The Story of Canada’s Telecom Monopoly
With the ongoing merger between Shaw and Rogers, and the recent service outage experienced by Rogers’ users, we have seen rising concerns within Canada’s monopolistic Telecommunication industry. Is there a monopoly? A lack of regulation? We dive into the current landscape of the industry to answer these questions and explore the existing problems within the telecommunication networks. Additionally, we will discuss the government’s role in regulating the industry and protecting Canadians from outages
For this episode, two guests join us to talk about the telecommunication monopoly in Canada. In our first segment Professor Fenwick McKelvey from Concordia University discusses monopoly and regulation. We met with Mr. Joe Rowsell from Telus to continue the discussion and delve into market standards.
Producers
Vicky Li - Junior Producer
Kriti Sharma - Junior Producer
Keyi Liu - Junior Producer
Episode Transcript
Host: Good morning and welcome to Beyond the Headlines on CIUT 89.5 FM. I'm your host, Keyi Liu, joined today by Kriti Sharma and Vicky Li. Beyond the Headlines is a weekly current affairs show that aims to make public policy discussions more accessible to you. We take you beyond the headlines of our daily news, bringing your access to current leaders through in-depth interviews. You can join us in the conversation by tweeting @Byond_Headlines.
Today, we have two guests joining us to talk about the telecommunication monopoly in Canada, Professor Fenwick McKelvey from Concordia University and Mr. Joe Rowsell from TELUS. With the ongoing merger between Sean and Rogers and the recent service outage experienced by Rogers users, there have been rising concerns with Canada's monopolistic telecommunication industry. For today's podcast, we try to explain the current landscape of the industry and explore the existing problems within the telecommunication systems. Additionally, we will discuss the government's role in regulating the industry.
Our first guest is Fenwick McKelvey. He's an associate professor in information and communication technology policy at Concordia University, Montreal. He's co-director of the Applied AI Institute and leads machine agencies at the Melia Institute. He's the author of Internet Daemons, Digital Communications Possessed, and co-author of the permanent campaign, New Media, New Politics. Fenwick, we are so thrilled to have you on this episode on telecommunication policy and telecom industry.
Fenwick McKelvey: It's my real pleasure to be here.
Host: Thank you so much. Now, before we get into the specifics of the issues and concerns that we wish to discuss today, could you first provide a broad overview of the current landscape of Canada's telecommunication industry for our listeners? Who are the major players and how does the industry basically look like today?
Fenwick McKelvey: Yeah, thanks, Kirti. And I think it's important and helpful to just think about how broad the term telecommunications is, and what that means when we talk about Canada. Telecommunications refers to your home Internet, your home phone, often increasingly your home security and your mobile phone. So this is all part of the telecommunications industry that impacts you. Increasingly, though, when we talk about telecommunications, it means more than just your home services. It also means critical infrastructure. So the way that you're able to do your banking pay your interact fees, it all depends upon the telecommunications sector. And increasingly with concerns around cybersecurity, the telecommunications sector is increasingly responsible for protecting your personal information, as well as protecting your access to the Internet to make sure it's secure. And so that's a really important part of making sense of this sector. It's one that's really essential for many of your listeners' everyday lives, their basic human rights and I think also the their access critical information.
Canada has a history of attempting to bring about competition in a very concentrated and naturally concentrated industry. So Canada for the past 30 years has been committed to the idea of a successful telecommunications sector being delivered by the private sector competing over the development of competitive infrastructures. This is the paradigm called facilities-based competition. And so we have a few main firms: Bell, Telus, Rogers, Quebecor are the big or the major players in this sector in Canada. Canada's commitment and really its industrial policy and its governance regime has really tried to support a competitive marketplace. In recent years that’s kind of fallen on hard times. And it's part of the kind of shift we're in right now. We have a duopoly in regional markets between cable and DSL providers. Most of these firms are fairly vertically integrated, so we see content providers also being carriers or telecommunications provider. Much of the infrastructure that is being built is actually co-shared. There's a decline in the number of independent ISPs. We see fewer actual competitors and more flanker plans or the appearance of competitive firms, and as well as growing concerns about cybersecurity and network resilience. Out of the few players that we've been trying to grow as a country for decades, there's been little movement on that kind of competitive expansion.
