The importance of 5G and the digital economy in Canada

At a glance

  • The digital economy represents the end-to-end digitization of business processes and everyday activities—an achievement that requires integrating connectivity, software and hardware.

  • 5G will deliver faster connections (up to 20x the speeds of 4G), increased network capacity (up to 100x the traffic capacity of 4G), ultra-low latency and improved reliability (up to 10x lower than 4G) as well as enhanced security.

  • The connectivity improvements delivered by 5G will further accelerate the digital economy, through enabling use cases that will deliver a range of economic, environmental and societal benefits.

The COVID-19 pandemic accelerated several existing trends that increased the demand for connectivity and adoption of the digital economy. These trends include shifts in migration patterns, entertainment preferences, business operating models, service preferences and consumer purchasing habits. We’re also seeing many businesses move to localized and digitized supply chains. These trends further increase the importance of the digital economy and the need for fast, ubiquitous 5G connectivity.

However, Canada’s reliance on low-band networks make it a laggard in 5G network performance, with the country ranking 14th among a group of 25 leading nations in download and upload speeds. Canada is years behind its 5G spectrum allocations for mid- and high-band frequencies when compared to its global peers in the G7, Australia and South Korea.

Canada needs a healthy telecommunications industry to support the deployment of 5G. The 4G rollout experience of peer countries bears this out: jurisdictions where network operators were in poorer financial health had slower deployment and adoption rates. In the 5G era, Canada’s peer countries are understanding the importance of 5G to the digital economy and are already acting. They’re ensuring that network operators are incentivized to deploy networks at pace, despite the higher costs and challenging business cases.

To understand more about the digital economy and the implications of delayed 5G deployment on Canada’s global competitiveness, click here.

In the digital economy, Canadian mobile network operators (MNOs) are small compared to their global peers and large multinational competitors. The three largest Canadian telcos generated, on average, approximately three and a half times less revenue than the leading telcos in the G7, South Korea and Australia. Similarly, Canadian telcos are undersized compared to some of their main suppliers—significantly hampering their ability to negotiate better prices. With the cost of delivering 5G forecast to be up to 71% higher than previous generations of connectivity, the comparatively small scale of Canadian MNOs and their relatively higher network capital costs are likely to impact investments in the 5G connectivity required to enable the digital economy.

Globally, telcos have sought to use M&A to create value and address industry trends including slowed core revenue growth, increased competition and higher capital expenditure. Notably, regulatory decisions announced in 2020 approving large-scale mergers in both the US and Europe demonstrate that regulators’ attitudes are shifting towards incentivizing and supporting large-scale telcos that are capable of funding the next-generation connectivity networks required for the digital economy.

The role of the telecommunications industry is evolving towards being a primary enabler of the digital economy and, with this context, Canada’s regulatory approach also needs to evolve. While affordability should remain a key priority, regulators also need to consider the necessity of 5G for Canada’s economic development as well as the changing competitive landscape.

To learn more about the evolution of Canada’s telecom industry and the growing digital economy, read the full report here.

In Western Canada, 5G is forecast to enable an estimated increase in GDP of $34bn annually by 2035, with all major industries expected to benefit. 5G connectivity will enable new use cases in the digital economy, such as smart mining automation, connected and autonomous vehicles as well as automated smart farming that improve the use of inputs to reduce costs and provide opportunities to increase revenues through improved products and services. The deployment of 5G is expected to deliver significant environmental and societal benefits for Western Canada, including help closing the urban-rural digital divide.

The economies of the four Western Canadian provinces—Manitoba, Saskatchewan, Alberta and British Columbia—have historically relied on capital-intensive industries such as mining, oil and gas. To reduce Western Canada’s dependence on these industries, all four provincial governments are looking to diversify and promote more balanced and sustainable economic models. The desire of each Western Canadian province to diversify their economies through the use of technology highlights the importance of 5G deployment.

The forecasted benefits of 5G provide a clear incentive for Western Canada to deploy 5G at pace. However, Canada currently lags its global peers in 5G network performance as its network is limited to low-band connectivity, which has potential negative consequences for Western Canada’s economic growth.

To understand more about the potential benefits of 5G to Western Canada, learn about 5G-enabled technologies that are being used today and how Western Canada can overcome the challenge of 5G deployment at pace, click here.

Contact us

John Simcoe

John Simcoe

National Media & Telecom Lead, Assurance Partner, PwC Canada

Tel: +1 416 815 5231