Bill Graham Director

1. An Overview of Canada’s Telecommunications Sector Paving the Road to Tunis – WSIS IIUniversal Access to Information & KnowledgeCanadian Commission for UNESCO ConferenceWinnipeg, May 13-15, 2005 Bill Graham Director International Telecommunications Policy & Coordination graham.bill@ic.gc.ca

2. TELECOMMUNICATIONS: Backbone of the nation • Telecommunication facilities and services - enable social and economic growth in era of Information Societies • Sector is technology driven: • Cellular expansion, PDAs, satellites, computers • Internet: home and business; e-commerce, e-health • Digitalization; convergence issues • Canadians - avid users of communications facilities, services • Telecoms includes radio frequency spectrum - an international resource shared by all countries and several telecommunications services

3. Telecommunications Policy & Regulatory Roles Industry Canada Canadian Heritage Canadian Radio-television and Telecommunications Commission Industry Canada • Telecommunications • Radiocommunications • Broadcasting • Telecommunications • Broadcasting • Radiocommunications Policies Regulation

4. Canada’s Legislative Framework • Telecommunications Act – 1993 • economic focus, technology neutral • Broadcasting Act – 1991 • nurture Canadian culture • Radiocommunication Act – 1989 • spectrum management • Competition Act – 1985 • general anti-trust framework • Changing technology requires adjustments - foster enabling environment • Open world economy imposes more competitive approach

5. Outcomes: Canada’s World Class Network Infrastructure Wireline Communications Network • One of the most developed telecommunications networks in the world: • More than 99% of the lines are linked to a digital network • Nation-wide fibre-optic network • More than 98% of households have at least one telephone • A well developed cable distribution network: • 92% of households have access to cable • 74% of these actually subscribe to cable • 70% of households have access to high speed cable internet

6. Outcomes: Canada’s World Class Network Infrastructure Wireless Communications • Three national wireless networks • National satellite communications network (Telesat) • Competitive radio carriers and service providers • Over the air television and radio broadcasting • Two Direct To Home satellite broadcasting licenses • Satellite mobile services • Fixed wireless, e.g., MDS

7. Wireless Providers Wireline Carriers Bell & Partners* TELUS Mobility Rogers Wireless Microcell Telecommunications Paging Companies e.g. PageNet Canada Broadcast Distribution Incumbents Major Telephone Companies: Bell Canada TELUS Aliant MTS SaskTel Independent Telephone Companies: e.g. Thunder Bay Telephone Overseas Carrier: e.g. Teleglobe Competitors e.g. Allstream Inc. (formerly AT&T Canada) Call-Net (Sprint Canada) FCI Broadband (formerly Futureway Communications) $8.2 Billion Cable Providers Rogers Communications Shaw Communications Cogeco Cable Vidéotron Ltée Persona Cable EastLink Communications Direct-to-Home (DTH) e.g. Bell ExpressVu, StarChoice Multi-point Distribution Systems e.g. Look Communications 2003 Revenues $38.0 Billion $23.1 Billion $5.4 Billion $1.3 Billion Resellers, Satellite & Other Telecommunications Resellers e.g. Primus Telecommunications Satellite e.g. Telesat Canada, Globalstar, Mobile Satellite Ventures *Bell & Partners includes Bell Mobility, Aliant Mobility, SaskTel Mobility and MTS Mobility. Source: Statistics Canada, Survey of Telecommunications Service Providers (April 2004) and CRTC, Broadcast Distribution Statistical and Financial Summaries (April 2004). Canada’s Communications Service IndustriesKey Players

8. Communications Service Industries Revenues Canada’s Market Segments, 1998-2003 *Direct-to-Home (DTH) and Multipoint Distribution Systems (MDS). Source : Industry Canada estimates based on Statistics Canada, Survey of Telecommunications Service Providers, CRTC, Broadcast Distribution Statistical and Financial Summaries, and company annual reports (April 2004).

9. Communications Service Industries Subscribers1998-2003 *Direct-to-Home (DTH) and Multipoint Distribution Systems (MDS). Source : Industry Canada compilations based on Statistics Canada, Survey of Telecommunications Service Providers and CRTC, Broadcast Distribution Statistical and Financial Summaries (April 2004).

10. Telecom Sector GDP has Steadily Increased Telecommunications* GDP, 1997-2004 • In 2004, the telecommunications industry* produced $26.8 billion of value added** (1997 constant dollars) to Canadian gross domestic product (GDP), a 2.4 percent increase over 2003. • Telecommunications’ share of total economy GDP had continually increased prior to 2002, but since then it has remained steady at 2.6 percent. *Telecommunications industry includes telecommunications services and broadcast distribution. **Value added is the term used to describe the net value of production by an industry group. It is equivalent to the differences between the value of an industry’s output and the value of the inputs of materials, energy and services purchased and used by the industry in the production of its output. Source: Statistics Canada, Gross Domestic Product by Industry, CANSIM database (February 2005).

