Communications Monitoring Report 2017: Telecommunications sector overview

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5.0 Telecommunications sector overview

Canada’s telecommunications industry consists of six sectors: local, long distance, Internet, wireless, data, and private line. The two largest sectors combined, Internet and wireless, have grown by more than $7.3 billion or 25.9% since 2012, and accounted for more than 63.8% of total telecommunications revenues in 2012 and 72.3% in 2016. Over the same five-year period, wireline voice service revenues have shown steady declines, representing 18.5% of total telecommunications revenues in 2016 compared to 25.6% in 2012.

In 2016, Canadian telecommunications revenues reached $48.7 billion, with the vast majority (92%) derived from retail services and the balance (8%) from the wholesale sector. Service providers supplied retail services to over 14 million households, 1 million businesses, and, through the wholesale market, 800 other telecommunications entities. Service providers continued to increase investments in their infrastructure, with capital expenditures reaching $11.6 billion in 2016, an 11.3% increase over 2015 levels.

Large incumbent telecommunications service providers (TSPs)^{Footnote 1} captured over 59% of industry revenues. Their main group of competitors, cable-based carriers,^{Footnote 2} reported 33% of revenues and 8% of the total number of companies. Resellers^{Footnote 3} comprised nearly 69% of service providers but generated only 4% of revenues. The remaining 4% of revenues were captured by smaller incumbent TSPs and other facilities-based service providers.^{Footnote 4}

In December 2016, the Commission issued Telecom Regulatory Policy 2016-496, in which it set out policies and actions it is taking to help Canadians participate in the digital economy and society. The main objectives of the new policies and actions are as follows:

• Canadians in urban, rural, and remote areas can access affordable, high-quality telecommunications services;
• telecommunications companies continue to invest in and various levels of government continue to fund robust infrastructure that can be upgraded in the future and that is capable of providing high-quality telecommunications services to Canadians across the country;
• Canadians can access innovative service offerings that enhance social and economic development; and,
• Canadians can make informed decisions about their telecommunications services.

The Commission also established the following universal service objective: Canadians, in urban areas as well as in rural and remote areas, have access to voice services and broadband Internet access services, on both fixed and mobile wireless networks. To measure the successful achievement of this objective, the Commission established several criteria, including the following:

• Canadian residential and business fixed broadband Internet access service subscribers should be able to access speeds of at least 50 megabits per second (Mbps) download and 10 Mbps upload, and subscribe to a service offering with an unlimited data allowance; and
• the latest generally deployed mobile wireless technology should be available not only in Canadian homes and businesses, but on as many major transportation roads as possible in Canada.

To help meet the universal service objective, the Commission began to shift the focus of its regulatory frameworks from wireline voice services to broadband Internet access services. The Commission will establish a mechanism to assist in funding continuing access to the basic telecommunications services that form part of the universal service objective. The Commission will also begin to phase out the subsidy that supports local telephone service and review its voice service regulatory frameworks. The Commission established regulatory measures to address issues related to accessibility for persons with disabilities and to enhance consumer empowerment. The effects of this policy will be reflected in future editions of the Communications Monitoring Report.

i) Revenues

As shown in the table above, over 90% of telecommunications revenues are generated from the retail sector.

ii) Forbearance

The Commission refrains from regulation when it finds that a service is subject to sufficient competition or where refraining is consistent with the Canadian telecommunications policy objectives. This is referred to as forbearance. Where a service is forborne from regulation, the provider is generally relieved of the obligation to provide it pursuant to a Commission-approved tariff. Other aspects of the service may still be regulated.

In 2016, approximately 95% of telecommunications revenues were from services for which the Commission does not regulate the retail rates.

iii) Canadian ownership

Section 16 of the Telecommunications Act addresses the eligibility of Canadian carriers to operate as telecommunications common carriers. For the purposes of applying the provisions of Section 16, the Commission has determined that, for the period between the date of release of the 2016 Communications Monitoring Report and the date of release of the 2017 edition, total annual revenues from the provision of telecommunications services in Canada was $48.7 billion.

iv) Number, size, and type of companies

Figure 5.0.1 Distribution of telecommunications revenues, by type of TSP, 2016

The industry is dominated by 10 large companies that collectively, with their affiliates, accounted for 93% of Canadian telecommunications revenues in 2016. The remaining companies accounted for less than $3.4 billion of these revenues.

Figure 5.0.2 Percentage of total combined telecommunications revenues by ownership group

Providers of telecommunications services are classified as either incumbent TSPs or alternative service providers. The alternative service providers consist of resellers and other facilities-based service providers, which include cable-based carriers.

Incumbent TSPs are the traditional telephone companies. For monitoring purposes, this group of TSPs is further subdivided in to large and small incumbent TSPs. Additional details on the classification of providers of telecommunications services (TSPs) can be found in Appendix 8.

The incumbent TSPs’ revenues have increased at an average annual rate of 1.1% over the 2012 to 2016 period. Over the same period, revenues for alternative service providers, including resellers, grew 5.3% annually. Overall, the alternative facilities-based service providers have experienced the strongest growth in telecommunications revenues, which increased 24%, from $14.4 billion in 2012 to $17.9 billion in 2016.

v) Financial performance

There are a number of elements to consider in assessing a company’s financial performance or profitability. One of these is EBITDA (earnings before interest, taxes, depreciation and amortization) as a percentage of total revenue (EBITDA margins).

Figure 5.0.3 Telecommunications revenues and EBITDA margins

Non-facilities-based alternative service providers (i.e. resellers) generally had a lower EBITDA margin. In 2016, contrary to previous years, the EBITDA margin for other service providers (i.e. those that were neither cable-based nor traditional telephone companies) was similar to that of facilities-based service providers. Despite modest wireline and wireless revenue growth in 2016, both segments experienced a decrease in EBITDA margins from 35.0% and 44.6% to 33.3% and 43.4%, respectively.

Figure 5.0.4 Percentage of total revenues by size of entity and their respective EBITDA margins, 2016

vi) Annual investment in plant and equipment

“Annual investment in plant and equipment” refers to the capital expenditures made to ‘replenish’ or upgrade a telecommunications service provider’s network. In 2016, TSPs with over $100 million in revenues spent $11.6 billion on capital expenditures, of which 46% was for access services and 23% was network related. The remaining 31% related to non-network activities such as billing and fleet operations.

Investments in spectrum

Total investments made in spectrum between 2012 and 2016 were $0.29 billion, $0.28 billion, $5.26 billion, $2.96 billion, and $0.15 billion, respectively. The data excludes TSPs with revenues less than $100 million. The amounts reported in 2012 and 2013 reflect investments made mainly by satellite carriers. Investments made between 2014 and 2016 reflect investments made to acquire AWS-3 (advanced wireless services), 700 megahertz (MHz), and 2500 (MHz) spectrum.^{Footnote 5}

Capital intensity

A useful measure to compare annual capital expenditures is “capital intensity.” Under this measure, cable-based carriers and other facilities-based service providers spent, on average, 40 cents from every dollar of revenue over the past three years on wireline facilities, compared to 36 cents by the incumbent TSPs.