So now we're in a kind of moment of compromise where there's contested competition. And I think it's debatable how much competition is taking place. But certainly there is competition between these big major firms and public pressure to ensure that these firms are complying with their mandates. And this is, I think, largely been the context where we have these few firms facing a lot of public pressure to bring down prices around mobile Internet and mobile phone services.
Host: I want to come back to the question of competition. But you said the word history and it sort of rang a bell. Could you take us back a little bit and talk about how Canada's telecom industry evolved into this monopoly or regional duopoly that you talked about? How from concentration in a few state-owned companies to a turn towards privatization, to these voracious mergers that we are now looking at, how has the history sort of shaped the present?
Fenwick McKelvey: When I teach the history of telecommunications in Canada, I usually describe three eras. So initially there was a period of competition and consolidation. And this is when telecommunications came about and really consolidated into a few firms. I always give the example of Bell Canada, which when Canada was building its railroads, which I think are really critical for this history in the railway, Bell was given rights to use the long lines built along the railways to offer long distance services. And so early on, there was a period of competition where we saw a few firms emerge and become dominant.
And that period led to a second phase of public utilities and a conversion of these kind of few private companies into regional telecommunication providers. So I'm originally from New Brunswick. I think back to my youth about NBTEL. There's also SaskTel and other regional firms. And these collaborated largely to deliver telecommunication services in Canada. And so we had a long period of public utilities approach to telecommunications. Beginning in the 1980s with the turn towards regulatory liberalism and the belief in market-based solutions, what we talk about as neoliberalism, led to a desire to shift away from these public corporations and public utilities towards private services and private utilities. And this is still the epoch we're in right now where we've let these public firms be sold off, become their own companies, and then merge back into a few smaller firms themselves, the largest being Bell Canada as a conglomeration now of these original utilities that have all merged back together.
So that's kind of that history. Then alongside, we've seen the rise of cable and cable providers that typically offered television, moving into the internet sector, as well as new disruptions that are taking place, such as Elon Musk's Starlink, which is promising new opportunities to connect to the internet through a satellite system. That's all part of this current moment we're in around a private solution to the delivery of telecommunication services.
Host: I'm so glad you raised the history of railroads, because I think it sort of helps us in understanding the present digital divide. It has a lot to do with the railroad system, which was eye-opening and interesting. But let's talk a little bit about what everybody's concerned about, the high phone bills that Canadians pay. And more often than not, the most talked about solution is competition. But what we see now is not so much competition with the Rogers and Shaw mergers. The dominance of the big three will only intensify. But the merger, the way it played out, seemed so complex, so opaque, and so protracted that regular Canadians like myself, we just couldn't understand it after a point of time. But there were people commenting that perhaps the protractedness was because the government was trying to stall the merger for as long as possible to prevent further consolidation in the industry. So my question is, is this the case? And if this is, is delaying the best the government could do to prevent a monopoly in the industry?
Fenwick McKelvey: I think I can answer your question in two parts. And there's two separate issues to unpack here. One is whether competition is ultimately the right answer to ensuring that other objectives like universal access, affordability, I think dealing with quite directly when you're talking about the railway system, I think part of this is also the colonial history of telecommunications in Canada that has systematically led to some communities being more connected, and often Indigenous communities being disconnected from these infrastructures. Part of how I understand this to work with Indigenous communities to help me understand all the work that they've done to be connected. And that's something I always carry with me when I talk about telecommunications. So one sense is, how do we think about the right regulatory solutions to competition? And then the second questions is whether Canada's framework for competition policy robust enough for doing its job.
And that's, I think, where we see this kind of intersection taking place. Because there is a real question about whether competition is the right answer here. And maybe what we want is just more regulatory oversight and capacity of setting rates, of ensuring that there is a minimum standard for broadband accessibility, a minimum price, as well as governments themselves taking initiatives like taking tax off your cell phone bill or having it so that certain programs, public subsidies are actually ensuring that there's public access or greater public access to the internet. So that's kind of this one question is that competition, I think, is standing in for this greater debate about whether we see as the United Nations and other firms see that access to the internet is essential human right. How do we mandate that? How do we deliver that? But what we've kind of gone to has said, well, the way we're going to do that is we're going to have competition.
