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Uncompetitive Canadian Pricing Threatens Mobile Internet

My weekly Law Bytes column (Ottawa Citizen version, Toronto Star version, homepage version) focuses on the mobile Internet in Canada, arguing that we are falling behind even developing countries as a consequence of overpriced mobile data services in our cozy, uncompetitive market. Until recently, the conventional wisdom held that there were two barriers – technology and cost – to the emergence of widespread mobile Internet use.  From a technological perspective, most cellphones and wireless devices could manage email and text messaging, but were ill-suited for the full Internet experience including browsing and Internet video.  That technology barrier has largely been eliminated, fuelled by popularity of devices such as the Apple iPhone.

The cost barrier still looms large, however.  Canadian carriers have treated mobile Internet use as a business product, establishing pricing plans that force most consumers to frugally conserve their time online.  Indeed, the mobile Internet in Canada is reminiscent of Internet access in the mid-1990s, when dial-up access dominated the market and consumers paid by the minute for their time online. 
For example, Rogers – Canada's sole GSM provider and therefore the only telecom company currently equipped to offer the iPhone – offers a starter data plan that provides 1.5 megabytes of data per month for $15 (each additional MB is $21).  Since that is not even enough data to download a single high-resolution photograph, most consumers presumably opt for more.   The company's biggest data plan provides 500 MB, yet costs $210 per month – far beyond the reach of most consumers.

This pricing, which is comparable to plans found with Bell and Telus, is not close to competitive internationally.   The introduction of the Apple iPhone in the U.S. has placed the spotlight on the difference between the Canadian and U.S. market, where AT&T, the sole iPhone provider, offers unlimited data for only US$20 per month (the total monthly price is US$59.99, but AT&T divides the bill as two-thirds for voice and one-third for data).

While it is tempting to believe that the AT&T offer is an anomalous product of pressure from Apple, the reality is that unlimited data plans are becoming commonplace around the world.  For example, consumers in Lithuania can purchase an unlimited data plan for less than $3.00 per month, while similar plans can be had in the Netherlands and France for under $15.00 per month.  In fact, Canada not only trails the U.S. and Western Europe, but Eastern European countries such as Poland and Romania, Asian countries such as Malaysia, and African countries such as Rwanda all offer unlimited monthly data plans for less than $50. Even in those countries without unlimited data plans, the pricing is often far better than what is found in Canada.  Italians can purchase 1 GB – double the largest Rogers plan – for $29 per month, while a 500 MB monthly plan is $45 in South Africa, $79 in Mozambique, and $103 in Tanzania.

The negative consequences of Canada falling behind even the African market should not be underestimated.  RIM has expressed frustration with Canadian pricing, predicting that carriers could sell "eight or nine times" more Blackberries if they lowered data prices to levels found elsewhere.  Reduced sales are only part of the story.  High data prices mean Canadians use the mobile Internet less than people in other countries, which Google has noted leads to lower Canadian usage of web-based email or online mapping services from wireless devices.

Canadian carriers would do well to reshape their approach to mobile data by better servicing consumers, however, the longer-term solution lies in Industry Minister Maxime Bernier cracking open the wireless market by encouraging new entrants through a spectrum set-aside.  The prospect of a new national wireless carrier offering unlimited data – and perhaps even the red-hot iPhone – would do wonders for a once-proud market that now lags behind the rest of the world. 

16 Comments

  1. I have a music subscription service from TELUS on my LG phone for $20/month. It includes unlimited data downloads of all the music I want and includes the cost of the tracks. Just buying the tracks alone would cost me over a $500 per month if I had to buy them through iTunes. Seems like a pretty good deal to me. I’m curious if they can get a better deal than that in Rwanda or Mozambique?

  2. Mobile
    I don’t really know that Canada have the marketplace for better mobile market deals because people like freebies: ie: libraries, unlimited free Internet service at home in some Toronto areas etc. It does not help when our technology is in 2.5G and only now that we are up to 3.5G on selected phones. Even obtaining phones from mobile companies are extremely difficult. I need to go to certain online tech stores to get my next 3.5G phone.

  3. This is just one part of the problem.
    The internet service and pricing we have here is ridiculous. We lack *waayyyyy* behind many of the same countries in terms of the speed, down/upload caps and pricing for internet access, for the same reason. It frustrates me to no end every time i take another peek at the possibilities, in the hopes that some cool plan from some new company would have come up. Instead i’m left feeling good having found a no-cap, 5Mbps/800kpbs plan for less than $30 (+ a dry line fee to Bell, of course), when for the same price people in most civilized countries can get 100Mbps…
    Why are we allowing the big telecom companies to be so anticompetitive? Why is the CRTC not doing anything about this? Why is it that i have only 2 choices of providers? (sure, others offer DSL, but over Bell’s lines, which leaves me prey to Bell’s legendarily crappy customer service).
    I feel like we’re living in some remote african corner, technologically.
    Don’t forget about the brakes this put on the economy as well: Montréal and Toronto are hotbeds of innovation on the web, but when potential employees are faced with a choice of where to work, these things matter to them. When access is so bad, and controlled and expensive, it prevents many “startup in a garage” from happening, since it’s impossible to serve content from a vidéotron connection, and made difficult (and extremely unreliable by Bell on DSL). Do not underestimate the negative effect this has: most huge companies have started that way, and now many huge companies start up on the web.