Figure 5.0.5 Telecommunications capital expenditures as a percentage of revenues, by type of TSP

5.1 Telecommunications retail sectors

As noted in the previous section, Canada’s telecommunications industry consists of six sectors: local, long distance, Internet, wireless, data, and private line.

In 2012, revenues from wireless services were $19.5 billion, or 49% of total retail revenues. By 2016, wireless service revenues increased to $23.2 billion, or 52% of total retail revenues. This growth was driven in large part by more subscriptions and heightened demand for wireless data services. Data revenues, excluding roaming and other services (e.g. interconnection), experienced an average annual growth rate of 15.2% between 2012 and 2016.

In 2016, Canadian retail telecommunications revenues were $44.7 billion, of which 48% were from wireline services. Of the wireline revenues, 59% were from residential services and 41% from business services. The top five incumbent TSPs and top five cable-based carriers accounted for 59% and 35% of retail telecommunications revenues, respectively. Collectively, these 10 companies captured 94% of all retail revenues. The remaining 6% of the revenues were garnered by a large number of resellers and other facilities-based service providers. The data suggests that companies which operated in multiple sectors continue to have clear competitive advantages relative to those that are less integrated.

Wireline revenues have increased at a much slower pace since 2012. Wireline service revenues increased from $20.6 billion in 2012, or 51% of retail telecommunications revenues, to $21.4 billion, or 48%, in 2016. This small expansion masks the fact that wireline voice service revenues have fallen by nearly $2.0 billion, or 20.4%, since 2012. The number of local lines has also declined from 17.7 million lines in 2012 to 15.2 million lines in 2016. In contrast, Internet was the only wireline service that experienced positive revenue growth in 2016. In fact, the Internet sector had the fastest growth across all sectors, with revenue growth of more than $930 million, or 10.1%, in 2016.

i) Revenues

Telecommunications revenues come from a variety of sources. Wireline voice service revenues come from local telephone and long distance services, while revenues from non-voice services come from Internet services, newer data protocols services (such as Ethernet and IP VPN^{Footnote 6}), legacy data protocols services (such as X.25 and frame relay), and private line. Wireless service revenues come from mobile voice and data services, and from the sale and rental of mobile devices.

Similar to last year, revenue growth comes from the Internet and wireless sectors. These sectors reported growth rates of 10.1% and 3.2%, respectively, while other sectors’ revenues decreased.

Wireline services are generally a household or a business service, whereas wireless services are an individual or personal type of service. In 2015, the most recent period for which telephone penetration data is available from Statistics Canada’s Survey of Household Spending, 71.9% of households had wireline service, 86.1% had wireless service, 13.2% had only wireline service, and 27.5% had only wireless service.

Figure 5.1.1 Telecommunications wireline and wireless retail revenues

Figure 5.1.2 Distribution of telecommunications retail revenues, by market sector

ii) Technology indicators

Technology has been a key driver of growth in the telecommunications industry. It has promoted network efficiencies, encouraged service and product innovation, and facilitated competition. Revenues from legacy services have generally been declining as consumers switch to other services that provide greater functionality and flexibility.

Figure 5.1.3 Annual revenue change for newer and legacy telecommunications services, by technology

Figure 5.1.4 Residential IP-based service revenues

While Internet Protocol television (IPTV) revenues are growing steadily, more growth is driven by Internet access revenues.

Figure 5.1.5 Homes passed by fibre-optic cable (millions), 2016

Figure 5.1.6 Percentage of homes using fibre-optic cable provided by large incumbent TSPs

iii) Competitive landscape

Facilities-based providers of telecommunications services accounted for 97% of the retail telecommunication revenues in 2016. Cable-based carriers and other facilities-based alternative providers of telecommunications services are the largest source of competition to the incumbent TSPs.

Figure 5.1.7 Total retail telecommunications revenue market share by type of service provider, 2016

Entities with services in five or more market sectors are generally large facilities-based service providers with annual revenues greater than $100 million. Companies with services in two or fewer market sectors are generally resellers with annual revenues less than $10 million.

In the wireline telecommunications market sectors, alternative service providers made greater revenue gains in both the residential and business markets. Contributing to this increase are the cable companies that upgraded their cable networks to provide telephony services to their residential television subscribers.

iv) Contribution

In 2016, approximately 10% of residential telephone lines were in high-cost serving areas. TSPs, or groups of related TSPs, with at least $10 million in Canadian telecommunications service revenues, contributed towards the provision of residential telephone service in these areas. The total amount of subsidies paid to local exchanges carriers (LECs) has declined to $105 million in 2016.As mentioned earlier, the Commission will be phasing out the local service subsidy regime in light of its shift in focus towards broadband Internet access services.

Figure 5.1.8 Subsidy paid to local exchange carriers (LECs) and the revenue-percent charge

v) Consumer voices

In 2016, the CRTC and the Commissioner for Complaints for Telecommunications Services Inc. (CCTS) had over 30,000 communications with Canadians regarding telecommunications services. Of these, 53% were with the CRTC and 47% were with the CCTS. Wireless service issues were the most common (35%), followed by Internet issues (22%), and telemarketing issues (6.2%).

The underlying issues of these complaints were billing errors (28%), CRTC decisions and policies (23%), contract disputes/terms of service (18%), and service delivery/provision of service (15%).

5.2 Wireline voice retail sector

Over 150 companies provide local and long distance services across Canada. In 2016, the retail wireline voice sector reported $7.8 billion in revenues, 84% of which was from local telephone services. Revenues from wireline voice services decreased $728 million, or 8.5%, from the previous year. This decline is mostly from local services (70%)

Cable-based carriers accounted for approximately 30% of residential local and long distance revenues in 2016, virtually unchanged since 2013.

The Canadian wireline sector continues to face pressure from technological substitution such as wireless services, video calling applications, and instant messaging. Steady losses in the wireline voice retail sector continued in 2016 as providers reported nearly 500,000 in line reductions. The wireless retail sector gained approximately 1 million new subscribers for the same year.

Voice over Internet Protocol (VoIP) services have opened the wireline voice market sector to new non-traditional providers. Access-independent VoIP providers use broadband Internet, giving them less control over the quality of the service, to provide voice services similar to those of traditional providers at a fraction of the cost. Canadians subscribing to access-independent VoIP service now represent 569,000 subscribers, or approximately 4% of retail local telephone lines.