And this has been the enduring and very consequential paradigm in Canada. We've invested so much resources and efforts to fostering competition as if it's an inevitable solution to achieving these human rights values that we tie to telecommunications. Which gets into the second issue about the Roger Shaw merger more broadly, which is how capable Canada is at ensuring effective competition between key firms. And this is something extends well beyond the telecommunication sector. Right now, there's a lot of concern about price gouging on the part of grocery firms and the consolidation of the market and those grocery chains in Canada. And so that gets into this second question is whether Canada has the kind of apparatus to ensure mergers like the Roger Shaw mergers are properly accounted for. And that's why there's been stalling because in part, this has become a kind of critical moment of trying to bring about reforms and competition policy to ensure that this merger is being vetted properly.
There are debates about that. The immediate example would be when the CRTC was considering this Roger Shaw merger, they only were looking at parts of the business, the broadcasting parts of the business, when they were saying whether this would have an positive or negative effect on competitiveness. And that's, I think, an indication that the way that this merger is being measured and measured institutionally might be out of sync with the lived consequences of that merger. And so that's the second part of why there's been delays. There's been efforts to use this as a critical case to bring about reforms to competition policy in Canada, which are really thoroughly needed.
Host: Talking about the delay and the fourth deadline, the final say or the final approval rests with Minister Champagne. And he said that his priority is going to be on delivering lower wireless prices when he weighs the final approvals. Say it goes through. Does the deal going forward sound like a good telecommunication policy? Can it set a good precedent to mergers that may happen in future years? How does this sort of alter the telecommunication policy in Canada going forward?
Fenwick McKelvey: Well, I think this represents this compromise position. What we'll see is a move away from competition as a defining objective and more towards trying to carve out modest consumer-oriented objectives, like lower cellphone bills. And that's, I think, a fairly modest agenda for the telecommunication sector. It certainly, I think, is not addressing deeper questions about digital divide and access. What I think we'll see is that because of nothing other than public pressure, modest decreases in cell phone bills, which we observed and have been observing largely because of public campaigning to raise this issue of the cost and affordability. We'll see a compromise being struck where consolidation will continue to occur, so long as there are modest price benefits for consumers. And what we've seen in the evidence is a slight decrease in cell phone bills over time. And I think that that's really enough of a talking point that we'll see these deals potentially go through because it allows the government to say it's lowering cell phone bills, even though that drop isn't something that's necessarily that tangible for everyday Canadians.
Host: The compromise doesn't sound very bright, but you also mentioned a lot about how the narrative in Canada is saturated by the discussion and the focus and the emphasis on competition. Now, if competition is not the solution to all our telecom issues, what is?
Fenwick McKelvey: Well, the distinction is often between facilities based competition and service based competition where you would have crown corporations or public utilities rebuilding or maintaining public infrastructures, or large monopolies obligated to share their infrastructures with third parties and independents. And that's sort of what we have in Canada. We have independent ISPs that have access to critical infrastructure of incumbent ISPs. I think the example of TechSavvy is one your listeners may be familiar with, which is regrettably one of the last remaining of these types of independent ISPs. And that was the program in some way - the idea that we're going to allow this to take place in the service of competition. That hasn't happened because there's been a consolidation: My own independent ISP e-box, which is in Montreal, has just been acquired by Bell. And I'm getting lots of reminders to sign up to Bell's fiber services now. That's an indication of that paradigm not working. So if we're trying to talk about change, one thing would be to ensure that there was access to new entrants to be able to use and sustainably use the infrastructure of large incumbents to deliver and compete on service delivery, and trying to shift it from a facilities based program, which is about delivering infrastructure to trying to compete around service and service delivery.
Another kind of direction would be a change of governments themselves to really kind of think about their relationship to telecommunications. Taking taxes off critical communications services and really kind of finding a line between, say, poverty programs and poverty alleviation programs and the fact that there needs to be mandates with telecommunications access. So really kind of thinking about that more directly. I think the other part, and I think telecommunications firms have a right to be critical of how they've been set up in a certain way, because one of the ways the governments have really increased their coffers and increased their revenues is through the sale of wireless spectrum. And many of the firms have kind of mortgaged themselves out to maintain their competitive advantage by paying huge fees for the wireless market. And when we have only a few players, really what's happening is those costs are being downloaded, I think, on cell phone providers to pay for that access.
