The importance of 5G and the digital economy in Canada
Development of infrastructure is essential for building strong economies and inclusive societies. Investments in the right infrastructure drives economic growth, creates jobs, and will improve the lives of all Canadians.
Just as investments in railroads and roads propelled Canada’s economic development in the 18th and 19th century, investments in 5G and next generation networks will be critical for Canada’s economic growth and prosperity in the 21st century.
However, like the roads and railroads that came before, building digital networks depends on continuous flows of large amounts of capital, often with a rate of return measured in decades.
For a country as vast and sparsely populated as Canada – you could fit 10 countries the size of the UK, 10 the size of Italy and 8 the size of Spain all within Canada – the challenge is even greater. Which is why we need strong Canadian companies that have the scale to meet the challenge.
It is estimated that our industry needs to spend $26 billion in the next five years to build 5G networks across the country. This will require strong Canadian companies that have the scale to continually invest billions of dollars in the digital infrastructure Canada needs to secure its economic future.
It also requires the private sector to work in partnership with government and a policy and regulatory environment that is stable, predictable and encourages investment and innovation.
PWC Canada recently released three reports exploring these themes. A summary of the reports is below and over the coming weeks we’ll publish a series of blogs that take a closer look at PWC’s findings and recommendations.
‘The evolution of Canada’s telecom industry and the growing digital economy’
In ‘The evolution of Canada’s telecom industry and the growing digital economy’ report, PWC argues that for 5G to reach its full potential in Canada, telecommunications companies will need to scale.
Large multinationals, such as Amazon, are more than eight times larger than Canadian telecommunication companies in revenues. While these large multinationals want to take advantage of the value generated by 5G investments in Canada, they are not the ones making the investments.
The responsibility for investing in 5G infrastructure lies with telecommunication companies, who have the unique reach and capability to deploy 5G across urban and rural Canada. Telecommunications companies in other countries are on average three times larger than their Canadian counterparts. To compete, Canadian companies need to generate adequate cash flow and scale will allow them to do so. Scale will also allow them to better negotiate with their suppliers and have a more balanced relationship with multinationals.
Telecommunications providers will continue to be enablers of the digital economy – Canada’s regulatory approach will need to address this reality.
‘5G, the digital economy, and Canada’s global competitiveness’
In its report “5G, the digital economy, and Canada’s global competitiveness”, PWC argues that 5G will bring significant environmental, societal, and economic benefits to Canada.
However, PWC points out that while the benefits of 5G are clear and the last two years have underscored the need for connectivity, Canada is currently behind other nations who are deploying the technology aggressively. The report argues that the slow release of wireless spectrum and a complex regulatory environment has significantly slowed down the roll-out of 5G in Canada.
PWC estimates that 5G has the potential to increase Canada’s GDP by $94 billion annually by 2035, but to achieve this Canada must maintain a healthy telecommunications industry where predictable and fair regulations encourage investment and network deployment to help Canada achieve the potential of its 5G-enabled digital economy.
‘The Importance of 5G and the Digital Economy in Western Canada’
In ‘The Importance of 5G and the Digital Economy in Western Canada’, PwC estimates that Western Canada (Alberta, British Columbia, Manitoba and Saskatchewan) could collectively see a $34 Billion lift to its GDP from 5G by 2035.
These four provinces contributed 42% of the country’s GDP in 2019, with nearly a third of the value coming from primary industries in these provinces, such as mining, construction and manufacturing. All these provinces plan to economically diversify through technological advancements towards “Growth Priority Industries”, which include Logistics and Transportation, Technology and Financial Services, Education, Tourism and Agriculture. $7.4 Billion (of the $34 Billion) of value will be driven by these industries by 2035.
5G technology has an important role to play in the digital transformation of industries in Western Canada. However, to realize the full benefit of 5G in Western Canada, regulatory agencies need to consider the impact 5G will have on the wider economy as it seeks to balance affordability, investment and competitive concerns. PWC argues that well-capitalized Canadian service providers need a stable and predictable policy environment to continue making the necessary investments in 5G. Advancing Canada’s 5G network deployment will be key to propelling Western Canada’s economic growth.
Charit Katoch, Director, Public Policy