A monthly subscription to local telephone service typically includes unlimited local calling within a specific geographic area, emergency calling (9-1-1), message relay services, and access to long distance and dial-up Internet services. Optional add-on services or features include call display, call forwarding, and conference calling. Long distance service provides voice communication between two different local calling areas and is generally billed on a per-minute basis or offered as a flat-rate option.

i) Revenues

Local retail revenues represent 84% of all local and long distance retail revenues, steadily increasing from 78% in 2012.

ii) Subscriber data

Local telephone service subscriber data is represented by the number of telephone lines, while minutes are used for long distance.

This section categorizes local telephone lines into two types: managed and non-managed. A managed line refers to telephone service that uses a local service provider’s network, and the provider has control over call quality. A non-managed line refers to telephone service that is provided using the public Internet, with the local service provider having less control over the quality of service. This type of local service is referred to as access-independent VoIP.

The use of VoIP services in the residential and business markets varies significantly. Cable-based carriers provide local telephone service – mostly to residential customers – over their managed network using access-dependent VoIP technology. They leverage existing cable infrastructure to provide local telephone service via their cable networks. As a result, these carriers are the largest competitor to the traditional telephone companies in the residential market. Approximately 39% of households subscribed to local telephone service from a cable-based carrier in 2016, virtually unchanged since 2014.

Figure 5.2.1 Retail VoIP local lines, access-dependent and access-independent, by market

iii) Performance indicators

Figure 5.2.2 Long distance retail monthly revenues ($), per line

Aside from a slight increase in long distance revenue per business line per month from 2012 to 2013, long distance revenues per line have been consistently decreasing over the last decade for both residential and business lines.

iv) Price

Basic local telephone service includes unlimited calling within a geographic area, 9-1-1 services, and message relay services, as well as access to long distance services. Approximately 11% of households subscribing to wireline local service (unchanged from 2015) subscribe to basic service, while the remaining 89% subscribe to additional local features, which may be bundled with other services such as Internet, television, or wireless. The figures below display the price of basic local telephone service on a stand-alone basis in a number of urban and rural centres.

Excluding access-independent VoIP service providers, urban areas tend to have two to three service providers, while rural areas tend to depend on a sole service provider.

Urban centres

The bar charts below display the range of monthly prices for basic local service in 24 major urban centres in Canada. The blue bar displays the difference between the lowest and the highest price. The number in brackets along the vertical axis represents the number of providers within the urban centre.

Figure 5.2.3 Price of basic local telephone service ($/month) and number of companies providing this service in major urban centres, 2016

Rural communities

Figure 5.2.4 Price of basic local telephone service ($/month) and number of companies providing this service in urban and rural communities, by province and territory, 2016

v) Type of local facilities

Leased lines are lines acquired from facilities-based carriers. Resold lines connect directly from the underlying facilities-based carrier’s network to a customer.

Figure 5.2.5 Alternative service providers’ (including cable-based carriers) local retail lines, by type of facility

Figure 5.2.6 Local lines by type of line, (%), 2016

vi) Competitive landscape

Traditionally, large incumbent TSPs were the sole providers of long distance services in Canada. With the introduction of long distance competition in 1992, other service providers entered the market.

vii) Pay telephone service

Large incumbent TSPs continue to be the primary providers of payphone service across Canada.

5.3 Retail Internet sector and broadband availability

As mentioned in previous sections, in Telecom Regulatory Policy 2016-496, the Commission established criteria to measure the successful achievement of the universal service objective, which included the availability of a fixed broadband Internet access service with a downstream rate of at least 50 Mbps and an upstream rate of at least 10 Mbps, as well as the availability of an option for unlimited monthly data transfer (usage). As of 31 December 2016, service meeting these criteria was available to 84% of Canadian households. However, the availability varies greatly between urban and rural areas, with only 39% of rural households having access to this kind of service, versus 96% in urban areas. Overall, 11% of Canadians households subscribe to a service meeting these criteria. It is important to note that the Commission’s objective was to have these speeds available to Canadians, although actual subscription is at the discretion of consumer.

While the majority of Canadians do not subscribe to a plan meeting the Commission’s target speeds, Canadians are increasingly subscribing to faster Internet services. Subscriptions to plans including service speeds of 5 to 9 Mbps declined from 41.3% in 2012 to 19.9% in 2016, while subscriptions to plans including service speeds of 50 Mbps and higher went from just 3.6% of residential high-speed subscriptions in 2012 to 26.2% in 2016.

At the same time, Canadians are demanding more bandwidth from broadband service providers. The average monthly amount of data downloaded by residential subscribers increased 25.6% between 2015 and 2016 to 116.9 GB per month, and an average of 42.4% annually over the last five years, indicating that Canadians are likely using more video content and other high-bandwidth-consuming services. Average upload amounts also increased 4.8% in 2016, reaching an average of 11.4 GB per month.

Stimulated by increasing demand for faster Internet services and bandwidth, Internet retail revenues are increasing at an impressive pace. Internet service revenues increased 10.1%, from $9.2 billion in 2015 to $10.2 billion in 2016. 82% of these revenues ($8.3 billion) came from residential sources and 18% ($1.8 billion) came from business sources.

Internet services were provided by a variety of ISPs, consisting of traditional telephone and cable companies, fixed wireless service providers, and resellers. The revenue market share for Internet access for the top five companies (Bell, Rogers, Shaw, TELUS, and Videotron) declined slightly, from 73.2% in 2015 to 73.1% in 2016. The cable-based carriers’ revenue market share declined to 46% in 2016 from 47% in 2015, while the incumbent TSPs’ revenue market share stayed roughly stable at 40%. Residential high-speed Internet service subscriptions provided through wholesale DSL and cable have more than doubled since 2012.

Industry churn rates^{Footnote 7} declined slightly in 2016. For residential high-speed Internet access service subscriptions, the rate went down slightly over last year, from 1.80% to 1.74%. For business subscriptions, the rate also went down slightly, from 1.47% to 1.40%.

In the Communications Monitoring Report, services providers are divided in two broad categories: Incumbent TSPs, which are the companies that provided local telecommunications services on a monopoly basis prior to the introduction of competition, and alternative service providers, which encompasses all other entities.

Alternative service providers (or alternative TSPs) include cable-based carriers, which are the former cable monopolies that also provide telecommunications services; other carriers; and resellers, which are defined as those who primarily^{Footnote 8} provide services based upon others’ facilities.

In the following section (5.3), the following categories are used, to provide greater salience to cable-based carriers’ Internet services:

1. Incumbent TSPs, such as Bell Canada, Saskatchewan Telecommunications (SaskTel), and TELUS . This also includes small incumbent TSPs such as Sogetel inc. and Execulink Telecom Inc.;
2. Cable-based carriers, such as Rogers, Shaw, and Videotron; and
3. Other service providers.

The “Other service providers” category maybe be further divided in “other carriers”, such as Xplornet Communications Inc. and Zayo Canada Inc., and “resellers”, such as Distributel Communications Limited, TekSavvy Solutions Inc. and Verizon Canada Ltd.