And so another shift here that could take place would also a new approach to wireless spectrum away from an auction model towards trying to ensure access to spectrum was delivering or encouraging new innovation in either mobile wireless delivery or mobile internet delivery. And I think that those are kind of examples where we could see either modest moves towards more service-based competition, or I think more direct activities where the government of Canada is becoming more involved. Long ago, there was proposals for Canada Post, per se, to be reformed to offer more internet-like services or being like hotspots, like the Community Access Program from long ago. And so the last option would be something more around building or participating in the production of public utilities around internet services, which I think is ambitious and scary, and certainly one that's kind of risky for governments, but I think also raises, you know, important questions about how we've let the internet be built in Canada, and if it's infeasible to think about or consider public utilities, I think that's a really significant consequence of the turn towards a markets-based approach.
Host: The things that you just said made so much more sense, and it sort of also allows us to shift our focus from competition to a focus on what actually needs to be done, especially in the realm of service delivery. But I want to know whether there are, because we know that this is natural monopoly and things globally are going to be more or less same, if not completely similar to what we have in Canada, but do we have any effective and efficient telecom models in other countries that Canada can learn from?
Fenwick McKelvey: I think there's been interesting work in New Zealand in trying to foster service-based delivery, as well as I think, and it's quite controversial because it's been so politicized, but the Australian government's attempts to build a national fiber backbone, neither of those are ringing success stories, but I think demonstrate at least the opportunity toward governments being more engaged in delivering critical infrastructure and taking that responsibility. I think even in the United States, you're also seeing, I think, stepping up in terms of measurement and work in measurement. So talking about effective broadband maps and the broadband mapping that's taking place. When we're talking about competitiveness, I think one of the challenges, particularly the challenges as being an expert here, is around data and the contentiousness of data. When we talk about how competitive it is, what type of services being delivered, affordability, the CRTC has historically maintained a data collection responsibility. There's been concerns about how effective that's been in recent years. And I think that that's another part is even trying to establish measures of goals that we're trying to achieve around the broadband sector.
Host: I'm curious if we can talk about India here, because we have a similarly structured telecom industry in India with key dominating player, but the prices were really low, especially when compared to Canada, because of predatory pricing, perhaps. This makes me think that low prices or reduction in prices is not necessarily a hallmark of competition alone.
Fenwick McKelvey: Well, Kirti, I think, first off, that's a brilliant comparison. I think one of the things to encourage is more discussion of where Canada can compare itself to. India and Canada are good test cases, both with similar kind of histories as British colonial states. Often we compare our situation to the United States, which is dramatically different context. Certainly with Europe, as well as with India, I think there's important points of comparison. Second thing I'd say on the point of comparison between India and Canada, which I think really gets to the intuitiveness of what's taking place, is the rise of flanker brands, which are most evident in the cell phone services where you have Rogers offering Fido, Bell, Virgin, Telus, Kudu, Videotron, Fizz. And these are all the flanker brands that make it look like there's a number of different cell phone providers, which are really actually coordinated and using the same networks. So that, I think, is really where we will get into a concern about consolidation of the market, good or bad. I think that it won't be recognizable because of a turn towards flanker brands. And I think a problematic turn towards branding and marketing is a way of papering over deeper concerns about the kind of structures of the telecommunications sector.
Host: It does sound like it's a deceptive picture. You think that there's competition, but there's only the big three.
Fenwick McKelvey: Well, I think one part to always look for is these moments of coordination. And that's one part is that it's really interesting where the prices don't differ dramatically. And occasionally you'll see this moment where someone cuts a rate and all the firms follow it and then it rises back up. But I think it's important to pay attention to just the comparability of offerings on the table here. And that's, I think, one part of these moments where you see a few firms acting in ways that appear coordinated. And it's hard to make sense of what's taking place there. But certainly it's not necessarily competition. It's more actually cooperation to keep prices at a certain point. And these are the moments where the flanker brands, I think, are important to pay attention to is how much distinction and difference they have than the prices being offered by the main family brand.
Host: And another thing, talking about brands, it brings me to the idea of bundling. So you're one person, you're using Wi-Fi, you're using your phone bill, and you don't want to go to 10 different service providers. You would want to stick to one.
Fenwick McKelvey: Trying to make sense that telecommunications is weird and unlike other types of products that we want to pay attention to. And the example I give is that for my ISP, it's now been bought by Bell, and I'm trying to figure out whether I can switch or not. And the work to be done to switch to another ISP, it's killing me. It's taking a lot of time, and I only have one service, right? So it should be a relatively easy switch. And even that, I'm so lazy to get it off the ground. What you're raising with the bundling, I think is really part of the way that we really want to emphasize this kind of need for consumer protection, because it's really hard to switch. It's really hard to kind of negotiate your way out when you're so dependent upon that company, and so much would change.
