Incumbents still dominate telecom sector, CRTC competition survey discovers

All segments of the telephony industry, with the exception of LD, grew in 2001 and it’s not surprising that the ILECs were the major beneficiaries, according to a new report from the CRTC. The commission released its second Status of Competition in Canadian Telecommunications Markets survey in December. The 120-page report updates material first collected a year earlier (NL, Oct. 10/01). "All market segments, except long distance, had positive annual growth rates in 2001," the CRTC study says. "Long distance revenues declined approximately 6% from 2000 to 2001. Internet continued to be the fastest growing market segment within the wireline industry with a 2001 growth rate of approximately 48%. In 2001, mobile and paging was the second largest segment, in terms of revenues."Wireline constituted $25.2 billion of the $32-billion telephone industry in 2001, according to the report. Local service and access accounted for $11.5 billion; LD was $6.5 billion; data, private line and other brought in $4.8 billion and Internet revenues were $2.5 billion. Most of that money flowed back to the ILECs. This is to be expected since most of the CLECs do not offer residential service and all competitors operate in specific regions, not the broad territory serviced by incumbents. "Wireline revenues continued to be generated largely by the incumbents," the survey notes. "In 2001, two incumbent groups accounted for almost 80% of the wireline revenues: Bell Canada, Telus and their respective wireline affiliates. Of this amount, Bell Canada and its affiliates accounted for 72%." One section of the report lists ILEC share of local lines by province. Saskatchewan is the most heavily dominated by an incumbent. SaskTel’s share of the market dipped from 100% in 2000 to 99.98% in 2001. The only other province to see a chink in its total domination is Prince Edward Island, where Aliant went from 100% to 99.5%. Ontario has the most competition, with Bell holding 94.39% of the local lines in 2001. But that is an increase from the 94.24% it held in 2000.Bundling was responsible for most of the growth in local service revenues. Revenue increases far surpassed the jump in phone lines. "Between 1998 and 2001, local residential lines grew at an average annual rate of 0.9% while local residential revenues grew at an average annual rate of 7.1% over the same period," the CRTC reports. "Optional local services such as voice mail, call display and call answer represent a gradually increasing proportion of local revenues. While just over half of the 1998 to 2001 growth in local residential revenues came from basic local service, optional local services, which were less than 25% of total revenues in 2001, contributed over 40% of the growth in local residential revenues over the 1998 to 2001 time period." While revenues have shot up, teledensity has been inconsistent (see table). Residential teledensity remained flat in 2001, falling to its lowest level in five years. Business wireline took a dip last year, after climbing for the previous four years. Teledensity in the wireless sector more than doubled from 1997 to 2001. The provision of Internet access continues to be a growing segment of the industry. Retail Internet access revenues exploded from $392.7 million in 1998 to just under $2 billion in 2001. The majority of revenue derived from residential subscribers. Both residential and business customers are shifting from dial-up access to high-speed, either DSL or cable modem. Residential dial-up subscriptions fell from 93% in 1998 to 55% in 2001. Business subscriptions dropped from 56% to 30% over the same period. "The decreasing rate of growth for dial-up Internet access does not necessarily imply its disappearance," the report notes. "Indeed, in some ways, dial-up Internet access appeared to be taking on a new role as a secondary or back-up access method. In particular, high-speed access providers offered dial-up numbers for customers roaming with laptops when they were unable to access their fixed connections." Capital expenditures have tended to level off after years of growth. Echoing results found in other studies (NL, Feb. 26/02; Jan. 15/01), the commission found competitors spent only slightly more in 2001 on capex than they did in 1998. "The analysis shows that the competitors’ ability to finance capital expenditures from internally generated funds was very limited as compared to the incumbents," the survey states. The telecom industry’s share of Canadian real GDP has grown from 1.8% in 1997 to 2.6% in 2001. That figure has been achieved without greatly increasing the number of jobs in the sector. The CRTC study discovered that telecom workers made up 0.9% of total employees in the Canadian economy last year. The 2001 total was 118,600 workers, up 7,000 from 1997.

Incumbents still dominate telecom sector, CRTC competition survey discovers

News | 01/13/2003 5:00 am EST

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