Cable-based carriers, along with incumbent TSPs, own and operate the greater part of the infrastructure used by other service providers to provide Internet services, and together generate 88% of Internet access services revenue and have 87% of subscriptions in the residential market.

i) Revenues

Over the 2012 to 2016 period, residential Internet service revenues increased at a faster average annual rate than business Internet service revenues, i.e. 10.6% versus 3.3%, respectively

The types of Internet services available vary according to the download speed of the Internet connection. The lowest download speed comes with dial-up service, at 64 kilobits per second (Kbps). High-speed services refer to services provided including download speeds greater than 256 Kbps. Broadband service is defined as any service including a 1.5 Mbps or greater download speed. “Business transport” refers to the transfer of Internet traffic between networks. This is generally used by large business customers.

Over the 2012 to 2016 period, revenues from the business Internet access and transport service market increased on average 5.5% annually.

ii) Subscriber data

Residential Internet service subscribers receive Internet service from a variety of service providers. In 2016, residential subscribers reached 12.3 million, a 2.4% increase from 2015.

Other service providers reported the highest growth rates from 2012 to 2016, although cable-based carriers and incumbent TSPs still dominate the market. Overall, Internet subscription increased, on average, 2.9% annually since 2012. When compared to Statistics Canada’s annual population growth rates, the rate of Internet service subscriber growth was approximately three times that of population growth.

Figure 5.3.1 Residential Internet service subscriber market share by type of service provider (%)

As shown in figure 5.3.2, take-up of unlimited Internet packages increased from 12% to 23% from 2012 to 2016. However, for resale-based independent ISPs, subscribers with unlimited bandwidth packages represent approximately 55% of their subscriptions, while 75% have plans that include 300GB per month or more.

In 2016, it is estimated that Canadian households paid around $100 million in Internet overage charges, which accounts for around 1% of total residential Internet service revenues. Residential subscriptions that went over their limits on an average month are estimated at under 5%.

Canadian businesses paid around $2.5 million in Internet overage charges, with only around 1% of subscriptions going over their monthly limits on an average month.

Figure 5.3.2 High-speed residential Internet service subscribers, by transfer (upload/download) capacity (GB) included in subscriptions

In 2016, while most subscribers (51%) had transfer limits of 160GB or more, approximately 2% of subscribers had transfer limits below 20GB.

Data for tables 5.3.6, 5.3.8, 5.3.9, 5.3.10, 5.3.11, and 5.3.12, and for figure 5.3.2, are from the larger ISPs, which reported providing approximately 89% of total residential high-speed subscriptions in 2016.

Downloads still account for the vast majority of Internet usage, reaching an average of 116.9GB per month per subscriber in 2016, a 25.6% increase over 2015 levels.

iii) Performance indicators

In general, the average revenue per user (ARPU) for high-speed Internet services has been increasing since 2008.^{Footnote 9} While some packages have experienced price declines, these declines have been offset by movement towards larger, faster packages.

Not only are Canadians choosing to subscribe to faster Internet services, they are also choosing packages with more capacity. From 2012 to 2016, the amount of GB downloadable in the average package increased every year except 2013.

As shown in table 5.3.7, from 2012 to 2016, resellers consistently reported the lowest ARPU, while the highest ARPU have been attributed to the Other facilities-based TSPs category, which consists mainly of fixed wireless and satellite-based service providers.

As shown in table 5.3.10, the weighted average download and upload speeds are approaching the 50 Mbps download and 10 Mbps upload speed set out in the universal service objective. However, only 23% of subscriptions currently meet or exceed these speeds, while 79% of subscriptions exceed 5 Mbps download and 1 Mbps upload.

iv) Price

The price structure of Internet services is based on download and upload speed as well as bandwidth or monthly transfer limits.

Consistent with previous years, urban households generally had access to lower Internet service prices and had a greater number of Internet service providers (ISPs) to choose from than rural households.

In 2016, service providers were asked to report the price of services meeting the new service objective target, the former objective target as well as an intermediate service:

• 5 Mbps download and 1 Mbps upload (5/1 Mbps) (the former basic service objective target speeds)
• 25 Mbps download and 3 Mbps upload (25/3 Mbps) with at least 100 GB of monthly transfer (intermediate service)
• 50 Mbps download and 10 Mbps upload (50/10 Mbps) with unlimited monthly transfer (the new universal service objective target speeds)

The analysis below consists of information from 28 service providers.

Urban centres

Figure 5.3.3 Price of residential broadband (5/1 Mbps) Internet access service and number of companies providing this service in urban centres, 2016

The price of 5/1 Mbps Internet service varies from lows of between $25 and $86 per month to highs of between $53 and $89 per month.

The lowest cost 5/1 Mbps service option is provided with unlimited data transfer by at least one provider, and often two or three, in most urban centres outside the territories. Reported service options with data transfer limits include 25 to 300 GB per month.

Figure 5.3.4 Price of residential broadband (25/3 Mbps, 100 GB/month) Internet access service and number of companies providing this service in urban centres, 2016

The lowest cost 25/3 Mbps service option tends to include at least 125 GB per month, while in some areas up to 450 GB are included with the service. A service with unlimited transfer was provided by at least one provider in all non-territorial areas, and oftentimes by two or three providers.

Figure 5.3.5 Price of residential broadband (50/10 Mbps, unlimited GB/month) Internet access service and number of companies providing this service in urban centres, 2016

As shown in the above figure, services including unlimited transfer, 50 Mbps download, and 10 Mbps upload are available in all non-territorial urban centres.

Rural communities

As displayed below, Internet service prices are generally higher in rural communities than in urban centres.

Internet service subscribers living in rural communities generally have fewer service providers to choose from than subscribers living in urban centres. Of all the rural areas examined, the median number of available providers was 3, with an average of 3.7. The median for urban areas was 7, with an average of 6.6.

Figure 5.3.6 Price comparison of residential broadband (5/1 Mbps) Internet access service and number of companies providing this service in urban and rural communities, 2016

Figure 5.3.7 Price comparison of residential broadband (25/3 Mbps, 100 GB/month) Internet access service and number of companies providing this service in urban and rural communities, 2016

Figure 5.3.8 Price comparison of residential broadband (50/10 Mbps, unlimited GB/month) Internet access service and number of companies providing this service in urban and rural communities, 2016

Service offerings were reported in all rural communities for 5/1 Mbps, and in 61% of communities for 25/3 Mbps and 50/10 Mbps.

In addition to higher prices, service offerings in rural communities tend to have lower monthly transfer limits than in urban areas.

