The advent of the Internet of Things (IoT), which will soon revolutionize every aspect of our economy and our lives, will force Ottawa to reconsider its telecommunications priorities and policies, argues the 2017 edition of The State of Competition in Canada’s Telecommunications Industry, published today by the MEI.
This “fourth industrial revolution,” as it is described, will not just disrupt the telecommunications industry. From appliances to security systems, and from body sensors for patients to the management of road traffic and agricultural production, everything will soon be connected to the Internet. In Canada, the total value of this market will reach $21 billion by 2018. This increased data traffic will need to pass through telecommunications networks, in particular the new 5G wireless technology that will be deployed over the coming years.
“Major network investments will therefore be required to accommodate this exponential growth of traffic,” explains Martin Masse, co-author of the report. “Yet only solid national and regional providers with their own infrastructure have the means to invest in the wireline and wireless networks that will be required to keep up with IoT developments. These providers invest more than $11 billion on average every year in network infrastructure, while resellers only invest about $30 million.”
Mr. Masse points out that the policies of the federal government and the CRTC over the past decade, aimed at propping up undercapitalized wireless players and Internet service resellers, have only encouraged artificial competition and led to waste and the misallocation of resources like spectrum. These policies, if pursued by Ottawa going forward, may well slow down the development of the Internet of Things in Canada.
Indeed, these policies were criticized in the first three annual editions of this report. “Facilities-based competition, as opposed to service-based competition, is the best way to spur innovation. We pointed this out in previous editions of this report, but it’s even truer today, with the arrival of the Internet of Things,” says Paul Beaudry, co-author of the report.
There is no doubt, according to him, that Ottawa should adapt its policies to the new IoT reality. “In any case, only providers with their own wireline and wireless infrastructure will be able to manage the networks so as to ensure the safety and robustness required, for example, for the navigation systems of self-driving cars. Resellers will have no role to play in this market,” explains Mr. Beaudry.
The 2017 edition of The State of Competition in Canada’s Telecommunications Industry also points out, based on data from international studies, that Canadians continue to enjoy competitive, quality telecommunications services.
The report goes on to analyze some issues that made headlines in the industry over the past year, including BCE’s acquisition of MTS and the recent CRTC decision on basic telecommunications services.
The authors also look back on the 2006 Policy Direction which, among other things, directed the CRTC to rely on market forces as much as possible when it hands down its decisions. While the regulator seemed to take the principles contained in the Policy Direction seriously for the first few years following its adoption, it soon went back to its old interventionist ways, as with its 2015 decision mandating the sharing of next-generation networks with resellers who make little if any infrastructure investments.
The 2017 edition of The State of Competition in Canada’s Telecommunications Industry was prepared by Martin Masse, Senior Writer and Editor at the MEI, and Paul Beaudry, Associate Researcher at the MEI.
The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its studies and its conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms.