registration lists, telecommunications fees,
Canadian contribution mechanism fund administration, international licences and monitoring of the
Canadian telecommunications industry, Telecom Circular CRTC 2003-1, 11 December 2003.
2
The Group 1 entities were required to complete and submit data collection forms that
encompassed 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 product and geographic market information. Geographic markets are
defined on a national, provincial/territorial, regional, city or, for mapping purposes, postal code
basis. Group 2 entities were required to complete and submit a simplified form in which only
general information was requested. In all cases, the data submitted was as of 31 December 2004.
Certain figures published in prior years' monitoring reports may be restated to be consistent
with data displayed in this report. Other figures may change as a result of some companies
resubmitting prior 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 the CRTC Data Collection
System while others are derived using Statistics Canada and Industry Canada information.
The data, derived from these sources, are not always consistent with each other, given that the
universe surveyed, the definitions used and the level of detail requested may be different. The
data source is identified for each table and figure contained in the report. Statistics Canada data
is generally only used when the data is not available from the CRTC Data Collection System.
The report also includes the results of a consumer survey conducted by Decima Research Inc.
for the Commission to assess consumer behaviour towards, and perceptions and awareness of,
various telecommunications services. Objectives of the survey included the measurement of
consumers' expenditure and choices in telecommunications services, wireless and Internet usage
and views on regulation and the benefits of competition.
Each reporting entity was assigned a separate company type and sub-type classification, which
reflects historical legacies (e.g., incumbent in a specific industry prior to competition) and
whether the company owns facilities (e.g., facilities-based or reseller). Where operating entities
are part of a larger corporate family (defined as direct or indirect ownership above 50%), the
longer historical legacy supersedes other classifications.
The following classifications and sub-classifications have been adopted for the purpose of
this report:
i)
Incumbent telephone companies
a) large incumbent carriers
b) small incumbent carriers
3
ii)
Competitive service providers
a) Competitive (ILEC out-of-territory) service providers
b) Competitive (other) service providers
i)
ii)
iii)
iv)
facilities-based competitive service providers
resellers/pay telephone service providers
cable service providers
utility telcos
Wireless service providers are not identified separately under this classification structure. They
are however categorized based on their affiliation with the other service providers. For example,
the incumbent telephone companies wireless affiliates are categorized as incumbent and those of
cable service providers are categorized as cable service providers.
This report is divided into the following sections and appendices:
•
Section 2 discusses the role of market information in monitoring progress and changes within
the industry.
•
Section 3 provides an overview of the telecommunications industry and regulation, as well as
an overall review of service providers in the market.
•
Section 4 provides a review of financial information, including revenue, capital expenditures
and other operational data for various sectors of the industry. It also examines the status of
competition in each of the major market segments, including long distance, local and access,
Internet and broadband, wireless, data and private line, and pay telephone.
•
Section 5 reviews broadband availability and promising means for accelerating broadband
deployment to rural and remote areas of the country.
•
Section 6 provides information on residential consumers and business customers, including
the results of the consumer survey commissioned by the Commission.
•
Appendix 1 contains a summary of Canadian telecommunications milestones to competition.
•
Appendix 2 contains a summary of Canadian telecommunications markets subject to
forbearance rulings.
•
Appendix 3 provides a summary of certain recent Commission rulings relevant to
telecommunications competition.
•
Appendix 4 contains a glossary of terms and acronyms used in this report.
4
2.0
The Role of Market Information
2.1
Overview
The Commission is largely responsible for the implementation of the Act enacted in 1993.
Certain objectives of the Act, set out in section 7, are directly or indirectly tied to the notion of
competition. For example, subsection 7(f) of the Act explicitly states that an objective is "to
foster increased reliance on market forces for the provision of telecommunications services and
to ensure that regulation, where required, is efficient and effective."
In providing an overview on the status of competition in the various telecommunications market
segments in Canada, this report, as well as the ongoing monitoring of the telecommunications
industry, will assist the Commission in the administration of the Act and the regulation of the
industry.
The Commission is among a number of telecommunications regulatory bodies throughout the
world that prepare regular monitoring reports. The use of monitoring reports has gained favour
as a means of tracking ongoing industry developments to determine whether regulatory and
legislative objectives are being met. This is particularly true of countries that place an emphasis
on competition to replace traditional regulation of telecommunications services.
2.2
Competition and Monitoring
Although there are various means for measuring competition, good quality data is critical if the
monitoring process is to be accurate and useful. For the most part, the Commission uses its own
data collection mechanisms in order to gather detailed and timely information.
There is no single or simple way of assessing the state of competition in a market. The
Commission collects information related to Canadian telecommunications markets in order to
monitor the status of competition. This includes, among other things, (i) various measurements
of market size and market share according to criteria, such as revenues and number of
subscribers, lines and minutes, (ii) number and description of suppliers in the market, (iii) lists
of available services, pricing levels and trends, and (iv) corporate financial conditions.
Specific elements of the monitoring exercise change over time to take into account new
regulatory issues or market developments, such as new technologies, changes in the market
structure or in domestic or international regulations or agreements, or the introduction of new or
evolving services. Adaptability ensures that monitoring reports continue to be useful tools for all
stakeholders, including regulators, customers and industry players.
5
3.0
Overview of the Telecommunications Industry and Regulation
3.1
Regulatory Oversight of Canadian Telecommunications Markets
The Commission has a broad range of powers to implement the policy objectives set out in
section 7 of the Act, including the powers to ensure that rates are just and reasonable and that
Canadian carriers do not discriminate unjustly or accord any undue preference with respect to the
provision of telecommunications services.5 In addition to regulating the rates, terms and
conditions under which telecommunications services are provided, the Commission has the
power to forbear from regulating telecommunications services or classes of service where it
finds, among other things, that there is sufficient competition to protect the interests of users.6
Industry Canada exercises powers relating to the allocation of radio spectrum under the
Radiocommunication Act. Among other things, Industry Canada is responsible for developing
spectrum allocation, spectrum utilization and service policies covering fixed and mobile
terrestrial and non-terrestrial (i.e., satellite) wireless service applications. In this regard, it has the
power to issue spectrum licences, either through an application process or a spectrum auction
process.7 As well, Industry Canada has pursued spectrum licensing strategies that have increased
potential entry into the various segments of the wireless market. It may also set the terms and
conditions for any such licences as it deems appropriate.
While the Commission is responsible for regulating and for establishing the terms and conditions
of competition in the telecommunications industry as a whole, Industry Canada determines the
terms and conditions of entry in the wireless segment of the industry. Consequently, there is a
shared responsibility for regulating the wireless portion of the telecommunications industry in
Canada between the Commission and Industry Canada.
3.2
The Commission and Competition
In exercising its statutory powers both under predecessor legislation and the Act, the
Commission has gradually and in an orderly manner opened up monopoly-based markets to
competition over the years. The Commission's approach to opening up various market segments
to competition is to weigh the potential advantages and disadvantages, and to strike a fair and
reasonable balance between the often conflicting interests of all concerned, including
incumbents, competitors and customers. The Commission forbears from regulation pursuant to
section 34 of the Act, when it considers that a service or class of services is subject to a level of
competition sufficient to protect the interests of users of the service.
5
6
7
Subsections 27(1) and 27(2) of the Telecommunications Act.
Section 34 of the Telecommunications Act.
Section 5 of the Radiocommunication Act.
6
The Commission continues to strive to render reliable and affordable services of high quality,
accessible to both urban and rural area customers, to foster facilities-based competition, to
provide incumbents with incentives to increase efficiencies and be more innovative, and to adopt
regulatory approaches that impose the minimum regulatory burden possible. The Commission
continues to remove obstacles to fair and sustainable competition, including eliminating barriers
to access and ensuring regulatory compliance. In addition, the Commission maintains regulatory
clarity through clear rules, clear determinations and the establishment of clear lines of
communication. However, regulation is only a piece of the puzzle. Economic conditions are also
an important part of the mix, as are technology development and the quality of business
decision-making.
The Commission has put in place a range of other measures to encourage the development of
competition in the remaining regulated sectors of the industry. For instance, the
CRTC Interconnection Steering Committee (CISC) process provides a forum for interested
parties, with the assistance of Commission staff, to resolve local competition implementation
issues of a technological, operational or administrative nature.
A summary of the most significant milestones in opening telecommunications markets to
competition is contained in Appendix 1.
When competitive disputes arise, the Commission encourages parties to explore various options
to resolve the dispute, including bilateral negotiations, third-party mediation or staff assisted
dispute resolution.
The Commission also conducts expedited procedures8 for resolving competitive issues that are
factual in nature and relate to established rules and not to the creation of new ones. This process
is an efficient and effective way of dealing with disputes. The expedited hearings generally result
in decisions being issued within a week. In other cases, no application is necessary, or
applications are withdrawn because the parties are able to resolve their issues with the help of
Commission staff.
The Commission recognizes the need for timely disposition of tariff applications by companies
for new or amended services. Taking into account the interests of incumbents, competitors and
consumers, initiatives were taken to streamline and expedite the processing of retail tariff filings9
and the processing of applications concerning withdrawal of services for which new technologies
are employed and for which there are replacement services.10
8
9
10
Expedited procedure for resolving competitive issues, Telecom Circular CRTC 2004-2, 10 February 2004.
Introduction of a streamlined process for retail tariff filings, Telecom Circular CRTC 2005-6, 25 April 2005.
New procedures for disposition of applications dealing with the destandardization and/or withdrawal of
tariffed services, Telecom Circular CRTC 2005-7, 30 May 2005.
7
The Commission strives to minimize the regulatory burden on the industry, where appropriate.
For example, in 2005, the Commission forbore from regulating approximately 800 additional
interexchange private line routes.11
Appendix 2 provides a summary of the most significant forbearance rulings since the
Commission was granted this power in 1993. While the Commission has forborne and continues
to forbear from regulating a growing number of services, at the same time, the Commission
continues to regulate certain telecommunications services. In the case of large incumbents
[including Aliant Telecom Inc. (Aliant Telecom), Bell Canada, MTS Allstream Inc.
(MTS Allstream), Saskatchewan Telecommunications (SaskTel) and TELUS Communications
Inc. (TCI)], these services include residential basic local services, business single and multi-line
local services, local calling features and options, pay telephone, digital network access, local
channels and competitor services. Starting in 1998, the regulation of these services (for all of
these companies except SaskTel) changed fundamentally, shifting away from an earnings-based
to a price level-based form of regulation.12 The first price regulation regime covered the period
1998 to 2002. In 2002, it was reviewed and modified.13 The new regime, which now also applies
to SaskTel, became effective in June 2002 and extends through to 2006.
Non-forborne telecommunications services provided by Société en commandite Télébec
(Télébec) and TELUS Communications (Québec) Inc. (TCQ) (now part of TCI) were made
subject to price cap regulation as of August 2002.14 In addition, non-forborne services provided
by small incumbent telephone companies were made subject to a simplified form of price
regulation effective in January 2002.15
In 2005, the Commission issued Telecom Public Notice CRTC 2005-216 to initiate a proceeding
and to invite comments, among other things, on a framework for forbearance from the regulation
of residential and business local exchange services.
11
12
13
14
15
16
Forbearance from regulating additional interexchange private line services, Telecom Decision CRTC 2005-18,
29 March 2005 (Decision 2005-18).
Price cap regulation and related issues, Telecom Decision CRTC 97-9, 1 May 1997 (Decision 97-9).
Regulatory framework for second price cap period, Telecom Decision CRTC 2002-34, 30 May 2002
(Decision 2002-34).
Implementation of price regulation for Télébec and TELUS Québec, Telecom Decision CRTC 2002-43,
31 July 2002 (Decision 2002-43).
Regulatory framework for the small incumbent telephone companies, Decision CRTC 2001-756,
14 December 2001 (Decision 2001-756).
Forbearance from regulation of local exchange services, Telecom Public Notice CRTC 2005-2, 28 April 2005.
8
Steps were also taken to substantially reduce the administrative burden of filing quarterly and
annual reports. Quarterly reporting requirements for (i) 911 Manual Access to ALI,17 (ii) Quality
of Service - Network Outages18 and (iii) Affordability Monitoring19 were changed to an annual
requirement. As discussed above, the Commission also reduced the administrative burden of
filing data under the data collection process through the elimination of 20% of the data collection
forms and the simplification of another 40% of the forms.
The Commission also reduced the regulatory requirements related to the application and renewal
of international licenses by extending the license period from 5 years to 10 years and eliminating
various conditions of licence.20
As well, the Commission issued a number of recent rulings that further support the development
of competition in the Canadian telecommunications industry. The most important recent rulings
are summarized in Appendix 3.
3.3
Overview of the Telecommunications Services Industry
The Canadian telecommunications services industry plays a significant role in the Canadian
economy as a whole. The industry's share of Canada's real gross domestic product (GDP) value
added was 2.4% in 200421 up from the 2003 level of 2.3%. The telecommunications industry
ranked ninth in 2004 out of the 14 major service producing components of the GDP as listed by
Statistics Canada.22
17
18
19
20
21
22
Filing of reports on 9-1-1 manual access to the ALI database and on incumbents' service interruptions to
competitors, Telecom Circular CRTC 2005-5, 4 April 2005 (Circular 2005-5).
Filing of reports on 9-1-1 manual access to the ALI database and on incumbents' service interruptions to
competitors, Telecom Circular CRTC 2005-5, 4 April 2005.
Modification to the affordability monitoring program for residential telephone service in Canada,
Telecom Decision CRTC 2004-73, 9 November 2004.
Basic international telecommunications services (BITS) licensing regime - Amendments,
Telecom Circular CRTC 2005-8, 23 June 2005.
Industry Canada, Information and Communication Technologies Statistical Overview
(http//strategis.ic.gc.ca/ictso) Update: April 2005 ICT Sector Gross Domestic Product 2004 (in 1997 constant
dollars).
Statistics Canada CANSIM Table(s); 379-0017 and Catalogue no.15-001-XIE.
9
Capital expenditures for telecommunications service providers also account for a significant
portion of the overall capital expenditures in the Canadian economy. Telecommunications
industry capital expenditures were 2.3% of total economy-wide capital expenditures in 2004,23
up from the 2003 level of 2.2%. Capital expenditures for the industry increased in 2004 by
9.6%.24 This increase was due, in part, to companies deploying new or advanced technologies to
enter new markets. For example, cable companies were preparing to enter the local and access
market utilizing Internet Protocol (IP) technology and thereby offering subscribers a broader
range of services. Telephone companies were augmenting and/or upgrading their networks to
take advantage of IP technology and expanding the Digital Subscriber Line (DSL) footprint to
offer their subscribers a broader range of services.
Telecommunications employment, as displayed in Table 3.3.1 increased 2.5% annually from
103.7 thousand employees in 2000 to 114.3 thousand employees in 2004.
Table 3.3.1
Telecommunications Services Employment
(Thousands)
Year
Employees
2000
103.7
2001
104.9
2002
105.1
2003
110.8
2004
114.3
Source: Statistics Canada
In 2004, the number of employees in the Canadian telecommunications services industry
represented 0.9% of total employees in Canada.25
Telecommunications services revenues were $33.3 billion in 2004.26 This represents an annual
growth rate of 3.6% over the 2000 level of $28.9 billion. Table 3.3.2 provides a summary of the
total telecommunications services revenues for each of the five years.
23
24
25
26
Capital Expenditures economy wide for 2004 was $243,871.4 million. These are preliminary actuals reported
by Statistics Canada as of 30 August 2005. Source - Statistics Canada table 029-005 and Cat. no. l61-205-XIB.
CRTC Data Collection (excluding spectrum).
Industry Canada - Telecommunications Service in Canada: An Industry Overview; [updated 11 August 2005]
Section 1, Table 1-2.
This amount includes estimates that were made for entities that were unable to complete the forms on time.
This estimate, generally referred to as undercoverage, was used for the Internet market.
10
Table 3.3.2
Total Telecommunications Services Revenues
($ billions)
Year
Total telecommunications
services revenues
2000
28.9
2001
31.4
2002
31.5
2003
31.8
2004
33.3
Source: CRTC Data Collection
3.4
Penetration Rates
Penetration rates provide a useful general indicator of consumer access to telecommunications
networks.
For the purposes of this report, penetration rates are measured by identifying the percent of
households that have access to the network. Penetration rate data for Canada, including wireline,
wireless, wireline and/or wireless and wireless only, covering the period 1999 to 2003, is
summarized below in Table 3.4.1.27
The penetration rate of wireline and/or wireless has remained relatively constant over the years
1999 to 2003 at approximately 98.8% of households. Wireline penetration has gradually declined
over this period from 98.2% to 96.3% of households. In contrast, wireless penetration increased
almost 70% over this period, reaching 53.9% of households in 2003. The penetration rates in
Table 3.4.1 indicate that 2.5% of Canadian households had only a wireless service in 2003,
up five-fold from 0.5% in 1999.
27
June 2005 Affordability Monitoring Report pursuant to Modification to the affordability monitoring program
for residential telephone service in Canada, Telecom Decision CRTC 2004-73, 9 November 2004.
Data source: Statistics Canada.
11
Table 3.4.1
Canadian Penetration Rates
Wireline Access Lines and Wireless Subscribers
(per 100 households)
Year
Wireline
Wireless
Wireline
and/or wireless
Wireless
(only)
1999
98.2
31.9
98.7
0.5
2000
97.7
41.8
98.8
1.1
2001
97.4
47.6
98.6
1.2
2002
97.0
51.6
98.7
1.7
2003
96.3
53.9
98.8
2.5
Source: Statistics Canada
3.5
Market Participants
The Commission maintains registration lists28 of service providers that either operate or propose
to operate in the Canadian telecommunications industry. There are over
1,000 telecommunications service providers on these lists. These service providers were
contacted and issued the Reporting Entity Profile (REP) form to file as part of the data collection
process discussed in section 1.2.
As noted in section 1.2, these providers are classified as follows:
1) Incumbents are the telephone companies that provided telecommunications services on a
monopoly basis prior to the introduction of competition. However, for the purposes of this
report, the operating results of these companies from their activities outside their traditional
operating territory are included with the competitor (ILEC out-of-territory) group discussed
below.
a) Large Incumbents are those incumbents serving relatively large serving areas, usually
including both rural and urban populations, and providing local, long distance, wireless,
Internet, data, private line and other services. The large incumbent companies include
Aliant Telecom, Bell Canada, MTS Allstream, SaskTel and TCI, as well as Northwestel
Inc. (Northwestel), Télébec, and TCQ.
28
Separate lists are maintained for non-dominant carriers, competitive local exchange carriers (CLECs), carriers,
basic international telecommunications services (BITS), competitive pay telephone service providers (CPTSPs),
digital subscriber line (DSL) providers, independent carriers, resellers and resellers of Internet high-speed
service. These lists can be viewed at: http://www.crtc.gc.ca/eng/lists.htm.
12
b) Small Incumbents are those incumbents serving relatively small serving 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. The small
incumbents include companies such as NorthernTel, Limited Partnership and TBayTel.
2) Competitors are providers of telecommunications services that are not incumbent telephone
companies discussed in (1) above. However, this group includes incumbent companies
operating outside their traditional operating territory such as Navigata. Competitors are
subdivided as follows:
a) Competitors (ILEC out-of-territory) are the incumbent companies operating outside their
traditional operating territory. This includes both subsidiaries and divisions of the
incumbents providing telecommunications services outside their traditional operating
territory such as TCI's operations in Ontario.
b) Competitors (other) are providers of telecommunications services that are not incumbent
telephone companies.
i)
Facilities-based competitive service providers are those competitive service
providers that own physical transmission facilities (e.g., inter-city, intra-city, or
local). These service providers include such companies as Call-Net Enterprises Inc.
(now Rogers Telecom Holdings Inc. (Rogers Holdings)) and FCI Broadband
(a division of Futureway Communications Inc.)
ii)
Resellers are non-facilities-based competitive service providers.
These service providers include Primus Telecommunications Canada Inc.,
Distributel Communications Limited, YAK Communications (Canada) Inc.,
and many others, including independent Internet service providers (ISPs).
iii)
Competitive Pay Telephone Service Providers (CPTSPs) are competitive service
providers that provide public telecommunications services by way of pay
telephones.
iv)
Cable service providers are the former cable monopolies that also provide
telecommunications services (e.g., Internet, wireless and voice). These cable service
providers include such companies as Rogers Communications Inc. (Rogers),
Shaw Communications Inc. (Shaw), Le Groupe Vidéotron ltée, Cogeco Inc. and
Bragg Communications Incorporated (EastLink).
v)
Utility telcos are service providers whose market entry into telecommunications
services, or whose corporate group's market entry into telecommunications services,
was preceded by a group-member company's activity in the electricity, gas or other
utility business. These service providers include such companies as Hydro One
Telecom Inc., Toronto Hydro Telecom Inc. and FibreWired Network.
13
As previously discussed in section 1.2 and noted in the classification structure above, wireless
companies are classified based on the affiliate relationship of the service providers.
As displayed in Figure 3.5.1, approximately 55% of the service providers are resellers,
representing the single largest group of telecommunications service providers operating, or who
propose to operate, in the Canadian telecommunications industry. Although the resellers
represent 55% of the participants, as a group, they captured approximately 4% of the revenues.
Figure 3.5.1
Distribution of Telecommunications Service Providers
Large incumbents (incl. out-of-territory)
Small incumbents
Facilities-based competitive providers
Resellers
CPTSPs
Cable service providers
Utility telcos
0
10
20
30
40
50
60
70
80
Percent
Entities
Revenues
Source: CRTC Telecommunications Lists
The incumbents, including their out-of-territory and wireless operations, were approximately 3%
of the number of participants, capturing approximately 76% of the revenues making them the
largest group with respect to revenues. Cable service providers were the third largest group with
8% of the number of participants, capturing 15% of the revenues. As a result, they were the
second largest group in terms of telecommunications revenues. Over 95% of the cable providers'
revenues was related to Internet and wireless services.
Each of the reporting entities was assigned to one of the above-noted categories. Certain
categories of competitive service providers were combined, as separate reporting would have
resulted in residual disclosure of confidential information. Also, certain figures and percentage
growth calculations may not reconcile due to rounding.
14
As discussed in section 4.0, there were a number of major acquisitions in 2004 that impact the
assignment of revenues to the above-noted categories. In the case of competitors acquiring other
entities, the revenues from the acquired company were reassigned to the same category as the
competitor that acquired the company. However, in the case of incumbents, the revenues from
the acquired company, generated within the traditional operating territory of the incumbent, were
reassigned to the incumbent category and the remaining revenues were assigned to competitor
(ILEC out-of-territory).
Incumbent carriers' out-of-territory activities are generally captured within the various sections
of the report with the competitors (ILEC out-of territory) group as discussed above. However,
in certain cases this was not possible. In these cases, the incumbent carriers' out-of-territory
activities were included with the incumbent and are noted as incumbent (incl. ILEC
out-of-territory).
A summary of total telecommunications service revenues in aggregate and by type of
market participant for the five year period 2000 to 2004 is provided in Table 3.5.1 below. As
Table 3.5.1 demonstrates, the incumbents' share of the industry's total telecommunications
service revenues increased from 75% in 2003 to 77% in 2004 due to the acquisitions of several
facilities-based competitors by the incumbents.
Table 3.5.1
Total Telecommunications Services Revenues
by Type of Market Participant
($ millions)
Incumbents Carriers (incl. out-of-territory)
Large
Small
Sub-total
Percent of total
Competitors (other)
Facilities-based
Resellers/CPTSPs
Cable providers
Utility telcos
Sub-total
Percent of total
Total
Source: CRTC Data Collection
2000
2001
2002
2003
2004
22,622.9
278.4
22,901.3
79%
24,541.0
281.9
24,822.9
79%
23,560.4
319.5
23,879.9
76%
23,483.9
311.9
23,795.8
75%
25,410.2
369.0
25,779.2
77%
3,310.9
625.0
2,037.7
5.6
5,979.2
21%
28,880.5
3,391.3
709.2
2,448.4
31.2
6,580.1
21%
31,403.0
3,247.3
1,217.6
3,009.2
104.5
7,578.6
24%
31,458.5
3,141.5
1,315.2
3,432.9
132.3
8,021.9
25%
31,817.7
1,001.8
1,558.6
4,875.8
95.5
7,531.8
23%
33,311.0
15
4.0
Status of Competition
4.1
Financial Review of Markets
Highlights
•
•
•
Telecommunications industry service revenues increased 4.7% in 2004, with wireline
revenues increasing 0.3% and wireless revenues increasing 17.6%.
Telecommunications industry capital expenditures increased from $5.2 billion in 2003 to
$5.7 billion in 2004, a 9.6% increase.
Telecommunications industry earnings before interest, taxes, depreciation and amortization
(EBITDA) increased from $10.9 billion in 2003 to $11.5 billion in 2004, a 5.5% increase.
Part A - Telecommunications Revenues
Overview - Market Segment Revenues
Telecommunications revenues include revenues from both wireline and wireless service
offerings. Wireline service revenues include local and access, long distance, data and private line
and Internet service revenues, but exclude revenues from terminal equipment sales and rentals.
Wireless service revenues include mobile and paging service revenues as well as the terminal
equipment revenues generated within this market segment.
As shown below in Table 4.1.1, wireline revenues increased 0.3% from $23.8 billion in 2003 to
$23.9 billion in 2004.
Table 4.1.1
Total Telecommunications Service Revenues29
($ billions)
Wireline
Wireless
Total
2000
23.3
5.6
28.9
2001
25.0
6.4
31.4
2002
24.4
7.1
31.5
2003
23.8
8.0
31.8
2004
23.9
9.5
33.3
Growth
2003-2004
0.3%
17.6%
4.7%
CAGR
2000-2004
0.6%
14.1%
3.6%
Source: CRTC Data Collection
Note: CAGR refers to Cumulative Annual Growth Rate
29
Total Telecommunications Service Revenues consist of the telecommunications service revenues of all
companies surveyed. Wireline terminal equipment as well as other non-telecommunications revenues were
excluded. Estimates were used to capture the revenues of the smaller entities that were not required to complete
data forms. These estimates were based on the information provided by the entities in their reporting entity
profile (REP) forms.
16
This 0.3% increase was accompanied by wireless growth, which was still strong at 17.6%.
Wireless revenues increased from $8.0 billion in 2003 to $9.5 billion in 2004. Total
telecommunications revenues increased from $31.8 billion in 2003 to $33.3 billion in 2004,
a $1.5 billion or 4.7% increase.
As shown in Figure 4.1.1 below, wireline revenue after displaying strong growth of 11% in
2000, declined to a negative growth rate of 3% in 2002 and remained negative until 2003. In
2004 the growth rate became a positive 0.3%. In contrast, wireless revenue growth has been
strong since 2000, at approximately 15%, dipping in 2002 to 10% and then recovering to 13% in
2003 and increasing to 17.6% in 2004.