Unlimited transfer is included in the cheapest service offering in around 85% of rural areas at 5/1 Mbps, and in 44% of these areas at 25/3 Mbps.

v) Consumer trends

In 2012, 41.6% of ISPs’ high-speed residential Internet access service revenues were generated from plans with download speeds of between 5 and 9 Mbps. Plans with lower speeds yielded 20.1% of the revenues, while plans with higher speeds generated 38.4%.

Four years later, 5 to 9 Mbps plans no longer yield the highest percentage of revenues, the revenues from these plans having declined to 17.7%, while revenues from lower-speed plans declined to under 3%, and revenues from higher-speed plans increased to 79.8%.

In 2016, Canadians continued to subscribe to higher-speed Internet access services. In 2012, the most common plans included download speeds of 5 to 9 Mbps, representing 41.3% of all subscriptions. Plans with lower speeds made up 21.4% of all subscriptions, and plans with higher speeds represented 37.2% of subscriptions. Four years later, the 5 to 9 Mbps plans are no longer the most popular plans. The percentage of subscribers to these plans declined to 19.9%. In 2016, the percentage of subscribers to plans including speeds less than 5 Mbps declined to 1.4% while the percentage of subscribers to plans including speeds greater than 9 Mbps grew to 77.2%.

vi) Competitive landscape

Canadians can access broadband Internet services using either wireline or wireless facilities. These facilities support evolving services, which make new experiences possible for Canadians, ranging from television and radio services, to new and highly interactive services and programs offering greater consumer control and choice. Consumers can engage with the digital world using their wireless devices at the time and place of their choice.

Figure 5.3.9 Residential broadband subscriptions ‒ Incumbent TSPs vs. cable-based carriers (millions)

Figure 5.3.10 Internet access service revenue shares, by market and type of service provider, 2016 (%)

Figure 5.3.11 Business Internet access service revenues by access technology, 2012 vs. 2016 (%)

Figure 5.3.12 Residential Internet access service subscriptions by access technology, 2012 vs. 2016 (%)

vii) Capacity requirements

This section examines the capacity requirements of various streaming services. These services are a major component driving the demand for larger, faster broadband packages.

Bit rate

The bit rate of a stream is, essentially, the number of bits transmitted in a particular time period. The standard measurement for bit rate of streaming services, like Internet access packages, is in a multiple of bits per second. Here, we use megabits per second (Mbps), which is one million bits (or 125,000 bytes) per second. The measurements presented in this section show sample average bit rates of various streaming services. The measurements were performed in the CRTC’s Technology Resource Centre using off-the-shelf consumer electronics. For more information on the testing environment and methodology, see Appendix 10.

Since many streaming services use similar bit rates, they have been split into seven ranges. Table 5.3.13 lists the ranges, their average bit rate, a description, and examples of streaming services in each range. Some streaming services are in multiple ranges because their bit rate is automatically adjusted based on connection type (i.e. mobile or wireline) and speed. A stream’s bandwidth can be adjusted by changing its compression level or codec; this compression level affects the bandwidth and thus the number of simultaneous streams that an Internet connection can handle. For more information on these topics, see Appendix 10.

Where services do offer multiple quality options, they have been itemized separately in the table. Some services use qualitative names for their settings (e.g. good, better, best), while others use the resolution and video frame rate. For example, “144p” means 144 lines of vertical resolution, progressive scan.^{Footnote 12} “2160p60” means 2160 lines of vertical resolution (marketed as “4K”), at 60 frames per second.^{Footnote 13} The term “Ultra-high-definition (UHD)” encompasses resolutions greater than 1440p, specifically 2160p and 4320p (also known as “4K” and “8K,” respectively); this is in contrast with the current High Definition (HD) standard, which includes 720p, 1080p, and 1440p.

Due to the limited number of samples and the diversity of network configuration and equipment, the reported values in this section should be viewed as average-case estimates, not worst-case limits. It is important for consumers with data-limited Internet plans to monitor their usage using tools provided by the service provider. Some operating systems also include – or offer for download – usage measurement utilities, which can be used to estimate the provider’s data usage calculation.

Figure 5.3.13 shows the approximate amount of data used per hour of streaming for each bit rate range listed in Table 5.3.13. These numbers measure the stream without any auxiliary content (e.g. previews, menus, trailers, advertisements), so the actual amount of data used may be greater than these estimates.

As an example, a 30-minute Skype HD video call would use, on average, approximately 0.3GB.

Figure 5.3.13 Data usage (GB) per hour of streaming, per bit rate range

Streaming on mobile devices

With the proliferation of LTE data networks, consumers are now able to reliably use streaming and real-time communications applications on their mobile devices. Not only do LTE networks have much higher bandwidth, but they have consistent latency^{Footnote 15} regardless of signal strength.

While some streaming services allow the user to choose a quality setting, many automatically reduce the quality if they detect that the destination device is on a mobile network. This automatic adjustment ensures that users don’t prematurely exhaust their data allowance by streaming high-bandwidth content. Many video streaming services also prompt the user for confirmation that they wish to use their mobile data, rather than connecting to a Wi-Fi network.

Many applications will reduce video quality on mobile devices regardless of the type of network they’re connected to. Since mobile devices generally have smaller screens than televisions, bit rates above a certain threshold offer negligible quality increases for an often-significant increase in data usage. Therefore, a video streaming service’s HD option may have a different bit rate on a mobile device than on a computer or a set-top streaming device.

viii) Key indicators

Broadband service availability is calculated using information provided by ISPs. In 2012 to 2015 data, locations are considered to be serviced if their dissemination block representative point falls within broadband service coverage. As of 2016, ISED pseudohouseholds are used, along with 2016 census demography. Broadband service availability data may not take into account capacity issues or issues regarding line of sight.^{Footnote 16}

Figure 5.3.14 Broadband service availability vs. subscriptions by province/territory, 2016

Figure 5.3.15 Broadband service, 5 Mbps availability (% of households)

ix) Broadband service availability

As mentioned in previous sections, in Telecom Regulatory Policy 2016-496, the Commission established criteria to measure the successful achievement of the universal service objective, which included the availability of a fixed broadband Internet access service with a downstream rate of at least 50 Mbps and an upstream rate of at least 10 Mbps, as well as the availability of an option for unlimited monthly data transfer (usage). As of 31 December 2016, service meeting these criteria was available to 84% of Canadian households. However, the availability varies greatly between urban and rural areas, with only 39% of rural households having access to this kind of service, versus 96% in urban areas. Overall, 11% of Canadians households subscribe to a service meeting these criteria. It is important to note that the Commission’s objective was to have these speeds available to Canadians while subscription is at the discretion of the consumers.

Approximately 99% of Canadian households can access a download speed of at least 5 Mbps, which is sufficient for streaming high quality audio and video content. The vast majority of Canadians (97%) can access this speed using either landline or fixed wireless facilities, and an additional 1.5% may get access via satellite facilities. Eighty-one percent of Canadian households subscribe to services with download speeds of 5 Mbps or higher. When taking into account an upload speed of 1 Mbps, availability of 5 Mbps or higher Internet services declines to 97%^{Footnote 17} (95% excluding satellite), with 67% of Canadian households subscribing to a service meeting these speeds.

