OTTAWA – High levels of personal debt and limited job prospects are affecting Canadian consumers' ability to afford their current telecom services, according to The Conference Board of Canada.
The report Canada’s Telecommunications Industry: Industrial Outlook Autumn 2015 says that consumers may choose to limit their services and options in order to keep their telecom spending under control, especially with increases in wireless prices surpassing inflation.
The pace of growth in Canada's telecommunications industry has slowed remarkably in recent years, from an increase of more than 4% in 2010 to a mere 0.4% per cent in 2015. According to the report, the industry has been negatively impacted by the decline in landline phone usage, which has caused revenues from landline services to plunge by almost 40% in the past 10 years. Moreover, with the equivalent of 95% of Canadians already using a mobile phone, it is becoming more difficult for wireless carriers to grow their customer base. Also undergoing significant disruption is the paid-TV segment as more Canadians view their content online.
New technologies continue to fuel demand for wireless and wireline data, however, and Canadians will continue to need fast and reliable Internet connections with greater download capabilities to support their growing consumption of online content.
On the wireless data side, some carriers are trying to leverage the increasing popularity of audio streaming to encourage their users to upgrade their monthly plan. However, consumers may have reached the point where every extra dollar spent on wireless may be diverted from other types of telecommunications services such as paid-TV and wireline phone service, continues the report.
The outlook is slightly brighter for the business segment, as demand for telecommunications services among firms in the manufacturing and transportation sectors is forecast to grow at a healthy pace. In particular, the transportation sector is expected to spend more on Internet-of-Things (IoT) solutions, as connected devices are increasingly used in the industry for fleet tracking.
With gains in the business segments partly offsetting weaknesses on the consumer front, output growth in the telecommunications industry is forecast to pick up pace, with an expected increase of 1.4% this year. Pre-tax profits are estimated to have dipped slightly in 2015 but are expected to regain ground in 2016 and rise to $7.9 billion. Profit margins are forecast to remain above 10% over the next five years, well above the average for all sectors.
"Canadian consumption will grow only modestly in 2016”, said said Conference Board of Canada senior economist Kristelle Audet, in the report’s news release. “This, combined with sharp telecom price increases seen in the past couple of years, will likely prompt Canadians to review their telecom services and eliminate unnecessary options along the way."