11. 131 126 120 119 118 116 Employment in Telecommunications Continues to Increase • In 2004, the telecommunications industry* employed 130,926 persons, an increase of 3.5 percent from 2003. • Since 1998, the composition of employment in telecommunications has remained relatively stable with approximately 87 percent coming from telecommunications services***, and the remaining 13 percent from cable distribution. • The increase in telecommunication services employment was led by the wireline and wireless segments, as overall employment grew by 4,478. Telecommunications* Employment, 1999 - 2004 Thousands of Employees *Telecommunications industry includes telecommunications services and broadcast distribution. **Other includes resellers, satellite and other telecommunications. ***Telecommunications services include wireline, wireless and other. Numbers may not add up due to rounding. Source: Statistics Canada, Survey of Employment, Payrolls and Hours (SEPH), CANSIM database (March 2005).

12. Salaries in Telecommunications Industry Continue to Outperform the Total Economy Average Annual Salary by Segment, 1998-2004 • Average annual salaries in the telecommunications industry* continue to outperform the total economy. • For 2004, the average salary in the wireline and wireless segments were $49,038 and $42,125, 34 percent and 15 percent higher than the total economy. • Wireline was the only telecom segment to see an increase in salary between 2003 and 2004. • The broadcast distribution segment’s average salary declined by 2.1 percent to $43,236. *Telecommunications industry includes telecommunications services and broadcast distribution. **Other includes resellers, satellite and other telecommunications. Source: Statistics Canada, Survey of Employment, Payrolls and Hours (SEPH), CANSIM database (March 2005).

13. Wireless Revenues Continue to Grow Total Wireless* Revenues, 1999-2003 • In 2003, wireless revenues increased 14 percent to approximately $8.2 billion. • Between 1999 and 2003, wireless revenues have grown at a compound annual rate of almost 16 percent. * Includes Cellular, PCS and ESMR. Source: Statistics Canada, Survey of Telecommunications Service Providers (April 2004).

14. Today there is a Telephone for Each Canadian Teledensity, 1994-2003 * Wireline and Wireless access paths are in terms of Voice Grade Equivalents (VGE). VGE conforms to ITU and OECD practice when calculating the telephone lines per 100 population indicator. Numbers may not add up due to rounding. Source: Based on Statistics Canada, Survey of Telecommunications Service Providers (April 2004).

15. But Investment in Telecommunications Infrastructure Continued to Decline in 2003 Telecommunications Services Capital Expenditure*, 1997-2003 • Capital expenditures for telecommunications services fell 15 percent to $4.8 billion in 2003, following a drop of 26 percent in 2002. • Relative to the total economy, the telecommunications services share of the economy's capital investment was 2.9 percent in 2003, its lowest level over the past seven years. Numbers may not add up due to rounding. *Telecommunications services capital expenditure (capex) includes wireline and wireless only. Source: Based on Statistics Canada, Survey of Telecommunications Service Providers and CANSIM database (April 2004).

16. 2003 Saw Both Wireline Local And Long Distance Voice Revenues Continue to Fall Wireline Voice Revenues,1998-2003 • Wireline voice revenues have been declining at an average annual growth rate of 3.4 percent since 1998. • However, the decrease was much smaller than the drop which occurred in 2002, which saw voice revenues drop in the local and long distance segments by 6.7 percent and 12 percent, respectively. • In 2003, long distance revenues decreased by $92 million (1.2 percent), while local voice revenues declined by $85 million (2.1 percent), when compared to 2002. Source: Statistics Canada, Survey of Telecommunications Service Providers (April 2004).

17. Overall, a Competitive Communications Industry • Vigorous competition in long distance and business telecommunications, as well as Internet access and PCS, and increasingly in broadcasting distribution between cable and Direct-to-Home satellite. • Competition in the provision of high-speed bandwidth and Internet access has also emerged as a powerful new force. • Competition is emerging in local business service markets • While local residential service remains largely a monopoly, cable television operators have developed entry strategies using Voice over Internet Protocol (VoIP) technology.

