OTTAWA – While Canada’s telecommunications industry is expected to see profit levels increase again to $4.3 billion in 2007, the reasons behind that growing profit are troubling, according to the Conference Board’s Canadian Industrial Outlook: Canada’s Telecommunications Industry – Spring 2007.
The report looked at Canada’s traditional wireline telephone companies.
"Despite modest sales growth and minimal price increases, industry profits reached a record high in 2006," said Michael Burt, senior economist, in a press release. But that growth was primarily due to "weak growth in material and capital costs."
That means the growth will be cooling soon. "(W)eak price appreciation and a shrinking market for traditional wired services will limit industry profit growth to an average of just 4.4 per cent annually between 2007 and 2011," said Burt.
Service carriers have been forced to adapt to ongoing regulatory and technological changes in the industry, including the increased availability of voice over internet protocol (VOIP) services, says the Conference Board.
The number of traditional fixed wire lines has steadily declined since its peak in 2001. The number of cable telephony subscribers has surged over the past 18 months. Also, the recent proposed regulatory changes related to local voice services could further limit price appreciation over the forecast horizon.