Fixed wireless services are a major source of broadband Internet connectivity in rural areas, since 31% of rural households have access to broadband Internet via fixed wireless services, but not fibre, cable, or DSL. While satellite coverage is nationwide, capacity limitations restrict practical broadband Internet service availability to approximately 1.5% of all Canadian households. Additional coverage is available via LTE and HSPA+ networks, although data allowances may differ from satellite and wireline broadband. For more information on the wireless sector, see section 5.5.

Unless otherwise noted, broadband Internet service availability figures exclude wireless mobile technology. Satellite access services in this section refer to direct-to-home satellite, and not to the technology used to connect communities to the Internet.

Figure 5.3.16 Broadband service availability by speed (% of households)

Figure 5.3.17 Broadband service availability – Urban vs. rural (% of households), 2016

5.4 Data and private line retail sector

“Data and private line services” refers to services sold by telecommunications service providers (TSPs) to business customers for the transmission of data, video, and/or voice traffic. These services provide private, highly secure communications channels between locations.

Data services are packet-based services that intelligently switch data through carrier networks. They make use of (a) newer data protocols such as Ethernet and IP, or (b) legacy protocols such as X.25, asynchronous transfer mode (ATM), and frame relay to transmit data.

Canadian businesses were served by approximately 191 entities offering data and private line services in 2016. Of these, incumbent telecommunications service providers (incumbent TSPs or incumbent providers) accounted for approximately 15%, and alternative service providers, such as cable-based carriers, utility telcos, and resellers, accounted for the remaining 85%.

These services are provided by both incumbent TSPs and their competition, with competitors having around 36% of the total market, including network management and equipment. Notable is the increase in the activity of cable-based carriers in the newer protocol space.

Private line services provide a non-switched dedicated communications connection between two or more points to transport data, video, and/or voice traffic. These services include high-capacity digital transmission services and digital data systems, as well as voice-grade and other analog systems. Transmission facilities include copper wire and fibre-optic cable. Private line services make use of transmission facilities such as OC-3 fibre optic lines and DS-1 copper facilities.

The private line market is dominated by the incumbent TSPs. Of the alternative service providers, the independent operator category is the largest provider category.

i) Revenues

Figure 5.4.1 Breakdown of newer data service revenues, by protocol used

ii) Competitive landscape

Although incumbent TSPs accounted for only approximately 15% of the entities providing data and private line services, they captured 66% of retail revenues. The remaining 85% of entities providing these services, consisting of cable-based carriers, other carriers, and resellers, accounted for 34% of retail revenues.

Figure 5.4.2 Retail data and private line revenue market share (%), by type of TSP

Figure 5.4.3 Retail data service revenue market share (%), by type of TSP

5.5 Wireless retail sector

The wireless retail market remained the largest communications market sector, with revenues of $23.2 billion in 2016. This included growth of 3.2% or $720 million from 2015.

Canada’s wireless networks enable Canadians to access services that are comparable to wireline services. Wireless service providers (WSPs) provide voice, data, Internet, and video services. The differentiating factors for these services tend to be mobility and price. Based on MTM’s 2016 statistics, the three most popular activities by Canadian smartphone owners were text messages, Internet access, and email.

Wireless networks cover approximately 20% of Canada’s geographic land mass and reach 99% of Canadians. The advanced wireless networks such as long-term evolution (LTE) and LTE-advanced (LTE-A), which deliver even higher speeds than previous generation networks, is available to approximately 98.5% and 83.0% of Canadians, respectively. Not only were these networks serving over 30.7 million Canadian subscribers, there were also over 3.0 million machine-to-machine connections reported in 2016.

In addition to advanced wireless networks such as LTE that provide broadband Internet access, WSPs significantly increased the number of publicly available WiFi hotspot locations (free and for-pay) across the country, from 14,000 at the end of 2014 to over 27,900 by the end of 2016. This provided Canadians with an additional method of accessing voice and data communications services on their handheld and other wireless communication devices. WiFi hot spots also provide wireless subscribers a means to minimize potential roaming charges.

In terms of provider choice, Canadians were served by three large national WSPs, collectively accounting for 89% of wireless service subscribers. A number of smaller, regional, facilities-based WSPs and a small number of mobile virtual network operators and resellers accounted for the remaining 11%. In both urban centres and rural communities, Canadians generally had a choice of between two and five WSPs.

In 2013, the Wireless Code came into effect, ensuring that consumers of wireless services could better understand their contracts, establishing consumer-friendly business practices, significantly limiting the early cancellation fees that were previously sought by retail WSPs; and enabling consumers to take advantage of competitive offers at least every two years. In 2016, approximately 91% of post-paid plan subscribers had contracts that were equal to or less than two years in length, compared to 67% in 2014 and 44% in 2013.

After the 700 megahertz (MHz) spectrum auction in 2014, the Government of Canada took additional measures in early 2015 to encourage greater competition in the wireless market by releasing 50 MHz of spectrum in an auction for advanced wireless services (AWS-3) in the bands of 1755-1780 MHz and 2155-2180 MHz. As a result, five companies invested $2.1 billion in AWS-3 spectrum and 39 licences were issued that year. In 2016, the amount of capital investment as a percentage of total wireless revenues, or capital intensity, dropped to 10%, compared to 22% in 2015 and 35% in 2014. This was largely due to higher investment spending on spectrum in 2014.

In 2015, the Commission published Telecom Regulatory Policy 2015-177, in which it determined that it is necessary to regulate rates that Bell Mobility, Rogers, and TELUS charge other wireless carriers for domestic Global System for Mobile communications (GSM)-based wholesale roaming.  These regulations will facilitate sustainable competition and provide benefits to Canadians, such as reasonable prices and innovative services, as well as continued innovation and investment in high-quality mobile wireless networks. In the decision, the Commission expressed its intent to monitor the competitive conditions in the mobile wireless services market.

In late 2016, the CRTC launched the first review of the Wireless Code since it came into effect in December 2013. The review looked at consumer concerns surrounding issues such as bill shock, unlocking fees on all devices, and trial periods. As a result of the review, many Canadians will benefit from the revisions that were set out in mid-2017 in Telecom Regulatory Policy 2017-200. For more details regarding the review, see section 2.0.

