CRTC Releases First Combined Communications Monitoring Report

The CRTC has released an exhaustive report into the telecoms and broadcasting industries, as well as examining related technology use. The Communications Monitoring Report 2008 contains industry statistics and survey data consolidating information from a variety of sources and for the first time combines data collection by the CRTC and Industry Canada as the regulator copes with convergence and eliminates overlaps in data gathering (see Canada: 29 February 2008: CRTC and Statistics Canada Consolidate Telco Data Reporting).

Regulation

The reports gives an overview of the regulatory environment and notes that the portion of telecoms revenues that it regulates has fallen to around 10%, of which around 25% related to wholesale services provided by incumbents to other providers, for which a conservative timetable for deregulation has been set (see Canada: 29 February 2008: CRTC Schedules Deregulation of Non-Essential Wholesale Telecoms Services). At the end of June 2008, the CRTC has forborne from regulating 73% of residential lines and 65% of business lines, equating to 80% of local access revenues. Some 95% of long-distance revenues are no longer covered by price regulation, although some wholesale access tandem and direct connect services remain regulated. Internet services are largely unregulated and 98% of internet revenues in 2007 were from forborne services. The CRTC also plans to use funds to improve rural broadband access (see Canada: 21 January 2008: CRTC Approves Rural Broadband Plans). The data and private line market is also largely forborne, with 75% of revenues from non-regulated products. All (100%) wireless revenues are forborne from regulation, although a dispute over charges for incoming SMS messages has led to some threats of regulatory intervention from Industry Minister Jim Prentice (see Canada: 1 August 2008: Incoming SMS Charge Spat Could Force Industry Regulation in Canada).

Revenue Overview

Telecoms revenues have risen by 5.3% year-on-year (y/y) to 2007 or at a compound annual growth rate (CAGR) of 4.4% since 2003. Wireline revenues have fallen by a CAGR of 0.4% over the same period while wireless revenues have risen by a CAGR of 15.6%.

Looking at revenues by provider type, resellers saw a 10.2% y/y decline in revenues to C$1.6 billion, while incumbent telcos grew by 1.9% to C$26.7 billion and grew broadcasting distribution revenues by 16.0% to total C$1.3 billion for an overall growth of 2.5% to C$28.0 billion. Utility telcos grew their revenues by 39.0%, but this came from a low base, reaching C$477.8 million. Cable companies grew telecoms revenues by 19.4% to C$9.2 billion and broadcasting revenues by 7.1% to C$4.9 billion for total revenues of C$14.2 billion, up 14.7% y/y. Retail revenues rose by 6.0% y/y to C$34.7 billion in 2007, while wholesale revenues were static at C$3.3 billion, of which the major revenue sources were long-distance services with 23%, 24% came from local and access revenues, and 28% from data and private line.

Capital Expenditure

Overall capital expenditure has increased at a CAGR of 12.2% between 2003 and 2007. Incumbent service providers led expenditure with a total of C$6.3 billion. Some C$4.6 billion, up 17.1% y/y, was spent by incumbent service providers; C$1.6 billion was spent by non-incumbents, up 31.0% y/y; resellers spent 0.1 billion, up 41.8% y/y; while alternative service providers grew spending by 31.5% y/y to C$1.7 billion. Wireless capital expenditure was up by 12.7% y/y to C$1.9 billion.

Outlook and Implications

Video

Broadcasting revenues rose by 6.7% y/y to C$13 billion in 2007, with the increase driven by cable Broadcast Distribution Undertaking (BDU) growth, up 8.8% y/y to C$6.3 billion. Pay per view, speciality and VoD revenues grew C$226 million (9%) y/y to C$2.7 billion and generated 52% of TV revenues in 2007. Pay, pay per view and specialty subscription revenues increased by C$152 million (or 10%) to C$1.73 billion. Advertising revenues generated 45% of revenues for English language channels and 36% for French language channels. Programming distribution revenues totalled C$6.3 billion, up C$0.5 billion or 8.8% on 2006, with revenue growth driven by a 7.0% increase in ARPU on 2006 to C$49.82, while subscriber growth was 2.3%.

The cable footprint covers 12.4 million households in 2007 and there are around 10.7 million BDU subscribers. Some 7.7 million subscribe to either cable or IP TV services, up 0.2 million or 1.7% y/y—nearly 90% of all households. Some 25% of subscribers, or 2.6 million subscribers, utilise one of two DTH (satellite) BDUs—Bell and the Star Choice network. Four major cable companies—Rogers, Shaw, Videotron and Cogeco—dominate with 65% of subscribers. Subscriber numbers were up by 2.3% y/y while revenues increased by 7.7%. IP TV providers have had only a limited impact on the market so far due to limited network deployments.

Internet

Anglophone Canadians use significantly more internet services than Francophones, with internet usage at 71% and 9.8 hours per week for Francophones and 81% and 13.4 hours per week for Anglophones. Broadband reaches 93% of the population with satellite services able to fill in coverage gaps. Internet penetration rose from 68% in 2006 to 72% in 2007, but the rate of growth in subscribers has slowed from 8.8% to 6.8%, reaching 8.4 million subscribers. High-speed internet uptake has reached 64% penetration from 58% in 2006, with 75% using services at speeds over 1.5 Mbps and 59% at 5 Mbps or over.

The share taken by incumbent telcos and cable companies increased as resellers, out of territory incumbents and utility telcos continued to fall from taking 20.7% of the market in 2003 to hit 7.8% in 2007 from 10.2% in 2006. Cable continued to claw back some of what had been a falling market share with 1.3 cable modems to each DSL modem. Cable companies grew by 13.2% y/y to 2007 and rose from a 54.2% share of the broadband market in 2006 to 54.7% in 2007 with 4.57 million subscribers. Incumbent telcos dropped 0.2% market share in the same period to hit 42.7% or 3.97 million subscribers, up 6.3% y/y.

Voice Services Overview

Fixed Voice

Access lines fell by 0.6% y/y to 20.9 million lines, with total local and long-distance revenues falling by 4.1% to C$13.5 billion. Local and access revenues fell by 1.1% to C$9.3 billion, while long-distance revenues fell by 10.1% to C$4.3 billion as alternative IP solutions hit the industry particularly hard in this area. Incumbent providers lost some market share, falling from 87.7% of local revenues to 86.1% in 2007 as cable players entered new markets and increased their penetration, taking their share of access lines. In the residential market, cable companies' share rose from 12.3% of lines to 17.9% in 2007 to hit 2.3 million residential subscribers, while revenue share rose from 8.4% to 13.6%. The incumbents lost a total of 772,000 lines while access independent VoIP lines grew from 334,000 to 464,000. However, incumbents did manage to increase their share of remaining long-distance revenues from 60.5% to 62.5%.

Wireless