Figure 4.1.1
Wireline and Wireless Annual Revenue Growth Rates (%)
20
Wireline
Percent
15
Wireless
10
5
0
-5
2000
2001
2002
2003
2004
Source: CRTC Data Collection
Table 4.1.2 below illustrates that the long distance and data and private line revenues displayed a
downward revenue trend in 2004 of 6% and 1.6% respectively. The local and access revenues
remained relatively unchanged. The Internet segment revenues displayed a growth of 12.9%.
Declining prices and reduced demand in the private line market resulted in a decrease in data and
private line revenues of $0.1 billion. Long distance revenues declined $0.3 billion mostly due to
declining prices. Despite the declining growth rates in some wireline segments, total wireline
services still represent the majority (72%) of telecommunications service revenues as displayed
in Figure 4.1.2.
17
Table 4.1.2
Segmented Telecommunications Service Revenues
($ billions)
2002
2003
2004
Growth
2003-2004
Wireline
Long distance
Local and access
Data & private line
Internet
6.5
10.0
4.5
3.3
5.9
9.7
4.5
3.7
5.6
9.7
4.4
4.2
-6.0%
0.0%
-1.6%
12.9%
-7.5%
-1.6%
-1.5%
12.6%
Total wireline
24.4
23.8
23.9
0.2%
-1.0%
7.1
8.0
9.5
17.6%
15.5%
31.5
31.9
33.3
4.6%
2.9%
Wireless
Total industry
CAGR
2002-2004
Source: CRTC Data Collection
Figure 4.1.2
Total Service Revenues
Wireline v. Wireless
($ billions)
2003
2004
8.0
9.5
Wireless
Wireline
23.9
23.8
Source: CRTC Data Collection
Figure 4.1.3 below compares the segmented telecommunications service revenues of 2000 with
2004. Long distance revenues decreased from 2000 to 2004, while Internet and wireless service
providers experienced an increase in annual revenues from 2000 to 2004 of 137% and 70%
respectively. Revenues from data and private line services, however peaked in 2001 as displayed
in Table 4.6.1 in Section 4.6, and have since declined by 4%. Local and access revenues also
peaked in 2001 and then decreased by 11% in 2002 and have since declined by 3%, as displayed
in Table 4.3.1 in Section 4.3.
18
Figure 4.1.3
Segmented Telecommunications Service Revenues
($ billions)
2000
2004
Wireless
5.6
6.0
7.0
Internet
9.5
Data & private line
2.0
Local & access
Long distance
9.7
4.2
4.0
10.0
4.4
Source: CRTC Data Collection
Figure 4.1.4 below shows that the average monthly wireline revenue per line has remained
relatively unchanged at $98. Monthly wireless revenue per subscriber has been steadily
increasing from $48 in 2002 to $52 in 2004.
Figure 4.1.4
Average Monthly Revenue per Line/Subscriber
Revenues per month
120
100
80
Wireline
60
Wireless
40
20
0
2000
2001
2002
2003
2004
Source: CRTC Data Collection
The local and access portion of the monthly revenue per line in 2004 for wireline service
providers was roughly 41% of the total monthly revenue per line.
19
Part B - Key Financial Indicators30
The following section provides a broader indication of the state of the Canadian
telecommunications industry than can be achieved only through the study of service revenues. In
addition to revenue, key indicators such as EBITDA and capital expenditures can also be used to
determine the financial state of the Canadian telecommunications industry. Due to the difficulty
of determining these financial indicators for the out-of-territory operations of the incumbents, the
financial results of the incumbents include their out-of-territory operations.
a)
EBITDA
As shown in Figure 4.1.5 below, wireless service providers experienced continued growth in
EBITDA in 2004. These providers registered a 19.4% increase in EBITDA from $3.1 billion in
2003 to $3.7 billion in 2004, increasing their share of the industry EBITDA from 28% in 2003 to
32% in 2004. The wireline EBITDA declined slightly in 2004 from $7.83 billion in 2003 to
$7.81 billion in 2004, a 0.2% decline.
Wireline competitors' (other) EBITDA was $0.11 billion in 2004, a decrease of 83%. The
wireline incumbents' EBITDA, including their out-of-territory operations, increased from
$7.2 billion in 2003 to $7.7 billion, a $0.5 billion or 7.0% increase. The EBITDA for the industry
as a whole increased from $10.9 billion in 2003 to $11.5 billion in 2004. The wireline
competitors' (other) share of the industry EBITDA decreased from 6% in 2003 to 0.9% in 2004,
while that of the wireline incumbents, including their out-of-territory operations, increased from
66% in 2003 to 67% in 2004.
30
It is important to note that the universe surveyed for the calculation of these metrics differs slightly from
the universe surveyed in the calculation of the Telecommunications Service Revenues calculated in Tables 4.1.1
and 4.1.2. Notably, companies whose primary source of revenue is not telecommunications service have been
excluded entirely, as have providers who were unable to segment the key financial data related to the
telecommunications portion of their operations.
20
Figure 4.1.5
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
by Provider Type
10
Wireless providers
$ billions
8
6
Wireline
incumbents (incl.
out-of-territory)
4
2
Wireline
competitors (other)
0
-2
2000
2001
2002
2003
2004
Source: CRTC Data Collection
b)
Telecommunications Expenditures
The main costs of provisioning telecommunications services are capital expenditures related to
the building of an entity's own facilities or inter-carrier expenses related to acquiring access to
the facilities of other entities. The industry's gross plant-in-service in 2004 amounted to
$58.7 billion.
Capital expenditures in the Canadian telecommunications industry for the period 2000 to 2004
are displayed below in Figure 4.1.6, by type of provider. Total capital expenditures in the
Canadian telecommunications industry were $5.7 billion in 2004, a 9.6% increase from
$5.2 billion in 2003.
Wireline capital expenditures increased from $3.9 billion in 2003 to $4.7 billion in 2004, a
20.5% increase, whereas wireless capital expenditures, excluding spectrum, decreased from
$1.3 billion in 2003 to $1.1 billion in 2004, a decrease of 15.4%.
Wireline capital expenditures accounted for $4.7 billion or 82% of industry capital
expenditures in 2004.
21
Figure 4.1.6
Capital Expenditures by Provider Type
7
6
Wireless
providers
billion
5
4
Wireline providers
3
2
1
0
2000
2001
2002
2003
2004
Source: CRTC Data Collection
Capital Intensity
As shown below in Figure 4.1.7, the capital expenditures per revenue dollar for wireless service
providers, wireline incumbents, including their out-of-territory operations, and facilities-based
wireline competitors have shifted significantly over the past five years. While the wireline
incumbents had the lowest capital expenditures per revenue dollar in 2000, in 2004, they had the
highest rate at approximately 21%; whereas facilities-based competitors had the highest capital
expenditures per revenue dollar of 49% in 2000, they are now among the lowest at 12%.
Wireless providers showed a decrease in their capital expenditures per revenue dollar over the
past three years, dropping from 31% in 2001 to 11% in 2004. This decrease resulted from
reduced expenditures and increased revenues. Increased coverage through roaming agreements
has minimized the need to expand facilities.
22
Figure 4.1.7
Capital Expenditure per Revenue Dollar
60
Wireless providers
50
Percent
40
Wireline incumbents
30
20
Facilities-based
wireline competitors
(other)
10
0
2000
2001
2002
2003
2004
Source: CRTC Data Collection
Figure 4.1.8 below, compares EBITDA and capital expenditures for incumbents, including their
out-of-territory operations, and facilities-based competitors (other) for the years 2003 and 2004.
The data shows that in each year, the incumbents' EBITDA exceeded their capital expenditures,
indicating that the incumbents are generally able to rely on internally generated funds to finance
their expenditures. This has not generally been the case with the facilities-based competitors. The
level of capital expenditures and EBITDA for facilities-based competitors was minimal in 2004.
This can be attributed to industry consolidations and to a lesser extent a declining EBITDA in
2004, which limited their ability to finance these expenditures.
Figure 4.1.8
Wireline EBITDA v. Wireline Capital Expenditures (CAPEX)
8
billion
6
4
2
0
Incumbents (incl.
out-of-territory)
2003
EBITDA
Facilities-based
competitors (other)
CAPEX
Incumbents (incl.
out-of-territory)
2004
Facilities-based
competitors (other)
Source: CRTC Data Collection
23
c)
Inter-carrier Payments
Table 4.1.3 below displays inter-carrier payments, excluding settlement, on a per revenue basis
for incumbents, including their out-of-territory operations, and competitors (other) in the
wireline industry by market sector. In 2004, as in the previous year, the competitors (other) had
significantly higher inter-carrier payments per revenue dollar in each sector except for the
Internet sector. In the local and access market these payments, as a percent of revenues,
increased from 52% to 58% for the competitors (other). The inter-carrier payments per revenue
dollar for competitors (other) in the data and private line sector also increased from 36% to 46%.
The increase, in competitor inter-carrier payments per revenue dollar for long distance, from
41% to 48% may be attributed to the long distance calling plans that tend to increase with long
distance minutes.
Table 4.1.3
Inter-carrier Payments per Revenue Dollar
by Wireline Market Sector31
Local
Long Distance
Data & Private Line
Internet
Total
2002
2003
2004
2002
2003
2004
2002
2003
2004
2002
2003
2004
2002
2003
2004
Incumbents
(incl. out of territory)
n/a
1%
2%
8%
16%
23%
29%
28%
20%
21%
17%
6%
9%
11%
9%
Competitors (other)
78%
52%
58%
30%
41%
48%
44%
36%
46%
12%
17%
7%
34%
25%
17%
Source: CRTC Data Collection
n/a
Due to residual disclosure issues, these expenses have been combined with competitors' expenses.
d)
Industry Developments
A number of significant shifts in the make-up of the Canadian telecommunications market
occurred during 2003 and 2004. For example, the major players have recognised the potential
impact that Internet protocol (IP) may have on their operations or networks and on the services
offered. As noted above, providers have made expenditures on IP and virtually every major
wireline service provider has announced a VoIP initiative directed at business customers,
residential customers, or both.
31
Inter-carrier expenses do not include contribution payments.
24
Incumbent Out-of-Territory Operations
In 2004, a number of larger competitors were acquired by regional incumbents as they continued
to expand beyond their traditional territories. MTS, through its acquisition of Allstream,
suddenly became the third largest service provider in the country and a national player with a
presence in eastern Canada. Bell Canada strengthened its position in western Canada through the
acquisition of the Canadian operations of 360networks. As part of the deal, Bell Canada sold
360networks' eastern Canadian customer base to Call-Net Enterprises Inc. (Call-Net). Rogers
Wireless Inc. (RWI) purchased the shares of Microcell. Bell Canada also assumed 100%
ownership of Bell West by purchasing the remaining (40%) shares held by MTS (now MTS
Allstream). More recently, in 2005 Call-Net was acquired by Rogers.
Figure 4.1.9 shows that for incumbents with out-of-territory operations in 2004 their revenues
from these activities represented approximately 13% of their total wireline revenues.
When compared to the competitor (other), the competitors (ILEC out-of-territory) revenues are
approximately 62% of the revenues of the competitor (other).32
Figure 4.1.9
Competitors (ILEC out-of-territory) Revenues
v.
The Incumbents Wireline Revenues (2004)
13%
87%
Incumbents
Competitors (ILEC out-of-territory)
Source: CRTC Data Collection
32
CRTC Data Collection.
25
e)
Service Bundling
Over the past number of years, telecommunications service providers have increasingly relied on
the packaging or bundling of various services to maintain or increase their revenues. For
example, those providing local service are increasingly bundling long distance service with their
local service offering.
Service providers that offer the full spectrum of telecommunications services are well positioned
to take full advantage of the benefits of bundling services. Companies that are not full service
providers who want to realize the benefits of bundling are required to make agreements with
other service providers to complement their service offerings.
Summary
Revenues in the Canadian telecommunications industry increased by approximately 4.7% in
2004. Within the service segments, strong growth in both the Internet access and wireless service
revenues of 12.9% and 17.6%, respectively, continued in 2004. The increases in both these
service segments were again mostly offset by declines in long distance (6%), and in data and
private line (1.6%) revenues. Local and access revenues remained relatively unchanged. Monthly
revenue per line for wireline service providers has remained relatively unchanged since 2002 at
$98 while monthly wireless revenues per subscriber has been steadily increasing from $48 in
2002 to $52 in 2004.
The wireline share of telecommunications service revenues continued to decrease from 75% in
the previous year to 72% in 2004 due to the strong growth of the wireless industry. Wireline
incumbents continued to have the largest portion (77%) of total telecommunications revenues.
The industry EBITDA experienced an increase from $10.9 billion in 2003 to $11.5 billion in
2004, a 5.5% increase. The wireline share of the industry EBITDA decreased from 72% in 2003
to 68% in 2004, as wireless increased its EBITDA from $3.1 billion in 2003 to $3.7 billion in
2004.
Total capital expenditures in the Canadian telecommunications industry were $5.7 billion in
2004 a 9.6% increase from 2003. With the expected move to IP technologies and the growth of
IP-based networks, companies are anticipating lower operating costs that would improve
operating margins. The competitive market may put pressure on the incumbents and competitors
to share some of these cost savings with consumers in the form of lower prices.
26
4.2
Long Distance
Highlights
•
•
•
•
Long distance revenues continued to decline, decreasing from $5.9 billion in 2003 to
$5.6 billion in 2004, a 6% decline.
Long distance minutes continued to grow, increasing from 55.8 billion minutes in 2003 to
59.2 billion in 2004, a 6% increase.
The incumbents' share of long distance revenues remained relatively unchanged at 67%.
Within the retail market, competitors' share of the long distance revenues in 2004 remained
relatively unchanged over the previous year at 31%.
Sector Description
a)
Description of Services
The long distance market sector encompasses wireline voice traffic to a location outside the local
service calling area. Wireline long distance services are sold in a variety of fashions, ranging
from a standard per minute charge to a monthly fixed charge plan provided by a pre-selected
Primary Inter-exchange Carrier (PIC), to the use of dial-around services that bypass the PIC'd
carrier to use another long distance service provider's services. Long distance traffic was
traditionally transmitted via the circuit switched network. In 2004, several service providers were
offering voice communication services using IP technologies.
b)
Markets and Observations
Table 4.2.1 provides long distance revenues and minutes for the period 2000 to 2004. Revenues
include retail revenues from long distance services sold to the residential and business customer,
wholesale revenues for long distance traffic sold to other service providers for the purposes of
resale, and settlement revenues paid to carriers for the transport of traffic outside a service
provider's operating territory. Long distance minutes include both retail and wholesale minutes,
but exclude minutes associated with domestic and international settlement revenues.
Table 4.2.1
Total Long Distance Revenues and Minutes
2000
Revenues ($ millions)
7,126
Minutes (millions)
50,885
Source: CRTC Data Collection
2001
6,700
52,977
2002
6,534
54,835
27
2003
5,944
55,820
2004
5,588
59,175
Growth
2003-2004
-6.0%
6.0%
CAGR
2000-2004
-5.9%
3.8%
The effects of competition continue to be evident in the number of optional long distance
package alternatives available, the number of service providers who offer these and declining
prices. Many long distance service providers made progress on IP network transformation in
2004 which may result in improved operating margins for long distance service providers.
However, competitive pressure transferred some of these savings to consumers in the form of
lower long distance prices, resulting in lower revenues but higher long distance minutes. As well,
long distance service is increasingly bundled with local service by the competitive local service
providers when promoting local services.
Figure 4.2.1 outlines the long distance revenue components split between retail and wholesale,
for the period 2002-2004. Retail revenues constituted 83% of total long distance revenues in
2004, up slightly from 81% in 2003. Usage-based revenues also declined in 2004 by 11%.
Wholesale revenues continued to decrease from 19% of long distance revenues in 2003 to 17%
in 2004. Usage-based revenues, which constitute the major portion in 2004, increased to
$0.5 million or 57% of wholesale revenues. Settlements continued to decline from $0.6 billion or
51% of wholesale revenues in 2003, to $0.4 billion or 40% of wholesale revenues in 2004.
Figure 4.2.1
Long Distance Revenues by Component
6,000
$ millions
5,000
Other
4,000
Payphone
3,000
Settlement
2,000
Fixed Charges
1,000
Usage Based
0
2002
2003
Retail
2004
2002
2003
2004
Wholesale
Source: CRTC Data Collection
28
c)
Sector Participants
The sector participants primarily include the large incumbent telephone companies,
facilities-based carriers providing both local and switched long distance services, and a variety of
resellers who either resell long distance service or provide long distance service using facilities
typically purchased from either the incumbent or interexchange facilities-based carriers. The
large incumbents also provide long distance service outside their traditional territories either
directly or through a separate subsidiary. The incumbents' activities within their traditional
operating territories are referred to as incumbent, whereas, their out-of territory operations are
referred to as competitor (ILEC out-of-territory). The remaining competitors are referred to as
competitor (other).
In addition to selecting their PIC for long distance traffic, retail long distance customers also
have the option of using alternative carriers, by "dialing around" their PIC carrier. This option is
typically provided via either prepaid card or dial-around service providers. In 2004, revenues
from these services constituted approximately 7% of retail long distance revenues.
d)
Regulatory Framework
Competition in the long distance market began in 1990 with the resale of certain switched
long distance services (Decision 90-3).33 In 1992, the market was further opened to include
facilities-based carriers (Decision 92-12).34 In 1998, pursuant to Decision 97-19,35 the
Commission forbore from regulating the incumbents' long distance service rates, with the
exception of Northwestel, with certain conditions imposed on the incumbents, most notably price
ceilings applying to each basic long distance rate schedule.
The Commission has forborne from regulating the long distance market through a series of
decisions that addressed various market players and market segments (Decision 94-19,36
Decision 95-19,37 Decision 97-10,38 Decision 97-19, Order 99-120239).
33
34
35
36
37
38
39
Resale and sharing of private line services, Telecom Decision CRTC 90-3, 1 March 1990.
Competition in the provision of public long distance voice telephone services and related resale and
sharing issues, Telecom Decision CRTC 92-12, 12 June 1992.
Forbearance - Regulation of toll services provided by incumbent telephone companies,
Telecom Decision CRTC 97-19, 18 December 1997.
Review of regulatory framework, Telecom Decision CRTC 94-19, 16 September 1994.
Forbearance - Services provided by Non-dominant Canadian carriers, Telecom Decision CRTC 95-19,
8 September 1995.
Teleglobe Canada Inc. - Resale and Sharing of international private line services, Telecom Decision
CRTC 97-10, 5 May 1997.
Forbearance for agreements between domestic and foreign common carriers, Telecom Order CRTC 99-1202,
22 December 1999.
29
While the Commission has forborne from regulating the long distance market, it continues to
regulate the local and access market, which determines the competitive long distance carrier's
cost to interconnect with an ILEC's facilities. The direct connect rates were reviewed in 2002 and
again in 2003 resulting in reductions in these rates, which are paid by long distance providers to
ILECs for originating and terminating long distance traffic.40
Market Segments
Long Distance
Table 4.2.2 presents a summary of long distance revenues by residential, business and wholesale
segments for the period 2000 to 2004.
Table 4.2.2
Long Distance Revenues by Market Segment
($ millions)
2000
Residential
3,211
Business
2,209
Wholesale
1,706
Total
7,126
Source: CRTC Data Collection
2001
3,007
2,081
1,612
6,700
2002
3,038
1,970
1,526
6,534
2003
3,013
1,777
1,154
5,944
2004
2,857
1,790
941
5,588
Growth
2003-2004
-5.2%
0.7%
-18.4%
-6.0%
CAGR
2000-2004
-2.9%
-5.1%
-13.8%
-5.9%
In 2004, long distance revenues declined by 6.0%, to $5.6 billion. The largest decline was
experienced within the wholesale market, which includes settlement payments between carriers
for transmission and/or termination of another carrier's traffic. Wholesale revenues declined by
18.4%, or $0.2 billion, in part due to carriers continuing to lower settlement and wholesale rates
for the transport and termination of long distance traffic. As a percentage of total long distance
revenues, wholesale revenues continued a downward trend from 19.4% in 2003 to 16.8%
in 2004.
Residential revenues declined from $3.0 billion in 2003 to $2.9 billion in 2004, a $0.1 billion or
5% decline. By contrast, business revenues remained relatively unchanged at $1.8 billion. As a
percentage of total long distance revenues, business revenues increased from 29.9% in 2003 to
32.0% in 2004, and residential revenues increased from 50.7% in 2003 to 51.1% in 2004.
40
Regulatory framework for second price cap period, Telecom Decision CRTC 2002-34, 30 May 2002, Direct
Connection service, Telecom Decision CRTC 2003-83, 17 December 2003, Rates for co-location floor space,
Direct Connection service, Wireless Access Service: Line-side Access services and Wireless Service Providers
Enhanced Provincial 9-1-1 Network Access service, Telecom Decision CRTC 2003-12-1, 19 November 2003.
30
The decline in residential revenues can be attributed, in large part, to competitive pricing
pressures and bundling of long distance services in packages provided by the carriers.
As displayed in Figure 4.2.2, incumbents' share of long distance revenues remained
unchanged in 2004.
Figure 4.2.2
Long Distance Revenue Market Share41
2003
2004
22%
Incumbents
30%
Competitors (ILEC
out-of-territory)
11%
3%
67%
67%
Competitors (other)
Source: CRTC Data Collection
In the residential long distance market, the average revenue per minute (ARPM) decreased for
all service providers. However, in the business long distance segment, the incumbents and
competitors (other) realized an increase in ARPM. In 2004, business customers enjoyed price
advantages over the residential customer, as the major competitive providers continued to target
high volume enterprises and large business customers with lower rate structures. The ARPM for
residential and business traffic is illustrated in Figure 4.2.3.
41
The competitors' (cable) share of long distance revenues was negligible in 2004.
31
Figure 4.2.3
Retail Average Revenue per Minute (ARPM)
ARPM ($)
0.15
0.10
0.05
0.00
2003
2004
2003
Residential
Incumbents
2004
Business
Competitors (ILEC out-of-territory)
Competitors (other)
Source: CRTC Data Collection
The higher ARPM for the incumbents can be attributed, among other things, to the incumbents'
customers that have not subscribed to a long distance calling plan.
Table 4.2.3 provides the major incumbent telephone companies' retail market shares for 2003
and 2004, measured in terms of retail business and residential long distance revenues, in their
traditional operating territories.42
Table 4.2.3
Incumbent Telephone Companies' Long Distance
Retail Revenue Market Share by Region
Percent
Region
2003
2004
BC, Alberta
72%
69%
Saskatchewan
82%
84%
Manitoba
76%
84%
Ontario, Quebec
66%
65%
Atlantic
75% #
78%
Source: CRTC Data Collection
42
The market share data in Table 4.2.3 excludes the incumbents out-of-territory revenues.
32
Retail Long Distance - Business Market
Tables 4.2.4 and 4.2.5 display the business long distance revenues and minutes, respectively,
for 2003 and 2004. Figure 4.2.4 displays the business long distance revenue market share by
service provider.
Business long distance revenues in 2004 remained relatively unchanged at $1.8 billion. Related
traffic declined by 7% from 22.5 billion minutes to 21.1 billion minutes, with the competitors
(incl. ILEC out-of-territory) carrying as much traffic as the incumbents. The minimal increase in
business revenues in 2004, with a 7% decline in minutes, is reflective of the increase in the
ARPM for both the incumbents and the competitors (other). The impact of the service providers'
price structure is reflected in the ARPM which increased by 9% in the business market, from
8 cents per minute in 2003 to 9 cents per minute in 2004.
Table 4.2.4
Business Long Distance Revenues
($ millions)
2003
977
62
738
1,777
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Total
Source: CRTC Data Collection
2004
1,067
332
390
1,790
Growth
2003-2004
9.2%
435.6%
-47.1%
0.7%
Table 4.2.5
Business Long Distance Minutes
(Millions)
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Total
Source: CRTC Data Collection
2003
11,247
951
10,334
22,532
33
2004
10,585
5,584
4,882
21,051
Growth
2003-2004
-5.9%
486.9%
-52.8%
-6.6%
The incumbents' business long distance revenues increased 9.2% in 2004 over 2003, to
$1.1 billion. The competitors' business long distance revenues declined 9.8%, from $0.8 billion
in 2003 to $0.7 billion in 2004. The large increase for the competitor (ILEC out-of-territory) and
decrease for competitor (other) were mainly due to the industry consolidation that took place in
2004 in which Allstream Canada was acquired by MTS (now MTS Allstream) and 360networks
was acquired by Bell Canada, as previously discussed in section 4.1 (Financial Review of
Markets). With reference to business long distance minutes, the incumbents' minutes declined
by 6% to 10.6 billion minutes, while the competitors' minutes declined 7% from 11.3 billion
minutes in 2003 to 10.5 billion minutes in 2004. As previously noted, the impact of the service
providers' price structure is reflected in the average rate per minute which increased by 16% and
12% for the incumbents and the competitor (other), respectively, and declined by 9% for the
competitor (ILEC out-of-territory).
Figure 4.2.4
Business Long Distance Revenue Market Share
2003
2004
22%
Incumbents
55%
42%
Competitors (ILEC
out-of-territory)
60%
Competitors
(other)
19%
3%
Source : CRTC Data Collection
As a result of the increase in business long distance revenues by the incumbents in 2004 and the
decline in these revenues by the competitors, the competitor market share declined from 45% in
2003 to 41% in 2004.
Retail Long Distance - Residential Market
Residential long distance revenues in 2004 equalled $2.9 billion, down 5.1% from the previous
year. Residential long distance minutes were up in 2004, increasing 3% from 22.4 billion
minutes to 23 billion minutes in 2004. The increase in residential long distance minutes was
primarily due to growth in competitor traffic, partly offset by the incumbents' minutes which
declined 6% over the same period.
34
Tables 4.2.6 and 4.2.7 display residential long distance revenues and minutes, respectively, for
the years 2003 and 2004.
Table 4.2.6
Residential Long Distance Revenues
($ millions)
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Total
Source: CRTC Data Collection
2003
2,300
1
712
3,012
2004
2,135
2
721
2,857
Growth
2003-2004
-7.2%
221.1%
1.3%
-5.1%
Table 4.2.7
Residential Long Distance Minutes
(Millions)
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Total
Source: CRTC Data Collection
2003
16,295
5
6,061
22,361
2004
15,383
26
7,592
23,001
Growth
2003-2004
-5.6%
420.0%
25.3%
2.9%
The incumbents' residential long distance revenues declined by 7.2% in 2004 over the previous
year, to $2.1 billion, while the competitors' revenues remained relatively unchanged at
$0.7 billion. With reference to residential long distance minutes, the incumbents declined by
5.6% to 15.4 billion minutes, while the competitors' (other) minutes increased by 25.3%, to
7.6 billion minutes. The out-of-territory competitors carried minimal residential minutes as they
were focused on business customers.
