Wireless sector good for the country, says report

The Canadian wireless sector has been growing healthily for the past decade, so it comes as no surprise that a study paid for by the industry says it provides “significant value” to the economy.

The report on the benefits of the wireless industry to this country, done by the research firm Ovum Consulting and paid for by the Canadian Wireless Telecommunications Association, (CTWA) said that in the estimated value all companies in the industry contributed to the gross domestic product in 2008 was $16.3 billion — including $15.9 billion in revenue from wireless operators.

“This is a significant contribution, comparable to other major economic sectors” in the country, wrote report author Stewart Anderton. “Wireless is a sector which brings significant benefits to all Canadians – they get a very good return from the wireless industry.”

In addition the use and availability of wireless telecom services and products created a “consumer surplus” of at least $8.8 billion. Ovum defines this as the difference between what end-users are willing to pay for a service and what they actually paid, a methodology the consulting firm created.

In an interview from his home in South Wales, Anderton said the consumer surplus is a calculation used by many economists and companies to figure out what to charge for products. He gave as an example a team that charges $20 for a hockey ticket when the buyer is willing to pay $50. The consumer surplus is $30.

Usually the calculation for the what a buyer is willing to pay for a product or service is compliled through detailed personal surveys. But since they weren’t available for Canada, Anderton used what he said was an established formula.

By various calculations Ovum figures the real value of the wireless industry to the country in 2008 totalled $39 billion.

Through another formula, Anderton estimated that about 300,000 people were directly and indirectly working for the industry that year, including 81,000 jobs “as a result of spending by government of tax revenues and spending by financial institutions and shareholders.”

Bernard Lord, president and CEO of the CTWA, acknowledged in an interview Monday that “everybody knows” how important the industry, including politicians. But, he added, it’s important to have the details.

“Sometimes, I think the importance is overlooked,” he added. “When governments are looking at, for instance, increasing [annual licence] fees on wireless spectrum in Canada, it’s important to realize that becomes a barrier to innovation and growth in the future.”

One thing he found interesting in the study is how the wireless sector compares to other industries: Its contribution to GDP in 2008 was $16.3 billion, compared to agriculture (crops only, $16.6 billion), food manufacturing ($18.2 billion) and the automotive industry ($20 billion).

The report reminds readers that the wireless carriers paid a total of $5.74 billion to Ottawa in the last two cellular spectrum auctions.

Included in the 42-page report are figures many would be more familiar with, including the fact that wireline revenues have basically been flat for the past few years while wireless revenues continue to march steadily upwards.

To some degree the numbers are out of date. In 2009 carrier revenues from data use jumped significantly, industry observers believe, as more smart phones came on the market. The introduction of tablets like Apple’s iPad this year will only accelerate the trend. In November 2009, BCE Inc.’s Bell Canada, Rogers Communications Inc. and Telus Corp. initiated state-of-the-art HSPA+ data networks, expected to encourage data use even more.

In addition, in December startup Wind Mobile opened its doors, the first of four new entrants that will battle for the estimated 30 per cent of eligible Canadians who have yet to subscribe to wireless service.

Next year cableco’s Shaw Communications Inc. of Calgary and Bragg Communications of Halifax are expected to begin wireless service using he spectrum they bought in 2008.

An indication of the most recent wireless trends will come at the upcoming annual general meeting of the big three incumbents. The first starts Thursday with Rogers, followed by Telus on May 5 and BCE on May 6.

According to the CTWA, at the end of 2009 the five cellular carriers had 22.8 million wireless subscribers. Rogers led the group with just under 8.5 million subscribers, BCE Inc’s Bell Canada and its partner Bell Aliant Regional Communications Income Fund had a combined 6.8 million, Telus Corp. had 6.5 million, SaskTel had 541,000 and MTS Allstream had 458,000.

The CTWA represents wireless carriers and Internet providers, satellite companies, handset and network manufacturers and software developers.