I don't know about you, but I have a friend who's like really good at negotiating, and they're the ones that figure out some way where they can get the lower rate. And that speaks to part of this hidden world, the hidden world of true prices, and how much there's transparency, and what's the lowest rate, or what are the rates that companies are willing to accept in order to make sure they don't lose a customer.
And I think that that world, like bundling, switching, is all, I think, part of the nuance why competition is complicated in the telecommunication sectors, and maybe not the answer, because really, it might be better contract law, and ensuring that you have guarantees for rates of services, or better transparency. There's also been a push for decades to actually have nutrition labeling on your broadband service so you actually know what you're getting. These are all things that I think, as someone slightly depressed about the telecommunication sector, who's watched it for a long time, I don't see a lot of movement on these simpler solutions. We can talk all day about competition of the big firms, but simpler regulatory reforms, and particularly regulatory reforms at the CRTC, around transparency or contracts, or even taking the tax off essential services like mobile phones or home internet, could drive immediate change, and we haven't seen a lot of movement on that.
Host: Once again, that is Professor Fenwick McKelvey, who joined us for discussion of Canada’s telecommunications monopoly. Thanks for tuning in for Beyond the Headlines. Remember, you can join our conversation on Twitter @Byond_Headlines, checking out our website www.beyondtheheadlines.net, or by following us on Instagram. Our second guest is Joe Rowsell. Joe is the Director of Regulatory Affairs at TELUS Communications. He leads a portfolio of research projects in areas such as rural broadband and internet affordability. Previously, Joe was a Project Director at the Council of Canadian Academics, where he led more than a dozen multi-year expert panel research and policy assessments. Joe has a Master’s of Philosophy in Economics from Oxford University, and his research interests include behavioral economics, poverty, innovation, and artificial intelligence. It's so nice to have you, Joe, with us today. Thank you for joining us.
Joe Rowsell: Thanks, Vicky, for that very kind introduction. It's a real honour and a pleasure to be here. I've listened to a few of your episodes, and you've had some pretty amazing guests, so a real honour to be here today.
Host: Thank you. Canadians have long been told that they're paying some of the highest wireless rates in the world, perhaps maybe 16 or 17 times more than the least expensive countries, according to a 2019 report. I want to ask the big question. Why? Why is this the situation?
Joe Rowsell: Yeah, so that's a great question. I mean, I get where this question is coming from. It's people's lived experience, that they pay a lot for their cell phone, they pay a lot for their home internet. I hear this from my parents, from my friends, my family. We've learned this in focus groups, online, etc. And we saw this during the pandemic, and it will become increasingly more so: Connectivity, whether home internet or wireless connectivity, is so crucial to people, that this is a monthly line item that you can’t sidestep. I get when people say that they feel like they are paying too much, and that it's that it's more than in other countries.
But, if I was to ask you, do you want to pay less for your phone? You're going to say yes. If I asked you, do you want to pay less for your housing, your transportation, your food, tuition? You might also say yes to those things. And that's kind of common across many, many products. But from a policy perspective, we at least need to add in, national statistics and rigorous valid studies into the mix to understand what is going on in Canada. And from the experience of people, those are important proof points, but it's not enough. It's not enough for policy. So if you look at the 16 to 17 times number, that comes from a particular study. I'm happy to spend some time discussing the issues with that study. But in stark contrast to that statement and what is in that study, ISED's own report, which is an international comparison of prices across country, positioned Canada as having prices that are lower than the United States and lower than Japan. And that is a study that does not take into account the quality of the networks. It doesn't take into account the types of plans that people have, unlimited plans, for example. It doesn't take into account Canada's higher costs. And that Canada's prices are now lower than in the United States and Japan is a result of Canada's wireless prices declining 30% over the last couple of years. And those data come from Statistics Canada and have been cited by the minister himself.
