Acceleration of Digital Economy is Central to Canada’s Future

July 29, 2020

The COVID-19 pandemic has caused financial hardship for nations around the world, and despite quick actions by all orders of government to assist businesses, families and individuals, Canada is no exception. Our economy is in recession, unemployment rates have touched record highs, and the federal government’s finances are under such strain that the national public debt is expected to exceed $1 trillion. It would seem to most observers that now is the wrong time to implement policies that could cause the economy to regress even further. But that is precisely what the Canadian Radio-television and Telecommunications Commission (CRTC) is currently considering.

The CRTC is reviewing mobile wireless services in Canada, and in doing so is contemplating a policy that would force national mobile network operators to provide wholesale access to Mobile Virtual Network Operators (MVNOs) – companies that don’t invest in building their own network infrastructure. Part 1 of a new report from PwC, released earlier this month by the Canadian Wireless Telecommunications Association (CWTA), shows that such a measure would have profoundly negative consequences for Canadians even at the best of times.

The reality is that Canada does not need to make drastic changes to its wireless industry, which remains a bright spot and national success story even during these challenging times. If anything, with the COVID 19 crisis we are seeing how important Canadian wireless networks are to sustaining economic activity and government services, supporting businesses, and driving innovation and job creation.

Our wireless industry contributed more than $48 billion to Canada’s GDP in 2018 alone, and facilities-based operators have invested more than $70 billion in building wireless networks that are among the fastest and most widely available in the world.

Telecommunications has become one of the planet’s most critical infrastructure systems, with governments regarding the acceleration of the digital economy as central to their countries’ economic recovery. Canada’s successful participation in this global recovery will depend largely on massive new investments in expanding our telecommunications networks to reach all Canadians, and introducing new innovations, such as 5G, that will fuel innovation across industries and public services and ensure Canadians can compete and prosper in the digital economy.

Mandating wholesale access for MVNOs would undo all of that remarkable progress and slow our strong forward momentum. PwC’s detailed economic assessment shows it would reduce Canada’s GDP by an estimated $10 billion within five years. Over the same period, tax revenues would decline by an estimated $2.5 billion and approximately 94,000 jobs would be lost across the supply chain supporting Canada’s wireless network operators. In addition, network operators’ capacity to spend on operations and capital projects would be reduced by an estimated $8 billion per year, which would significantly slow down their efforts to connect underserved communities and bridge the rural and urban digital divide. To the contrary, as Part 2 of the PwC report shows, mandating network access for MVNOs would actually further widen this divide by reducing the effective reach of 5G from 95% of Canadians to 75% of the population, with most of reduction being felt by Canadians residing outside urban centres.

It should go without saying that these are all impacts that could have a devastating effect on our economy – which is already expected to shrink by nearly 7% this year.

The economic impact of the COVID-19 crisis was not something any government could have predicted, but it is the reality we must face together. Now, more than ever, Canada should support policies that drive new private sector investment, create new jobs and encourage more innovation. Mandating network access for MVNOs does the opposite of those things. It would be a bad idea at any time. Right now, we simply cannot risk regulatory intervention that would further slow Canada’s recovery, eliminate jobs and widen the rural and urban digital divide.

Parts 1 and 2 of the new PwC report – Understanding the likely impacts of MVNOs in Canada – are available at cwta.ca.

 

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