Furthermore, the Commission issued Telecom Regulatory Policy 2016-496, in which it established a universal service objective (USO) framework that aims to help Canadians participate in the digital economy and society. One of the key components in the USO is the importance of wireless services. The goal is for Canadians, in urban areas as well as in rural and remote areas, to have access to voice services and broadband Internet access services, on both fixed and mobile wireless networks.

i) Revenues

Figure 5.5.1 Wireless service revenue and subscriber growth rates (excluding paging)

In 2016, of companies that reported data overage charges, approximately 6.0% of their total retail mobile revenues were reported to be directly from revenues collected from subscribers who exceeded allowable monthly data limits; the revenues excluded charges for flex-type plans, domestic and international roaming, and text messaging services.

Figure 5.5.2 Roaming revenues by type and destination, 2016

ii) Subscriber data

Figure 5.5.3 Percentage of wireless service plans with contracts, by duration

Figure 5.5.4 Total and daily number of SMS and MMS messages

iii) Competitive landscape

Figure 5.5.5 TSPs’ wireless subscriber market share

Figure 5.5.6 TSPs’ wireless service revenue market share

Figure 5.5.7 Percentage of revenues and subscribers derived via primary brands, flanker brands, and resellers/rebillers

iv) Technology indicators

The following tables and charts indicate the extent to which Canadians are adapting to a digital communication system. Smartphones, tablets, and other wireless devices that provide access to the Internet are continually increasing demand for wireless capacity.

Figure 5.5.8 Mobile device penetration

Figure 5.5.9 Mobile device penetration, by region, 2016

Figure 5.5.10 Mobile data-only plan revenues and subscribers by data plan capacity, 2016

Data-only plans include built-in and portable access devices, such as hubs, sticks, dongles, and laptops.

Figure 5.5.11 Percentage of mobile revenues from voice vs. voice and data vs. data-only plans, 2016

Figure 5.5.12 Percentage of mobile wireless subscribers with a data plan

Figure 5.5.13 Percentage of mobile wireless subscribers with data plans by size of plan, 2016

Figure 5.5.14 Percentage of mobile wireless subscribers with voice plans, by size of voice plan, 2016

Figure 5.5.15 Percentage of mobile wireless subscribers with SMS plans by size of plan, 2016

Figure 5.5.16 Popular Internet and mobile activities performed by Canadians on their smartphone, 2016

Figure 5.5.17 Popular Internet and mobile activities performed by Canadians on their tablet, 2016

v) Performance indicators

vi) Price

The price structure of wireless services is based on usage. To assess the price of wireless services in urban centres and in rural communities, four baskets are used, and both flanker and primary service brands were considered. These baskets were adopted from the report Price Comparisons of Wireline, Wireless and Internet Services in Canada and with Foreign Jurisdictions (2014) and were modified in 2016 to increase the amount of Internet data included per month in baskets 2, 3, and 4.

• The Level 1 mobile service basket represents introductory or low-usage types of plans that offer 150 minutes of voice service per month, with no SMS or Internet data.
• The Level 2 mobile service basket encompasses low- to mid-tier types of plans that provide customers with at least 450 minutes of voice service, 300 SMS, and 1 GB of Internet data per month.
• The Level 3 mobile service basket comprises plans representative of a typical smartphone user, offering at least 1200 minutes of voice service, 300 SMS, and 2 GB of Internet data per month.
• The Level 4 mobile service basket is geared towards smartphone users who want access to unlimited minutes of voice service and SMS, along with 5 GB of Internet data per month.

Urban centres

Urban centres with four or more WSPs generally had the largest variance between the lowest and highest prices reported, as well as the lowest prices in each of the four service baskets. The variance between the lowest and highest prices across all service baskets in any given urban centre was wide, ranging from a low of $3 to a high of $60. The price variances that were most pronounced were found in service baskets 3 and 4. The average price variances between lowest and highest prices for the Level 1, 2, 3, and 4 service baskets were $13, $17, $21, and $46, respectively.

Figures 5.5.18 to 5.5.21 display the range in the monthly price of a Level 1, Level 2, Level 3, and Level 4 wireless service basket in 24 urban centres in Canada. The number at the end of each bar is the highest price. The number appearing in parentheses along the vertical axis after the name of each urban centre represents the number of local WSPs.

Figure 5.5.18 Price of a Level 1 basket wireless service ($/month) and number of companies providing the service in a number of select cities, 2016

Figure 5.5.19 Price of a Level 2 basket wireless service ($/month) and number of companies providing the service in a number of select cities, 2016

Figure 5.5.20 Price of a Level 3 basket wireless service ($/month) and number of companies providing the service in a number of select cities, 2016

Figure 5.5.21 Price of a Level 4 basket wireless service ($/month) and number of companies providing the service in a number of select cities, 2016

Price comparison of urban and rural wireless services

To assess the price of wireless services in rural Canada, 54 rural communities were selected, and the price of wireless services in these communities was compared to that in urban centres.

The price of wireless services in rural communities, across all service baskets, was generally equal to or higher than that in urban centres, with the exception of Quebec. In the province of Quebec, the highest price for the level 4 basket in the urban communities were $5 more than in the rural communities. Price differences were more pronounced for level 3 and 4 baskets, especially in Ontario and Alberta, where the minimum price varied by approximately $30 between rural and urban communities. The highest price for the level 4 basket in Ontario and Manitoba showed a notable variance of $45 between rural and urban communities.

The variance between the lowest and highest price of wireless services across all service baskets in rural communities, by province and territory, was wide, ranging between $3 and $67. Across all rural and urban communities, the average price variance in the level 1 and level 4 basket was $11 and $41, respectively.

The average price variances among rural communities for Level 1, 2, 3, and 4 service baskets were $11, $22, $22, and $46, respectively. In the urban centres for the identical service baskets, the price variances were $11, $12, $19, $36, respectively.

Figures 5.5.22 to 5.5.25 display the range in the monthly price of wireless services in urban centres and rural communities in Canada, by province and territory. The number at the end of each bar is the highest price. The number appearing in parentheses along the vertical axis after the name of each province and territory represents the number of local WSPs.

Figure 5.5.22 Price of a Level 1 basket wireless service ($/month) and number of companies providing the service in urban centres and rural communities, 2016

Figure 5.5.23 Price of a Level 2 basket wireless service ($/month) and number of companies providing the service in urban centres and rural communities, 2016

Figure 5.5.24 Price of a Level 3 basket wireless service ($/month) and number of companies providing the service in urban centres and rural communities, 2016

Figure 5.5.25 Price of a Level 4 basket wireless service ($/month) and number of companies providing the service in urban centres and rural communities, 2016

Historical price comparison

The historical price analysis was conducted using the previously defined price baskets as summarized below and covers the period between 2013 and 2015. Due to methodology changes, namely in the composition of the service baskets, 2016 data is not comparable to previous year data and is excluded from the following analysis.