35
While residential minutes increased by 3%, this increase was with the competitors, as customers
continued to take advantage of their offerings.
Figure 4.2.5
Residential Long Distance Revenue Share
2003
2004
24%
25%
0%
Incumbents
Competitors (ILEC
out-of-territory)
0%
76%
Competitors (other)
75%
Source: CRTC Data Collection
As a result of the decline in residential long distance revenues by the incumbents and the
increase in these revenues by the competitors, the incumbent's revenue market share decreased
marginally from 76% in 2003 to 75% in 2004, as displayed in Figure 4.2.5. The competitors
(ILEC out-of-territory) had minimal share of the residential long distance market, as these
competitors focused on the business long distance market.
Wholesale Long Distance
Wholesale long distance represents services provided by long distance providers to other long
distance service providers. These services include connection arrangements between
facilities-based carriers to transit and/or terminate traffic on behalf of another provider,
excluding originating and terminating traffic on the local network, and the sale of wholesale bulk
minutes to resellers of long distance service. In 2004, wholesale long distance revenues
accounted for $0.9 billion, down $0.2 billion or 18% from 2003.
Table 4.2.8 displays the wholesale long distance revenues for 2003 and 2004. In 2004, the
incumbents' wholesale long distance revenues decreased by $156 million, or 23% and the
competitors' long distance revenues declined by $56 million or 12%. The major increase in
revenues for the competitors (ILEC out-of-territory) and decrease for the competitors (other)
was due to the industry consolidations in 2004.
36
Table 4.2.8
Wholesale Long Distance Revenues
($ millions)
2003
686
130
337
1,154
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Total
Source: CRTC Data Collection
Growth
2003-2004
-22.8%
107.7%
-58.2%
-18.4%
2004
530
270
141
941
With respect to settlement, both incumbents and competitors experienced decreases in settlement
related revenues, which declined from $1.1 billion in 2002, to $0.4 billion in 2004, a 64%43
decrease. The decreases in settlement revenues can be attributed in part to the continued
reductions in settlement rates and reduced reliance on Canadian wholesale providers to complete
international calls.
Figure 4.2.6
Wholesale Long Distance Revenue Share
2003
2004
15%
Incumbents
29%
56%
Competitors (ILEC
out-of-territory)
60%
Competitors (other)
11%
29%
Source: CRTC Data Collection
Figure 4.2.6 displays the wholesale revenue market share for 2003 and 2004 by type of provider.
The competitors' share of long distance wholesale revenues increased from 40% in 2003 to 44%
in 2004.
43
CRTC Data Collection.
37
Summary
Overall, wireline long distance revenues continue to decrease annually, primarily due to pricing
pressures caused by competition. Incumbent revenues decreased in the residential market
segment in 2004 but increased in the business market segment. Competitors, however, lost
revenues in the business market segment but gained revenues in the residential market segment.
Incumbents and competitors lost long distance wholesale revenues.
Wireline long distance services are being replaced by alternative communication technologies,
such as wireless, e-mail, instant messaging and other voice communications services.
For 2004, the long distance landscape experienced significant changes. The growing use of IP
networks to transmit long distance traffic, with their lower cost structure, may have a positive
impact on the service providers' long distance cost structure. Industry consolidation has also
had an impact on the industry. MTS (now MTS Allstream) acquired Allstream Canada, thereby
increasing its market share significantly. As well, Call-Net purchased 360networks' eastern
customer base from Bell Canada with the option to acquire the eastern assets as well. The
bundling of long distance service with services such as local, Internet, mobile, and video/cable
by major players will continue to put downward pressure on long distance rates.
38
4.3
Local and Access
Highlights
•
•
•
In 2004, local and access revenues, and lines were essentially unchanged at $9.7 billion and
20.6 million lines, respectively.
The total number of retail lines was essentially unchanged at 19.8 million lines, of which the
competitors held 6.5%, up from 5.2% in 2003.
The share of retail revenues held by competitors increased by 19.4% to $548 million, or 6.4%
of total retail revenues, up from 5.4% in 2003.
Sector Description
a)
Description of Services
Local wireline telephone service is the basis for voice telecommunications services for
residences and businesses in Canada. Local service has traditionally been characterized as basic
phone service utilizing a telephone set that is wired to a LECs' network that, for a basic monthly
fee, provides unlimited access to make calls within a free-calling area. Local service also
includes other services such as automated call answering services, business Centrex, Integrated
Services Digital Network (ISDN) services, and other user services such as inside wiring,
installation and repair, teleconferencing and miscellaneous local services.
Local and access revenues also include the sale of local services on a wholesale basis and since
the introduction of local competition, has included access services revenues for interconnection
with carriers and other service providers, including switching and aggregation, and unbundled
network components.
Contribution revenues, which are received by LECs based on the number of residential lines they
provide in high-cost serving areas (HCSAs), are also included in local and access revenues.
While contribution revenues are included in the overall segment revenues reported in Table
4.3.1, they are excluded from the remaining tables in the local and access section of this report.
Revenues from the sale of wireline terminal equipment, such as telephone handsets and private
branch exchange (PBX) switching equipment, are also excluded from the local and access
revenues covered in this report.
39
b)
Markets and Observations for 2004
Table 4.3.1 provides total local and access revenues and lines for the period 2000 to 2004.
Table 4.3.1
Total Local and Access Revenues and Lines
Total local and access revenues ($ millions)
Less: contribution revenues ($ millions)
Local and access service revenues ($ millions)
Lines (thousands)
Growth
CAGR
2003-2004
2000-2004
2000
2001
2002
2003
2004
10,345
11,203
10,003
9,699
9,695
0.0%
-1.6 %
957
1,002
250
247
240
-2.8%
-29.2 %
9,388
10,021
9,724
9,452
9,455
0.0%
0.2 %
20,840
21,126
20,622
20,612
20,610
0.0%
-0.3 %
Source: CRTC Data Collection
Total local and access revenues in Table 4.3.1 include local and access monthly rates and service
charges, contribution, and local pay telephone services. Local lines in Table 4.3.1 include
residential, business and local pay telephone lines, as well as lines provided on a wholesale basis
to affiliated companies and third party providers of telecommunications services. All other tables
and figures in this section, unless otherwise noted, exclude revenues from contribution as well as
pay telephone revenues and lines.
Between 2003 and 2004, total local and access revenues, and lines remained essentially
unchanged at $9.7 billion and 20.6 million lines, respectively.
i)
Telephone numbers vs. lines
While the number of retail lines peaked in 2001 (and subsequently commenced a slow decline),
the number of in-service central office codes (a proxy for telephone number consumption)
continues to increase at an annual rate of approximately 4.5%.44 The growth of wireless
telephone subscriptions is clearly a major contributor to this divergence as well as any service
that requires large quantities of telephone numbers relative to the number of PSTN access lines.
Such services may include facsimile mailboxes, unified messaging, third-party switchboard
services, and most recently, Internet telephony.
ii)
Increasing local competition
While the ability for personal computer users to utilize the Internet for voice communications
between personal computers has existed for several years, the use of Internet Protocol for voice
communications (VoIP) is increasing on a number of other fronts:
•
facilities-based telecommunications service providers are migrating legacy networks to more
efficient and cost-effective IP-based backbone networks;
44
Canadian Number Administrator - Number Resource Utilization Forecast, www.cnac.ca/cocus.htm.
40
•
the commercialization and availability of services, facilitated by the increasing penetration of
residential broadband, which allows an Internet user to interconnect with the PSTN, using the
standard North American Numbering Plan (Internet telephony); and
•
the introduction of residential telephone service by the cable undertakings, utilizing their
existing distribution networks (cable telephony).
In 2004 and throughout 2005, numerous industry participants including incumbents,
facilities-based competitors, resellers and cable undertakings have introduced retail services that
carry voice traffic utilizing VoIP and interconnect with the PSTN. Although local service has
been available from participants within each of these service provider categories for some time,
the service utilized traditional circuit-switched technology.
Traditional local service includes an access line from the customer to the service provider,
connectivity to the PSTN, and a telephone number. VoIP services are capable of reproducing the
functionality of traditional local service, offer subscribers numerous call and
message-management features, and operate over the Internet or a distinct connection. Internet
telephony allows the service provider and the access provider to be independent. As with
traditional wireline, cable telephony is "fixed" in nature in that there is a managed access
connection between the subscriber and the service provider.
In 2004, VoIP services had essentially no impact on local revenues; however, it is expected that
revenues and subscriptions from VoIP services will increase in 2005.
iii)
Pay Telephone
After declining for several years, the number of pay telephones in Canada was unchanged in
2004 at approximately 155 thousand lines, almost all of which are provided by the incumbents.
In 2004, the incumbents' annual revenues were approximately $1,250 per pay telephone, down
from about $1,500 in 2003. Incumbents' pay telephone revenues consist of:
•
•
•
their own pay telephones when consumers place calls;
per-call compensation received from inter-exchange carriers (IXCs) when consumers dial
toll-free numbers not carried by the incumbent; and
charges to CPTSPs for the local pay telephone line and for call setup.
As the dominant providers of pay telephone service in Canada, the Commission requires that the
incumbents:
•
•
inform the Commission when they intend to de-commission the last pay telephone within a
community; and
report on an annual basis, among other things, the number of pay telephones in their
operating territories that accept coins and/or allow incoming calling.
Competitors offering pay telephone service must be registered with the Commission. In 2004,
there were more than 200 registered CPTSPs, most of which had fewer than five lines.
41
c)
Sector Participants
The large incumbents operate in most areas of the country. In addition to their original operating
territories, some incumbents also operate in other regions either directly or through affiliate
operations. Small incumbents operate in limited areas of Ontario, Quebec, and B.C., and include
both municipally-owned and public- and privately-held carriers. The small incumbents account
for 1.8% of all incumbent-provided retail lines in Canada.
There has been a limited amount of competitor penetration in the local and access segment since
the introduction of local competition in 1998. Competitors have typically been facilities-based
service providers, who own a portion of their PSTN network facilities, or resellers of PSTN
services, such as Centrex, purchased from either the incumbent carriers or other facilities-based
competitors. Facilities-based competitors also include telecom operations of cable undertakings
who deliver services using their own infrastructure. Some ILECs have also expanded outside of
their traditional serving territories, providing competition either directly or through affiliate
companies. Within this report, these operations are referred to as competitor (ILEC
out-of-territory).
Competitors continue to focus on the residential and business markets in larger urban centres,
although penetration in these markets continues to be negligible in a number of locations.
Further consolidation occurred during 2004 with MTS Communications Inc. completing its
acquisition of Allstream (forming MTS Allstream) in June; and Bell Canada completing its
acquisition of 360networks, including the assets of LondonConnect Inc. and GT Group Telecom
Services Corp., in November. In preparing this report, revenues and expenses accrued by the
acquired entities up to the completion of the respective transactions, have been classified as
incumbent for the portion within the incumbents traditional territory and as competitor (ILEC
out-of-territory) for portions outside their traditional territory.
d)
Regulatory Framework
Local telephone service in the territories of the large ILECs (excluding the territories of SaskTel,
Northwestel, Télébec and TCQ) was opened to facilities-based competition in 1998. Local
competition is now permitted in the territories of all large ILECs except that of Northwestel.
Local services provided by ILECs to consumers as well as the interconnection services provided
by all LECs continue to be regulated by the Commission. Prior to the introduction of local
competition, ILECs were subject to a rate-of-return regulatory framework, under which local
service prices were set based on a revenue requirement basis using a rate of return approved by
the Commission.
With the introduction of competition in local services, price cap regulation replaced rate-of-return
regulation. Price cap regulation uses a formula approach to determine the maximum allowable
prices for different baskets of services. Price cap regulation is recognized as being more effective
than rate-of-return regulation in that ILECs are provided with stronger incentives to minimize
costs, operate more efficiently and be more innovative in the provision of services.
42
e)
Regulatory Developments
In Decision CRTC 2004-46,45 the Commission modified the regulatory framework for local
network interconnection between LECs, which are intended to provide a more efficient and
cost-effective means of interconnection. In addition to exchanging traffic on fewer distinct trunk
groups, CLECs can now interconnect with an ILEC at fewer locations by utilizing larger local
interconnection regions, composed of many exchanges.
In 2004, and continuing in 2005, numerous service providers began offering, or announced their
plans related to, VoIP services. In Decision 2005-28,46 the Commission set out details of the
regulatory regime applicable to the provision of VoIP services including, among other things, the
requirement that local VoIP service providers that are not operating as Canadian carriers are to
register with the Commission as resellers, and that local VoIP service revenues are
contribution-eligible.
Local exchange service is one of the last markets within the telecommunications industry
that continues to be regulated. Currently underway is a proceeding, initiated by
Public Notice 2005-2,47 the intent of which is to establish, among other things, a framework
for forbearance from regulation of residential and business local exchange services.
Market Segments
Table 4.3.2 presents a summary of local and access revenues (exclusive of contribution, terminal
equipment, and pay telephone revenues) segmented on a residential, business and wholesale
basis for the period 2000 to 2004. Table 4.3.3 provides the number of local lines that correspond
to these market segments, while Table 4.3.4 provides aggregated residential and business
revenues and lines (retail revenues and lines).
Table 4.3.2
Local and Access Revenues by Market Segment
($ millions)
2000
Residential
4,833
Business
3,769
Wholesale
636
Total
9,238
Source: CRTC Data Collection
45
46
47
2001
5,060
3,946
740
9,746
2002
5,140
3,544
893
9,577
2003
5,132
3,398
755
9,285
2004
5,099
3,402
822
9,323
Growth
2003-2004
-0.6%
0.1%
8.9%
0.4%
CAGR
2000-2004
1.3 %
-2.5 %
6.6 %
0.2 %
Trunking arrangements for the interchange of traffic and the point of interconnection between local exchange
carriers, Telecom Decision CRTC 2004-46, 14 July 2004.
Regulatory framework for voice communication services using Internet Protocol, Telecom Decision
CRTC 2005-28, 12 May 2005.
Forbearance from regulation of local exchange services, Telecom Public Notice CRTC 2005-2, 28 April 2005.
43
Table 4.3.3
Local Lines by Market Segment48
(Thousands)
2000
2001
Residential
12,909
12,920
Business
7,378
7,561
Wholesale
381
474
Total
20,668
20,955
Source: CRTC Data Collection
2002
12,913
7,024
521
20,458
2003
12,886
6,952
611
20,450
#
#
2004
12,891
6,947
617
20,455
#
#
Growth
2003-2004
0.0%
-0.1%
1.0%
0.0%
CAGR
2000-2004
0.0%
-1.5%
12.8%
-0.3%
Table 4.3.4
Total Retail Revenues and Lines
Revenues ($ millions)
Lines (thousands)
2000
8,602
20,287
2001
9,006
20,481
2002
8,684
19,937
2003
8,530
19,838
2004
8,501
19,838
Growth
2003-2004
-0.3%
0.0%
CAGR
2000-2004
-0.3%
-0.6%
Source: CRTC Data Collection
In 2004, local and access revenues (excluding contribution, terminal equipment and pay
telephones) increased by 0.4%. While revenues for the residential segment declined by 0.6%, the
business segment revenues were essentially unchanged. The wholesale segment however,
experienced revenue growth of 8.9%.
Over the same period, the total number of local lines remained relatively unchanged at just under
20.5 million lines, with the number of retail lines unchanged and the wholesale segment showing
a marginal increase in the number of local lines to 0.62 million lines.
a)
Local Retail Market
In 2004, retail revenues held by competitors increased by 19.4%49 to $548 million, representing
6.4%50 of all retail revenue, up from 5.4% in 2003. With retail lines remaining unchanged, the
growth of wholesale revenues and lines confirms that more retail lines were provided by
competitors. In 2004, retail lines provided by competitors increased by 24.8% to 1.3 million
lines, many of which were provisioned using some component of wholesale services. The
correlation between the growth of competitor-provided retail lines and wholesale revenue is
discussed in part (d) Local Wholesale Market.
48
49
50
The data contained in Release of certain local market data, Telecom Public Notice CRTC 2005-11,
30 August 2005, has been updated in this table to reflect revised data recently received from companies.
Source: CRTC Data Collection.
At the national level, competitors' market share of the retail local revenues in 2004 included 0.3% held by cable
service providers.
44
Table 4.3.5 shows the share of local retail lines held by the incumbents for each province. The
incumbents' out-of-territory local operations are not included in the incumbent market share.
Table 4.3.5
Incumbent Local Retail Market Share by Province (lines)
Province
British Columbia
Alberta
Saskatchewan
Manitoba
Ontario
Quebec
New Brunswick
Nova Scotia
Prince Edward Island
Newfoundland and Labrador
2003
95.3%
94.2%
100.0%
98.1%
93.3%
96.4%
99.7%
89.0%
93.1%
97.0%
2004
94.0%
92.4%
100.0%
99.6%
91.9%
95.4%
99.8%
85.1%
90.7%
97.7%
Source: CRTC Data Collection
Table 4.3.6 provides further detail on retail market share, disaggregated by residential and
business segments, measured in terms of the number of local lines, for a list of major
Canadian centres.
When compared to the provincial results shown in Table 4.3.5, the higher share of local lines
held by competitors within most major centres, demonstrates that competitors continue to target
the major centres in Canada. Collectively, 90.2%51 of competitors' retail lines are located within
the 21 major centres shown in Table 4.3.6.
51
Source: CRTC Data Collection.
45
Table 4.3.6
Market Share (Local Lines) in Major Centres52
Province
Business Lines
City
2003
British Columbia
Alberta
Saskatchewan
Manitoba
Ontario
52
Vancouver
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Victoria
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Calgary
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Edmonton
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Saskatoon
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Regina
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Winnipeg
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Toronto
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Ottawa-Gatineau
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Hamilton
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
London
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
2004
2003
2004
81.5%
7.5%
11.0%
#
#
#
78.1%
17.0%
4.9%
96.9%
0.0%
3.1%
95.1%
0.0%
4.9%
90.1%
1.6%
8.3%
#
#
#
90.8%
9.1%
0.1%
100.0%
0.0%
0.0%
99.5%
0.0%
0.5%
84.1%
6.3%
9.5%
77.7%
16.5%
5.8%
94.9%
0.0%
5.1%
93.0%
0.0%
7.0%
79.7%
13.0%
7.3%
77.1%
22.5%
0.3%
100.0%
0.0%
0.0%
99.7%
0.0%
0.3%
99.9%
0.0%
0.1%
99.8%
0.2%
0.0%
100.0%
0.0%
0.0%
100.0%
0.0%
0.0%
99.9%
0.0%
0.1%
99.9%
0.1%
0.0%
100.0%
0.0%
0.0%
100.0%
0.0%
0.0%
92.4%
0.0%
7.6%
98.4%
1.5%
0.1%
100.0%
0.0%
0.0%
100.0%
0.0%
0.0%
81.3%
1.9%
16.8%
81.0%
11.1%
8.0%
94.0%
0.1%
5.9%
91.9%
0.1%
8.1%
91.3%
0.0%
8.7%
90.5%
6.1%
3.4%
98.4%
0.0%
1.6%
96.6%
0.0%
3.4%
85.6%
0.8%
13.6%
85.4%
9.4%
5.2%
96.8%
0.0%
3.2%
94.1%
0.0%
5.9%
84.8%
0.0%
15.2%
83.7%
10.5%
5.8%
96.4%
0.0%
3.6%
93.6%
0.0%
6.4%
Major centre boundaries are defined using Statistics Canada and census agglomeration.
46
Residential Lines
Table 4.3.6
Market Share (Local Lines) in Major Centres (cont'd)
Province
Ontario (cont'd)
Quebec
New Brunswick
Nova Scotia
Prince Edward Island
Newfoundland and
Labrador
Business Lines
City
Kitchener
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
St. Catharines-Niagara
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Windsor
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Oshawa
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Montréal
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Québec
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Fredericton
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Halifax
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Charlottetown
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
St. John's
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
47
Residential Lines
2003
2004
2003
2004
84.2%
0.0%
15.8%
83.6%
10.3%
6.1%
96.4%
0.0%
3.6%
94.2%
0.0%
5.8%
86.1%
0.0%
13.9%
87.7%
10.5%
1.8%
100.0%
0.0%
0.0%
99.9%
0.0%
0.1%
83.3%
0.0%
16.7%
83.4%
13.1%
3.5%
100.0%
0.0%
0.0%
100.0%
0.0%
0.0%
88.6%
0.0%
11.4%
89.7%
6.8%
3.5%
96.6%
0.0%
3.4%
93.9%
0.0%
6.1%
87.8%
3.0%
9.3%
85.3%
10.9%
3.8%
98.3%
0.0%
1.7%
95.8%
0.0%
4.2%
83.8%
5.5%
10.7%
83.0%
16.3%
0.6%
100.0%
0.0%
0.0%
99.9%
0.0%
0.1%
99.9%
0.0%
0.1%
99.9%
0.1%
0.0%
100.0%
0.0%
0.0%
100.0%
0.0%
0.0%
89.2%
0.0%
10.8%
#
91.4%
0.0%
8.6%
#
89.8%
0.0%
10.2%
#
#
#
#
85.1%
3.6%
11.3%
#
#
#
80.0%
0.0%
20.0%
#
89.2%
0.2%
10.7%
#
81.8%
0.0%
18.2%
#
86.5%
0.6%
12.9%
#
#
#
100.0%
0.0%
0.0%
#
#
72.1%
0.0%
27.9%
76.0%
0.0%
24.0%
100.0%
0.0%
0.0%
b)
Local Residential Market
Local residential service is composed of three primary components: basic local service, optional
service features, and other non-recurring services such as connection and inside wiring charges.
Figure 4.3.1 shows that the distribution of local residential revenues amongst these three
components has remained essentially unchanged over the last several years, with basic local
service representing 71% of local residential revenues in 2004.
Figure 4.3.1
Local Residential Revenues by Component
80
Local
Optional Service
Other
Percent
60
40
20
0
2000
2001
2002
2003
2004
Source: CRTC Data Collection
Table 4.3.7 and Table 4.3.8 present local residential revenues and lines, respectively, for the
period 2000 to 2004.
Table 4.3.7
Local Residential Revenues
($ millions)
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Total
Source: CRTC Data Collection
n/a: not available
2000
4,817
n/a
16
4,833
2001
5,038
n/a
22
5,060
2002
5,082
n/a
58
5,140
2003
5,035
0
97
5,132
2004
4,957
0
142
5,099
Growth
2003-2004
-1.5%
n/a
46.4%
-0.6%
CAGR
2000-2004
0.7%
n/a
72.6%
1.3%
In 2004, local residential revenues declined by 0.6% to just under $5.1 billion, while over the same
period, the number of local residential lines was essentially unchanged at 12.9 million lines.
As shown in Table 4.3.7, local residential revenues held by incumbents decreased by 1.5% to
just under $5.0 billion in 2004, while competitors' local residential revenues increased by 46.4%
to $142 million. The share of local residential revenues held by competitors grew to 2.8% in
2004, up from 1.9% in 2003.
48
Table 4.3.8
Local Residential Lines
(Thousands)
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Total
Source: CRTC Data Collection
n/a: not available
2000
12,864
n/a
45
13,909
2001
12,846
n/a
74
12,920
2002
12,729
n/a
184
12,913
2003
12,627
1
258
12,886
2004
12,473
1
418
12,891
Growth
2003-2004
-1.2%
n/a
62.0%
0.0%
CAGR
2000-2004
-0.8%
n/a
74.6%
0.0%
As shown in Table 4.3.8, the number of local residential lines held by incumbents decreased by
1.2% to just under 12.5 million lines in 2004, while the number of competitors' lines grew by
62% to 0.42 million lines. The share of local residential lines held by competitors increased from
2.0% in 2003 to 3.2% in 2004.
Among the competitors, local residential revenues and lines provided by competitors (ILEC
out-of-territory) remained negligible in 2004 as they continued to focus on the business market.
Over the past several years, the number of Canadian households has grown consistently,53 yet
the number of residential telephone lines remained almost unchanged in 2004. A number of
demographic and technology factors may be contributing to this, including, but not limited to,
the growth of wireless subscriptions, the elimination of secondary telephone lines as consumers
migrated to broadband Internet, and the growth of retirement communities with shared
telephone systems.
53
Canadian Housing Observer, http://www.cmhc-schl.gc.ca.
49
c)
Local Business Market
Table 4.3.9 and Table 4.3.10 present local business revenues and lines, respectively, for the
period 2000 to 2004.
Table 4.3.9
Local Business Revenues
($ millions)
Incumbents
Competitors (ILEC
out-of-territory)
Competitors (other)
Total
Source: CRTC Data Collection
n/a: not available
2000
3,619
2001
3,736
2002
3,258
2003
3,036
2004
2,996
Growth
2003-2004
-1.3%
n/a
150
3,769
n/a
210
3,946
n/a
286
3,544
92
270
3,398
298
108
3,402
223.9%
-60.0%
0.1%
CAGR
2000-2004
-4.6%
n/a
-7.9%
-2.5%
In 2004, local business revenues were essentially unchanged at just over $3.4 billion, while over
the same period, the number of local business lines also remained essentially unchanged at
6.9 million lines.
As shown in Table 4.3.9, local business revenues held by the incumbents decreased by 1.3% in
2004 to approximately $3.0 billion, while over the same period, competitors' revenues increased
by 12.2% to just over $0.4 billion, or 12% of total business revenues.
Table 4.3.10
Local Business Lines54
(Thousands)
Incumbents
Competitors (ILEC
out-of-territory)
Competitors (other)
Total
Source: CRTC Data Collection
n/a: not available
2000
6,806
2001
6,970
2002
6,303
2003
6,185
n/a
572
7,378
n/a
591
7,561
119
602
7,024
169
598
6,952
#
#
CAGR
2004
6,086
Growth
2003-2004
-1.6%
2000-2004
-2.8%
596
265
6,947
252.7%
-55.7%
-0.1%
n/a
-17.5%
-1.5%
#
As shown in Table 4.3.10, local business lines held by the incumbents decreased by 1.6% in
2004 to 6.1 million lines, while the number of competitors' business lines increased by 12.3% to
approximately 0.9 million lines, or 12.4% of total business lines.
54
The data contained in Release of certain local market data, Telecom Public Notice CRTC 2005-11,
30 August 2005, has been updated in this table to reflect revised data received from companies. For the
year 2004, data was revised to reflect the assignment of lines used by service providers for internal use.