So this idea that Canada's prices are way higher than everybody else's in the world does just not comport with national statistics and high quality studies. Maybe the most simple way to answer the question of why would prices be somewhat more elevated in Canada? It's really two core pieces. It's the quality of the service offering you're getting and it's the cost. So if you look at the quality, virtually all Canadians have access to home or wireless Internet. And that's a pretty amazing thing in a country like Canada, which is very big, very cold, high population dispersion. And Canadians on the wireless side and on the wireline side, benefit from the best quality network or one of the best quality networks in the entire world. We have the best network in the G20, a network that rivals the networks in South Korea. So Canadians are getting great value for what they're spending. And then Canadian operators face costs that are twice the average costs in the G7, driven by spectrum prices, which are are 400 percent the OECD average. And then Canadian operators and consumers face the high costs of devices. So the high cost of your actual cell phone. These things are fifteen hundred to two thousand dollars. There's no markup on these cell phones in Canada because we face a global duopoly with only Apple and Samsung to buy from. So there's that cost piece.
So when you step back, you can feel like you're paying a lot. There's poor quality studies out there that support that perspective. But when you look at the national statistics that are cited by ISED and when you look at rigorous, well-controlled studies that take into account quality and costs, then the idea that Canadians are paying prices that are that much higher than other international countries turns out to just not be the case.
Host: I want to dig deeper into the competition that you talked about. As we see now in the Canadian market, there are some problems facing new competitors. So what are some of the problems that are preventing small firms from entering as independent operators?
Joe Rowsell: That the telecoms industry across all countries has high barriers to entry. Regulation is complicated, there’s high infrastructure costs, high spectrum prices, economies of scale. These factors inhibit entrance to telecom markets all over the world. That's why when you look across all countries, countries either have three or four national operators, Canada having three national operators. So there's nothing particularly significant to Canada. In fact, what is actually happening in Europe, for instance, where there are more smaller independent Internet service providers, is that it's making the market structure somewhat unsustainable. So Ericsson just laid off 8,500 workers and the head of the European Commission has said that this heavy price competition is not allowing operators to raise sufficient revenue to be able to invest and build out the network. We're in the middle of the 5G era. 6G will happen. You need to bring fiber to everybody's homes.
So the idea of having more independent small operators in Canada could put us in a position like Europe, without raising enough capital to invest in the network, and now that market becoming potentially unsustainable. I would say that in Canada, I don't think there are any barriers to these small operators. If anything, when you look at the spectrum side of the equation, ISED has been using what are called “set asides” for more than 15 years. This is where you set aside an amount of spectrum for non-national players to be able to deploy their networks throughout the country. And when you set aside that spectrum, it's auctioned in a “set aside” auction. So the prices are a little bit lower to try to give some of these smaller independent companies an opportunity to compete with the larger national operators. But what has happened is that spectrum has not been deployed for the most part, especially in rural parts of the country. And these companies are not building out in rural parts of the country. So you're just not seeing the development of those smaller independent operators because the business case just is not there in rural parts of Canada.
Where you do see these operators is in urban areas. And there are many of them. Most urban areas have 8, 9, 10 plus operators that you can choose from. And they put downward pressure on price. But like I was saying, there's no opportunity to collect enough revenue to be able to invest in the network. And it's investment in the network which is essential. That's why all Canadians have access to the Internet and to wireless connectivity, why the networks are the highest quality in the world, because we have a facilities-based competition framework in Canada that is motivated on ensuring that operators invest in the network. If the objective of telecom policy is to ensure that all Canadians have access to the best possible networks wherever you live, then that has to be the focus as opposed to trying to push smaller independent new operators. Canada has tried to encourage new operators, but it has not been particularly effective. And we wouldn't expect it to be particularly effective given the international experience.
Host: So speaking of service delivery of these large companies, I think we should talk about Rogers in particular and their outage that happened eight months ago that crippled a large part of the country's telecommunications system. As a result, we saw on the news how 911 was temporarily unavailable, people couldn’t call the police. The online interact service system was not working for businesses and customers were left without network services for hours. So I want to ask you this. Has the Rogers outage become a distant memory or is it a symptom of a larger problem that is not being addressed or has not been paid attention to by either policymaker or lawmakers?
