While much of the focus of yesterday’s Rogers quarterly call was on the wireless sector (see part one on roaming rates), it should be noted that company executives indicated that consumer broadband Internet prices – which the OECD recently reported were among the ten most expensive in the developed economy world – will continue to increase. Moreover, the company called unlimited bandwidth offers “short-sighted” and recent price increases just one step in the efforts to monetize broadband services.
In response to a question from an analyst who noted that Internet pricing keeps going up every year, Robert Bruce, President of the Communications Division, stated:
The other important thing that I think we should say about Internet is, it is the key to the future of our business, hence, monetizing the increased bandwidth usage will rapidly become the future across all our businesses, whether it’s wireless or wireline. So there is — there are clearly some unlimited offers out there. We think they’re fairly short-sighted as Internet is the future of the business. And the reason that we think over time there is more pricing upside in Internet are all the things that we’re doing to build the superiority of the Internet. And you will have seen many of these things. Virtually, all our customers in the past 6 months, we’ve up-speeded them significantly. We’ve invested in verifying speed consistency with the first Canadian ISP to use SamKnows, which is an internationally recognized methodology, to ensure that we’re actually delivering the speed that we commit to deliver at peak times and at all hours throughout the day. And we believe that customers are looking for this kind of transparency. We’ve launched things like TechXpert so that we can give premium technical support to our customers. We’ve removed all our traffic management processes. We have significantly enhanced the value of this product, and overtime, it is our plan to monetize it accordingly and the price increase that you would receive in the mail would’ve just been 1 step in that monetization that we think will continue as Internet becomes the backbone product in the home.
The description of unlimited Internet plans as short-sighted are telling, since Rogers currently offers such a plan. Why is Rogers engaged in pricing its own executives describe as short-sighted? The Rogers offers was merely a response to a Bell offer. If the Bell offer disappears, so will the Rogers plan. With limited competition, favourable pricing plans will come and go, with executives anxious to increase prices and implement usage caps. The only solution is sufficiently robust competition that all players are continually forced improve service and keep pricing in check in order to retain and attract customers.
Rogers recognizes how dependent the public has become on the Internet. While the company points to improvements in its services, the OECD data shows that most countries are continually improving their services, yet stronger competition dictates that prices do not necessarily follow. Canada already has some of the highest broadband prices in the world and, given the lack of competition, Rogers is telling the investor community it sees the potential for even higher prices and usage caps.