50
d)
Local Wholesale Market
The wholesale market segment includes carrier access services used by LECs for the purposes of
interconnecting their respective networks and connecting to their retail customers. Additionally,
a service or facility which is subsequently resold by a service provider to their end-customer is
included within the local wholesale segment. The major components of wholesale services
include:
•
•
•
interconnection, including switching and aggregation, transit and bill-and-keep trunk
settlement;
unbundled network components such as loops used by competitors to extend services
over "the last mile" to their customers; and
PSTN access, such as ISDN, Centrex and basic local service used by resellers and other
competitors to provide local service in exchanges where they do not have facilities.
Table 4.3.11 provides a breakdown of local wholesale revenues by component, for the period
2000 to 2004. In 2004, local wholesale revenues increased by 8.8% to $822 million, up from
$755 million in 2003. Increases in interconnection, unbundled loop and PSTN access revenues
largely contributed to the increase of local wholesale revenues.
Table 4.3.11
Local Wholesale Revenues by Major Component
($ millions)
2000
Interconnection
248
Centrex resale
84
PSTN access
148
Unbundled loops
13
Basic local
38
Other user charges
105
Total
636
Source: CRTC Data Collection
2001
315
120
129
31
55
90
740
2002
354
163
146
53
84
93
893
2003
287
134
128
61
89
56
755
2004
333
123
136
84
83
62
822
Growth
2003-2004
16.0%
-8.2%
6.6%
37.9%
-6.9%
11.3%
8.8%
CAGR
2000-2004
7.6%
10.0%
-2.0%
59.5%
21.5%
-12.2%
6.6%
When a competitor cannot reach a retail customer by utilizing self-provisioned facilities, there
are two alternatives it can employ:
•
leased facilities, such as unbundled loops or loop-equivalent facilities leased from a
facilities-based telecommunications provider, and used to connect the retail customer to the
competitor's network. As with owned facilities, dial-tone is provided by the competitor's
network; or
•
resold services, such as Centrex or its equivalents, leased from a LEC and resold to the
end-customer without touching the competitor's network.
51
In 2004, the growth of retail lines held by the competitors is most likely a contributing factor to
the increase of unbundled loop and interconnection revenues. While unbundled loop revenues
increased due to growth in the number of competitor-provided local lines, also contributing may
be competitors who are migrating existing customers, originally provisioned using resold
services, onto their own network. Interconnection revenues increased due to the larger volumes
of network traffic exchanged between incumbents and competitors.
Figure 4.3.2 illustrates the proportions of competitor retail lines provisioned utilizing either
owned (self-provisioned), or leased facilities or resold services.
Figure 4.3.2
Competitor Local Retail Lines by Type of Facility
600
Thousands
500
Owned
Leased
Resold
400
300
200
100
0
2003
2004
Source: CRTC Data Collection
Among the competitors, the use of leased facilities continued to be the dominant means of
provisioning local retail lines, increasing again in 2004. However, within the individual
residential and business segments, the distribution of the types of facilities used in the
provisioning of local service is dissimilar.
The dominant means that competitors use to provision local residential service is via unbundled
local loops leased from the incumbents. In 2004, revenues realized by the incumbents for the
supply of local loops increased by 37.9% to $84 million, driven primarily by the growth of
competitor-provided local residential service which, as shown in Table 4.3.8, increased by 160
thousand lines. As shown in Figure 4.3.3, unbundled loops are used for 80% of all
competitor-provided residential lines, with self-provisioned lines representing the other 20%.
52
Figure 4.3.3
Competitor Local Residential and Business Lines
By Type of Facility
Business
Residential
45%
27%
20%
Owned
80%
Leased
Resold
28%
Source : CRTC Data Collection
Within the business market, the dominant means that competitors use to provide service is by
reselling the lines of a LEC. Almost 45% of the competitors' business lines are provided via
resale, with the balance equally split between leased and self-provisioned facilities. Some higher
capacity local services, such as ISDN Primary Rate Interface, are used by business customers.
For these services, when a competitor is unable to provision by using their own facilities, it may
lease digital accesses from a LEC. Revenues realized for digital access services are captured
under private line services.
As reported in Table 4.3.12, local wholesale revenues held by the incumbents increased by
15.4% to $712 million in 2004, while competitors' revenues declined by 20.3% to $110 million.
Table 4.3.12
Local Wholesale Revenues
($ millions)
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Total
Source: CRTC Data Collection
n/a: not available
2000
608
n/a
28
636
2001
713
n/a
27
740
2002
836
n/a
57
893
2003
617
70
68
755
#
#
2004
712
93
17
822
Growth
2003-2004
15.4%
32.9%
-75.0%
8.9%
CAGR
2000-2004
4.0%
n/a
-11.7%
6.6%
Over the same period, as shown in Table 4.3.13, local wholesale lines held by the incumbents
increased by 11.3% to 454 thousand lines, while the number of competitors' lines decreased
by 19.7% to 163 thousand lines. The incumbents remain the dominant supplier of local
wholesale services.
53
Unlike the retail market, the composition of providers within the wholesale services market was
affected by the Bell Canada acquisition of 360networks in that the operations of two affiliated
companies GT Group Telecom and LondonConnect were essentially consolidated, thereby
eliminating a supplier of wholesale services.
Table 4.3.13
Local Wholesale Lines
(Thousands)
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Total
Source: CRTC Data Collection
n/a: not available
2000
289
n/a
92
381
2001
368
n/a
106
474
2002
376
43
102
521
2003
408
11
192
611
2004
465
129
34
628
Growth
2003-2004
14.0%
1072.7%
-82.3%
2.8%
CAGR
2000-2004
12.6%
n/a
-22.0%
13.3%
Summary
In 2004, total local and access revenues remained essentially unchanged at $9.7 billion.
Similarly, local and access lines were also essentially unchanged at 20.6 million lines. Exclusive
of revenues from contribution, wholesale services and the sale of terminal equipment, retail
revenues decreased by 0.3% to $8.5 billion, while retail lines were unchanged at 19.8 million
lines.
In 2004, local retail revenues held by competitors increased by 19.4% to $548 million,
representing 6.4% of all retail revenue, up from 5.4% in 2003. Local retail lines, held by
competitors, increased by 19.3% to 1.3 million lines, or 6.5% of all retail lines. This increase
contributed to the growth of total wholesale revenues from sales of components competitors use
to interconnect with the incumbents, and their customers.
The incumbents continue to hold the vast majority of both residential and business segment
revenues and lines. Although the competitors are making line-share gains in certain major urban
centres, in other centres competition remains almost non-existent. In 2004, the majority of new
retail lines provided by competitors came from the residential segment, almost none of which
were provided by the competitors (ILEC out-of-territory), which continue to focus primarily on
the business segment.
The dominant means that competitors use to provision local lines differs between the residential
and business segments. While unbundled loops or equivalent, leased from a LEC, are used for
80% of competitor-provided residential lines, the dominant method that competitors use to
provide service in the business segment is through the resale of business lines, such as Centrex,
also provided by a LEC.
54
In 2004 and throughout 2005, numerous service providers including incumbents, facilities-based
competitors, resellers and cable undertakings have introduced retail voice services which
interconnect with the PSTN and use Internet Protocol. These VoIP services are capable of
reproducing the functionality of traditional telephone service and can provide users with
numerous call and message-management features. In 2004, VoIP services had essentially no
impact on local revenues; however, it is expected that revenues and subscriptions from VoIP
services will increase in 2005.
55
4.4
Internet Services
Highlights
•
•
•
•
Internet revenues increased 12.9% from $3.7 billion in 2003 to $4.2 billion in 2004, making
it one of the fastest growing segments of the Canadian telecommunications services industry.
Retail Internet access revenues reached $3.3 billion in 2004, increasing 10.3% from
$3.0 billion in the previous year.
The number of households with residential Internet access subscriptions reached 7.4 million
in 2004, representing 59% of all Canadian households. The number of households with
high-speed Internet access reached 5.4 million households or 43% of all Canadian
households, up from 36% in the previous year.
Dial-up subscriptions continued to decrease. The number of dial-up subscriptions declined
20%. As a percent of total subscriptions, dial-up subscriptions declined from 36% of total
subscriptions in 2003 to 27% in 2004.
Sector Description
a)
Description of Services
Internet-related telecommunications services can be divided into three broad market segments:
Internet access, Internet transport and Internet applications.
Internet access is the provision of an IP connection to an end-user which allows the end-user to
exchange applications traffic with Internet hosts and other end-users. Internet access service
consists of three distinct components:
•
•
•
a physical access line, such as a twisted-pair or coaxial copper cable, a fibre optic cable, or
over-the-air spectrum;
a low- or higher-speed data link, to move information between the end-user's modem or
switch and the Internet service provider's (ISP's) facilities; and
an IP connection established between a computer or similar device behind the end-user's
modem and the ISP's facilities.
Internet access services are provisioned at 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 over
dial-up access lines. High-speed access services, including wideband (up to 1.5 Mbps) and
broadband (faster than 1.5 Mbps), are for the most part delivered over digital subscriber lines
(DSL), coaxial cable and, particularly to businesses, fibre optic cables. Satellite and terrestrial
wireless technologies are also used to provide high-speed access services.
56
Internet transport service is the provision of Internet connectivity to ISPs. Internet transport
capacity is provided over Internet backbone facilities that carry aggregated traffic across
domestic and international intercity links between Internet traffic switches or routers. In some
cases, peering arrangements between Internet backbone service providers substitute for the
outright purchase of Internet transport by one ISP from another. Consequently, separate
accounting of all Internet transport services is not available.
Internet applications include a growing number of services which piggyback on the Internet
connectivity services. They include e-mail, Web surfing and hosting, and instant messaging,
among others. Typically, many of the application services are bundled together with Internet
access services. However, ISPs and other telecommunications companies do 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, security and firewall
services, among others.
b)
Markets and Observations for 2004
Internet-related telecommunications revenues in Canada were $4.2 billion in 2004, representing
an increase of almost 13% over the previous year. As shown in Table 4.4.1, retail Internet access
services accounted for the vast majority of these revenues.55 The annual growth, however, in
retail access revenues has been declining from 54.7% in 2001 to 10.3% in 2004.
Table 4.4.1
Internet Revenues56
($ millions)
Retail Internet access services
Internet transport, applications & other
Total Internet revenues
Source: CRTC Data Collection
c)
2000
1,293
459
1,752
2001
2,000
660
2,660
2002
2,537
748
3,285
2003
3,004
685
3,689
#
#
2004
3,314
851
4,165
Growth
2003-2004
10.3%
24.2%
12.9%
CAGR
2000-2004
26.5%
16.7%
24.2%
Sector Participants
There are four principal groups of participants providing retail Internet access and transport
services in Canada:
55
56
This category includes wholesale Internet access services, Internet transport and retail and wholesale
Internet applications services and equipment, Internet access/transport equipment and ancillary services.
The Internet transport, applications and other related revenues reported in this Table exclude peer-to-peer
agreements where there is no financial compensation. In these arrangements, the carriers exchange similar
volumes of traffic. They simply reflect the revenues reported by telecommunications service providers
participating in the Commission's data collection process. Consequently, this section focuses primarily on
retail Internet access, which makes up the majority of the collected data on Internet-related revenues.
57
•
Incumbent local exchange carriers (incumbents), who own the vast majority of the copper
twisted pair access links to homes and businesses. These entities provide Internet access
mainly by dial-up, DSL, fibre and/or satellite, although some fixed wireless is utilized in
certain places.
•
Cable distribution undertakings, who own the coaxial-based television distribution networks
serving homes and, to a lesser extent, businesses. These companies mainly provide access by
cable modem or by fibre.
•
Competitive facilities-based telecommunications service providers, which provide service via
dial-up, DSL, fibre and/or satellite. An increasing trend in this group is the presence of ISPs
who utilize unlicensed wireless in rural areas.
•
Non facilities-based ISPs such as AOL Canada, Cybersurf Inc., Inter.net Canada and
Uniserve focus primarily on the provision of Internet access services. These companies tend
to utilize the wholesale DSL data services of the incumbents, although there is increasing use
of cable Third Party Internet Access (TPIA).
In addition, Telesat Canada (Telesat) offers wholesale satellite services to ISPs in order to serve
their end-users. In 2004, Telesat launched the Anik F2 satellite, and in 2005 is providing
wholesale satellite services to ISPs for purposes of providing end-user access to the Internet via
the Anik F2 satellite. In addition to Internet access services, some facilities-based service
providers, including the incumbents, cable distribution undertakings and competitors, also
provide Internet transport services.
ISPs are categorized based on the description of participants in section 3. The telephone
companies' activities within their traditional territories are categorized as incumbent and their
out-of-territory activities are categorized as competitor (ILEC out-of-territory). Although the
cable undertakings are incumbents with respect to their cable distribution activities, they are
categorized as competitor (cable). The remaining entities are referred to competitor (other).
d)
Regulatory Framework
In 1999, in its consideration of how to regulate new media,57 the Commission found that while
some Internet applications fell under the Broadcasting Act, they did not warrant regulation.
While both low-speed and high-speed retail Internet access services have been forborne from
regulation under the Act, the Commission regulates the provision of wholesale Internet access
services. In the case of the incumbents, the underlying facilities and services required by
third-party DSL Internet access service providers are subject to price regulation and generally
fall within the Competitor Services basket of services under the current price cap regime. Cable
companies have also been required to provide third-party access, known as TPIA, to their
underlying facilities.
57
New Media, Telecom Public Notice CRTC 99-14, Broadcasting Public Notice CRTC 1999-84, 17 May 1999.
58
e)
Regulatory Developments in the Past Year
In Decision 2004-34,58 the Commission directed Bell Canada, Aliant Telecom Inc., SaskTel and
TCI to extend, upon request, DSL Internet service to CLEC business customers thereby allowing
these customers to be served by the independent ISPs.
In Decision 2004-37,59 the Commission introduced guidelines for the use and testing of cable
modems used by ISPs to provide Internet access service over cable networks.
In Decision 2004-69,60 the Commission approved tariffs and agreements setting out the rates,
terms and conditions for third party Internet access (TPIA) to allow Internet service providers to
connect with and serve customers over the cable networks of the major cable companies, namely,
Cogeco Cable Canada Inc., Rogers Communications Inc., Shaw Communications Inc., and
Vidéotron ltée. The rates were approved on an interim basis pending further consideration of the
level of mark-up over costs appropriate for TPIA services and facilities provided by the cable
companies.
In Order 2005-62,61 the Commission gave approval to an application by Bell Canada to provide
Gateway Access Service and High Speed Access Service on a wholesale basis as part of its
General Tariff. These services provide ISPs with the ability to reach customers utilising
Bell Canada's ADSL high speed infrastructure. These services were provided on an interim basis
by Bell Canada, and previously, on a non-tariffed basis by BCE Nexxia.
In Order 2005-144,62 the Commission granted interim approval to Bell Canada's application to
remove the requirement in its General Tariff on Gateway Access Service (GAS) that an
end-customer must subscribe to a primary exchange service (PES). This configuration, often
termed "naked DSL," permits an ISP to provide high speed Internet service utilising DSL
facilities without the need for the end-user to subscribe to local telephone service.
Market Segments
Table 4.4.2 provides a market segment breakdown of revenues for the retail Internet access
service market. Since 2002, residential Internet access revenues have accounted for over three
quarters of the retail market.
58
59
60
61
62
FCI Broadband Request to lift restrictions on the provision of retail digital subscriber line Internet services to
business customers, Telecom Decision CRTC 2004-34, 21 May 2004.
Cable modems for third-party Internet access, Telecom Decision CRTC 2004-37, 4 June 2004.
Point of interconnection and service charge rates, terms and conditions for third party Internet access using
cable networks, Telecom Decision CRTC 2004-69, 2 November 2004.
Gateway Access Service and High Speed Access Service, Telecom Order CRTC 2005-62, 17 February 2005.
Gateway Access Service, Telecom Order CRTC 2005-144, 15 April 2005.
59
The annual growth rate for residential Internet access revenues has consistently declined since
2001, from a 50% growth rate to 10.7% in 2004. Similarly, the annual growth rate for business
Internet access revenues has also consistently declined but at a faster pace, declining from 69%
in 2001 to 9.1% in 2004. When compared to the growth rate in 2003, business Internet access
revenue growth rate has declined by 13 percentage points, versus about 7 percentage points for
residential.
Nevertheless, the average annual growth rate for both segments combined was 27% over the
period 2000 to 2004, making the retail Internet access service market one of the fastest growing
segments in the telecommunications industry.
Table 4.4.2
Residential and Business Internet Access Service Revenues
($ millions)
2000
2001
Residential
974.7 1,461.9
Market Share 75.4% 73.1%
Business
318.5
537.6
Market Share 24.6% 26.9%
Total revenues 1,293.2 1,999.5
Source: CRTC Data Collection
2002
1,943.0
76.6%
593.8
23.4%
2,536.8
2003
2,279.5
75.9%
724.5
24.1%
3,004.0
#
#
2004
2,523.6
76.1%
790.4
23.9%
3,314.0
Growth
2003-2004
10.7%
CAGR
2000-2004
26.9%
9.1%
25.5%
10.3%
26.5%
Table 4.4.3 provides a breakdown of retail Internet access revenues by market participant
categories. These figures show that the incumbents and the competitor (cable) companies are the
dominant players with revenue market shares of 43% and 39%, respectively, in 2004, up from
41% and 37%, respectively in 2003. The decline in the market share of the Competitor (Other),
from 21% to 15%, may be attributed to in large part to the acquisitions of Allstream Canada by
MTS and 360networks by Bell Canada in 2004. These acquisitions resulted in the reclassification
of Allstream Canada's operations outside the operating territory of MTS from competitor (other)
to competitor (ILEC out-of-territory) and its operations within the operating territory of MTS as
incumbent. In the case of 360networks, its western operations were reclassified from competitor
(other) to competitor (ILEC out-of-territory) and its eastern operations remained as competitor
(other) as these were acquired by Call-Net Enterprises Inc. (now Rogers Holdings).
60
Table 4.4.3
Internet Access Service Revenues by Market Participant Group
($ millions)
2003
1,218.9
40.6%
1,108.2
36.9%
Incumbents
Market Share
Competitors (cable)
Market Share
Competitors
(ILEC out-of-territory)
35.1
1.2%
641.8
21.4%
1,785.1
59.4%
3,004.0
Market Share
Competitors (other)
Market Share
Competitors
Market Share
Total
Source: CRTC Data Collection
2004
1,431.6
43.2%
1,284.6
38.8%
#
102.1
3.1%
495.7
15.0%
1,882.4
56.8%
3,314.0
#
#
#
Growth
2003-2004
17.4%
15.9%
191.1%
-22.8%
5.5%
10.3%
As displayed in Table 4.4.4, the four largest Internet access service providers63 continue to not
only dominate the market, but to steadily increase their market share of the Internet market,
growing from 39% in 2000 to 59% in 2004.
Table 4.4.4
Top Four Retail Internet Companies' Revenues
($ millions)
2000
505.7
2001
875.3
2002
1,289.9
2003
1,641.0
39.1%
43.8%
50.8%
54.6%
787.4
1,124.2
1,246.9
1,363.0
60.9%
56.2%
49.2%
45.4%
Total
1,293.1
Source: CRTC Data Collection
1,999.5
2,536.8
3,004.0
Four largest companies
Market Share
Others
Market Share
#
2004
1,956.4
#
1,357.6
Growth
2003-2004
19.2%
CAGR
2000-2004
40.2%
-0.4%
14.6%
10.3%
26.5%
59.0%
41.0%
#
3,314.0
As reflected in Table 4.4.5, competitors' (other) market share declined in the business segment of
the retail Internet access market, declining from 42% to 31% in 2004. As previously described,
this decline was mainly due to the industry consolidation activities in 2004.
The competitors (other) had the biggest share (31%) of the business Internet segment in terms of
revenues after the incumbents who had 49%. The competitors (ILEC out-of-territory) and the
competitors (cable) had 12% and 8% of these revenues respectively in 2004.
63
The four largest companies are Bell Canada, TCI, RWI and Shaw.
61
Table 4.4.5
Business Internet Access Revenues by Market Participant
($ millions)
2003
326.9
Incumbents
Market Share
Competitors (cable)
Market Share
Competitors (ILEC out-of-territory)
Market Share
Competitors (other)
45.1%
49.3%
58.9
66.1
8.1%
8.4%
35.1
93.1
4.8%
11.8%
303.6
Market Share
Competitors
Total
Source: CRTC Data Collection
#
41.9%
397.6
Market Share
#
2004
389.8
12.2%
165.5%
241.4
-20.5%
30.5%
#
54.9%
724.5
Growth
2003-2004
19.2%
400.6
0.8%
50.7%
#
790.4
9.1%
Figure 4.4.1 displays the shift in participant market share for the business segment of the Internet
access market.
Figure 4.4.1
Business Internet Access Revenues Market Share by Market Participant
2004
2003
Incumbents
31%
Competitors (cable)
42%
45%
49%
Competitors (ILEC
out-of-territory)
Competitors (other)
12%
5%
8%
8%
Source: CRTC Data Collection
The residential Internet access revenues were approximately 3.2 times the size of business
revenues. Table 4.4.6 displays residential Internet access revenues by market participant for the
period 2000 to 2004. Incumbents have minimal out-of-territory operations with respect to the
residential Internet access market. As displayed in Table 4.4.6 and Figure 4.4.2, competitors
(other) have been losing market share to the incumbents and cable companies, and, unlike the
business Internet access market, the incumbents and the competitors (cable) had approximately
90% of the residential Internet access revenues in 2004.
62
Table 4.4.6
Residential Internet Access Revenues by Market Participant
($ millions)
2000
342.3
Incumbent
Market Share
2001
551.5
2002
780.0
2003
892.0
2004
1,041.8
35.1%
37.7%
40.1%
39.1%
41.3%
326.1
570.8
846.2
1,049.3
1,218.5
Market Share
33.5%
39.0%
43.6%
46.0%
48.3%
Competitors (ILEC out-of-territory)
-
-
-
-
Competitors (cable)
Market Share
Competitors (other)
Market Share
Competitors
Market Share
Total
Source: CRTC Data Collection
Growth
2003-2004
16.8%
CAGR
2000-2004
32.1%
16.1%
39.0%
-24.8%
-4.5%
6.8%
23.7%
10.7%
26.8%
9.0
0.4%
306.3
339.6
316.9
338.2
254.3
31.4%
23.2%
16.3%
14.8%
10.1%
632.4
910.4
1,163.0
1,387.5
1,481.8
64.9%
62.3%
59.9%
60.9%
58.7%
974.7
1,461.9
1,943.0
2,279.5
2,523.6
The decline in the competitors' (other) residential market share is largely explained by the fact
that these competitors have very little share of the growing residential high-speed access market
as displayed in Table 4.4.8. Table 4.4.8 indicates that competitors (other), over the 2000 to 2004
period, had between 1% and 4% of the high-speed Internet subscribers.
Figure 4.4.2 displays the revenue shift in participant market share for the residential segment of
the Internet access market for 2000 and 2004.
Figure 4.4.2
Residential Internet Access Revenues Market Share by Market Participant
2000
2004
10.1%
0.4%
31.4%
Incumbents
35.1%
Competitors (cable)
41.3%
Competitors (ILEC
out-of-territory)
Competitors (other)
0.0%
48.3%
33.5%
Source: CRTC Data Collection
63
Table 4.4.7
Residential and Business Internet Access Revenues and
Revenue Market Share by Access Technology
($ millions)
Revenue
(millions)
Dial-Up
Residential
Business
Retail
Business share
DSL
Residential
Business
Retail
Business share
Cable
Residential
Business
Retail
Business share
Other
Residential
Business
Retail
Business share
Total
Residential
Business
Retail
Business share
Incumbent
561
121
682
18%
668
288
955
30%
2,279
725
3,004
24%
Competitor
(Other)
Access
Mode
Share
Revenue
(millions)
Incumbent
2004
Participant Market Share
Competitor
Competitor
(ILEC
(Cable)
Out-of-Territory)
Competitor
(Other)
Access
Mode
Share
Growth
2003-2004
44%
46%
45%
2%
0%
1%
0%
17%
3%
54%
37%
51%
25%
17%
23%
433
126
559
23%
53%
42%
50%
1%
1%
1%
2%
7%
3%
44%
51%
45%
17%
16%
17%
-22.8%
4.0%
-18.0%
95%
59%
85%
0%
0%
0%
0%
2%
0%
5%
39%
15%
29%
40%
32%
845
287
1,133
25%
95%
74%
90%
0%
0%
0%
0%
6%
2%
5%
19%
8%
33%
36%
34%
26.6%
-0.1%
18.6%
0%
0%
0%
99%
100%
99%
0%
0%
0%
0%
0%
0%
46%
6%
36%
1,226
58
1,284
5%
0%
1%
0%
99%
99%
99%
0%
0%
0%
1%
0%
1%
49%
7%
39%
17.3%
31.6%
17.9%
#
47%
37%
37%
0%
5%
5%
0%
3%
3%
53%
54%
54%
0%
38%
9%
19
319
338
94%
12%
39%
37%
0%
2%
2%
0%
21%
19%
88%
39%
42%
1%
40%
10%
229.3%
17.5%
21.9%
#
39%
45%
41%
46%
8%
37%
0%
5%
1%
15%
42%
21%
100%
100%
100%
2,524
790
3,314
24%
41%
49%
43%
48%
8%
39%
0%
12%
3%
10%
31%
15%
100%
100%
100%
10.7%
9.1%
10.3%
#
1,045
44
1,089
4%
6
272
278
98%
2003
Participant Market Share
Competitor
Competitor
(ILEC
(Cable)
Out-of-Territory)
Source: CRTC Data Collection
Notes:
(a) Access Mode Share shows access mode's share of total revenues in same category.
(b) Access Mode Share for residential dial-up, for example, shows residential dial-up's share of total residential revenues.
(c) Other includes the remaining technologies such as, but not limited to, ISDN, Fibre, Fixed Wireless and Satellite.
64
Types and Sources of Facilities and Services Used by Competitors
Table 4.4.7 displays the residential and business Internet access revenues by access technology
for 2003 and 2004. There is a shift in technology from dial-up facilities to high-speed in the form
of DSL and cable modem. The percent of revenues in the Other category related to fibre has
increased from approximately 79% in 2003 to 81% in 2004.64
Competitive ISPs rely predominately on incumbent facilities and services and to a much lesser
extent on cable company TPIA services to provide Internet connectivity to end-users. In some
cases, in addition to the incumbents, competitive ISPs also rely on other competitive
telecommunications providers for Internet access and transport facilities such as satellite.