Joe Rowsell: Yeah, so that's a terrific question. It's remarkable sort of what happened to parts of the country and to individual consumers when Rogers network went down There are some dangerous implications of the network failing around 911, lack of connectivity in hospitals. And then, it just impacts on individual people not being able to access, interact. Maybe if folks were teleworking, not being able to work from home. So it was very problematic for the country overall. So in that sense, it's not a distant memory. National operators and some smaller operators signed a memorandum of understanding in the fall to, to work together to ensure that issues like this, if they happen again, don't lead to the same kind of fallout that they did in this particular circumstance. My understanding is that they were doing routine maintenance and it caused a malfunction in the core network due to problematic code. And Rogers was using a single core for routing all of their internet and wireless traffic. So when it went down, the whole network went down. They should have used probably multiple cores so that there's more redundancy built into their network, or conducted more thorough testing before maintenance upgrades. And Rogers, according to the government did not do a particularly good job of communicating to Canadians about the nature of the outage, when it would be back on and these sorts of things, which motivated the CRTC to work towards this memorandum of understanding.
But that was a Rogers outage. That wasn't a Canadian outage. It wasn't a Bell, a TELUS. Other operators did not have that issue. Bell's network went down in the fall out east, and that was due to extreme weather events. Now there, potentially there were things that Bell could have done there again, but that was an isolated Bell outage. So it's important to take each outage for what it is, a particular company having some kind of issue at that time and not think about it as being representative of the entire telecom industry in Canada, nor to think that these outages are routinely happening. This is why I think it's important to not go overboard here. I think it's important that the operators find ways of building more redundancy and reliability into their networks, that they work together when these issues happen, but it's also important for policymakers and perhaps others to understand that there are going to be outages here and there forever. I mean, sometimes you lose power to your network, which is outside of the control of the telcos, or there could be vandalism and cable theft. We're in a period of increasing harsh weather events, which could lead to network outages. So what we need in place is a bit more of a framework building off the MOU that was developed by the operators, not necessarily to prevent such things because these things can happen, but really to have protocols in place so if there is an outage, other operators can step up.
But this is not necessarily the time I think to kind of assume that there is something problematic with all networks in Canada or the telecommunications networks and outages happen in other countries as well. That's not to downplay it. It's just to appreciate sort of those incidents when they happen and the factors that cause those individual incidents and not to extrapolate sort of too much from them. CRTC and ISED are thinking about these issues.
Host: I just want to reemphasize to our listeners that the CRTC announced that 12 of Canada’s biggest telecoms have signed this memorandum of understanding to provide emergency roaming, mutual assistance and telecommunications to the public and governmental authorities during a critical network failure. About this memorandum, I want to ask you, do you think this collaboration can be sustainable in the long run? Or I guess an extended question would be, do you think there's any security concerns for one telecommunication company to provide emergency services to the clients of another company?
Joe Rowsell: I think that any issues around the operators collaborating have been sorted out in the memorandum of understanding because the 12 operators came together with key folks from CRTC, ISED, other key stakeholders to determine what the best path forward was. So any of those sorts of issues would have been sorted out, I believe, during the memorandum of understanding. Perhaps the challenge is maybe more that when it comes to competition – you can compete on price, you can compete on other aspects of network quality. And in Canada, the operators are competing on network quality. And network quality is its speed, its latency, its reliability, its resiliency, redundancy. It's those kinds of things that operators are competing on that you would want to build into your network. And as you have more robust agreements across operators, you reduce the incentives to invest in those dimensions of network quality, which over time could have the unintended, perverse consequence of eroding network capacity. If other operators are just going to pick up my slack if my network goes down, there's less incentive for me to have a world-leading network. So those are the kinds of things that are very important to take into consideration here.
I think when developing and thinking about collaboration and coordination across the industry going forward, I think this is a particular moment when it's important to see the bigger picture around the importance of networks to the country. This just needs to be more of a collaborative piece, which is how it has been thus far.
Host: We asked Professor Fenwick McKelvey the same question. I want to ask you the same question. In addition to creating a crisis plan, do you think the government, as you mentioned, as well as CRTC, has used all of the tools at its disposal to ensure that our telecom networks serve the public? I guess I could expand on this question. You don't have to answer this following question, but do you think the government should play a bigger role in regulating the telecommunication industry? Or on the other hand, should it let the market find its own equilibrium and adjust itself?