• Basket 1: this mobile service basket represents introductory or low-usage types of plans that offer 150 minutes of voice service per month, with no SMS or Internet data.
• Basket 2: this mobile service basket encompasses low- to mid-tier types of plans that provide customers with at least 450 minutes of voice service and 300 SMS per month, and no Internet data.
• Basket 3: this mobile service basket comprises plans representative of a typical smartphone user, offering at least 1200 minutes of voice service, 300 SMS, and 1 GB of Internet data per month.
• Basket 4: this mobile service basket is geared towards smartphone users who want access to unlimited voice and SMS, along with 2 GB of Internet data per month.

Combined urban and rural pricing

Figure 5.5.26 displays the average price of each of the four baskets across all 80 urban centres and rural communities. Between 2013 and 2015, mobile prices generally declined, with the most significant price reductions for baskets 2 and 3 in 2014.

Figure 5.5.26 Average prices for mobile services, 2013-2015

All centres:

• The average Basket 1 price decreased 9% over the 2013-2015 period, going from $31.31 in 2013 to $28.43 in 2015.
• The average Basket 2 price decreased 17% over the same period, from $43.39 in 2013 to $35.83 in 2015.
• The average Basket 3 price decreased 16% over the same period, from $69.27 in 2013 to $58.00 in 2015.
• The average Basket 4 price increased by 2% in 2015, from $61.14 in 2014 to $62.23 in 2015.

Overall, from 2013 to 2015, the average price for basket 1 to 3 mobile service plans declined by 15%, while the price of the 4th basket slightly increased (2%) from 2014 to 2015.

Urban vs. rural pricing

In terms of urban-rural comparisons, price declines were higher in rural areas than in urban centres. The percentage price decrease in urban centres was approximately half the decrease found in rural areas for baskets 1 and 2 in 2015. During the same period, the price decrease in urban centres was about 70% of the price decrease in rural areas for basket 3, and the price increase for basket 4 was equivalent in both urban and rural areas.

Figure 5.5.27 Average urban prices for mobile services, 2013-2015

Urban centres:

• The average Basket 1 price decreased 5% over the 2013-2015 period, going from $29.80 in 2013 to $28.16 in 2015.
• The average Basket 2 price decreased 10% over the same period, from $39.59 in 2013 to $35.66 in 2015.
• The average Basket 3 price decreased 13% over the same period, from $64.68 in 2013 to $56.51 in 2015.
• The average Basket 4 price increased by 2% in 2015, from $59.03 in 2014 to $60.06 in 2015.

Overall, in urban areas, from 2013 to 2015, the average price for basket 1 to 3 mobile service plans declined by 10%, while the price of the 4th basket slightly increased (2%) from 2014 to 2015.

Figure 5.5.28 Average rural prices for mobile services, 2013-2015

Rural areas:

• The average Basket 1 price decreased 11% from 2013-2015, going from $31.94 in 2013 to $28.55 in 2015.
• The average Basket 2 pricedecreased 20% over the same period, from $44.96 in 2013 to $35.90 in 2015.
• The average Basket 3 pricedecreased 18% over the same period, from $71.17 in 2013 to $58.64 in 2015.
• The average Basket 4 priceincreased by 2% in 2015, from $62.06 in 2014 to $63.17 in 2015.

Overall, in rural areas, from 2013 to 2015, the average price for basket 1 to 3 mobile service plans declined by 17%, while the price of the 4th basket slightly increased (2%) from 2014 to 2015.

vii) Coverage/availability details

Figure 5.5.29 Roaming voice and data traffic by destination, 2016

Figure 5.5.30 Established carriers’ coverage and penetration vs. new entrants’ coverage and penetration (% of population), 2016

Figure 5.5.31 Number of WiFi hotspot locations

Figure 5.5.32 Number of free and pay-for-use WiFi hotspot locations in Canada, 2016

Map 5.5.1 Wireless service availability by number of facilities-based WSPs, 2016

Map 5.5.2 Wireless HSPA+ service availability by incumbent and new-entrant facilities-based WSPs, 2010 and 2016

Map 5.5.3 Wireless LTE service availability between 2013 and 2016

Map 5.5.4 Wireless LTE-Advanced service availability, 2016

5.6 Wholesale telecommunications sector

Wholesale services are services provided by a TSP (telecommunications service provider) to another provider of telecommunication services for use in the provision of telecommunications services. Providers of telecommunications services rely on wholesale services to varying degrees. Resellers of telecommunications services depend more on wholesale services than companies that have their own facilities to provide service. In 2016, for the purposes of providing wireline services, resellers spent 45 cents of every revenue dollar on wholesale services, compared to around 6 cents for facilities-based service providers.

The availability of wholesale services is a major factor that ultimately provides greater choice to Canadians in the telecommunications service market. In 2016, the wholesale telecommunications market was worth $4.1 billion, of which 30% was for the provision of wireless services and 70% for wireline services.

Independent Internet service providers (ISPs) frequently depend on access services offered by the incumbent TSPs and the cable-based carriers to connect to their customers. Over the years, sales of cable-based access services, known as third-party Internet access (TPIA) services, to independent ISPs have increased.

Wholesale wireless services are an increasingly important part of the telecommunications landscape. Joint network building by several large carriers allows them to minimize overall costs and maximize the use of networks. Since 2012, wireless wholesale revenues have increased at an average annual rate of 9.3%.

i) Revenues

Figure 5.6.1 Wholesale telecommunications revenues, by market sector

Figure 5.6.2 Percentage distribution of wholesale telecommunications revenues, by market sector (2012 vs. 2016)

Figure 5.6.3 Wholesale high-speed access (HSA) based subscriptions across Canada, 2015 vs. 2016

Figure 5.6.4 Wholesale HSA-enabled subscriptions by service speed in Mbps (thousands)

ii) Subscriber data

iii) Competitive landscape

iv) Forbearance

Figure 5.6.5 Wholesale telecommunications service revenues, by type of tariff, 2016 (%)

Approximately 77% of wholesale revenues were from non-tariff services and from services where the parties have agreed to an alternative price (off-tariff services).

Tariff services are services whose rates, terms, and conditions are set out in a Commission-approved tariff.

Non-tariff services are those telecommunications services whose rates, terms, and conditions are not set out in a Commission-approved tariff.

Off-tariff services are those whose prices are filed with the Commission but for which parties have agreed to an alternative price.

Tariff service revenues exclude revenues from off-tariff services.

Figure 5.6.6 Wholesale wireline telecommunications service revenues by type of service, 2016 (%)

v) Inter-provider expenses

Wholesale service revenues are the inter-provider expenses incurred by TSPs acquiring these services. All TSPs purchase telecommunications services from other carriers. The extent to which service providers rely on these services depends on the nature of their operations.

Figure 5.6.7 Inter-provider expenses per revenue dollar for wireline services

In total, facilities-based service providers spend around 6 cents of every revenue dollar on wholesale telecommunications services, whereas resellers – service providers that do not own or operate transmission facilities – are very dependent. They spend 45 cents of every dollar on these services.

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Date modified:

2018-04-18