Another growing access method is fixed wireless, utilizing unlicensed radio spectrum.
Incumbents are increasingly providing high speed Internet services outside of their incumbent
territory by utilizing the same services utilized by other competitive ISPs. This applies to both
large and small incumbents.
To date, as displayed in Tables 4.4.7 and 4.4.8, competitors have made little headway in the
residential segment of the high-speed Internet access market by making use of incumbent
facilities and services, as indicated by the relatively small share they hold of that market
(i.e., roughly 5% in the case of DSL and a negligible amount in the case of cable).
Internet Subscribers
The number of Internet access connections is generally measured on the basis of the number of
end-user subscriptions. This, however, is not the case with business Internet access subscriptions
which support multiple users. Consequently, the following data on subscriptions focuses solely
on the residential segment of the market.
As Table 4.4.8 indicates, as of year-end 2004, there were 7.4 million residential Internet access
subscriptions, or 59% of all Canadian households. Households with high-speed Internet access
reached 5.4 million households, or 43% of all Canadian households, up from 36% in the previous
year.
This Table also shows a change in residential high-speed and dial-up Internet access
subscriptions from 2000 to 2004. These figures illustrate the shift from dial-up Internet access to
high-speed since 2000. In 2000, the vast majority of Internet access was by dial-up access (69%).
Four years later, in 2004, dial-up access was 27% of all residential Internet subscriptions.
High-speed access is now the dominant means of accessing the Internet, comprising 73% of all
residential Internet subscriptions.
64
CRTC data collection.
65
As further displayed in Table 4.4.8, during the period 2000 to 2004, the number of dial-up
subscriptions declined from 3 million subscriptions to 2 million, an average annual decline of
19%. Since 2000, the competitors have had a roughly stable share of a declining dial-up market.
In 2000, competitors had 56% of dial-up subscriptions, compared to 50% in 2004.
A contributing factor to the decline in dial-up subscriptions is the introduction of "high-speed
Lite" in 2002, by DSL and cable Internet access service providers, further defining the niche
characteristics of Internet dial-up service. High-speed Lite service provides always-on
connections at slower transmission speeds (e.g., in the range of 128 Kbps) to the Internet. In
Table 4.4.8, this service is included in the high-speed category.
High-speed Internet subscriptions increased 41% annually over the 2000 to 2004 period. DSL
continued to narrow the gap with cable modem subscriptions. In 2000, cable modem
subscriptions were approximately 2.3 times that of DSL or approximately 42 DSL subscriptions
per 100 cable modem subscriptions. Cable modem subscriptions decreased from 1.3 times as
many DSL subscriptions in 2003 to 1.2 in 2004, or roughly 82 DSL subscriptions per 100 cable
modem subscriptions, up from 77 in 2003.
The above shift in the technology mix in the residential Internet access market is displayed in
Figure 4.4.3 by comparing the technology mix in 2000 to that in 2004.
Figure 4.4.3
Residential Internet Access Technology Mix (2000 v. 2004)
2000
0%
2004
1%
9%
DSL
27%
32%
Cable
22%
Dial-up
Other
69%
40%
66
Source: CRTC Data Collection
Table 4.4.8
Residential Internet Subscribers by Market Participant
2000
Subscribers
/1000
Share*
2001
Subscribers
/1000
Share*
2002
Subscribers
/1000
Share*
2003
Subscribers
/1000
Share*
2004
Subscribers
/1000
Share*
Incumbents
Dial-up
1,318 44.4%
1,524 48.4%
1,392 46.1%
1,123 44.9%
1,010 49.8%
High Speed
398 29.3%
903 35.3%
1,400 39.7%
1,859 41.2%
2,268 41.9%
Total
1,716 39.7%
2,427 42.5%
2,792 42.7%
2,982 42.5%
3,277 44.0%
Competitors (cable)
Dial-up
74
2.5%
65
2.1%
70
2.3%
44
1.8%
38
1.9%
High Speed
943 69.6%
1,624 63.5%
2,055 58.3%
2,532 56.1%
2,933 54.1%
Total
1,018 23.5%
1,689 29.6%
2,125 32.5%
2,576 36.7%
2,971 39.9%
Competitors (ILEC out-of-territory)
Dial-up
25
1.2%
High Speed
0
0.0%
Total
25
0.3%
Competitors (other)
Dial-up
1,576 53.1%
1,560 49.5%
1,558 51.6%
1,333 53.3%
952 47.0%
High Speed
14
1.0%
31
1.2%
71
2.0%
122
2.7%
216
4.0%
Total
1,590 36.8%
1,591 27.9%
1,629 24.9%
1,455 20.7%
1,168 15.7%
Competitors
Dial-up
1,650 55.6%
1,625 51.6%
1,628 53.9%
1,377 55.1%
1,016 50.2%
High Speed
957 70.7%
1,655 64.7%
2,126 60.3%
2,654 58.8%
3,149 58.1%
Total
2,608 60.3%
3,280 57.5%
3,754 57.3%
4,031 57.5%
4,165 56.0%
Total
Dial-up
2,969 68.7%
3,149 55.2%
3,020 46.1%
2,500 35.6%
2,025 27.2%
High Speed
1,355 31.3%
2,558 44.8%
3,527 53.9%
4,513 64.4%
5,416 72.8%
Total
4,324
5,706
6,547
7,013
7,442
* Percentages refer to access mode's proportion of all residential Internet subscriptions of its type, except for the total rows, where they are a proportion of
total industry residential subscriptions.
Source: CRTC Data Collection
67
Growth
2003-2004
CAGR
2000-2004
-10.1%
22.0%
9.9%
-6.5%
54.5%
17.6%
-12.6%
15.8%
15.3%
-15.2%
32.8%
30.7%
-28.6%
76.9%
-19.7%
-11.8%
98.2%
-7.4%
-26.2%
18.6%
3.3%
-11.4%
34.7%
12.4%
-19.0%
20.0%
6.1%
-9.1%
41.4%
14.5%
Summary
In 2004, Internet service revenues reached $4.2 billion, increasing approximately 12.9% over the
previous year, making it one of the fastest growing segments of the Canadian
telecommunications industry. Retail Internet access services account for 80% of the Internet
market.
The largest service category, retail Internet access, increased very quickly in recent years,
increasing at an average annual rate of 27% between 2000 and 2004. The residential segment
made up roughly three-quarters of the market. The cable companies' and the incumbents' share of
virtually all major segments of the market grew and, in the case of residential high-speed
services, accounted for virtually the entire market. Competitors (other) retail market share
declined in both the residential and business segments, declining from 15% in the previous year
to 10% in 2004 in the residential segment, and from 42% to 31% in the business segment. The
market share of the four largest companies continued to increase, from 55% in 2003 to 59% in
2004.
As of year-end 2004, 7.4 million subscribers, or 59% of all Canadian households, had Internet
access subscriptions, an increase of 6% over the previous year.
68
4.5
Wireless
Highlights
•
•
•
•
In 2004, the wireless industry experienced a growth rate of 17.6% in revenues and 13%
in the number of wireless subscribers.
After exhibiting declining growth rates in 2002 and 2003, the growth in the number of
subscribers increased from 10.8% in 2003 with 13.3 million subscribers to 13% in 2004
with approximately 15 million subscribers.
There was consolidation in the industry with RWI acquiring Microcell.
The average revenue per subscriber (ARPU) increased from $49 per month in 2003 to
$52 per month in 2004.
Sector Description
a)
Description of Services
The wireless market segment encompasses telecommunications services provided via wireless
access facilities. These services include mobile telephone (including fixed wireless), mobile data
such as text messaging, wireless Internet access and paging services. While satellite private line
services are included in the data and private line section of this report, satellite services as they
relate to mobile telephone are included in this section.
In addition to voice communication, innovations have brought about new technologies and
applications in wireless which are increasingly being used to send text messages from one
wireless subscriber to another, as well as multi-media messages which include photos, graphics,
video and audio clips. In keeping with these developments, wireless operators have implemented
inter-carrier text messaging which has been in place for the last few years. In addition, the reach
of picture and video messaging services was expanded when the wireless carriers introduced full
inter-carrier multi-media messaging on 1 July 2005.65
b)
Markets and Observations
Wireless revenues continued to grow in 2004. The introduction of new services and applications,
targeted pricing plans, improved handsets, as well as innovative service bundles have contributed
to the increases in wireless revenues and subscribers. Table 4.5.1 displays the wireless revenues
for the period 2000 to 2004.
65
CWTA Press Release, 29 June 2005.
69
Table 4.5.1
Wireless Revenues
($ millions)
2000
Basic voice
3,994.5
Long distance
459.4
Paging
240.9
Data and other
364.5
Terminal
513.7
Total
5,573.0
Source: CRTC Data Collection
2001
4,758.4
494.3
232.0
416.9
521.3
6,422.9
2002
5,399.9
517.7
166.4
617.4
389.6
7,091.0
2003
6,315.5
572.6
131.4
549.3
467.9
8,036.7
2004
7,214.4
664.9
103.3
941.4
528.1
9,452.1
Growth
2003-2004
14.2%
16.1%
-21.4%
71.4%
12.9%
17.6%
CAGR
2000-2004
15.9%
9.7%
-19.1%
26.8%
0.7%
14.1%
In 2004, the wireless sector had revenues of approximately $9.5 billion, a 17.6% increase over
the previous year, and approximately 15 million subscribers, representing a 12.9% increase over
the previous year.
c)
Sector Participants
Industry participants include three national entities (the Bell Group,66 TCI and RWI), regional
wireless carriers, small incumbents and resellers of wireless services. Participants may register
with the Commission on the "Carriers" registration list as wireless providers. In 2004, the list had
15 such registrants.
In 2004-2005, a number of additional TSPs began offering wireless service. In October 2004,
Primus Canada introduced a national cellular phone service, using the network of Microcell. In
2004, the Virgin Group of the United Kingdom and Bell Mobility formed a jointly-owned
company, Virgin Mobile Canada and announced plans to provide mobile voice and data services.
These services were launched in March 2005 in Quebec, Ontario, British Columbia and Alberta
and focused on pre-paid mobile services to younger consumers. In 2005, Shaw Communications
Inc. announced that it would offer, in that year, wireless service bundled with its cable services
in partnership with a wireless service provider, as yet unnamed. This follows an earlier move by
EastLink in partnership with RWI to offer wireless service to its customers.
In November 2004, RWI acquired Microcell, adding 1.3 million wireless subscribers to its total
subscriber base.67
d)
Regulatory Framework
Since 1998, wireless services have been forborne from Commission regulation. Industry Canada
however, continues to regulate the spectrum required by the wireless industry.
66
67
Bell Group consists of Bell Canada, Aliant Telecom, Northwestel Mobility Inc., Télébec Mobilité,
and NorTel (Northern) Mobility.
Rogers Communications Inc. 2004 Annual Report.
70
e)
Regulatory Developments
Following a public consultation launched in 2003, Industry Canada, on 27 August 2004,
rescinded the existing mobile spectrum cap policy which was established in 1995, limiting the
spectrum holdings of cellular telephone companies to encourage innovation and help new
entrants become established in the cellular industry.68 Industry Canada indicated that the wireless
industry had matured with consumers having a range of voice and data services available to
them. The Minister indicated that the decision was consistent with the objectives of Canadian
telecommunications policy, and in particular, with fostering increased reliance on market forces
for the provision of telecommunications services.
In Decision 2004-68,69 the Commission directed TCI to offer a new optional two-way trunk
service to allow wireless service providers to combine toll terminating traffic with local traffic on
local trunks between these providers' point of interconnection with TCI's local switch. It was the
Commission's opinion that the two-way local/toll option is in the public interest since it allows
for enhanced call management services for customers and may allow for more efficient
interconnection arrangements.
In Decision CRTC 2004-70,70 the Commission approved MTS Allstream's Wireless Provider
Enhanced 9-1-1 Service and the associated WSP E9-1-1 Service Agreement, subject to
modifications. The Commission directed Aliant Telecom, Bell Canada, and TCI to make certain
modifications to their WSP E9-1-1 service agreements.
In Decision 2004-84,71 the Commission forbore, with some conditions, from regulating cellular
services provided by Prince Rupert City Telephones.
In the Government of Canada's Budget Plan tabled in Parliament in February 2005, reference
was made to the Government's intention to request that the Commission move expeditiously to
implement wireless number portability (WNP) which was in its three-year work plan for the
2005-2006 fiscal period. In response to this request, the wireless carriers agreed to implement
WNP and began efforts to develop an implementation plan that was completed in September
2005. WNP would include wireless-to-wireless, wireline-to-wireless and wireless-to-wireline
number portability.
In May 2005, Industry Canada announced a review of its spectrum policy framework to
accommodate increasing demand for wireless services and the rapid pace of evolution in
wireless technology.72
68
69
70
71
Industry Canada, Decision to Rescind the Mobile Spectrum Cap Policy, Notice No. DGTP-010-04,
27 August 2004.
Follow-up to Telecom Decision 2003-76: Rogers Wireless Inc. vs. TELUS Communications Inc.
- Toll termination arrangements, Telecom Decision CRTC 2004-68, 21 October 2004.
MTS Allstream Inc. - Introduction of Wireless Service Provider Enhanced 9-1-1 Service, Telecom Decision
CRTC 2004-70, 4 November 2004.
Prince Rupert CityTelephones - Cellular service forbearance, Telecom Decision CRTC 2004-84,
21 December 2004.
71
Following a consultation with the wireless industry and others, Industry Canada announced, in
July 2005, a new policy that encourages regional and national wireless carriers to voluntarily
provide digital roaming to non-competing rural wireless carriers.73 Industry Canada stated that
this will enable rural subscribers to benefit from advanced services and extended coverage across
Canada.
Market Segments
As displayed in Figure 4.5.1, wireless revenues increased from $5.6 billion in 2000 to
$9.5 billion in 2004, representing an annual growth rate of 14.1%. Similarly, the number of
wireless subscribers increased from 8.9 million in 2000 to 15.0 million in 2004, resulting in an
annual growth rate of 14.0%. As of June 2005, the number of wireless subscribers is estimated to
be at approximately 15.6 million.74
Figure 4.5.1 also shows the average revenue per subscriber (ARPU) for the period 2000 to 2004.
Revenues per subscriber dropped from an average of $49 per month in 2000 to $48 per month in
2001. The downward trend reversed itself in 2002, and the ARPU gradually increased to $52 per
month in 2004. This is likely due to an increased emphasis by suppliers on post-paid plans,
which generally have a higher ARPU than pre-paid plans. In addition, there is increased use of
cellular phones for text messaging using the Short Message Service, Internet services, and
Multimedia messaging services.
16
14
12
10
8
6
4
2
0
70
60
50
40
30
20
10
0
2000
Wireless Revenues
2001
2002
Subscribers
2003
Revenues/Subscriber/month
Revenues ($ billions)
Subscribers (millions)
Figure 4.5.1
Wireless Revenues, Subscribers and Revenues per Subscriber
2004
Revenues/Subscriber
Source: CRTC Data Collection
72
73
74
Industry Canada, Consultation on a Renewed Spectrum Policy Framework for Canada and Continued
Advancements in Spectrum Management, Notice DGTP-001-05 13 May 2005.
Canada Gazette Notice DGTP-006-05 - Policy to Promote Digital Roaming for Rural Subscribers,
21 July 2005.
Based on Companies' Quarterly Reports of June 2005.
72
As displayed in Figure 4.5.2, the number of wireless subscribers increased significantly over the
period 2000 to 2004. The rate of growth in subscribers on a yearly basis decreased significantly
from 2000 to 2002, and it has gradually increased since then. Although the average annual
growth rate of subscribers from 2000 to 2004 was 14%, the year-over-year increase for 2004 was
13%. In 2005, the strong growth in wireless subscriptions is continuing.
16
35
14
30
12
25
10
20
8
15
6
4
10
2
5
0
Percent Change
Number of Subscribers
(millions)
Figure 4.5.2
Mobile Subscriber Growth
0
2000
2001
Subscribers
2002
2003
2004
Subscribers Average % Growth
Source: CRTC Data Collection
Figure 4.5.3 presents the percentage of subscribers on pre-paid and post-paid plans for the years
2000 to 2004. As displayed in this figure, the proportion of post-paid subscribers has been
increasing slightly from 75% in 2002 to 78% in 2004. A variety of different post-paid plans and
options give customers more choices and more services. Most wireless service providers have
targeted the post-paid segment of the market in order to retain high value paying customers. As
post-paid customers are generally required to commit to the supplier for a fixed length of time,
the churn rate is also minimized.
Figure 4.5.3
Percent of Pre-Paid & Post-Paid Subscribers
100
Percent
80
Pre-paid
60
Post-paid
40
20
0
2000
2001
2002
2003
2004
Source: CRTC Data Collection
73
Major Revenue Components
As displayed in the Markets and Observations portion of this section in Table 4.5.1, wireless
revenues consisted of 5 major components: basic voice, long distance, paging, "data and other",75
and terminal. Generally, the increase in wireless revenues can be attributed to the growth in the
number of wireless subscribers and, to a lesser extent, increased use of existing and new wireless
applications as reflected in these components.
Since 2000, basic voice packages have accounted for 72% to 78% of total wireless revenues. In
2004, basic voice packages were 76% of total revenues. The remaining components, as a percent
of wireless revenues, are displayed in Figure 4.5.4 for the period 2000 to 2004.
Based on Table 4.5.1, long distance wireless revenues increased between 5% and 11% during the
period 2001-2003 and in 2004 grew by 16%. However, these revenues as a percent of total
wireless revenues in each of the years 2000-2004 were about 8% to 7%.
As shown in Figure 4.5.4, paging and terminal revenues, as a per cent of total wireless revenues
declined over the five year period. Paging revenues decreased primarily due to the replacement
of pagers by mobile telephones and other messaging devices. The "data and other" component as
a percent of total wireless revenues increased in the first three years, declined in 2003, but
increased significantly in 2004. A closer look at the "data and other" component reveals that data
revenues increased in 2004 by 89.9%, but this increase was mitigated by smaller increases in the
remaining revenues in that component, namely, those related to mobile roaming and
interconnection.
Figure 4.5.4
Wireless Revenues by Major Component (excluding Basic Voice)
12
Percent
10
8
6
4
2
0
2000
Long Distance
2001
Paging
2002
2003
Data and Other
2004
Terminal
Source: CRTC Data Collection
75
"Data and other" consist of roaming charges, interconnection charges, and mobile data revenues.
74
Comparison of Wholesale with Retail
The limited availability of licensed spectrum has constrained the industry to a few players. These
players have focused on the retail market, entering into agreements with each other which
enabled them to maximize coverage while minimizing capital expenditures. These players also
offer subscription plans that include handset subsidies. These factors reduce the incentive for
wireless resale. As a result, the wholesale market is small.
As the market evolves, the wholesale market is expected to grow. One indication of this growth
is the formation of a jointly-owned company by Bell Mobility and the Virgin Group to market
wireless services using Bell Mobility's network.
Market Share
Figure 4.5.5 portrays the market share of each of the major players in the industry, measured in
terms of revenues and number of subscribers for 2003 and 2004.
Overall, in 2004, the three largest suppliers (The Bell Group, RWI and TCI) continued to
dominate with a market share of approximately 90%. At the national level, there is no dominant
supplier of wireless services.
Figure 4.5.5
Wireless Players' Market Share76
Subscribers
Revenues
Percent
40
30
20
10
0
2003
2004
Bell Group
2003
TCI
RWI
2004
Other
Source: Companies' Annual Reports and CRTC Data Collection
76
Other includes MTS Allstream, SaskTel, and smaller wireless service providers.
75
Table 4.5.2 presents the wireless providers' subscriber share in each province and the North77 in
2004. A review of the data indicates that in most provinces/territories, a single supplier has over
50% of the subscribers. In Ontario and British Columbia, two suppliers each have 40% or more
subscribers' share. The data also indicates that in three of the provinces, three suppliers each have
at least 10% or more of the subscribers, while in six of the remaining seven provinces, there are
at least two suppliers with 10% or more of the subscribers. In Newfoundland and Labrador only
one supplier has 10% or more of the subscribers. In the North, there is only one provider of
wireless service.
Table 4.5.2
Wireless Subscriber Share By Province (2004)
Province
Bell Group
British Columbia
Alberta
Saskatchewan
Manitoba
Ontario
Quebec
New Brunswick
Nova Scotia
Prince Edward Island
Newfoundland and Labrador
The North
Source: CRTC Data Collection
8%
10%
0%
0%
40%
49%
74%
64%
89%
87%
100%
TCI
48%
64%
3%
8%
17%
18%
4%
9%
10%
8%
0%
RWI
Other
44%
26%
17%
30%
42%
32%
22%
27%
1%
5%
0%
0%
0%
80%
62%
1%
1%
0%
0%
0%
0%
0%
Churn Rate
Table 4.5.3 shows the average monthly churn rate for each of the major players for the years
2000 to 2004.78 The churn is calculated by dividing the number of disconnected subscriber units
by the average number of units. Without number portability and platform compatibility between
service providers, and with the continued preponderance of longer term post-paid contracts, these
rates are generally low. The churn rates in 2004 declined for all of the major players.
Table 4.5.3
Average Monthly Churn Rates
2000
2001
Bell Mobility
1.5%
1.5%
Microcell
2.2%
2.6%
RWI
2.4%
2.2%
TCI
2.0%
2.0%
Note: Microcell was acquired by RWI in 2004
Source: Companies' Annual Reports
77
78
2002
1.6%
3.4%
2.0%
1.8%
The North includes: Yukon, Northwest Territories and Nunavut.
In 2004, Microcell was acquired by RWI.
76
2003
1.4%
3.1%
2.1%
1.5%
2004
1.3%
see note
1.8%
1.4%
Paging
The number of subscribers in the 2004 paging market decreased over the previous year by
21.4%, and the revenues declined by 21%.79
Bell Mobility, RWI and TCI continued to dominate the market, accounting for 87% of the
paging revenues in 2004.
Mobile Coverage
The maps on the following pages show mobile coverage across Canada, by type of technology
(digital/analog) and by number of service providers.
In 2004, over 94% of Canadians had access to wireless services.80 Most Canadians had a choice
of service providers, except for the North, where there was only one provider.
Mobile coverage did not expand significantly in 2004, and capital expenditures for the industry
decreased by 15.4% over the previous year.81 As the wireless market evolves, it is expected that
new technologies such as third-generation wireless (3G) will enable the industry to offer
additional, as well as, enhanced services.
Summary
The wireless market continues to grow. The size of the market, both in terms of revenues and
subscribers, increased significantly in 2004. Wireless services are available to over 94% of the
Canadian population.
Market share, based on revenue on a national basis, of the three largest carrier groups (TCI, the
Bell Group and RWI) was approximately 90%. The ARPU has continued its upward trend
established in 2003, after several years of decline. The churn rate continued to be low. Paging
also continued its downward trend in 2004, as it is becoming a niche market, with customers
switching to other wireless technologies.
79
80
81
CRTC Data Collection.
Industry Canada, Notice No. DGTP-010-04, Decision to Rescind the Mobile Spectrum Cap Policy,
27 August 2004.
CRTC Data Collection.
77
78
79
4.6
Data and Private Line
Highlights
•
•
•
•
In 2004, data and private line revenues continued to decline, shrinking 1.6% to $4.4 billion.
Data revenues increased 6.9% to $2.3 billion, surpassing private line revenues which
declined 9.7% to $2.1 billion.
The distribution of data protocol services revenue is continuing to shift towards IP and
Ethernet services.
Competitors' share of data and private line revenues increased from 26% in 2003 to 27% in
2004.
Sector Description
a)
Description of Services
Data services are used to provide access to, and connectivity between, local area data, video and
voice networks within a metropolitan area or on a broader national or international scale,
providing customers with managed local area network and wide area network services. Data
services include legacy protocols such as X.25 (packet switched network), Frame Relay and
Asynchronous Transfer Mode (ATM); newer protocols such as IP-VPN (Virtual Private
Network) and Ethernet; and the provisioning and management of networks and network
equipment.
Private line services provide the capability to link two or more locations over dedicated facilities
for the purpose of transporting data, voice or video traffic. Private line services include
high-capacity digital transmission services (at speeds ranging from 56/64 Kbps to gigabit speeds
over fibre) and digital data systems, as well as voice grade and other analog services.
b)
Markets and Observations for 2004
The data and private line market sector is the fourth largest telecommunications segment with
revenues of $4.4 billion or roughly 13% of total telecommunications revenues. After peaking in
2001, data and private line revenues have declined at an annual rate of approximately 1.4% over
the period 2001 to 2004. In 2004, data revenues exceeded private line revenues for the first time
climbing to 53% of total data and private line revenues, up from 49% in 2003.
In 2004, the 1.6% decline in data and private line revenues is attributable to the 9.7% decline in
private line revenues, which was partly offset by the 6.9% increase in data revenues. The
reduction of private line revenues is mainly due to a declining private line wholesale market,
while higher protocol and management services revenues contributed to higher data revenues.
Data protocol revenues grew in 2004 due to growth of Ethernet and IP-VPN protocol revenues,
which were partly offset by lower legacy data protocol revenues.
80
Table 4.6.1
Data and Private Line Revenues
($ millions)
2000
Data
1,883
Private line
2,201
Total
4,084
Source: CRTC Data Collection
2001
2,069
2,528
4,597
2002
2,092
2,454
4,546
2003
2,184
2,300
4,484
2004
2,334
2,077
4,411
Growth
2003-2004
6.9%
-9.7%
-1.6%
CAGR
2000-2004
5.5%
-1.4%
1.9%
The competitors' revenue share of the data and private line market increased slightly from 26%
in 2003 to 27% in 2004.
c)
Sector Participants
Data and private line services are delivered using wireline, fixed wireless and satellite
technologies by a number of players including the incumbent carriers, satellite service providers,
facilities- and resale-based competitive service providers, cable undertakings and utility telcos.
Data and private line services are marketed to end-customers in the retail market and to other
service providers as wholesale services that are either resold directly or used to construct
underlying networks used to deliver products and services to their end-customers in the retail
market.
d)
Regulatory Framework
Competition was first permitted in the data and interexchange private line market in 1979. The
Commission has since forborne from regulating many of the incumbents' data services as well as
their private line services on many interexchange routes.
Generally, the Commission forbears pursuant to section 34 of the Act when it considers that the
service is, or will be, subject to a level of competition sufficient to protect the interest of users of
the service. Order 99-43482 directs competitors to file with the Commission on 1 April and
1 October of every year, the list of interexchange private line routes on which they offer or
provide service at the equivalent of DS-3 (44.736 Mbps) or greater, using their own terrestrial
facilities, or terrestrial facilities leased from a company other than an ILEC or an affiliate of an
ILEC. The Order further stated that upon the Commission being satisfied that one or more
competitors meet this criterion, it would proceed quickly to forbear without process given that
the evidence on which the forbearance determination would be made stems from the ILEC's
competitors. Incumbent companies are also free to apply for forbearance at any time.