Joe Rowsell: The government is already intervening quite heavily in Canada's oligopolistic telecom market. And this is true in all countries around the world. It is just the nature of telecom markets because of the need for high levels of investment in network and in innovation that markets can only support three or four operators. And as a result, governments heavily regulate telecom in the same way that they regulate air, they regulate pharmaceuticals, they regulate other industries. So if you look at Canada, there's pretty heavy handed regulation in some spaces. Canadian operators faced until recently retail price controls. So a 25% mandate to reduce wireless prices. As I mentioned, Canada's spectrum policy leads to spectrum prices that are among the highest in the world. And that is a result of spectrum policy being designed to give regional operators and small independent players an ability to compete with the national operators, which hasn't worked out particularly well. The government has mandated access for mobile virtual network operators to the networks of the national players. And there's legislation around cybersecurity, AI, etc. So it's a very heavy regulated space.
And if you look at the Canadian market compared to other markets internationally, we have three operators, which is in line with lots of other countries that are big and have small population densities. Pretty much all provinces have at least four carriers. Most urban areas have many smaller operators. And if you look at Canada's wireless market compared to other OECD markets, we have the seventh lowest concentrated market. So when you look at the Canadian market, it's an oligopoly like every telecom market is in the world, but Canada's is somewhat less concentrated among those markets. And then within Canada, like in all countries in the world, we have the CRTC and we have ISED that are heavily regulating the industry. We have price control spectrum, a few other things that aren't present in other countries that are an added layer of regulation. So I think to your question, the government is already regulating the industry pretty heavily. There’s probably not room for much more regulation. I do think there is obviously quite a lot of value in allowing the market to do what a market does best, which is to allocate resources efficiently, which in this context is ensuring resources are allocated to operators and to companies that will use them efficiently by building networks. So you want your national operators to be in a position where they are capitalized such that they can invest throughout the country and improve rates of rural and remote and indigenous connectivity.
Host: The telecommunications industry has important economic, social as well as environmental impacts. Can you maybe tell us more about their significance in these areas?
Joe Rowsell: Telecom is a very exciting field to be working in at the moment. It intersects everything: The environment, artificial intelligence, privacy, cybersecurity. All of these global, super interesting wicked problems are all intersected by telecom, because telecom is foundational to the functioning of a modern economy. If you step back and you think what are the impacts of telecom networks to Canada? So I touched on earlier that basically all Canadians can access these networks and for the most part, and the network is among the best in the world. So what does that bring to people? People are using networks all the time to connect with their friends, families, et cetera. If you look at like the economic impact, the Canadian telecom industry is already at 2% or so of Canada's GDP. And estimates have it about doubling over the next 20 years or so. The telecom industry alone is likely to account for 16% of Canada's GDP growth over the next 20 years. And the industry provides very high paying jobs to about 150,000 Canadians - jobs about 20% higher than the mean wage in the service sector. So, there's, there's significant economic impacts there.
If you take Canada as a small open economy that needs to compete globally, then innovation, trade, international competitiveness is particularly important for a country like Canada. So having robust, reliable, high performing networks is critical for all Canadian companies to, to export internationally. And then I think when you start to, to get into some of the social impacts, they're also very significant. I touched on the jobs piece, but networks are also very essential for addressing issues around loneliness, for example. You might also look at the impacts of telecom networks around agriculture, bringing in new use cases into agriculture, as well as into other industries. There’s estimates that greater rural connectivity and greater uptake of digital technologies in the agricultural industry can increase productivity by 25%, which is critical as the world is in the middle of a food insecurity crisis.
Finally, I don't know, Vicky, if you saw the report that came out from the UN today about climate change, it's another damning report that predicts people are going to have to make real wholesale changes to their lifestyles. Telecom and digital can play a huge role in addressing climate change. There's very credible studies now from academia, but also from multilateral organizations, world economic forum, OECD, etc., that show that greater access and adoption of broadband and digital technologies can reduce GHG emissions by 15 to 25% over and above current levels. That's a huge chunk. And oddly no G7 country has telecom and digital as a core component of their climate action strategies, despite this very significant potential to reduce GHGs. And we already saw this potential. In the early days of the pandemic GHG reductions declined across all countries around the world because people were staying home and they were using connectivity instead of having to drive to the office, drive to the doctor, do all these sorts of other things.
There is an incredible potential here to fight climate change with digital technology and with telecoms. And that kind of applies across the board. Telecom policy is climate policy or telecom policy is economic policy. It's health policy. It's social policy because digital technology and the digital transformation is so critical and so important.
Host: Thank you, Joe. I think that was a very good point to conclude our interview. And I personally, I have learned a lot from our conversation. So thank you for joining us.
Joe Rowsell: It was my pleasure!