  4. [ link ]

    Funny how the cellular lobby group always manages to find a study that disproves the above.. Yet they always manage to avoid the topic of data and instead focus on voice and paint voice as being \”Canadian Wireless Pricing\” avoiding half of the picture.

  5. I also find it funny how alarmist some of the posters are on this blog. I just bought a 1 gig download plan from Bell for $99, yet to read this blog you’d think we have no data services at all. Shop around, the deals are out there if you look for them.

    I wonder if some of those countries with cheaper data rates actually deliver a working service? I bought a long distance plan from an outfit that offered 1 cent per minute to Kong Kong so I could keep in touch with my girlfriend – it typically took 50 tries just to get a connection then the calls would drop every 5 minutes. Not much of a deal if it doesn’t work.

  6. Ok, now shopping around…
    @Marshall “I just bought a 1 gig download plan from Bell for $99″

    I just went through all of Bells data plans. The best I ever found was $100 for 250 meg, with $3/meg above that. At those prices 1 gig would cost $2350 per month.

    Can you please point me to *anything* – flyer, pamphlet, webpage, anything – that documents the 1 gig/$100? Or is it part of some other special deal – is there something else I have to buy? Do I need to accept 3 years of lock-in?

  7. Someone on the Howard Forums put it best. Bell and Rogers also have land-line internet access to protect. What incentive is there then for them to sell wireless internet at a lower price?

  8. generic_idea_machine says:

    monopolistic approach to business that curb innovation will cause real hurt to the economy in the long run.

    check this out —> [ link ]

    we need initiatives like this to counter these monopolistic setups

  9. for Chris S.

    I just looked at the Bell site and can’t find the 1 GB for $99 posted anywhere either, but that doesn’t matter, they offered it to me with a new Blackberry 7250 I just picked up – it might not be up on their website yet so just call them. The BB’s are actually pretty efficient with data anyways, I typically get about 3,000 emails each month and rarely use more than 50 MB so 1 GB should give me lots of room to play.

  10. Anonymous says:

    What are you smoking, $100 for 1GB isn’t good at all. I get unlimited on my land line at home for internet for $35 bucks, and the unlimited iPhone plan is $60 + minutes. $99 is $1200 a year just to browse the net on your 1 inch crappy screen!

    If you think that’s a good deal, I want your job.

  11. Disparishun says:

    I am disappointed that so little pressure has been put on the regulator of this sector, which is the Competition Bureau.

    (The Bureau’s powers in this area stem from a CRTC finding of competitiveness, and a CRTC-Bureau interface agreement setting out the transfer of regulatory authority in such instances.)

    The Competition Bureau has simply been asleep at the wheel in the mobile sector. It likes to call itself an ex post agency — acting to discipline market abuses — but it only really ever acts on an ex ante (beforehand) basis, as it does when it reviews mergers.

    In fact, merger activity forced the Bureau to make one of its few-ever rulings on the mobile services sector it regulates. It ruled that the Fido-Rogers merger was AOK.

  12. Les Nessman says:

    Does [ link ] this look like the bio of someone who is actively going to regulate the telcos on wireless data rates? Ha!

  13. Disparishun says:

    Maybe and maybe not, Les. But there is little doubt that public pressure helps put issues on an agency’s agenda. So far these has been just about no public pressure directed at the Bureau — almost all of it has been at the CRTC, which is not the regulator for mobile services. The Bureau has gotten away unscathed. That’s made it easy for the Bureau to keep on not doing anything.

  14. Internet
    Lets see, people are not demanding for high speed cuz they are lazy and still using 802.11g and Apple are using 802.11N wireless technology, in which I am using now. It speeds up my online Internet connections and does a better job on security. There are also compliment services like:
    http://www.opendns.com.

  15. University of Ottawa student
    Right on. Most Cellular services including data transfer plans in canada are ridiculously expensive, uncompetitive , highly monopolistic and simply appalling.

  16. Australia system
    I was working in Australia early in 2008 and needed internet service. They had a system for wireless broadband (on cell networks) that only cost $69/mo that allowed 6GB of monthly transfer, there were about 5 different companies offering the service. It was pretty good, youtube videos came through (a little slow) but skype calling was great. I don’t understand why we can’t get that here. This would be great to have in Canada.