82
Telecom Order CRTC 99-434, 12 May 1999.
81
In 2005, as a result of Decisions 2005-18 and 2005-44,83 an additional 1,000 interexchange
private line routes were forborne from regulation.
X.25 and Frame Relay services were forborne from regulation under Order 96-13084 in February
1996. Under Order 2000-55385 in June 2000, wide-area network (WAN) services were forborne
from regulation. The access components of ATM and Ethernet services continue to be regulated.
Generally, in forbearance decisions, the Commission retains sufficient powers under section 24
of the Act to specify, where warranted, possible future conditions upon the forborne services
provided by the affected ILECs.
In 2005, the Commission issued the Competitor Digital Network (CDN) service decision,86
which built upon the interim CDNA decision,87 by making additional rate elements available to
competitors at discounts to retail rates. The effective date of the decision is June 2002, thus in
addition to an immediate reduction in operating expenses, competitors utilizing these services
also realized retroactive rate adjustments.
Market Segments
a)
Data Services
For the purpose of this report, data revenues have been disaggregated into six categories. Five
categories constitute the data protocol services (X.25, ATM, Frame Relay, Ethernet and
IP-VPN), and a sixth category (Other) relates to non-specific data protocols, network
management and networking equipment. A summary of data revenues for the period 2000 to
2004 and for each of the categories is contained in Table 4.6.2.
As Table 4.6.2 illustrates, in 2004, total retail and wholesale data service revenues were
approximately $2.3 billion, representing an increase of approximately 7.4% over the previous
year. Retail and wholesale data revenues posted increases of 7.2% and 8.7%, respectively.
In order to identify the trends in the data services market segment, the Commission looks at
revenues for the five data protocol services, thereby excluding non-recurring revenues that are
included in the Other category. Revenues realized through the non-recurring sale of network
equipment that coincide with a service migration or network growth can inflate revenues for an
individual year. A year over year comparison is best achieved without the impact of revenues
from equipment and network management services.
83
84
85
86
87
Forbearance from regulating interexchange private line services on additional routes, Telecom Decision
CRTC 2005-44, 5 August 2005.
Telecom Order CRTC 96-130, 19 February 1996.
Forbearance granted for telcos wide area network services, Order CRTC 2000-553, 16 June 2000.
Competitor Digital Network Services, Telecom Decision CRTC 2005-6, 3 February 2005.
Interim Competitor Digital Network Access, Telecom Decision CRTC 2002-78, 23 December 2002.
82
In 2004, total revenues for the five data protocol services grew by 6% to $1.4 billion, with
aggregated revenues from Ethernet and IP-VPN services increasing to 41% of the total protocol
revenues, up from 34% in 2003. This is a continuing trend noted in last year's report, and is
expected to continue given the increased flexibility, capacity and interoperability that the new
generation of IP services provides the end-customer. In addition to capturing revenue from the
legacy data services, the newer data services are also contributing to the reduction in private line
revenues due to their ability to cost-effectively replicate the capacity and security associated with
private line services.
Table 4.6.2
Data Service Retail and Wholesale Revenues by Service Category88
($ millions)
2000
X.25
Retail
Wholesale
Total
ATM
Retail
Wholesale
Total
Frame Relay
Retail
Wholesale
Total
Ethernet
Retail
Wholesale
Total
IP-VPN
Retail
Wholesale
Total
Other
Retail
Wholesale
Total
Total Data
Retail
Wholesale
2001
2002
2003
2004
Growth
2003-2004
CAGR
2000-2004
134.7
19.3
154.0
140.6
20.2
160.9
134.4
22.5
156.9
131.2
9.1
140.3
102.0
5.7
107.7
-22.3%
-37.4%
-23.2%
-6.7%
-26.3%
-8.6%
67.1
8.2
75.3
96.7
8.8
105.5
116.0
12.4
128.4
109.5
14.6
124.2
83.6
16.1
99.7
-23.7%
10.3%
-19.7%
5.7%
18.4%
7.3%
499.9
65.1
565.1
518.0
80.4
598.4
564.4
73.7
638.1
573.7
76.0
649.7
546.8
78.4
625.2
-4.7%
3.2%
-3.8%
2.3%
4.8%
2.6%
n/a
n/a
n/a
n/a
272.5
24.7
297.2
351.3
48.1
399.4
427.4
44.4
471.8
21.7%
-7.7%
18.1%
n/a
n/a
n/a
n/a
38.6
0.1
38.7
64.9
2.4
67.2
110.7
2.4
113.1
70.6%
0.0%
68.3%
811.7
276.8
1,088.6
933.7
270.7
1,204.4
704.3
128.3
832.6
634.6
132.6
767.2
729.2
160.3
889.5
14.9%
20.9%
15.9%
-2.6%
-12.8%
-4.9%
1,513.5
369.4
1,689.1
380.2
1,830.2
261.7
1,865.1
282.8
1,999.7
307.3
7.2%
8.7%
7.2%
-4.5%
Total
1,882.9
Source: CRTC Data Collection
n/a: Not available
2,069.3
2,091.9
2,147.9
2,307.0
7.4%
5.2%
88
Data revenues provided by smaller service providers do not provide this level of detail and are not included
in this Table. This represents approximately $27 million in 2004 and $36 million in 2003.
83
Revenues for Frame Relay services declined (for the first time) by 3.8% in 2004. X.25 and ATM
services revenues, which were already in decline, decreased by 23.2% and 19.7%, respectively.
As with last year, IP-VPN services posted the largest revenue increase, growing 68.3% in 2004,
in addition to the 74% growth in 2003. Since 2002, aggregated IP-VPN and Ethernet services
revenue has increased at an annual growth rate of 32%.
The shift in revenue distribution can be seen graphically in Figure 4.6.1, which displays the
revenue share of the five data protocol service categories, for the period 2000 to 2004.
Going forward, this transformation is expected to continue as service providers grandfather and
migrate end-users from services based on legacy technologies, and retail customers increasingly
utilize secure VPNs over both private IP networks and the Internet.
Figure 4.6.1
Data Protocol Services
Revenue Distribution by Service Category
80
X.25
Percent
70
60
ATM
50
Frame relay
40
Ethernet
30
IP-VPN
20
10
0
2000
2001
2002
2003
2004
Source: CRTC Data Collection
Table 4.6.3 displays incumbent and competitor data revenue share by data service category.
The competitors' revenue share of data services increased from 28% in 2003, to 34% in 2004.
84
The competitors' share of revenues within specific data categories varies from approximately 9%
for X.25 service to 53% for ATM.
Table 4.6.3
Market Share by Data Service Category89
X.25
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
ATM
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Frame Relay
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Ethernet
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
IP-VPN
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Total
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
2003
2004
90%
8%
2%
91%
8%
1%
45%
2%
52%
47%
37%
16%
56%
5%
39%
52%
31%
17%
73%
14%
13%
72%
16%
12%
90%
0%
10%
71%
1%
28%
72%
5%
23%
66%
19%
15%
Source: CRTC Data Collection
b)
Private Line Services
Private line service is non-switched point-to-point or multipoint connections that can be used for
voice, data and video transmissions with various bandwidths. Private lines can be analog or
digital, and be provided over copper wire, fibre optics or satellite. In this report, private line
services have been disaggregated into two main categories: short-haul and long-haul private
lines. A further breakdown of long-haul revenues between satellite and terrestrial facilities
providers is also provided.
Table 4.6.4 provides a summary of industry-wide revenues for the years 2000 to 2004 for both
short-haul and long-haul private line services.
89
Competitors (other) includes competitor (cable). In 2004, at the national level, competitors (cable)
had approximately 1.6% of the data revenues.
85
Table 4.6.4
Private Line Service Retail and Wholesale Revenues by Service Category90
($ millions)
2000
2001
Short-Haul
Retail
385
471
Wholesale
259
342
Total
644
813
Long-Haul
Retail
922
971
Wholesale
635
744
Total
1,557
1,715
Total
Retail
1,307
1,442
Wholesale
894
1,086
Total
2,201
2,528
Source: CRTC Data Collection
2002
2003
527
440
966
496
444
940
800
688
1,488
739
600
1,339
1,326
1,128
2,454
1,235
1,044
2,280
2004
Growth
2003-2004
CAGR
2000-2004
#
#
#
521
369
890
5.0%
-16.9%
-5.3%
7.9%
9.3%
8.4%
#
#
#
732
419
1,151
-0.9%
-30.2%
-14.0%
-5.6%
-9.9%
-7.3%
1,253
788
2,042
1.5%
-24.5%
-10.4%
-1.0%
-3.1%
-1.9%
Total private line revenues were slightly above $2.0 billion in 2004, a decrease of 10.4% from
2003. Revenues for both the short-haul and long-haul categories were lower in 2004, declining
by 5.3% and 14%, respectively. As a result, long-haul revenues now contribute 56% of the
private line segment, down from 59% in 2003 and 61% in 2002.
The main contributor to the reduction in private line revenues was the wholesale segment, which
experienced continuing aggressive price competition. Additionally, with industry consolidation,
companies strengthen and expand networks through acquired facilities, while reducing the
number of competitors. In 2004, the size of the overall wholesale private line market decreased
by approximately 25%, driven by the long-haul category, which decreased by about 30%.
Retail revenues grew a modest 1.5% in 2004, due to 5% growth in short-haul revenue which was
partly offset by lower long-haul revenue. The increasing popularity of data services, including
private IP networks; and the use of VPN's over the Internet, may be contributing to a reduction in
demand for long-haul retail private line services.
As shown in Figure 4.6.2, during 2004, the incumbents gained revenue share within the smaller
private line market, as the competitors' share of private line revenues declined to 20%, down
from 25% in 2003. This decline is due, in large part, to the impact that the Bell Canada360networks and MTS-Allstream transactions had on the composition of the revenue share held
by the competitors.
90
Private line revenues provided by smaller service providers do not provide this level of detail and are not
included in this Table. This represents approximately $35 million in 2004 and $20 million in 2003.
86
Figure 4.6.2
Total Private Line Service Revenue Distribution
Incumbents v. Competitors91
2004
2003
5%
15%
16%
80%
75%
Incumbents
Competitors (ILEC
out-of-territory)
9%
Competitors (other)
Source: CRTC Data Collection
Wholesale private line service revenues peaked in 2002 at over $1.1 billion, representing 46% of
the total private line market. Since that time, wholesale revenues have declined to just under
$800 million in 2004, or 39% of total private line revenues. As both facilities-based service
providers and resellers to some degree utilize private line circuits provided through the wholesale
channel of other service providers, factors contributing to the decline of wholesale revenues
may include:
•
•
•
lower rates charged for services due to aggressive price competition and through reductions
directed by the Commission;
reduced spending by competitors as a result of network optimization activities; and
industry consolidation, which has reduced overall wholesale demand.
Long-haul private line services are provided using both terrestrial and satellite facilities. As
displayed in Figure 4.6.3, the share of the total retail and wholesale long-haul private line
revenues provided via satellite increased from 20% in 2003 to 22% in 2004.
91
Competitors (other) includes competitor (cable). In 2004, at the national level, competitors (cable) had
approximately 0.7% of the private line revenues.
87
Figure 4.6.3
Long-Haul Private Line Services
Satellite v. Terrestrial Facilities
100
Percent
80
60
Satellite
40
Terrestrial
20
0
2000
2001
2002
2003
2004
Source: CRTC Data Collection
Table 4.6.5 displays that the competitors' share of private line revenues declined from 25% in
2003 to 20% in 2004.
Table 4.6.5
Private Line Service Revenues
Short-Haul and Long-Haul Market Share
Short-Haul
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Long-Haul
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Total
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Source: CRTC Data Collection
2003
2004
79%
10%
11%
90%
9%
1%
73%
8%
19%
72%
20%
7%
75%
9%
16%
80%
15%
5%
Figure 4.6.4 shows the competitors' retail private line revenue share for 2003 and 2004. As
illustrated, the competitors' retail revenue share grew slightly to just under 20%, with both the
short-haul and long-haul categories experiencing revenue share gains.
88
Figure 4.6.4
Retail Private Line Service Revenues
Competitors' Revenue Share
30
Percent
Short-Haul
20
Long-Haul
Total
10
0
2003
2004
Source: CRTC Data Collection
Figure 4.6.5 illustrates the change in competitors' wholesale private line revenue share for 2003
and 2004. The competitors' revenue share of both the short-haul and the long-haul categories
declined, resulting in an overall decline to just over 20% in 2004, down from 33% in 2003.
Figure 4.6.5
Wholesale Private Line Service Revenues
Competitors' Revenue Share
40
Percent
30
Short-Haul
Long-Haul
Total
20
10
0
2003
2004
Source: CRTC Data Collection
89
Summary
Since peaking in 2001, data and private line revenues have steadily declined, falling another
1.6% in 2004. At the same time, the data and private line market is displaying the characteristics
of a competitive market as newer data services are replacing legacy data services and private line
services. In 2004, the competitors' share of data and private line revenues increased to 27%, up
from 26% in 2003.
Data revenues have grown every year since 2000, adding another 6.9% in 2004. Ethernet and
IP-VPN services experienced another year of strong growth; collectively they held 41% of data
protocol revenues, up from 34% in 2003. In 2004, competitors held 34% of data revenues.
Private line revenues continue to decline, falling another 9.7% in 2004. This decline is a result of
the long-haul private line category where retail and wholesale revenues fell by 0.9% and 30.2%,
respectively. The wholesale long-haul private line market segment is particularly affected by
aggressive price competition and industry consolidation. In 2004, competitors held 20% of
private line revenues.
90
5.0
Broadband Availability and Promising Means for Accelerated
Broadband Deployment
Highlights
• Broadband service was available to approximately 89% of Canadian households in 2004
compared to 86% in 2003.
• Broadband service was available to 98% of households in urban centres and
approximately 68% of households in rural centres.
• Of those who can have broadband service, approximately 48% actually subscribed
to the service.
5.1
Introduction
It is well recognized that, among other benefits, access to broadband networks and services in
rural and northern communities supports quality education and health care, job creation and,
more generally, helps sustain the vitality of those communities. Consequently, closing the
"digital divide" between urban and rural and remote areas of Canada by ensuring that broadband
access is available in every Canadian community is a key priority for the federal government as
well as other levels of government.
This section reviews the extent to which broadband access is available in both rural and urban
centres in Canada and the extent to which Canadians subscribe to broadband service. The
remaining portion of this section provides an update on promising means for accelerated
broadband deployment.
5.2
Geographic Broadband Deployment in Urban and Rural Areas
As displayed in Figure 5.2.1, limited progress has been made in the deployment of broadband
infrastructure in 2004. As of December 2004, approximately 38% of the communities in Canada
had access to broadband services.92 However, when viewed on a household basis, approximately
89% of Canadian households could have access to broadband services in 2004 compared to 86%
in 2003. With the deployment of Telesat's Ka band, broadband service was, as of July 2005,
available to an additional 150 thousand subscribers.93 With this deployment, broadband
availability has increased to 90% of Canadian households as of July 2005.
92
93
Source: Industry Canada: Broadband Directorate.
Source: Evidence filed by Telesat Canada pursuant to Review and disposition of deferral accounts for the
second price cap period, Telecom Public Notice CRTC 2004-1, 24 March 2004 (Public Notice 2004-1).
91
Figure 5.2.1
Broadband Availability
2003 v. 2004
100
Percent
80
60
40
20
North
NL
PEI
NS
NB
2004 Availability
Canada
2003 Availability
QC
ON
MB
SK
AB
BC
0
Source: Industry Canada and CRTC Data Collection
As a result of large projects currently underway in the North94 and New Brunswick, significant
progress will be realized once these projects are completed. In particular, the North will realize
close to 100% availability of Broadband service upon completion of the projects in the North
that are funded by both the Broadband Pilot Program and National Satellite Initiative.
In New Brunswick, an agreement has been reached between the federal government and Aliant
Telecom to finalize funding for a province-wide broadband program. Once completed in 2006,
broadband coverage will have been extended to 327 communities in New Brunswick, including
all of the First Nations communities in the province.
In 2004, Prince Edward Island realized an increase from 60% to 80% in Broadband availability.
This can be directly attributed to the Broadband Pilot Program, which funded 4 projects, the
largest of which was completed in 2004.
Figure 5.2.2 compares the availability of broadband access for urban and rural95 households. In
2004, virtually all (98%) of Canadian households in urban centres, representing 72% of all
Canadian households, could have access to broadband services versus 68% for rural96 centres.97
94
95
96
97
The North includes the Yukon, Northwest Territories and Nunavut.
Urban is defined as built up areas within Census Metropolitan Areas (CMAs), being classified as urban cores,
urban fringes, and secondary urban cores. Rural is defined in accordance with the "rural areas and small towns"
definition of Statistics Canada. This includes rural fringes, which are rural areas within CMAs, and urban areas
outside of CMAs.
It should be noted that the methodology used to identify broadband availability in rural areas may overstate
availability of broadband service in rural areas, since communities are taken to be served if service is reported
within them.
Due to granularity of the postal code structure in urban centres, broadband details by postal code collected by
the CRTC Data Collection System were used to identify the availability of broadband service within urban
centers. However, in rural areas and the North where the postal code structure does not lend itself to data
collection in sparsely populated areas, information gathered by Industry Canada was utilized.
92
On a provincial/territorial basis, broadband access is available to over 80% of the households for
all areas, except for New Brunswick, Newfoundland and Labrador and the North, where this falls
between 55% and 70%.
Figure 5.2.2
Broadband Availability
Urban v. Rural
100
Percent
80
60
40
20
Urban served
Canada
North
NL
PEI
NS
NB
QC
ON
MB
SK
AB
BC
0
Rural served
Source: Industry Canada and CRTC Data Collection
As displayed in Figure 5.2.3, while 89% of Canadian households can have access to broadband
services, 48% of these households actually subscribe to the service.
Figure 5.2.3
Broadband Availability v. Subscriptions
100
60
40
20
Availablility
Canada
North
NL
PEI
NS
NB
QC
ON
MB
SK
AB
0
BC
Percent
80
Subscriptions
Source: Industry Canada and CRTC Data Collection
93
With respect to the G8 group98 of countries, Canada ranks number one with respect to broadband
availability. As illustrated in Figure 5.2.4, as of December 2004, Canada ranks fifth
internationally in terms of broadband subscription rate per 100 inhabitants when compared to the
member countries of the Organisation for Economic Co-operation and Development (OECD). In
2004, Canada slipped three positions from its second place standing in 2003. As noted by the
OECD, broadband markets in its member countries continued their rapid growth during 2004.
The OECD also noted that, while all OECD countries have seen an increase in broadband
subscriptions, growth has been particularly rapid in parts of Europe.
30
25
20
15
10
5
OECD
Turkey
Greece
Mexico
Slovak Republic
Poland
Czech Republic
Ireland
Hungary
New Zealand
Italy
Australia
Portugal
Spain
Germany
Luxembourg
Austria
France
United Kingdom
United States
Norway
Sweden
Japan
Finland
Belgium
Switzerland
Iceland
Canada
Denmark
Korea
0
Netherlands
Subscribers per 100 Inhabitants
Figure 5.2.4
Broadband Access in OECD Countries
per 100 Inhabitants (December 2004)
Source: OECD
5.3
Promising Means for Accelerated Broadband Deployment
Previous Monitoring Reports have provided detailed overviews of government programs
designed to support the deployment of broadband access and transport facilities in rural, remote,
northern and First Nations communities. In what follows, an update on the status of existing
federal and provincial broadband programs is provided along with proposed private sector
initiatives aimed at completing these programs.
98
The G8 group of countries include: Japan, the United States, Italy, United Kingdom, Germany, France,
Canada and Russia.
94
a)
Federal Government Broadband Programs
One of the first major steps taken by the federal government to address the "digital divide" was
the establishment of the National Broadband Task Force (NBTF) in early 2001. The NBTF
estimated, at that time, that the cost of providing broadband access in unserved Canadian
communities ranged from close to $3 billion to slightly more than $4.5 billion, depending on the
mix of technologies used. This cost was to be shared by public and private stakeholders.
The NBTF recommended two alternative government-supported approaches for the deployment
of broadband services to communities where market-driven solutions are not feasible. The first
recommended approach involves the provision of public support to a local demand aggregator or
community champion responsible for delivering broadband services within currently unserved
communities. The second recommended approach involves the provision of public support for
the construction of broadband infrastructure, including transport facilities to a point of presence
in an eligible community, as well as distribution and access infrastructure within the community.
The two federal government programs were subsequently established to directly support
broadband deployment in rural, remote, northern and First Nation communities, each of which
followed one of these two recommended approaches.
The first of the programs is Industry Canada's Broadband for Rural and Northern Development
(BRAND) Pilot Program.99 Launched in September 2002, the BRAND program was modeled on
the above-noted local aggregator/community champion funding model. The federal government
committed a total of $105 million to the BRAND program which was scheduled to run for
three years.
BRAND funding is made available through two phases. In the first phase, eligible applicants
submit proposals for "seed funding" to support the development of a business plan. In the second
phase, funds are made available to successful applicants to implement their broadband service
proposals.
Two funding application rounds were scheduled under the program. The first was initiated in the
fall of 2002 and the second followed in the spring of 2003. In October 2003, successful first
round applicants were announced. They received $44 million in funding through BRAND to
support the implementation of broadband initiatives in 433 rural, remote, northern and First
Nations communities.100 Subsequently, in May 2004, successful second round applicants were
announced, who received $35 million in funding under the program to support the
implementation of broadband initiatives in a further 451 rural, remote, northern and First Nations
communities. In total, roughly 880 rural, remote and northern communities, of which
approximately 115 are First Nations reserves, have benefited from BRAND funding to date.
99
100
Details of the BRAND Pilot Program are available at: http://broadband.gc.ca/.
Broadband communities are based on aggregation of dissemination areas as defined by Statistics Canada,
with a naming convention based on postal codes.
95
Of the total amount of funding available under BRAND, roughly $80 million has been spent in
support of broadband network and service deployment projects in rural, remote and northern
communities. Moreover, partner contributions have more than matched the total amount invested
by the federal government in the initiative.
At this time, all existing BRAND funds are fully committed and no further application rounds
are scheduled.
The second of the two programs is the National Satellite Initiative (NSI).101 This program was
jointly launched in October 2003 by Infrastructure Canada, Industry Canada and the Canadian
Space Agency (CSA). Administered by Industry Canada's Broadband Office, NSI is based on the
infrastructure support model recommended by the NBTF.
The NSI program was created to specifically address the high cost of broadband access for
communities in the mid to far North and in isolated and remote areas of Canada where satellite
technology is the only reasonable means of providing broadband access. NSI funding is provided
to eligible communities through partnerships with provincial and territorial governments.
Satellite capacity or a funding contribution, as the case may be, is made available for the
deployment of broadband services via satellite to public institutions, such as schools and
hospitals, as well as residences and businesses, in qualifying rural and remote communities.
The total funding committed under the NSI program is $155 million, with $85 million of this
total coming from the Canadian Strategic Infrastructure Fund (CSIF). The balance is being
provided by the CSA, which is contributing a $50 million satellite capacity service credit to the
program, and by Telesat Canada, which is contributing a further $20 million in satellite capacity.
Ultimately, the goal of NSI is to lower the cost of broadband access for roughly
400 communities in the mid to far North.
Funding under the NSI program is being made available in three application rounds. The first,
which was completed in April 2004, provided four successful applicants with satellite capacity
valued at approximately $20 million over 15 years. The proposals to be implemented under this
first round of funding will provide broadband services via satellite to over 50 remote
communities in B.C., Manitoba, Ontario and Quebec, 41 of which are First Nations or Inuit
communities.
The deadline for second round NSI program applications was May 2005. Funding in this
round will be drawn from the $85 million CSIF component of the program. In this case,
a 50/50 cost-sharing formula applies where approximately 50% funding of successful broadband
proposals would come from the CSIF and the balance would come from other funding sources
such as provincial, territorial or First Nation governments, and/or third-party participants.
101
Details of the NSI Program are available at: http://broadband.gc.ca/.
96
A third application round under the NSI program is also planned which will pertain to the
$50 million CSA component of the program representing satellite capacity to be made available
for eligible public and community-based institutions in the North and far North over the next
11 years. This component of the NSI program will not, however, cover the cost of the ground
segment, gateway service, local access terminals or Internet service. Industry Canada is currently
working in cooperation with interested parties to develop a strategy for delivering funding in this
round of the NSI Program.
As outlined in previous Monitoring Reports, in addition, to the BRAND and NSI programs, the
federal government has introduced a variety of other initiatives which directly and indirectly
support the deployment of broadband networks and services across the country. These include
Infrastructure Canada initiatives such as the CSIF, which as already noted, supports the NSI
program in part, the Municipal Rural Infrastructure Program, as well as various regional
development programs. There are also a range of Connecting Canadians initiatives such as the
Community Access Program and SchoolNet, including First Nations SchoolNet that may
indirectly contribute to the deployment of broadband facilities. As well, the federal government
is also a partner in CANARIE, Canada's advanced Internet development organization, whose
mission is to accelerate the development of Canada's advanced Internet infrastructure and
next-generation communications products, applications and services.
It should also be noted that in April of this year, Industry Canada established a
Telecommunications Policy Review Panel.102 This Panel has been asked to study and, by year
end, report on several key areas of importance to the industry. Specifically, the Telecom Review
Panel has been asked to provide recommendations that would help ensure that all Canadians
continue to have an appropriate level of access to modern telecommunications services,
including access to high-speed networks.
102
Industry Canada News Release, "Minister Emerson Appoints Members of Telecommunications Policy
Review Panel", 11 April 2005.
97
b)
Provincial and Territorial Broadband Deployment Programs
Most provincial and territorial governments have also implemented programs aimed at
supporting the deployment of broadband facilities in their respective territories. The
Commission's 2003 Monitoring Report provided a detailed overview of provincial and territorial
broadband programs in existence at that time, and last year's Monitoring Report provided an
update on the status of these programs.
At this time, most provincial government broadband programs are at or near completion, with
some exceptions. Moreover, all territorial broadband programs have long been completed.
Broadband deployment in the North is now largely dependent on the federal government's
BRAND and NSI programs.
