The landscapes of the Canadian and US telecom markets present a study in contrasts.
In the dynamic arena of the US, telecom is a state of continual flux, fueled by a series of federal regulations which have reshaped the telecom landscape and created shifts in consumer demand. And as key decisions from the Federal Communications Commission (FCC) hang in balance, 2024 looks set to be another tumultuous year.
On the northern front, the Canadian telecom market looks almost placid by comparison – owing largely to a lack of competition. Despite regulators’ persistent efforts to address this issue over the years, their impact remains limited — a sharp distinction from the ongoing regulatory tumult to the south.
To understand this fascinating contrast further, it’s helpful to first examine the US market and the ways in which federal regulators have been reshaping the telecom landscape south of the 49th parallel.
How did regulation shape US telecom in 2023?
While there are still several unresolved issues pending decision with the FCC, such as approval of satellite launches and squabbles over spectrum use, there have been three major areas of regulatory impact.
Affordable Connectivity Program enrollment soars as funding negotiations remain stalled: The Affordable Connectivity Program (ACP), signed into law in late 2021 to subsidize low-cost wireless services for low-income households, has experienced a remarkable surge in enrollment, reaching 20.7 million households (nearly 17% of all US households) in September 2023, up from 13.6 million in September 2022. This uptake in enrolment has represented a large step toward narrowing the digital divide in access to wireless and broadband services.
The subsidy’s popularity has also brought attention to the market potential of previously unserviced low-income household, and is perhaps a strategic consideration for some major wireless operators launching strategies targeting low-income households – such as Verizon’s plan to launch hundreds of Total by Verizon stores in 2023 and 2024 that will provide no-contract prepaid wireless service. However, the ACP’s future is in jeopardy due to prolonged Congressional deadlock over partisan budget disputes, potentially leaving millions of households to face unaffordable rates or cancel services.
New regulations for data breach reporting move forward, despite mobile carrier protests: In early December, the FCC adopted an update to regulations on reporting breaches of customer data, the first since 2013. FCC Chairwoman Jessica Rosenworcel stated that these policies aim to strengthen consumer safety protections, addressing the growing volume of data collected by mobile carriers. The new rules necessitate a reevaluation of breach notification processes by mobile network operators to meet updated reporting requirements — something that T-Mobile and AT&T have expressed opposition to.
T-Mobile, in a December 6 filing, argued that the rules lack consistency and practicality, foreseeing challenges in implementation and an influx of notifications for inconsequential events. AT&T raised concerns about the legal basis of the draft document supporting the rules. Public interest groups, however, challenge the motives behind T-Mobile’s protest, highlighting its history of data breaches.
T-Mobile: Towers built, radios ready, licenses… pending: T-Mobile is close to receiving the 2.5GHz licenses that they bought for $304 million in 2022 but is still waiting to receive after Congress allowed FCC’s spectrum auction authority to lapse. On December 11, the US House passed legislation that would require the FCC to release the licenses — following a Senate decision three months prior. Analysts have noted that T-Mobile’s existing infrastructure would allow them to immediately upgrade service for 50 million individual customers, as well as enable them to provide home broadband services to 3 million households.
So how does the Canadian telecom market compare?
Thanks to ongoing consolidation in the Canadian telecom market, Canadians have the dubious distinction of paying some of the highest rates for wireless service in the world — which still didn’t stop the CRTC from approving the merger of Rogers and Shaw — a decision widely blasted by consumer advocacy groups as well as the Competition Bureau.
Subsequently, and perhaps in an effort to reverse the anti-consumer optics of that decision, Industry Minister François-Philippe Champagne mandated that the CRTC prioritize consumer rights, affordability, competition, and access in its decision-making going forward — an official change of direction from the previous 2006 directive for the CRTC to use market forces to guide decision-making.
However, Canadians shouldn’t expect much movement on telecom regulation soon; of the several major issues currently before the CRTC, most are still in the preliminary stages, including:
- Requirements for carriers to notify users of service disruptions, and to file after-incident reports to the CRTC: After the chaos of 2022’s 24-hour nationwide Roger’s outage, the CRTC made an interim decision directing carriers to provide notification of service disruptions within two hours, and to provide a report detailing the events and causes to the CRTC within 14 days.
However, this ruling has yet to be finalized, and — perhaps more notably — Rogers has yet to provide an explanation as to how the massive outage occurred.
- Canadian roaming fees: Canada’s roaming fees remain among the highest globally, and in 2023, all three major carriers increased their rates, exacerbating the already elevated costs. Minister Champagne has voiced concerns about this method of potentially raising rates without consumer awareness. The CRTC is currently in the early stages of studying the issue.
- Lack of wireless and internet service in the far north: in what is perhaps the most egregious example of the CRTC’s lack of urgency, its consultation surrounding lack of internet and wireless access in the North is entering its fourth calendar year, with no schedule for action after the end of public comments on December 22, 2023.
The CRTC’s lone flag in the sand: fiber broadband competition.
The only major telecom-specific issue that Canadian regulators have taken action on in 2023 is declining competition in the market for broadband internet services. This decline has been sharpest in Ontario and Quebec, where independent service providers serve 47% fewer customers than they did two years ago. This has left many Canadians with very few options for high-speed internet services.
Concerned about this decline in consumer choice, the CRTC issued a temporary ruling on November 6, 2023 that would require Bell and Telus (which control 60% of Canada’s home-to-fiber connections outside of the territories) to provide independent competitors with access to their fiber networks. The same day, Bell retaliated by canceling more than $1 billion in planned network investments, in addition to the $100 million in spending cuts made in 2023 made in anticipation of the ruling. These cuts come despite reports that Canadian telecom will need to continue making investments to meet a potential doubling of data consumption by 2027.
Bell has filed with the Federal Court of Appeal challenging the decision and has asked for a stay. The review, scheduled for Feb 12, could determine whether the ruling will be made permanent.
The U.S. and Canada: a study in telecom opposites.
Against this backdrop, the effect that US regulators have had on the American telecom landscape is even more striking — especially given that the United States federal government is notorious for its generally laissez-faire approach to regulation of industry. For all that its funding has become a political football, the Affordable Connectivity Program is a great example of regulatory intervention that has benefited consumers and industry alike, and which has been enormously successful in achieving its stated goal of narrowing the digital divide in the United States.
The CRTC’s approach to telecom regulation in 2024 will be an interesting development worth observing.