Canadian Regulator Issues Annual Communications Industry Report for 2009

The Canadian Radio and Telecommunications Committee (CRTC) has issued the comprehensive annual report for 2009 covering the broadcasting and telecoms industries. This includes an outline of the regulatory environment, and data on complaints, internet activities, revenues, connections, subscribers, penetration (to 2008), availability, bundling, pricing, and capital expenditure. It also contains a range of data on broadcasting and related industries, such as TV viewing hours, podcast use, music downloading, and streaming radio use.

Overview

Telecommunications revenues increased by 1.8% year-on-year (y/y) to C$41.0 billion (US$39.73 billion). The incumbent telecoms companies generated C$28.8 billion, up by 0.6% y/y, while the cable companies generated C$17.3 billion, up by 7.4% y/y. Growth came from newer, non-legacy data services (e.g. Ethernet), broadband, and wireless services. Internet service revenues rose by 6.35% y/y to C$6.6 billion, but this failed to stop fixed-line service revenues falling by 0.5% to C$24.1 billion as growth was mitigated by declines in local and access revenues, down by 1.9% to y/y C$9.4 billion. Long-distance revenues fell by 7.1% y/y to C$3.9 billion, and legacy data and private line revenues fell by 7.3% y/y to C$2.8 billion.

Forborne (non-regulated) services now account for 91% of revenues, up 15% y/y, with the percentage of local and access revenues from forborne services actually falling from 75% to 71%.

Local

Residential local and access lines now number 18.7 million, down by 3.7% y/y. Total local access lines fell by 2.9% y/y to 20.3 million, with residential lines generating C$37.01 per month, up by 1.6% y/y, and business lines generating C$48.64 per month, up by 3.1% y/y. Long-distance revenues declined by 6.8% y/y to C$0.066 per minute.

Internet

Internet coverage remained static at 95% of the population with essentially 100% urban coverage while rural coverage rose by 2% on the previous year to 84%. Residential internet connections are up by 3.1% y/y to 10.1 million, generating C$36.06 per connection, up by C$2.00 y/y. High-speed service penetration was 72%, up from 69% a year earlier, while broadband (over 1.5 Mbps) rose from 52% to 62% and over 5 Mbps service penetration rose from 41% to 44%. The top five providers took a static 76% share of revenues while cable operators raised their revenue share from 48% to 50%, and ILECs in-territory operations lost 2% share to 38%. Users averaged 12.0 GB downloads per month, up from 9.1 GB a year earlier, and 3.4 GB uploads from 3.2 GB a year earlier.

Wireless

Wireless coverage has risen from 98% to 99% of the population, with 3G coverage rising from 91% to 96%. Revenues rose by 5.3% to C$16.9 billion, with wholesale revenues reported to have risen by 19.3% y/y, although still coming in C$0.5 billion. Wireless subscribers are up by 7.7% y/y to 23.8 million, with the level of post-paid subscribers remaining around 79% of the total. ARPU fell by 2.2% y/y to C$59.

Capital Expenditure

Capital expenditure fell from C$5.9 billion in the wireline industry for 2008 to C$5.7 billion in 2009, but with Bell Canada and Telus building out their HSPA networks while a number of new entrants also joined the market, wireless capital expenditure is somewhat surprisingly down from C$6.1 billion to C$2.2 billion. This reflects the jump in spending from 2008, with C$4.6 billion paid out for the AWS spectrum.

Competition and Convergence

The market is dominated by the multi-service providers, such as Bell, Telus, Rogers, and MTS, offering all of the major telecom services, with multi-service providers claiming 92% of telecoms revenues. The top five ILECs maintained their 66% share of total telecoms revenues, but the top five cable companies increased their share from 26% to 28%.

The incumbent telecoms service providers saw telecoms revenues fall 1.6% y/y to C$26.72 billion while broadcasting revenues rose 10.1% to C$1.66 billion. The cable companies saw telecoms revenues increase by 7.9% y/y to C$11.52 billion while broadcasting revenues rose by 6.4% y/y. Alternative service providers (non-incumbents) took 37% of the market by revenues in 2009, up from 32% a year earlier. This includes incumbents outside their traditional operating territories (8%), cable companies, and other facilities-based competitors (23%) and resellers (6%).

Bundling is a major feature of the market, with 34% of subscribers taking local phone services bundled with at least one other service, up from 25% a year earlier.

Reflecting increasing market convergence, cable companies now generate 66.5% of revenues through telecoms services (from 66.2% a year earlier) while incumbent telcos generate 5.8% of revenues from broadcasting services, up from 5.3% a year earlier. Cable companies are the leading provider of internet services with 56% of the market, up from 55% a year earlier. They had captured 22% of the local telephony market by the end of 2008 and pushed this up to 27% by the end of 2009.

Internet Use

Anglophone internet users spent an average of 14.5 hours on the internet, up from 13.8 hours in 2008, while Francophones rose from 11.1 hours to 11.8 hours. Some 52% of Anglophones viewed internet video, up from around 42% a year earlier, compared to 44% and 37% for Francophones. This was predominantly amateur video (42% against 25% TV programming).

Outlook and Implications