One of the exceptions is B.C., where NetWork BC was established last year by the Premier's
Technology Council to work with communities in the province and the private sector to bridge
the "digital divide" in B.C. by 2006. The approach NetWork BC is following involves upgrading
and extending the existing Shared Provincial Access Network (SPAN/BC) to accomplish this
task. Under the plan, 366 communities103 in the province were identified as a priority for
broadband access, 151 of which currently do not have access to broadband services. In April of
this year, the Province of B.C. and TCI announced that they had reached an agreement that
would ensure that affordable, high-speed open network access is brought to all of the targeted
communities by the end of 2006.104 No specific funding requirement was announced. It appears
the costs of the expansion will be covered through the rates charged to the users (government and
others) of the services provided over the network.
In Alberta, it was announced in February of this year that the Alberta SuperNet is now in the
final stage of completion.105 The Alberta SuperNet project, undertaken by the Government of
Alberta, Axia NetMedia and Bell Canada, will link some 4,200 government, health, library and
education facilities in 429 communities across the province once completed. The total network
was scheduled for completion in September 2005.
103
104
105
In this case, communities are defined as any location in the province with a place name and either
a public school, library or healthcare facility.
British Columbia News Release, "Broadband expansion spells opportunity for B.C.", 7 April 2005.
Alberta News Release, "Government of Alberta, Axia, and Bell Canada announce SuperNet completion plan",
22 February 2005.
98
In Saskatchewan, SaskTel is continuing the second phase of the province's CommunityNet
program which provides broadband access to schools, libraries and provincial institutions in rural
communities, and remote areas of the province. The $34 million CommunityNet II initiative,
announced in June 2004, will provide wireless high-speed Internet access to schools and libraries
in a minimum of 71 communities in the province and their surrounding areas over the next
several years.106 In addition, the $12 million Northern Broadband Network initiative will see the
expansion of high-speed Internet to 35 northern communities by the end of 2006. Half of the
funding for this project comes from SaskTel and the balance from BRAND and other federal
western and northern regional development funds.107
No changes to existing broadband development programs have been announced in the provinces
of Manitoba, Ontario, Quebec or in the four Atlantic Provinces. However, it should be noted that
Ontario's Connecting Ontario: Broadband Regional Access (COBRA) program has been
suspended as of mid 2004, pending a review of the province's overall long term infrastructure
support plans. In Québec, the Villages Branchés du Québec remains in operation, but the
deadline for applications has long passed (i.e., the last due date for applications under the
program was in November 2003).
There are ongoing broadband projects being jointly funded by the provinces and the federal
government. For instance, in the fall of 2004, Quebec and the federal government jointly
announced a $14 million project to construct an underwater fibre optic link between Gaspésie
and Îles-de-la-Madeleine to provide broadband access to schools and hospitals, among others, on
the islands. The Government of Quebec provided half of the funding, while the balance will
come from the CSIF.108
The Province of New Brunswick recently completed an agreement with the federal government
and Aliant Telecom to finalize funding for a province-wide broadband program. The program
had initially been announced in late 2003. The total value of the program is $45 million, with the
province contributing $13 million of the total, and the federal government (via the CSIF) and
Aliant Telecom roughly splitting the balance equally.109 Once completed in 2006, broadband
coverage will have been extended to 327 communities in New Brunswick, including all of the
First Nations communities in the province.
A summary of existing initiatives is provided in Table 5.3.1. As indicated in the table, provincial
governments have committed roughly $600 million in funding spread over multi-year periods
under existing broadband programs. This total includes some federal funding, such as the
$22 million in CSIF funding in the cases of New Brunswick and Newfoundland and Labrador.
106
107
108
109
CommunityNet I provided broadband access to 366 Saskatchewan communities at a cost of $71 million.
Saskatchewan News Release, "Northern Saskatchewan High-Speed Access Funding Completed",
7 January 2005.
Infrastructure Canada News Release, "Government of Canada invests in fibre optic cables for
Îles-de-la-Madeleine", 3 September 2004.
New Brunswick News Release, "Province signs broadband agreement with federal government and Aliant",
21 March 2005.
99
In addition to the provincial initiatives, FedNor also announced $10 million to help communities
and rural businesses without access to broadband by deploying broadband Points of Presence to
communities, and by assisting rural businesses to find creative solutions to their broadband needs.
Table 5.3.1
Summary of Provincial Broadband Deployment Initiatives
Province
Alberta
Funding Description
($M)
193
British Columbia
SuperNet project linking 422 communities across Alberta
NetWork BC project to expand SPAN/BC broadband network to
366 communities across B.C. (No explicit contribution made by
the provincial government)
Manitoba
47
Upgrade and expansion of the Province's broadband network to
reach an additional 85 communities
New Brunswick
29
Joint project with federal government and Aliant Telecom to
expand broadband to most communities in province (total
includes provincial and federal government CSIF contributions)
Newfoundland &
Labrador
10
Private/public initiative focused on educational institutions
across the province (total includes equal contributions from the
province and federal government CSIF)
Nova Scotia
1
Information Economy Initiative focused on educational
institutions across the province (Aliant Telecom contributed
$5M to the project)
Ontario
55
COBRA aimed at funding the construction in rural and northern
communities in Ontario - suspended as of mid 2004
Prince Edward
Island
Program recently completed.
Quebec
150
Villages Branchés du Québec aimed at linking educational and
municipal institutions to provincial government's broadband
network
Saskatchewan
117
CommunityNet I & II and Northern Broadband Network
initiatives providing broadband services in well over
450 communities
TOTAL
602
100
c)
Proposed Private Sector Initiatives
Certain parties to the current ongoing proceeding relating to the review and disposition of the
large ILECs' deferral accounts110 established for the second price cap period, have proposed that
deferral account balances be used in whole or part to fund the deployment of broadband
networks and access services to rural and remote areas. While the proposals in this respect are
varied in nature, they are all aimed at complementing existing federal and provincial government
broadband programs.
The Commission is currently considering these proposals along with other proposals to dispose
of the ILEC deferral account balances. The Commission will issue its ruling on the
appropriateness of using existing deferral account balances to fund broadband deployment
initiatives in its decision.
5.4
Progress under Existing Initiatives
According to the Broadband Pilot Program National Selection Committee, which issued a status
report on the program,111 investments made through the pilot program are expected to extend
broadband access to approximately 880 rural, northern and First Nation communities by year end
2005. Moreover, the Committee also estimates that complementary investments made through
the NSI and CSIF, as well as provincial and territorial broadband initiatives, including private
sector participation, should extend broadband access to an additional 700 previously unserved
communities by year end 2005. In total, therefore, roughly 1,500 otherwise
unserved communities will have broadband access by the end of 2005 as a result of these
various initiatives.
Without these government broadband initiatives, the National Selection Committee estimates
that some 3,250 of Canada's 5,500 total communities would have remained without broadband
access as of year end 2005, representing roughly 60% of all Canadian communities or 3 million
Canadians (i.e., 10% of the population). However, as a result of the Broadband Pilot Program
and other federal, provincial and territorial government broadband deployment initiatives, it is
estimated that approximately 2000 communities will remain unserved as of year end 2007.
Consequently, the existing government broadband programs have proved successful in
significantly reducing the number of communities in Canada without broadband access to
the Internet.
110
111
In Decision 2002-34 and Implementation of price regulation of Télébec and TELUS Québec, Telecom Decision
CRTC 2002-43, 31 July 2002, the Commission introduced a mechanism requiring each ILEC to establish a
deferral account. The purpose of the deferral account was to provide a mechanism to mitigate potential adverse
effects on local competition as a result of mandated rate reductions for local service. These rate reductions could
result from the Price Cap regime to the basket of residential local services in non-high cost serving areas
(non-HCSAs). The ILECs were directed to assign to that account, an amount equal to any revenue reduction
that would otherwise be required. In March 2004, the Commission issued Public Notice 2004-1 to review and
dispose of these amounts.
National Selection Committee Report, 31 March 2004.
101
Figure 5.4.1
Communities With and Without Broadband Access
Broadband Pilot Program
100
Percent
80
60
40
20
0
2000
2003
Served communities
2004
2007 (Estimated)
Unserved communities
Source: Industry Canada
5.5
Summary
Most Canadians have access to broadband service. Nationally, approximately 89% of
Canadian households can have broadband service. Nationally, over 98% of households in urban
centres can have broadband service, but at most only 68% can have it in rural communities.
Although Canadians living in urban communities have very high availability rates for broadband
service, the same cannot be said of those living in rural communities. This highlights the need for
programs such as the Broadband for Rural and Northern Development Pilot Program
administered by the federal government and various other provincial programs or initiatives such
as Saskatchewan CommunityNet.
In all provinces/territories, except for the Atlantic provinces and the North, over 80% of all
households can have access to broadband service. In the Atlantic provinces and the North, the
availability of broadband service is between 55% and 80% of households. With the completion
of the current projects in the North, this is expected to rise to almost 100%.
At the national level, of those who can have access to broadband service, 48% actually subscribe
to the service. The potential introduction of various bundle packages that combine various
service offerings such as Internet, video and local voice as well as the introduction of VoIP
service may lead to increases in Internet subscription rates.
102
6.0
Users of Telecommunications Services
6.1
Introduction
This section provides information on retail service provided to the end users of telecommunications
services, namely, residential consumers and business customers. In addition, it presents the results of
a survey, conducted by Decima Research Inc. (CRTC 2005 Decima Survey)112 for the Commission
in May 2005, to assess residential consumer behaviour, perceptions and awareness with respect to
various telecommunications services. The survey measured household expenditures and choices in
telecommunications services, wireless and Internet usage, and ascertained consumers' views on
regulation and benefits of competition.
In 2004, total expenditures on telecommunications services by residential consumers and
business customers were approximately $29.5 billion, up 7.5% from 2003. Of these
expenditures, $9.3 billion or 32% related to wireless services and $20.2 billion or 68% related to
wireline services. Of the expenditures made on wireline services, approximately $10.7 billion or
53% related to residential consumers and $9.4 billion or 47% to business customers.
6.2
Residential Consumers
Availability of Service
According to the most recent data from Statistics Canada, in 2003, 98.8%113 of
Canadian households had wireline and/or wireless telephone service, up marginally from 98.7%
in 1999.
To maintain a high level of telephone service that meets the basic service objective114
as established by the Commission, and to continue to expand local telephone service in Canada,
the ILECs were directed to file service improvement plans (SIPs)115 for Commission approval.
These SIPs outlined how, over a four-year period, the companies proposed to improve or
upgrade telephone service, and to expand service in high-cost and non-high-cost serving areas.116
112
113
114
115
116
The Decima Survey sample consisted of 2,022 households across Canada. This sample size provided an overall
margin of error within +/- 3.1%, 19 times out of 20.
This is based on monitoring reports submitted by the ILECs pursuant to Commission modifies reporting
requirements for affordability, Order CRTC 2000-393, 10 May 2000. The June 2005 report was filed with the
Commission on 30 June 2005 and included penetration rates for 2003 based on Statistics Canada surveys.
In Telephone Service to High-Cost Serving Areas, Telecom Decision CRTC 99-16, 19 October 1999
(Decision 99-16), basic service objective was defined as local telephone service consisting of: (a) an individual
local line with touch-tone dialling; (b) dial-up Internet access service without incurring long distance charges;
(c) enhanced calling features, access to emergency services, Voice Message Relay service, and privacy
protection features; (d) access to operator and directory assistance services; (e) access to the long distance
network; and (f) a copy of a current local telephone directory.
Decision 99-16.
Decision 2002-34.
103
The SIP programs in high-cost serving areas are funded by the National Contribution Fund.117
Under the contribution regime, all telecommunications service providers that exceed a certain
revenue threshold are required to contribute to the fund. SIP programs in non high-cost serving
areas are funded from the ILECs' deferral accounts.118
The companies are continually reviewing and updating the number of premises requiring service
or upgrading of service that are eligible for funding. Table 6.2.1 displays the cumulative results
of the SIP program since 2002.
Table 6.2.1
Service Improvement Program Status
Change
(2003-2004)
2002
2003
2004
19,680
34,700
26,620
38,995
26,486
39,027
1,626
3,218
3,248
742
5,402
12,877
138.4 %
14,219
20,961
34,200
63.2 %
221
865
1,703
96.9 %
Percent of unserved premises now with service under SIPs
3.8 %
20.3 %
48.6 %
Percent of underserved premises improved to basic service
under SIPs
41.0 %
53.8 %
87.6 %
Unserved premises
Underserved premises
Total number of SIP communities
Previously unserved Premises (service provided by SIPs)
Previously underserved Premises (now with basic service)
Number of communities with service provided or improved
to basic service under SIPs
Source: ILECs' approved SIP filings for 2004 and previous years.
Since 2002, the Commission has reviewed and approved SIPs from the large and small ILECs
that identified 26,486 unserved and 39,027 underserved119 premises in more than
3,200 communities. SIPs have continually improved the level of local service. The impact of
the SIPs is demonstrated by the fact that 49% of households identified under the program as
unserved were receiving basic service by year end 2004. In addition, 88% of previously
underserved households in SIP areas have received improved service as defined in Decision
99-16.
117
118
119
Changes to the contribution regime, Decision CRTC 2000-745, 30 November 2000 and Decision 2002-34.
Decision 2002-34.
In Decision 99-16, underserved households were those with telephone service that did not meet the basic
service objective.
104
Pricing
In Figure 6.2.1, a price index reflecting the price changes experienced by a household for a
basket of telephone services is compared to the consumer price index (CPI) for the period 1999
to 2004. The telephone service price changes reflect a weighted average of consumer
expenditures on basic local service, other local services (such as options and features), long
distance, installation and repair charges. They do not, however, include wireless or Internet
service expenditures.120
Figure 6.2.1
Telephone Services Price Changes as Compared to Inflation
128
Price Index
124
120
116
112
108
104
100
1999
2000
CPI
2001
2002
2003
2004
Telephone services index
Source: Statistics Canada
Throughout the 1999 to 2004 period, the telephone services price index remained below the CPI.
During the 1999-2001 period, the rates for basic local service to residential consumers increased
in most urban and rural areas, consistent with the regime established by the Commission's 1997
price cap decision121 which applied to the large ILECs (except for SaskTel). During this period,
the Commission imposed an overall price cap constraint on ILECs' services that was tied to the
rate of inflation less a productivity factor of 4.5%.
In 2002, the price cap regime was continued for another four years with various changes to the
service baskets and to the pricing constraints for the services in residential and optional local
services.122 Under this regime, residential consumers, on average, would not see a rate increase
for basic local services unless inflation exceeded 3.5%. In 2003 and 2004, the ILECs did not
increase basic residential local rates.
120
121
122
Statistics Canada Catalogue No. 60-010XPB 1996-98; 62-001XPB 2001-2005; 62-001, 2004.
Decision 97-9.
Decision 2002-34.
105
Expenditures on Telephone Services
Since 2001, residential consumers have been spending less than 1.5% of their annual household
expenditures123 on traditional124 telephone services. From 1996 to 2001, shifts in the pricing of
telephone services took place in conjunction with growing competition in the long distance
market. In 1996, long distance and local services represented 54% and 38%, respectively, of a
household's average telephone expenditures, while in 2001, these proportions were essentially
reversed.125
Residential consumer spending on optional service features (including calling features such as
voice mail, call display and call waiting) has increased in recent years. In 1999, calling features
accounted for approximately 20% of residential local voice services expenditures. In 2004, this
proportion increased to 23%.126
As displayed in Table 6.2.2, residential consumer expenditures on telecommunications services
in 2005 did not change from the previous year. Based on the 2004 and 2005 Decima Surveys,
when asked about their telecommunications expenditures, 20% of Canadian households
indicated that they spent less than $50 per month in total on telecommunications services127
including local and long distance wireline services, wireless and Internet access services. The
percentages of household spending within each of the spending categories displayed in Table
6.2.2 did not differ markedly between larger and smaller communities.128
Fifty-two percent of Canadian households spent over $75 per month on telecommunications
services. This would suggest that a large proportion of Canadian households have multiple means of
meeting their communication needs. As discussed in section 3.4, 53.9% of households have wireless
service and 2.5% of households have only wireless service in 2003. This suggests that 51.4% of
households have both wireline and wireless service to meet their local service needs.
123
124
125
126
127
128
Statistics Canada 62-555-XPB, Family Expenditure in Canada, 1996; Statistics Canada 56-002-XIE,
Quarterly Telecommunications Statistics, 4th quarter 2001.
Traditional telephone service excludes wireless and Internet services.
Statistics Canada 62-555-XPB, Family Expenditure in Canada, 1996; Statistics Canada 56-002-XIE,
Quarterly Telecommunications Statistics, 4th quarter 2001.
Source: CRTC Data Collection.
CRTC 2005 Decima Survey Q.1 asked about total monthly spending on services including local, long distance,
cellular and Internet.
The results were sorted by census metropolitan area (CMA) and non-CMA. CMA refers to an urbanized core
having at least 100,000 inhabitants, according to Statistics Canada.
106
Table 6.2.2
Monthly Household Telecommunications Expenditures
(Percent of Households)
Less than $50
$50-$75
$75-$99
$99
and Over
Don't Know /
Refused to Answer
19%
24%
17%
35%
4%
20%
23%
Source: CRTC 2004 and 2005 Decima Survey
Base: All households
16%
36%
4%
2004
2005
The Connected Consumer
Although the number of local wireline residential subscriptions decreased since 2001
as discussed in section 4.3, the use of other communication methods, such as wireless and
Internet access service increased. The percentage of households reporting that they have only
wireless access increased from 1.9% in May 2003 to 2.7% in December 2004.129 As discussed in
section 4.5, the number of wireless subscriptions, both residential and business, surpassed
15 million subscribers in 2004. However, based on Table 6.2.3, the percentage of Canadian
households in 2004 and 2005 with at least one subscription to wireless service,130 remained
relatively unchanged at 68%.
Table 6.2.3
Wireless Subscriptions
(Percent of Households)
No wireless
subscriptions
One wireless
subscription
Two wireless
subscriptions
Three or more
wireless
subscriptions
33%
38%
20%
9%
32%
39%
Source: CRTC 2004 and 2005 Decima Survey
Base: All households
20%
9%
2004
2005
With respect to Internet access, approximately 89% of Canadian households can subscribe to
high-speed Internet service.131 In 2004, approximately 5.4 million or 43% of households actually
subscribed to high-speed service, and 2.0 million or 16% subscribed to a dial-up service,
resulting in over 7.4 million connected households or 59% of all Canadian households.132
129
130
131
132
Residential Telephone Service Survey (December 2004).
CRTC 2005 Decima Survey Q.2.
As discussed in Section 5 - Broadband Availability and Promising Means for Accelerated
Broadband Deployment.
CRTC Data Collection.
107
Local Service Competition
Although residential consumers have a range of alternative providers for long distance services,
Internet access, and wireless telephony, the availability of more than one provider of residential
local service is limited to certain centres in Canada, where a small number of competitors offer
local wireline service.
In regard to the provision of local telephone service to residential consumers, the Commission
has been removing barriers to competition, providing Canadians with flexibility and ease in
selecting services and providers and, where necessary, implementing safeguards:
•
Local number portability (LNP) was implemented to enable subscribers to switch wireline
local service providers without having to change telephone numbers.
•
To give consumers, living in multi-dwelling units such as apartments, choice of their local
service provider, the Commission, in Decision 2003-45,133 stated that all local telephone
companies that want to provide service to customers in multi-dwelling units, should have
access to them under reasonable terms and conditions.
•
In May 2005, the Commission established a regulatory framework for VoIP services134
serving to increase consumer choice for telecommunications services while, at the same
time, providing safeguards with respect to local VoIP services135 such as local number
portability, directory listings and 9-1-1 Emergency Services.
•
To inform the public of the availability and terms of local competition,136 the Commission
issued a guide that provides consumers with information about competition in the
residential telephone service market.137
•
The use of packaging or bundling of services together is increasingly becoming a common
marketing tool in promoting telecommunications services to residential consumers. Prior to
bundling local service with other services, incumbent telephone companies are required to
receive approval from the Commission.138
133
134
135
136
137
138
Provision of telecommunications services to customers in multi-dwelling units, Telecom Decision
CRTC 2003-45, 30 June 2003.
Regulatory framework for voice communication services using Internet Protocol, Telecom Decision
CRTC 2005-28, 12 May 2005.
VoIP services are defined as voice communication services using Internet Protocol (IP) that use telephone
numbers that conform to the North American Numbering Plan, and that provide universal access to and/or from
the Public Switched Telephone Network (PSTN). To the extent that VoIP services provide subscribers with
access to and/or from the PSTN along with the ability to make or receive calls that originate and terminate
within an exchange or local calling area as defined in the incumbent local exchange carriers' (ILECs') tariffs,
they are referred to in this report as local VoIP services.
Call-Net Part VII Application - Promotion of local residential competition, Telecom Decision CRTC 2004-4,
27 January 2004.
http://www.crtc.gc.ca/eng/INFO_SHT/t1023.htm.
Joint marketing and bundling, Telecom Decision CRTC 98-4, 24 March 1998.
108
Long Distance Service
Lower rates and aggressive competition among long distance service providers continued in
2004. Pricing alternatives in long distance calling continue to be offered in various forms
including a per-minute charge, a flat charge for a fixed number of minutes, or unlimited calling
for a flat monthly fee. Long distance services were offered in bundles consisting of competitive
services. With vigorous competition, the price per long distance minute has fallen considerably,
and has prompted many long distance service providers to introduce a fixed monthly "network"
or subscription fee to their long distance plans.
In 2003, residential consumers paid $3.0 billion for long distance wireline service. By 2004 this
declined to $2.9 billion. As discussed in Section 4.2, residential long distance minutes increased
from 22.4 billion minutes in 2003 to 23.0 billion minutes in 2004.
Consumer Protection
The Commission has taken various steps to address consumer protection in a
competitive environment:
•
In light of the development and use of emergency 9-1-1 service, the Commission noted in
Decision 2004-31139 that telephone networks were an even more important component of
public safety. The Commission determined that consistent with the ILECs' Terms of
Service, the ILECS were not permitted to suspend or terminate or threaten to disconnect a
customer's tariffed services for failure to make payment for non-tariffed services when that
customer has made partial payments sufficient to cover outstanding arrears for tariffed
services. In June 2005,140 the Commission directed the large ILECs to conduct a pilot debt
repayment plan for a period of 18 months with a representative sample of former
subscribers who have been disconnected because of outstanding debt. The ILECs are to file
the results after 12 months of the pilot study and show cause why such a plan should not be
permanently instituted by the parties.
•
The Commission in Telecom Circular 2005-7 introduced new procedures for disposition of
applications for the destandardization and/or withdrawal of tariffed services, recognizing
that such applications can have serious effects on individual consumers. The procedures put
in place take into account the needs of existing customers. The Commission established a
set of criteria which must be met by the applicant. These include the existence of
reasonable substitute service, a clear transition plan and an adequate notice to affected
customers.141
139
140
141
Terms of Service - Disconnection for partial payment of charges, Telecom Decision CRTC 2004-31,
11 May 2004.
Bill management tools - Debt repayment plans, Telecom Decision CRTC 2005-38, 29 June 2005.
New procedures for disposition of applications dealing with the destandardization and/or withdrawal of
tariffed services, Telecom Circular CRTC 2005-7, 30 May 2005.
109
•
Telemarketing is one way that businesses advertise their products and offer their services.
Restrictions apply to all telemarketers, although they may differ depending on whether they
use a fax or a telephone. To better protect the privacy of consumers from undue
inconvenience and nuisance caused by unsolicited telecommunications, the Commission
announced changes to its telemarketing rules in Decision 2004-35.142 Since then, the
Commission has approved a stay of these rules pending the disposition of an application to
review and vary143 of Decision 2004-35. Legislation to establish a national Do Not Call
List - Bill C-37 - was subsequently introduced and is currently under review by
Parliament.144
Quality of Service
The Commission established quality of service standards in 1982.145 The quality of retail service
to residential consumers and business customers has been of particular concern to the
Commission during the course of changes in the regulatory regime, as well as, changes in the
competitive landscape.
In 2002, the Commission stated that because of limited competition in the local service market,
competitive pressure alone would not be enough to ensure that ILECs would meet these
standards. The Commission implemented, on an interim basis, a plan in the form of payments or
rebates to customers when a large ILEC delivers substandard quality of service.146 In 2005, the
Commission finalized147 the rate adjustment plan whereby residential and business customers of
the large ILECs who deliver substandard quality of service would receive credits payable by
30 June of each year.
142
143
144
145
146
147
Review of telemarketing rules, Telecom Decision CRTC 2004-35, 21 May 2004 (Decision 2004-35).
In Application by the Canadian Marketing Association to stay Decision 2004-35, Telecom Decision
CRTC 2004-63, 28 September 2004, the Commission approved the Canadian Marketing Association's (CMA's)
request to stay the new telemarketing rules pending the disposition of the CMA's request to review and vary
Decision 2004-35. The stay applied to all requirements set out in Decision 2004-35, except the requirement
that telecommunications service providers track and report complaint statistics effective 1 January 2005.
On 13 December 2004, the Minister of Industry announced that the Government was introducing legislation,
Bill, C-37, that would amend the Telecommunications Act in order to provide the Commission with the ability
to establish a national Do Not Call List.
The Commission issued Final standards for quality of service indicators for use in telephone company
regulation and other related matters, Telecom Decision CRTC 2000-24, 20 January 2000. The Commission
also issued Quality of Service Indicators for Use in Telephone Company Regulation, Telecom Decision
CRTC 97-16, 24 July 1997.
Decision 2002-34.
Retail quality of service rate adjustment plan and related issues, Telecom Decision CRTC 2005-17,
24 March 2005.
110
Wireless Communications
Residential consumers continue to increase their consumption of wireless service. The
percentage of Canadian households with wireless service has increased year after year, from
26.2% of households in 1998 to an estimated 53.9% of households in 2003.148
The industry has developed a variety of rate plans for voice as well as data and Internet access to
meet consumer needs. As displayed in Table 6.2.3, it is not unusual for a household to have
multiple subscriptions.
In the CRTC 2004 and 2005 Decima Surveys,149 consumers were asked to indicate their level of
interest in being able to retain their wireless telephone number when changing from one wireless
service provider to another. As displayed in Table 6.2.4, based on the 2005 Decima Survey, of
the 68% of households in Table 6.2.3 that had at least one wireless subscription,150 70% stated
that it was important that they keep their existing wireless telephone number if they were to
change service providers. The percentage of households in support of retaining existing
telephone numbers increased over the previous year.151 As was the case in last year's survey, the
importance of keeping the telephone number when changing service providers increased with the
number of wireless subscriptions a household had.
On 21 April 2005, the wireless industry led by the Canadian Wireless Telecommunications
Association (CWTA) announced that the Canadian wireless carriers would implement number
portability in Canada. Number portability will enable Canada's wireless customers to keep the
same phone number when changing service providers (either wireless or wireline). The CWTA
published a proposed implementation plan on 12 September 2005.
