CHANGING TECHNOLOGIES AND CONSUMER DEMANDS COMPETITION REGULATION ECONOMIC CONDITIONS WIRELE SS TREND S CABLE TREND S MANAGEMENT’S DISCUSSION  AN D ANALYSIS Consumer demand for mobile devices, digital media and on-demand content across platforms is pushing providers to build networks that can provide more data faster, cheaper and more easily. Increased adoption of smartphones and double digit growth in our data revenue continued this year, reflecting expanded use of applications, mobile video, messaging and other wireless data. In the media industry, there continues to be a shift towards on-line media consumption by consumers which in turn drives advertisers to spend more on-line versus traditional media. In addition, there are more media competitors as additional on-line media companies enter the market, including large global companies. Most areas of our business are highly regulated, which affects who we compete with, the programming we can offer, where and how we use our networks, how we build our businesses and the spectrum we purchase. The telecommunications industry is being affected by more regulation and more reviews of the current regulations. Competition in wireless from national and regional operators as well as smaller new entrants changes how we compete for wireless services. This puts downward pressure on pricing affecting profit margins and impacts customer churn. Traditional wireline telephone and television services are now offered over the Internet, opening the door to more non-traditional competitors, and changing how traditional providers compete. This is changing the mix of packages and pricing that service providers offer, affecting profit margins and customer churn. Our businesses are affected by general economic conditions and consumer confidence and spending, especially in our Media segment, where advertising revenue is directly affected by the economy. MEDIA TREND S BU S INE SS S OLUTION S TREND S More sophisticated wireless networks, devices and applications are making it easier and faster to receive data, driving growth in wireless data services. Younger generations are increasingly using the Internet and social media as a substitute for traditional wireline telephone services, and televised content is increasingly available online, both on wireline and on wireless devices. Wireless providers are investing in the next generation of broadband wireless data networks, such as LTE, to support the growing data demand. Wireless market penetration in Canada is approximately 80 % of the population, and is expected to grow at an estimated 2 % annually. The new CRTC code of conduct has limited wireless term contracts to two years from three years. Although the code of conduct has only been in place for a month, we believe this is currently reducing churn and slowing growth in the wireless marketplace. North American cable companies are improving their cable networks and expanding their service offerings to include Internet, digital cable and VoIP telephony services, while competition from telco IPTV deployments and non-facilities based service providers continues to cause pricing pressures which negatively impacts revenue growth. We face new competition from companies like Skype and Vonage, who market Voice over Internet Protocol (VoIP) telephony services, and Netflix and Apple TV, who provide televised content over the Internet. Companies are using fibre-based access and cloud computing to capture and share information in more volume and detail. This, combined with the rise of multimedia and Internet-based applications, is driving exponential growth in data demand. Large enterprises and all levels of government are dramatically transforming data centre infrastructure and moving toward virtual data storage and hosting. This is driving demand for more advanced network functionality, robust, scalable services and supportive dynamic network infrastructure. In response, carriers are dismantling legacy networks and investing in next generation platforms that converge voice, data and video solutions onto a single distribution and access platform. Consumer demand for digital media, mobile devices and on- demand content is pushing advertisers to shift some of their spending to digital platforms. Traditional media assets in Canada have become increasingly controlled by a small number of competitors with significant scale and financial resources, while technology has allowed new entrants and even individuals to become media players in their own right. Across both traditional and emerging platforms, many players have become more vertically integrated, as both providers and purchasers of content. Access to premium content has become even more important for acquiring audiences that attract advertisers and subscribers. Ownership of content or long- term agreements with content owners, have also become increasingly important to Media companies. 2013 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 31 The telecommunications industry in Canada, and our business segments, is affected by several overarching trends. INDUSTRY TRENDS