Speech
CRTC'S SUMMARY REPORT OF SELECTED
TELECOMMUNICATIONS MARKET STATISTICS
Notes for an address
by Charles Dalfen
Chairman, Canadian Radio-television
and Telecommunications Commission
at the EXPO COMM CANADA Communications 2002 telecommunications industry trade
show
Toronto, Ontario
November 5th, 2002
(CHECK AGAINST DELIVERY)
Good morning, ladies and gentlemen.
Introduction
We at the Commission in recent years have issued a number of decisions to
encourage sustainable competition in telecommunications markets. As in all our
decisions, we must give effect to the policy objectives set out in the
Telecommunications Act, and this requires us to constantly be alert to
balancing interests fairly and efficiently.
In September of last year, the CRTC released its first annual report to the
Governor in Council on the state of competition in Canadian telecommunications
markets. That was the first of five such reports that will be issued annually.
Today, we are releasing summary statistics pertaining to telecommunications
markets. This is a preview of some of the key data that we have collected from
the telecom industry, which will be contained in the second annual report that
will be out before the end of the year.
These data are for only the largest telecommunications service providers, but
account for the vast majority of the figures - above 90 percent.
In the next 10 to 15 minutes, my presentation will focus on some of the
highlights. After that, I'll have a few minutes to answer questions that some of
you might have.
Slide 1 - Revenue by categories
Let me begin with a broad overview of the bailout we compiled from our report.
Total telecom revenues grew by eight percent from 2000 to 2001 - from just
under $29 billion to over $31 billion. That growth is consistent with the average
growth trend since the mid-1990s. This slide provides a snapshot of the major
revenue categories. A breakdown of the market segment shows a number of different
things.
Looking at long distance, we note that revenues declined by seven percent from
more than $6.5 billion in 2000, to just over $6.1 billion in 2001. However, local
and access revenues increased from roughly $10.2 billion to almost $10.9 billion.
That's an increase of some six percent.
But that growth was smaller than the mobile and paging market, which moved up
by more than 16 percent from some $5.8 billion to over $6.7 billion.
The next slide contains teledensity information released by Statistics Canada
in September. This information is not in the preliminary report we're releasing
today, but I wanted to include it in my presentation this morning because I think
it shows us some interesting trends in the industry.
These numbers tell us a number of things about the deployment and use of
telecom networks in Canada.
Teledensity is measured as the number of lines per 100 inhabitants. These
teledensity data cover the last five years for both wireline and wireless
services.
With the wireline market well established in Canada the thin blue line shows
us that growth in residential wireline teledensity has been flat over the last
five years and is now just over 41 access lines per 100 inhabitants as of 2001.
Business line teledensity, represented by the red line, increased by almost 15
percent over the same period, reaching almost 24 access lines per hundred in
2001.
However, both residential and business wireline teledensity decreased slightly
in 2001. Part of the reason for the decline, we believe, in residential wireline
teledensity can be attributed to the number of subscribers who upgraded to
highspeed Internet and consequently no longer needed a second line.
I note that teledensity is based on population growth in Canada. In absolute
terms, it's interesting to note that the number of residential lines actually
increased slightly while the number of business lines declined slightly, even
though in teledensity terms, they both showed a slight decline.
Wireless teledensity, by contrast, has more than doubled in the past five
years, reaching almost 35 subscribers per 100 people in the population last year.
It is also interesting to note, however, that if you compare the previous chart
with this one, the wireless teledensity growth rate has been twice as high as the
growth in revenues. The last chart showed that the growth in wireless revenues is
16.2 percent. The wireless teledensity growth rate was almost double that.
Slide 3 - Long distance revenues
On the next slide, we see wireline retail long distance revenues in 2000
compared to 2001 for both incumbent telcos and for competitors. These data
include international, U.S. and domestic long distance revenues.
The overall revenue pie for wireline retail long distance decreased by about
eight percent in 2001.
The question is, why is the pie getting smaller?
Here are some observations that may help answer that question. You will notice
that the number of long distance minutes declined from 41.3 to 40.5 billion
minutes. Looking more closely at the minute data, overall, the number of business
minutes was relatively constant in 2000 and 2001. However, the incumbents'
business minutes increased by some 500 million over the previous year, while the
competitors' business minutes declined by about the same amount.
On the residential side, the number of minutes dropped for both incumbents and
competitors. This could partially be explained by the fact that long distance
carriers capped their long distance savings plans for residential customers.