Table 6.2.4
Importance of Keeping Existing Wireless Telephone Number When Changing Suppliers
Households with:
One wireless
subscription
Two wireless
subscriptions
Three or more
wireless
subscriptions
All households
with at least one
wireless
subscription
2004
2005
2004
2005
2004
2005
2004
2005
Important
61%
65%
70%
76%
74%
80%
65%
70%
Not Important
36%
32%
28%
24%
24%
18%
32%
28%
Don't know/ did not answer
4%
3%
1%
1%
2%
1%
3%
2%
Source: CRTC 2004 and 2005 Decima Surveys
Base: Households with at least one wireless subscription
148
149
150
151
This is based on monitoring reports submitted by the ILECs pursuant to Order CRTC 2000-393, 10 May 2000.
The June 2005 report was filed with the Commission on 30 June 2005.
CRTC 2005 Decima Survey Q2a.
In the Survey, there were 1,376 households with at least one wireless subscription. This sample provides an
overall margin of error within +/-3%, 19 times out of 20.
In the CRTC 2005 Decima Survey Q3a, 65% of households with at least one wireless subscription stated that it
was important that they keep their existing wireless telephone number if they were to change suppliers.
111
In the CRTC 2005 Decima Survey, all households were asked to compare wireless service to
wireline service and to indicate whether they would consider replacing their wireline with
wireless service.152 As displayed in Table 6.2.5, in 2005, 55% of all households rated wireless
service as good as, or better than wireline service, compared to 48% in 2004. Sixty-two percent
of the households surveyed in 2005 that had at least one wireless subscription rated wireless
service as good as or better than wireline service, compared to 54% in 2004. Although the
consumers' rating of wireless service as being as good as or better than wireline service increased
from 48% in 2004 to 55% in 2005, consumers remained decidedly unchanged when asked if
their wireless service would replace wireline service. In 2005, 83% of the households indicated
that they would not consider replacing their wireline service with wireless, compared to 82% in
2004.
The households, with and without wireless subscriptions, that answered yes to being prepared to
consider replacing their wireline service with wireless service (15% of all households), were
asked to pick among a list of factors the two most important ones to consider if they were to
make such a move.153 Consistent with the results of the previous year, the factors most often
cited, were: (1) the cost of wireless service, followed by (2) quality/reliability, and (3) keeping
the same telephone number.
152
153
CRTC 2005 Decima Survey, Q4.
CRTC 2005 Decima Survey Q4a.
112
Table 6.2.5
Comparison of Wireline and Wireless Service
Compare wireless service to wireline service - which is better?
Households with wireless subscriptions
Number of
Wireless Phones
in Household:
All
Households
No wireless
subscriptions
One or more
One only
Two only
Three or more
2004
2005
2004
2005
2004
2005
2004
2005
2004
2005
2004
2005
Wireless is better
Wireless is as
good
Wireless is not as
good
9%
29%
9%
33%
11%
43%
13%
49%
10%
43%
8%
52%
10%
45%
12%
49%
18%
37%
19%
45%
10%
38%
10%
45%
29%
31%
40%
34%
38%
35%
43%
34%
44%
34%
36%
33%
Don't know/ did
not answer
34%
28%
6%
4%
9%
5%
3%
5%
2%
2%
15%
12%
Consider replacing wireline service for exclusive use of wireless service
Number of
Wireless Phones
in Household:
No wireless
subscriptions
Households with wireless subscriptions
One or more
2004
Two only
Three or more
2005
2004
2005
2004
2005
2004
2005
2004
2005
Yes - would
12%
12%
17%
19%
consider
replacing
No - would not
84%
86%
80%
78%
consider
replacing
Don't have
4%
2%
3%
2%
traditional phone
service/ don't
know/ did not
answer
Source: CRTC 2004 and 2005 Decima Surveys
Base: All households
15%
13%
17%
17%
28%
28%
15%
15%
83%
85%
80%
80%
69%
68%
82%
83%
2%
1%
3%
3%
3%
2%
3%
2%
2004
2005
One only
All
households
Access to the Internet
Internet service providers (ISPs) offer a range of Internet services that include dial-up, DSL,
cable modem, and wireless access services, with a variety of customer plans ranging from hourly
charges to a flat monthly fee for a certain number of hours or unlimited access. In 2003,
Statistics Canada identified 256 ISPs providing Internet services.154 This group consists of
incumbent telephone companies, cable companies and a large number of small entities that resell
Internet service. In 2004, about 7 million of 12.3 million Canadian households accessed the
Internet from home, representing a gain of 7% over the previous year.
154
Statistics Canada; "Struggling to remain competitive: a study of factors impeding growth for Canadian Internet
service providers", p.2; Heather Archibald; Catalogue No. 63F0002XIE No. 44, July 2003.
113
In 1998, the Commission required cable companies to open their networks to ISPs,155 and in
2003,156 ruled on wholesale prices charged by the cable companies to ISPs. As stated in section 5
of this report, broadband service in 2004 was available to 95% of households in urban centres
and 63% of households in rural areas.
Pricing for high-speed Internet service has reached the point where it is comparable to low-speed
service for users requiring a lot of connect time.157 Although dial-up can be generally obtained
for approximately $10/month, depending on the plan, plus an additional charge for excess
connect time, dial-up Internet subscriptions continue to decline in favour of high-speed service
which is priced from approximately $35/month.
In Decision 2003-49,158 the Commission mandated that high-speed DSL access service be
provided by Aliant Telecom, Bell Canada, MTS, SaskTel and TCI to residential customers who
subscribe to local wireline services of a CLEC provided via the ILEC's local loops. As a result,
consumers who switch their local service from an ILEC to a CLEC need not give up their
subscription to an ILEC's high-speed service.
Consumer Awareness
In a competitive market, consumers have choices. Their choices in telecommunications services
include, not only selection of the service that best meets their needs, but also encompasses choice
of supplier. In making these decisions, consumers assess, among other things, the features,
prices, benefits and quality of the services offered, and the customer support provided.
In the CRTC 2005 Decima Survey, consumers were asked how easy it was to compare the prices
and features offered by companies in local and long distance wireline services, wireless and
Internet access services.159 The results of the surveys for the last three years are shown in
Table 6.2.6.160
155
156
157
158
159
160
Regulation under the Telecommunications Act of certain telecommunications services offered by "Broadcast
Carriers", Telecom Decision CRTC 98-9, 9 July 1998. See also Application concerning access by Internet
service providers to incumbent cable carriers' telecommunications facilities, Telecom Decision CRTC 99-11,
14 September 1999.
IMCAIP's request for mandatory resale of retail Lite Internet service; Telecom Decision CRTC 2003-47,
14 July 2003.
Merrill-Lynch Broadband Handbook, 21 February, 2003, p. 17.
Call-Net Enterprises Inc. - Request to lift restrictions on the provision of retail digital subscriber line
Internet services, Telecom Decision CRTC 2003-49, 21 July 2003.
CRTC 2005 Decima Survey, Q8.
Ipsos-Reid Survey, 2003, Q4 - based on 1,055 respondents.
114
Table 6.2.6
Consumers' Ability to Compare Service Offerings
Local Service
Long Distance Service
Cellular Service
Internet Service
2003
2004
2005
2003
2004
2005
2003
2004
2005
2003
2004
2005
Easy to compare
58%
61%
63%
68%
54%
53%
55%
47%
44%
65%
55%
52%
Not easy to compare
36%
30%
23%
30%
39%
34%
33%
36%
36%
33%
25%
24%
Don't know/ did not
answer or service
does not apply
6%
9%
14%
3%
7%
13%
12%
16%
20%
12%
20%
24%
Source: CRTC 2004 and 2005 Decima Survey and CRTC 2003 Ipsos-Reid Survey
Base: All households
Respondents were asked if they had ever subscribed to a company other than their traditional
telephone company for long distance services.161 As displayed in Table 6.2.7, there is a slight
increase in 2005 in the number of households who at one time subscribed to long distance
service from an alternative provider, compared to 2004.
Table 6.2.7
Consumers' Ever Subscribing to Alternate Company Long Distance Services
Long Distance Service
2004
Yes
No
Don't know
41%
58%
1%
2005
42%
55%
Source: CRTC 2004 and 2005 Decima Survey
Base: All households
2%
Overall, 64%162 of respondents stated they had benefited from the availability of competition in
telecommunications services compared to 67%163 from the previous year.
Regulatory Developments Affecting Consumer Services
The Commission attaches high importance to the advancement of consumer interests and
consumer access to telecommunications services in the context of the continued transition from a
monopoly to a competitive telecommunications market. The Commission monitors and
implements certain regulatory measures to ensure that basic telephone service provided by the
ILECs continues to meet the changing needs of consumers:
161
162
163
CRTC 2005 Decima Survey, Q10 a,b; CRTC 2004 Decima Survey, Q10a,b.
CRTC 2005 Decima Survey, Q11 c.
CRTC 2004 Decima Survey, Q6c.
115
•
In light of the benefits of itemized billing, the large ILECs are now providing all customers
with monthly itemized billing statements.164, 165
•
Although demand for pay telephone service was declining, the Commission, in Decision
2004-47,166 concluded that pay telephone service is still an important public service that
wireless service has not rendered obsolete. The Commission considered that access to pay
telephone service was particularly crucial in rural and remote communities where consumers
may not have access to basic residential service and where telecommunications service
providers may not offer wireless services. The Commission therefore established a
notification process for ILECs when the last pay telephone in a community is scheduled for
removal. The Commission also directed the ILECs to implement a teletypewriter upgrade
program for certain pay telephones, to provide access to pay phones by deaf consumers.
•
Three-digit dialing (N-1-1) such as 411, 711 and 9-1-1 is used to provide public access to
specific services. In Decision 2001-475,167 the Commission, among other things, established
guidelines to be used to determine the type of services that may be assigned to unused 3-digit
codes. The Commission determined that in view of the scarcity of N-1-1 numbers, provision
of N-1-1 services must be based on a compelling need to serve the broad public interest that
cannot be satisfied through other dialing arrangements. The following N-1-1 codes have been
assigned for public access to designated services:
•
•
•
•
•
•
•
164
165
166
167
168
169
170
2-1-1 for access to community social services;168
3-1-1 for access to non-emergency municipal government services;169
4-1-1 for access to Directory Assistance;
6-1-1 for access to service providers' network repair service;
7-1-1 for access to Message Relay Service (MRS) by the deaf;
8-1-1 for access to non-urgent health care telephone triage services;170
9-1-1 for access to emergency services.
Bell Canada and Aliant Telecom Inc. - Show Cause on the issuance of monthly itemized billing statements
- Follow-up to Decision 2002-34, Telecom Decision CRTC 2003-86, 23 December 2003.
Télébec and TELUS Québec. - Show Cause on the issuance of monthly itemized billing statements
- follow-up to Decision 2002-43, Telecom Decision CRTC 2004-67, 8 October 2004.
Access to pay telephone service, Telecom Decision CRTC 2004-47, 15 July 2004.
Allocation of three-digit dialing for public information and referral services, Decision CRTC 2001-475,
9 August 2001 (Decision 2001-475).
Ibid.
Assignment of 311 for non-emergency municipal government services, Telecom Decision CRTC 2004-71,
5 November 2004.
Alberta Health and Wellness' request for code 8-1-1 for non-urgent health teletriage services,
Telecom Decision CRTC 2005-39, 6 July 2005.
116
6.3
Business Customers
In 2004, roughly 91% of business wireline accounts were small business accounts, a decrease
from the 95% in 2003. However, the revenues171 generated by these accounts represented
approximately 16% of total business wireline revenues. Table 6.3.1 summarizes the 2004
distribution of small, medium, large and very large business accounts and revenues for
incumbents, competitors (ILEC out-of-territory) and competitors (other).172
Table 6.3.1
Business Accounts and Revenues Distribution (2004)
Business Accounts
Incumbents
Competitors (ILEC out-of-territory)
Competitors (other)
Industry
Source: CRTC Data Collection
Small
Medium
Large
91.3%
89.1%
93.4%
91.4%
6.9%
8.3%
2.9%
6.5%
1.5%
1.9%
3.6%
1.8%
Business Revenues
Very
Large
0.3%
0.7%
0.1%
0.3%
Small
Medium
Large
16.8%
10.6%
22.8%
16.4%
15.4%
10.2%
16.5%
14.7%
14.5%
15.6%
24.0%
15.4%
Very
Large
53.3%
63.6%
36.7%
53.6%
During the 1999 to 2004 period, the number of large and very large business accounts combined,
as a percentage of total business accounts, remained relatively constant in a roughly 1% to 4%173
range for these 3 groups of service providers. However, the combined revenues over the period
represented 79% of the total business revenues for the competitors (ILEC out-of-territory) and
61% for the competitors (other). In 2004, the number of large business accounts was
approximately 6 times the number of very large accounts. However, in terms of revenues, the
very large business revenues were approximately 3.5 times the large business revenues.
Figure 6.3.1 compares the total incumbent, competitor (out-of-territory) and competitor (other)
local, long distance, and data and private line revenues for the small, medium, large and very
large business market segments in 2004. Incumbents had the lion's share of these market
segments, with approximately 70%, or more, of each of the business market segment revenues.
Except for the very large business segment where the competitors (ILEC out-of-territory) had
approximately 20% of the business revenues, the competitors (other) had the majority portion of
the total competitor share in each of the remaining market segments.
171
172
173
Revenues include wireline revenues from local and access, long distance and data & private line services.
For the purposes of this report, wireline business customers were segmented into small, medium, large and
very large customers. A small business customer is defined as a business account that generated less than
$6,000 in annual telecommunications revenues. A medium business customer is defined as a business account
that generated annual revenues of at least $6,000 but less than $30,000. A large business customer is defined
as a business account that generated annual revenues of at least $30,000 but less than $240,000. A very large
business account is defined as a business account that generated annual revenues of at least $240,000.
Source: CRTC Data Collection.
117
Figure 6.3.1
Total Revenue174 Distribution
Incumbents, Competitors (Out-of-Territory) and Competitors (Other)
2004
100
Percent
80
60
40
20
bu
sin
es
s
la
rg
e
V
er
y
bu
sin
es
s
Competitors (other)
La
rg
e
bu
sin
es
s
ed
iu
m
Incumbents
M
Sm
al
l
bu
sin
es
s
0
Competitors (ILEC out-of-territory)
Source: CRTC Data Collection
Figure 6.3.2 compares the local service revenues of incumbents, competitors (out-of-territory)
and competitors (other) from the small, medium, large and very large business market segments in
2004. The incumbents were the dominant suppliers of local service to all the business customers.
Figure 6.3.2
Local Service Revenue Distribution
Incumbents, Competitors (Out-of-Territory) and Competitors (Other)
2004
100
Percent
80
60
40
20
Incumbents
Competitors (other)
bu
sin
es
s
e
la
rg
Ve
ry
rg
e
bu
sin
es
s
La
bu
sin
es
s
ed
iu
m
M
bu
sin
es
s
Sm
al
l
0
Competitors (ILEC out-of-territory)
Source: CRTC Data Collection
174
Revenues include wireline revenues from local and access, long distance and data & private line services.
118
The competitors (other) had approximately 20% of the long distance market for the small,
medium and large business customers, as displayed in Figure 6.3.3. The competitors (ILEC
out-of-territory) had approximately 15% of the long distance market for the small, medium and
large business customers and over 30% of the very large business market. In all cases, the
incumbents had over 55% of the long distance revenues in each of these segments.
Figure 6.3.3
Long Distance Service Revenue Distribution
Incumbents, Competitors (Out-of-Territory) and Competitors (Other)
2004
80
Percent
60
40
20
Incumbents
Competitors (other)
bu
sin
es
s
la
rg
e
V
er
y
bu
sin
es
s
La
rg
e
bu
sin
es
s
M
ed
iu
m
Sm
al
l
bu
sin
es
s
0
Competitors (ILEC out-of-territory)
Source: CRTC Data Collection
With respect to data and private line service revenues, competitors (other) had approximately
25% to 30% of the medium and large business market and a smaller percentage of the small and
very large market. Competitors (ILEC out-of-territory) had approximately 10% of the medium
market and increasing amounts of the large and very large markets.
119
Figure 6.3.4
Data and Private Line Service Revenue Distribution
Incumbents, Competitors (Out-of-Territory) and Competitors (Other)
2004
100
Percent
80
60
40
20
Incumbents
Competitors (other)
ss
bu
sin
e
la
rg
e
V
er
y
ss
bu
sin
e
La
rg
e
ss
bu
sin
e
M
ed
iu
m
Sm
al
l
bu
sin
es
s
0
Competitors (ILEC out-of-territory)
Source: CRTC Data Collection
120
Appendix 1
Page 1 of 1
Summary of Canadian Telecommunications
Milestones to Competition
Market
Year
Details
Data and Private Line
1979
The interconnection of private line data circuits
between CNCP Telecommunications and Bell Canada
was permitted.
Terminal Equipment
1982
Customers were permitted to purchase their own terminal
equipment (e.g., telephone sets).
Wireless
1984
A duopoly market structure was initially created in 1984;
two additional national mobile wireless licences were
issued by Industry Canada in 1995. The terms and
conditions for wireless service providers to interconnect
to the incumbent telephone companies' networks were
initially established in 1984.
Long Distance (resale)
1987
Long distance resale was first permitted in 1987, with the
rules being liberalized in 1990. Resale of international
long distance service was permitted in 1991.
Long Distance
(facilities-based)
1992
Facilities-based competition was permitted in 1992,
but full competition did not begin until 1994 when the
incumbent telephone companies were required to modify
their networks to allow customers to make long distance
calls without dialling extra digits (equal ease of access).
Facilities-based competition in the provision of
international services was permitted in 1998.
Local
1997
The regulatory framework for facilities-based competition
in the local services market was established for most large
incumbent telephone companies in 1997. In the following
year, these large incumbent were required to begin to
modify their networks to allow customers to switch
service providers without changing telephone numbers
(i.e., implement local number portability).
Pay Telephone
1998
Incumbent telephone companies were required to put in
place access tariffs and service agreements for new entrants.
Local VoIP Services
2005
A regulatory framework for voice communication services
using Internet Protocol (VoIP) was established. The
Commission determined that local VoIP services should
be regulated as local exchange services.
Appendix 2
Page 1 of 1
Summary of Canadian Telecommunications
Markets Subject to CRTC Forbearance Rulings
Market
Year
Details
Terminal Equipment
1994
Sale and rental of terminal equipment.
Wireless
1994
Cellular, personal communications services, mobile
radio and paging, except in the case of incumbent
in-house mobile service providers. Forbearance
extended to incumbent mobile operations, starting
in 1998, once competitive safeguards had been
implemented.
Satellite Services
1994
Telesat's digital video compression services initially;
further services offered by Telesat, such as sale/lease of
earth stations and RF channels, in subsequent years.
Services Provided by
Non-dominant Carriers
1995
Services, such as long distance, data, Internet and private
line, provided by non-dominant competitive carriers.
Data and Private Line
1997
High-speed/DDS interexchange private line services
provided by the incumbent telephone companies on a
route-specific basis.
Internet Services
1997
Incumbent telephone companies' retail Internet services
in 1997 and those of cable providers in 1998.
Long Distance
1998
Toll and toll-free services.
International Services
1998
Initially excluded Teleglobe; however, certain
international services provided by Teleglobe later
forborne as well.
Data and Private Line
2004
With some conditions, additional high capacity digital
data interexchange private line services forborne from
regulation on routes for which competitors of several
incumbent local exchange carriers now offer, or
provide, services at DS-3 or greater bandwidth.
Appendix 3
Page 1 of 2
Summary of Certain Recent CRTC Rulings
Relevant to Telecommunications Competition1
Ruling
Details
Call-Net Part VII Application - Promotion of
local residential competition, Telecom
Decision CRTC 2004-4, 27 January 2004.
The Commission granted, with modifications,
Call-Net's request for an education program to
inform the public of the availability and terms of
local competition, and Call-Net's request for an
extension from three months to 12 months of the
no-contact restriction under the winback rules.
FCI Broadband - Request to lift restrictions
on the provision of retail digital subscriber
line Internet services to business customers,
Telecom Decision CRTC 2004-34,
21 May 2004.
The Commission directed Bell Canada,
Aliant Telecom, SaskTel and TCI, to provide upon
request, their respective retail digital subscriber line
Internet service to any business CLEC primary
exchange service customer who is being served by a
local loop leased from any of them and who would
otherwise qualify for the service.
Point of interconnection and service charge
rates, terms and conditions for third party
Internet access using cable networks,
Telecom Decision CRTC 2004-69,
2 November 2004.
The Commission approved tariffs and agreements
setting out the rates, terms and conditions for third
party Internet access to allow Internet service
providers to connect with and serve customers over
the cable networks of the major cable companies,
namely, Cogeco Cable Canada inc., Rogers
Communications Inc., Shaw Communications Inc.,
and Vidéotron ltée.
Competitor Digital Network Services,
Telecom Decision CRTC 2005-6,
3 February 2005.
The Commission determined that the ILECs provide
to competitors DNA access and links, DNA
intra-exchange, central office (CO) channelization,
non-forborne metropolitan IX, copper and optical
co-location links and other CO connecting links.
The Commission established the appropriate pricing
treatment for each service, the rates, terms and
conditions applicable to CDN services, and
compensation to the ILECs for their provision of
CDN services to competitors.
1
See previous GIC monitory reports for a summary of earlier rulings.
Appendix 3
Page 2 of 2
Ruling
Details
Emergency service obligations for local VoIP The Commission directed Canadian carriers, offering
fixed (non-nomadic) local VoIP service, where the
service providers, Telecom Decision
end-user is assigned an NPA-NXX native to any of
CRTC 2005-21, 4 April 2005.
the local telephone exchanges within the region
covered by the customer's serving Public Safety
Answering Point (PSAP), to provide 9-1-1/E9-1-1
service, where it is available from the ILEC.
With respect to voice services offered on a nomadic
basis, or with a telephone number that is not native
to any of the telephone exchanges within a
customer's PSAP serving area, the Commission
directed Canadian carriers offering these local VoIP
service configurations to implement, on an interim
basis, a level of service functionally comparable to
basic 9-1-1.
In light of the public safety issues related to the
limitations on 9-1-1/E9-1-1 service provided with
local VoIP services, the Commission directed
Canadian carriers to notify customers regarding any
limitations, before service commencement and
during service provision and to obtain from their
customers express consent to such limitations.
Promotions of local wireline services,
Telecom Decision CRTC 2005-25,
27 April 2005.
The Commission permitted ILEC promotions in the
local wireline market, subject to a number of
competitive safeguards.
Review of price floor safeguards for retail
tariffed services and related issues, Telecom
Decision CRTC 2005-27, 29 April 2005.
The Commission modified the imputation test for
certain stand-alone competitor services, general
tariff bundles, and pricing rules for term and
volume contracts.
Appendix 4
Page 1 of 3
Glossary of Terms and Acronyms1
Analog service: Transmission of a set of audible frequencies enabling telephony voice
conversations or dial-up Internet access via a regular telephone line. Virtually all residential
telephones are analog devices. Analog signals are typically converted to a digital format.
Broadband services: For the purposes of this report, a service enabling the two-way
transmission of voice, data or multimedia communications with speeds in one direction in
excess of 1.544 Mbps.
Cable Internet service: A bi-directional high-speed digital communication service, enabling
Internet access through the use of cable TV coaxial network.
Competitor Digital Network (CDN) Service: A Commission mandated service where certain
CDN service components are provided to competitors at mandated wholesale rates. In addition,
the service may not be utilised for simple resale.
Centrex resale: The purchase and resale of bulk Centrex service to retail customers.
Centrex service: A telephone company-supplied local service with associated sets of calling
features (e.g., call display, call forwarding).
Competitive local exchange carrier (CLEC): A facilities-based provider of local exchange
service, other than an ILEC.
CRTC Interconnection Steering Committee (CISC): A forum for parties, with Commission
assistance, to resolve local competition implementation issues of a technological, operational
or administrative nature and to resolve other telecommunications issues.
Digital network access (DNA) service: A tariffed service of the ILECs that provides for the
digital transmission of information from the customer's premises to another premises or a
network service within the local telephone exchange.
Digital service: The transmission of binary data signals (a continuous string of zeros and ones).
Such service is used for computer-to-computer communications or for transmission of
digitally-encoded analog signals in telephone and digital cellular networks.
Digital subscriber loop (DSL): A local copper loop equipped to allow high-speed
data transmission.
1
A complete glossary of telecommunications terms can be found at http://www.crtc.gc.ca/dcs/eng/glossary.htm.
Appendix 4
Page 2 of 3
Facilities-based carrier: A carrier that owns and operates transmission facilities to provide
telecommunications services
Fibre optics: A broadband transmission facility which uses a beam of light to transmit a digital
signal through a glass strand.
Fixed wireless: Point-to-point transmission through the air between stationary devices.
Incumbent local exchange carrier (ILEC): A company that, prior to the introduction of
competition, provided monopoly local telephone service.
Internet service provider (ISP): A company that provide customers with Internet access.
Interexchange private line (IXPL): A dedicated communications channel provided at flat rates
between points in different exchanges.
Local loop: Sometimes called the "last mile", the connection between the customer premise and
the central office.
Long distance resale: The purchase and resale of bulk private line and other interexchange
services for the provision of long distance services to retail customers.
Mobile service: Wireless service which includes analog and digital cellular (e.g. Personal
Communications Services or PCS), but excludes fixed wireless service.
Narrowband service: For the purpose of this report, a service enabling the two-way
transmission of voice or data communications with speeds in either direction not exceeding
64 Kbps.
Private line service: A dedicated communications channel between two or more points.
Support structure: Structures, such as poles and conduit, that support transmission facilities
(copper, cable and/or fibre optics).
Terminal equipment: Equipment located at the customer's premises, used for voice or data
communications (e.g., telephone set).
Voice over Internet Protocol (VoIP): A service or capability utilizing both hardware and
software that employs IP networks, such as the Internet, as the transmission medium for voice
communication.
Appendix 4
Page 3 of 3
VoIP services: Voice communication services using Internet Protocol (IP) that use telephone
numbers that conform to the North American Numbering Plan, and that provide universal access
to and/or from the public switched telephone network (PSTN). VoIP services that provide
subscribers with access to and/or from the PSTN, along with the ability to make or receive calls
that originate and terminate within an exchange or local calling area as defined in the ILECs'
tariffs, are referred to in this report as local VoIP services.
Wireless service: A telecommunications service via the airwaves using radio, cellular, satellite,
microwave and other wireless transmission systems, including fixed wireless.
Wireline service: Telecommunications service offered over wires.
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