The Government of Canada just gave Darren Entwhistle of Telus enormous incentive not to serve rural and remote areas. It is raising wholesale prices across the country to enhance “the phone companies’ ability to invest in building high-quality networks, particularly in rural and remote areas.”
Entwhistle is one of the sharpest CEOs in telecom. He’d be a fool to invest more than the minimum in rural areas That way, the government will continue to give the company boons like this.
Where will the money go?
In May 2019, TELUS announced its intention to target ongoing semi-annual dividend increases, with the annual increase in the range of 7 to 10 per cent from 2020 through to the end of 2022. This announcement further extends TELUS’ multi-year dividend growth program originally announced in May 2011 and extended for three additional years in each of May 2013 and May 2016. This program provides investors with ongoing clarity with respect to TELUS’ dividend growth model.
My experience is that 2/3rds of improved cashflow goes to shareholders, not investment. That will almost certainly be true here, Telecom worldwide is a slow growth business due to cost per bit falling more than demand increases. If raising dividends is a priority, that’s where the money will go.
Telcos worldwide are holding back on rural coverage in order to get subsidies and government boons like this.
Canada has long had superior networks in the cities and terrible rural coverage.
Response by the Government of Canada to petitions concerning CRTC wholesale Internet rates Français
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Innovation, Science and Economic Development Canada
Aug 15, 2020, 09:00 ET
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OTTAWA, ON, Aug. 15, 2020 /CNW/ – Innovation, Science and Economic Development Canada
The Honourable Navdeep Bains, Minister of Innovation, Science and Industry, made the following statement today:
“Canada’s future depends on connectivity. Our government recognizes that access to affordable, high-quality high-speed Internet is a necessity for all Canadians, no matter where they live.
“The COVID-19 pandemic has only reinforced the importance of connectivity. The investments our government is making in high-quality networks, particularly in rural and remote communities, are key to ensuring equitable digital access for all Canadians. Equitable access also means that it is available at fair prices that Canadians can afford.
“In June 2019, our government directed the Canadian Radio-television and Telecommunications Commission (CRTC) to consider how its decisions can promote competition, affordability, consumer interests and innovation. In particular, the CRTC was asked to consider the extent to which these decisions can encourage all forms of competition and investment. Balancing these objectives and improving consumer choice, while furthering investment in high-quality networks, have been the long-standing goals of the regulatory framework for access to wholesale Internet services.
“In August 2019, the CRTC set new wholesale rates to be paid by competitor Internet service providers that access the high-speed networks of cable and telephone companies. These companies petitioned the Governor in Council, asking it to overturn the decision or refer it back to the CRTC for reconsideration. They argued that the rates are too low and significantly undermine their ability to invest in building high-quality networks.
“The Governor in Council has carefully considered the petitions and the submissions from all parties, as part of the public consultations.
“On the basis of its review, the Governor in Council considers that the rates do not, in all instances, appropriately balance the policy objectives of the wholesale services framework and is concerned that these rates may undermine investment in high-quality networks, particularly in rural and remote areas. Retroactive payments to affected wholesale clients are appropriate in principle and can foster cooperation in regulatory proceedings. However, these payments, which reflect the rates, must be balanced so as not to stifle network investments. Incentives for ongoing investment, particularly to foster enhanced connectivity for those who are unserved or underserved, are a critical objective of the overall policies governing telecommunications, including these wholesale rates. Given that the CRTC is already reviewing its decision, it is unnecessary to refer the decision back to the CRTC for reconsideration at this time.
“Our government has made significant investments to support the building of Internet infrastructure in rural and remote areas so these communities can succeed in the digital age. We are committed to increasing higher speed broadband coverage and supporting competition, choice and the availability of services for Canadian consumers and business users.
“Wholesale broadband is a proven regulatory tool for enabling retail competition in the Internet service market. Setting the wholesale rates correctly is critical to ensuring these competitive options for Canadians while maintaining continued investment in high-quality networks and expanded access for Canadians in rural and remote areas.
“Our government is working hard to make sure that all Canadians have the access to high-speed Internet. We encourage all parties to cooperate in the CRTC’s ongoing review of the rates decision to support a timely conclusion that will provide more certainty for all involved parties.
“We will continue to monitor the CRTC proceedings closely to ensure our frameworks have the right incentives for investment and competitive choice, while preserving our policy flexibility for the forthcoming CRTC decision to ensure these important objectives are met.”
Order in Council responding to petitions to the Governor in Council concerning Telecom Order CRTC 2019-288
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