Telecom industry revenue slowed in 2009, says study

Canada survived the recession relatively better than a number of other developed nations, but its telecommunications sector still felt the sting of the slowdown.

According to figures compiled by the Canadian Radio-television and Telecommunications Commission (CRTC), the industry’s service revenues grew by only 1.8 per cent last year to $40.3 billion over 2008, compared to a 5.6 per cent jump in 2008 from the year before.

Part of that was due to a 7.1 per cent plunge in long distance revenue (to $3.9 billion in 2009 from $4.2 billion the year before), a 7.3 per cent loss in legacy data and private line revenues (to $2.8 billion from $3 billion) and a slight drop local and access revenues, which decreased from $9.6 billion to $9.4 billion.

But wireless and Internet revenues kept the industry in the black. Wireless revenues leapt to $16.9 billion from $16 billion, or by 5.3 per cent, while Internet service revenues increased to $6.6 billion in 2009 from $6.2 billion, or by 6.3 per cent.

The 172-page annual Communications Monitoring report is full of charts and graphs which from which industry observers found interesting nuggets.

For example, consultant Mark Goldberg noted that while 95 per cent of Canadian households have access to wireline broadband, about one-third don’t subscribe or put up with dial-up speeds. “What’s holding them back?” he asked. “That to me is a far more important question for the government and policy makers than trying to figure out how to reach the three or four per cent that don’t have a wireline broadband choice” in remote areas, he said.

“Why aren’t we focusing on those folks?”

As for those who don’t subscribe at all, Goldberg wonders if the reason is they don’t have computers. If so, he said, perhaps there should be a program to encourage computer purchase. There’s an impact on the quality of children’s education, he pointed out.

“That’s a digital divide that isn’t a rural and remote problem,” he said.

Instead, there’s been too much attention on the supply of broadband – through programs like the Harper government’s $225 million rural access plan– and not on demand.

Telecommunications consultant Iain Grant, managing director of the SeaBoard Group, was surprised by how much Canadians are still spending on long distance when they have alternatives such as Skype and deals from carriers.

Still, he found little in the report that wasn’t predictable. Next year’s report will be more exciting, he predicted, for it will start to show the effects new wireless entrants such as Wind Mobile, Public Mobile, Mobilicity and the soon-to-launch new service from Videotron in Quebec will have not only on wireless but also on long distance.

“I think out of the gate by this time next year Videotron will have a million [Quebec wireless] subscribers,” he predicted. Videotron not only has a base of cable subscribers to pitch to, it also has a substantial number of wireless subscribers after reselling access from Rogers Communications Inc. for years. Videotron’s new service will run on its own network after paying some $555 million for spectrum.

For those who think Canada lags in technology, the CRTC report notes that the average measured broadband speed from ISPs in the fourth quarter of last year was 4.7 Mbps, up 25 per cent over the same period in 2008. That was faster than the average speed in the U.S., Britain, France, Germany, Italy and Australia. Only Japan was faster, with an average speed of 7.6 Mpbs.

This reflects the introduction by Canadian cable companies of the DOCIS 3.0 technology, which has enabled Shaw Communications to test a service offering up to 100 Mbps in Saskatchewan, while Videotron is offering up to 50 Mbps in Quebec. At the same time, phone giants BCE Inc., and its Bell Aliant unit, and Telus Corp., are pushing out fibre optic to homes so they can offer competing speeds.

The report continues to show how cable companies are carving away at markets once held solidly by phone companies.

Sixty-seven per cent of cable companies’ revenues came from telecommunications services such as Internet access, home phone and wireless. On the other hand, the report said, broadcasting service revenues represented approximately only 6 per cent of the incumbent telephone companies revenues.

One of the reasons is the ability of cable to carry multiple services at high speed. That’s why Bell and Telus are betting heavily on bringing fibre optic to the home to counter cable companies.

In fact, last year competitors – largely cablecos – had increased their share of the residential landline phone market to 27 per cent, a 12 per cent jump over the year before. In the local business market, competitors saw a 4.8 per cent increase in the number of lines taken away from phone companies.

Alternative telecom service providers – including cablecos, hydro utilities and resellers –share of total wireline telecommunications revenues continued to increase, the report said, and at the end of 2009 reached 37 per cent.

The number of mobile phone subscribers increased just under 8 per cent in 2009 from the previous year and totaled 23.8 million.


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