18. Current Federal Government Policy Initiatives • Bill C-37, National Do Not Call List – unwanted telemarketing • Wireless number portability • Providing CRTC with direct fining authority • Minister Emerson, Telecommunications Policy Review Panel, April 11, 2005 • Review national policy and regulatory framework • Make recommendations on modern telecom framework by year-end • efficient, fair, forward-looking regulatory framework that serves consumers and business • reliable, affordable telecoms access appropriate to modern infrastructure • -promote adoption, use of advanced telecom services across economy (ICT enabler) • Goal: ensure that telecom industry supports Canada’s long-term competitiveness • (Members: Dr. Gerri Sinclair, Hank Intven, André Tremblay)

19. Some International Benchmarks

20. Subscribers per 100 Inhabitants Subscribers per 100 Inhabitants Low Access Prices and Competition Have Led to Canada’s High Level of Broadband Penetration Source: Based on OECD Communications Outlook 2003 and preliminary data from OECD Communications Outlook 2005 (forthcoming).

21. … Which has Contributed to Canada’s High Broadband Market Share Source: OECD Communications Outlook 2005, based on 2003 data *Ranked based on the largest percentage market share of cable modem. **Other includes Fixed Wireless, Ethernet LANs, Two-way direct satellite, Fibre to home, etc.

22. Competition is Relatively Strong Among Canadian Wireless Operators Source: Based on preliminary OECD Communications Outlook 2005, based on 2003 data. * Ranked by the smallest percentage of largest wireless operator

23. Canada 10th Canadian mobile prices are not the lowest among OECD countries, but are affordable Source: Preliminary OECD Communications Outlook 2005, based on US$ PPP

24. Luxembourg 121% in 2003 Sweden 99% in 2003 U.S. 55% in 2003 Canada 42% in 2003 Canada’s Wireless Penetration Rate Has Not Grown as Dramatically as in Other OECD Countries Source: OECD Communications Outlook (1995, 1997, 2001, 2003, preliminary 2005.)

25. Canada’s Per Capita Telecom Investment is Consistent with the OECD Average, but it Has Been Below the U.S. for Nearly a Decade Luxembourg 121% in 2003 Sweden 99% in 2003 U.S. 55% in 2003 Canada 42% in 2003 Source: OECD Communications Outlook (1995, 1997, 2001, 2003, preliminary 2005.)

26. Telecoms - Part of Broader ICT Sector • Information and Communications Technologies (ICTs) - essential enabler for other sectors • drive innovation, productivity improvement across entire economy • Narrowing productivity gap with US: key to improving Canadians’ standard of living • ICTs play essential role in achieving this objective • Second half 1990s: ICT- producing and ICT-intensive industries contributed 62 % share towards aggregate labour productivity growth in Canada* * Ho, Rao and Tang(2004), Sources of Output Growth in Cdn, US Industries in the Information Age

27. ICTs are Extremely Important to Wealth Creation • Communications & computer services, telecom equipment manufacturing, software etc, - information and communications technologies (ICTs) – are the platform on which the knowledge-based economy rests • The ICT sector itself represents 5.5 % of Canadian output, some $55.4 billion in GDP ($1997) in 2003 – telecom services represent 42% of these amounts • The ICT sector employs 545,000 people, exports $27.3 billion in goods and services and invests $5.2 billion in R&D – 43 % of all private sector R&D

28. Government’s ICT Influence Strongest in Communications Services Sector • ICT sector development determined by private industry – driven by technological change and consumer demand • Communications services policy and regulation strives to meet economic, social and cultural objectives • Telecommunications Act primarily economic objectives • Broadcasting Act primarily cultural objectives • Fundamental question is how government can best promote overall sector development and meet the needs of Canadians for ICT goods and services

29. Overall Government Objectives • Increase productivity through ICTs • A strong and healthy ICT industry • A stronger overall economy enabled through advanced ICT services and applications • Social development through ICTs • Access to advanced services for all Canadians • Improved delivery of social programs through ICTs • Strong cultural industries • Capacity to compete internationally • Continued production and presentation of Canadian content • A thriving domestic industry

30. From Winnipeg to Tunis and the WSIS • WSIS Declaration recognizes telecommunications infrastructure • “essential foundation for an inclusive information Society” • Notes that “Universal, ubiquitous, equitable and affordable access to ICT infrastructure and services” is a key objective for most countries. • Canadians have a world class sector • Challenge: to remain among the leaders in this dynamic world. • WSIS Challenge: to harness information and communications technology to promote the development goals of UN Millennium Declaration

31. Industry Canada References • Industry Canada’s Spectrum, Information Technologies and Telecommunications portal http://strategis.ic.gc.ca/app/sitt/portal/LoadMainPortalPage.do?lang=eng • Includes “Telecommunications Services in Canada – An Industry Overview” http://strategis.ic.gc.ca/epic/internet/insmt-gst.nsf/en/sf05637e.html • WSIS Canadian Information www.wsis-smsi.gc.ca • Main ITU site www.itu.int/wsis e

32. Government of Canada