CALGARY – While telecom is a vital service for virtually every business in the country, Canada’s policy-makers appear preoccupied with whether services are priced fairly for consumers, says a new report by The School of Public Policy at the University of Calgary.
The Economics Of Telecommunications In Canada: A Backgrounder says that the telecom sector is “an economic powerhouse” that is responsible for over 5% of all industry capital expenditures in Canada. The sector contributed products and services worth well over $30.3 billion to Canadian households, and products and services valued at more than $22.1 billion to other Canadian industries in 2013. Of the $54.9 billion gross value measurement, over half ($31.2 billion) represents value added to the Canadian economy through the use of capital and labour as factors of production, while the remainder ($23.7 billion) represents additional upstream activity motivated by the telecom sector’s activities.
As the use of IP-based networking applications and broadband penetration in Canada increases, telecom is beginning to look more like a traditional utility with significant and widespread downstream linkages, rather than a typical goods or services sector, continues the report.
“Telecom, like electricity, has become a crucial pipeline that powers virtually every business in the country, with all critical sectors either buying significant telecom services or benefiting from them indirectly”, said co-author G. Kent Fellows in the report’s news release. “This is a reality that policy-makers may not yet have grasped. Given telecom’s importance, that could have troubling knock-on effects across the economy.”
While Canada’s ‘Big Three’ telecom firms are regularly scrutinized by regulators for evidence of exercise of market power, the report adds that the telcos’ abilities to earn profits over the last decade has not changed markedly, due in part to the large capital requirements associated with high replacement rates that accompany a rapid rate of innovation, and rising salaries in the sector.
