OTTAWA – The Canadian Wireless Telecommunications Association argued before the federal Finance Committee this week that increasing the accelerate capital cost allowance on certain classes of wireless equipment would result in a substantial jump in mobile infrastructure investment.
Kurt Eby, director of regulatory affairs and government relations at the CWTA, told the House of Commons Standing Committee on Finance on February 16 that upping CCA to 50% “would return significant benefits to Canadians and the national economy.”
Specifically, annual telecommunications investment would increase by $122 million annually in the short term and if the tax change was permanent, the benefits would nearly double, jumping to $225 million per year, according to Conference Board of Canada data. As well, this increased infrastructure investment would create 1,660 full time jobs annually and add $163 million to Canada’s GDP, explained Eby in his opening remarks.
While trying to reiterate the association’s position that the tax changes would see greater wireless infrastructure investment, the CWTA representative instead found himself having to defend the retail pricing practices of its members.
Brampton East Liberal Raj Grewal wondered that if the wireless companies, which earn millions in revenue and profits, are to get some tax relief from the federal government, then consumers should also be able to benefit perhaps in the form of lower prices.
“To answer that question, we don’t typically pay a lot higher than the other countries that use a similar amount of data. You’ll see these other countries that use similar amounts of data on similar quality networks pay about the same on an affordability basis,” said Eby.
Grewal pressed the CWTA on the pricing issue noting that when he talks to family and friends in the United States, he claims they typically pay less than Canadians for wireless service.
Eby pointed to a World Bank study on the affordability of wireless released this week, saying it concluded that wireless is more affordable in Canada than it is in the U.S.
Another study, he said, “showed that the slowest LTE network in Canada is faster than the fastest LTE network in the U.S., so I think on that level we do quite well,” he added.
Gatineau Liberal Steve MacKinnon asked whether the wireless industry would be ready to accept a trade for a higher capital cost allowance – lower taxes but then some of that money has to be invested in rural areas where service is poor or non-existent.
“I think what we’ve requested, the accelerated capital cost allowance will certainly help, it will free up capital for that. I don’t know if it is the solution to a rural issue,” acknowledged Eby, adding that it’s difficult to answer that question because the structure of such a trade off would have to be determined.
He noted though that demand for mobile data is growing by leaps and bounds and the wireless carriers have to make investments to meet that demand. The requested tax measure changes will help wireless companies make those significant expenditures.
Eby explained how important the wireless industry is to the Canadian economy. It has recorded more than $2.5 billion in capital expenditures annually since 2009. Wireless companies have spent approximately $8 billion since 2014 to acquire spectrum, meaning that over the term of a spectrum licence, the federal government will be earning $830 million annually from spectrum auction revenue.
“These investments create jobs directly related to network expansion and enhancement and the ongoing delivery of advanced wireless services from Canada’s service providers. In 2014, Canada’s wireless industry generated 134,000 full time jobs and an overall economic benefit of $23.5 billion,” said Eby.