I should also point out that the revenue per minute for the incumbents dropped
from the 2000 level of 13.3 cents to 12.4 cents for 2001. A closer look at these
numbers reveals that the incumbents' revenue for business declined by 11 percent,
while the competitors' revenue per minute essentially remained unchanged.
At the same time, the residential revenue per minute for incumbents declined
by five percent, but the competitors' rates dropped by nine percent. It would
appear, then, that even though competitors' prices are generally lower than the
incumbents they have not been able to increase their market share of a shrinking
pie. In fact, it would appear that the incumbents are holding onto their market
share of the wireline retail long distance market by reducing their prices,
predominantly in the business market.
Slide 4 - Local voice and access
The next slide compares data for the years 2000 with 2001 for revenues in the
market for wireline local services.
Here, we note that total revenues are up by more than six percent. The
competitors' share of the local market remained virtually unchanged, even though
their access lines increased by more than seven percent.
The modest growth in competitors' access lines is mainly due to the fact that
a number of CLECs failed last year. By contrast, even though the incumbents'
access lines remained virtually unchanged, the total revenues increased by seven
percent. This growth was due mainly to the growth in optional service revenues
and increased basic residential rates in various parts of the country.
Finally, it's interesting to contrast the change in the long distance market
compared to the local market. Overall wireline long distance revenues are
decreasing at about the same rate as local and access are increasing. However,
the local and access revenue market is substantially larger than the long
distance market.
Slide 5 - EBITDA and capital expenditures
The next slide deals with wireline earnings before interest, taxes,
depreciation and capital expenditures (EBITDA), comparing 2000 to 2001.
Note, first of all, that while the competitors EBITDA improved last year, the
incumbents continued to enjoy the lion's share of EBITDA.
Secondly, I note that capital expenditures by the incumbents are increasing,
whereas we see a decline in capital expenditures by the competitors. It is also
evident from this slide that in both years, the incumbents' EBITDA far exceeded
their total capital expenditures, whereas the situation is the reverse for
competitors. The data suggest that the incumbents can fund their capital
expenditures more easily from internal sources, which would not, of course, be
the case for competitors.
Slide 6 - Wireless EBITDA and capital
expenditures
The last slide shows wireless EBITDA and capital expenditures for the year
2000 compared to 2001.
In 2001, both EBITDA and capital expenditures increased. I also note that
capital expenditures were higher than EBITDA for both years. However, the huge
increase in capital expenditures in 2001 - indicated by the black cross-hatching
- is largely attributed to the $1.5 billion that the wireless industry spent on
the spectrum auction.
Conclusion
I thought it was worth highlighting those points from the point of view of the
policy of sustainable, facilities based competition that the Commission has been
seeking to achieve for some time.
These figures show that we still have a long way to go in order to achieve
that objective. Competition, particularly in local markets, is certainly not
evolving as quickly as we had hoped.
Naturally, one of the questions we expect to hear is "what are you, the
Commission, doing about it?"
Certainly, we do have a responsibility as the regulatory authority for
telecommunications. Our decisions, particularly the recent price cap decision and
the follow-up proceedings have identified and will continue to address
competitive issues.
However, regulation is only one piece of the puzzle. Other pieces include the
financial markets, technology development and the quality of business
decision-making in the industry itself. Much, of course, will depend on how
quickly the markets begin to recover.
I must say that a quick overview of the Expo Comm Canada Communications 2002
trade show is one of the most optimistic things I've seen in a long time. The
trend I've seen in recent years is that trade shows were contracting and people
were as pessimistic as market conditions would seem to suggest.
So it's interesting that there is some optimism returning. Of course, we at
the Commission will do anything we can to ensure that whatever is flowing will
not be obstructed. We seek to facilitate conditions so that sustainable
facilities competition can emerge and grow.
It's a complex business, as everyone in this room knows. We need to continue
to work together to meet the challenges that are facing us. So with those words,
I would like to close my remarks and answer any questions that you might have.
And I'll be around for most of the morning to meet with any of you who wish to
discuss these issues further.
Thank you very much.
- 30 -
Contact: Denis Carmel, Ottawa, Ontario K1A 0N2
Tel.: (819)
997-9403, TDD: (819) 994-0423, Fax: (819) 997-4245
e-Mail:
denis.carmel@crtc.gc.ca
Toll-free #
1-877-249-CRTC (2782)
TDD -
Toll-free # 1-877-909-2782
This document is available in alternative format upon request.
Date Modified: 2002-11-05 |
