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Why Are Canadian Wireless Carriers Increasing Prices? Because They Can

Yesterday, I was contacted by a Toronto radio station wanting to discuss wireless pricing increases  that have occurred over the past few months (including increases over the weekend at both Rogers and Bell). Their key question was what lay behind the increased prices?  While some might point to reduced roaming revenues or costs associated with the spectrum auction, I believe the answer is far simpler.

The carriers increased prices because they can.

Indeed, this is precisely what the Competition Bureau of Canada concluded could and would happen in its analysis of the wireless environment in Canada.  In its  January 29, 2014 submission to the CRTC, it stated:

In the Bureau’s view, mobile wireless markets in Canada are characterized by high concentration and very high barriers to entry and expansion. Furthermore, Canadian mobile wireless markets are characterized by other factors that, when combined with high concentration and very high barriers to entry and expansion, create a risk of coordinated interaction in these markets. Given these factors, the Bureau’s view is that incumbent service providers have market power in Canadian retail mobile wireless markets.

And what is market power? As the Bureau notes, “market power is the ability of a firm or firms to profitably maintain prices above competitive levels (or similarly restrict non-price dimensions of competition) for a significant period of time.”

The risk of coordinated action and the ability to profitability maintain prices above competitive levels? Sounds familiar.

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22 Comments

  1. I wish someone in our country had the balls to call price fixing. Bah,

  2. pat donovan says:

    monopoly
    Annd the solution is to dump mono. (welcome to the cold belt, a medical pun there.)

    like cable, they are going to squeeze users. It’s far easier to get a million from one than a million at a buck apiece.

    oh, and leveling the playing field means rubble, by the way.
    You think data-mining /thieft / black-listing is bad now…

    pat

  3. Monoply is right
    This is a total monopoly like the gas monopys these companies know if they work together its more money for all

  4. A partial solution
    Buy your smartphone overseas, then get a non-data plan. Not only do the carriers in Canada force smartphone users to have a dataplan on subsidized phones, there is no market for unlocked phones here. E.g. Singapore, India, EU has small shops everywhere you look that sell non-carrier phones. I have a Samsung Mini 2, on a $15/m plan in canada. Best of both worlds. I can’t afford $50 or $80/month for a phone that I make 5 calls a month on, but use the wifi function a LOT.

  5. Fixing and Following
    We have precedent that “following” someone else’s prices isn’t illegal. In a market, that would be true, but we don’t have a market for cell phone service, we have an oligopoly.

    A “policing” body (perhaps even the CRTC) arguably should take notice of this and act: either expand the marketplace so we can have competition, or charge the price-followers with price-fixing.

    There is a risk though, that charging the criminals will be seen as “regulation” that limits the market. Which, as I said, would be true, but only if we *had* a market.

    –dave

  6. Competition
    To me the answer is to mandate cell tower sharing. Werent These networks built on the backs of taxpayer subsidies in the first place? Allowing new players to rent, at reasonable rates, the existing networks would bring the competition we need in the market.

    For me personally I use a Nexus device bought from google on the wind network for s reasonable $40 including 10gb of data. To bad they are on life support at this time.

  7. CBC Article
    The CBC ran a story on the blatant price fixing. The part that I found stupefying was the fact that in Saskatchewan and Manitoba baseline packages are $50+ cheaper compared to everywhere else in the country. This is due to the strong regional competitors found there in Sasktel and MTS. This is simply an egregious display of price fixing and demands charges be laid.

  8. drivebycommentor says:

    lack of competition…
    Until the public rises up and lets their MP’s know that they will not be re-elected because of the new and improved tv/internet/cell phone bills nothing will happen.

  9. Uncle Wiggily says:

    To quote an old advertisement for tea, “Only in Canada? Pity!”

  10. Cartel, not monopoly
    Monopolies have one market supplier. Oligopolies/cartels have many suppliers, in cahoots.
    http://en.wikipedia.org/wiki/Monopoly
    http://en.wikipedia.org/wiki/Oligopoly

    Honestly, if we must endure a managed economy, why are we letting pseudo-monarchs control it? It does not look to me like the Private Collective’s control of this niche is better or worse than employing a Crown Corporation. Didn’t we elect a right-leaning party to promote a market based on competition for consumer demand? Maybe we should bring back English Royalty while we entrench our supply-managed market.

  11. My local Safeway just raised the price my favorite flaxseed bread a couple of weeks ago. They gave no reasons for the price increase, no public notice, no news release … then wham, the price went up 30 cents a loaf overnight!

    We need to march on Ottawa and demand the government give us more choice by opening up the market to let in new grocery stores. We shouldn’t have to put up with this abuse of pricing power by grocery store cartels!!

    We want cheaper flax seed bread and cheaper cell phones and we want them now!!!!!!

  12. CBC is running an apology on CBC Newsnet for the errors in their comments
    CBC “WE HAVE SAY COUPLE POINTS TO CORRECT ON A STORY WE REPORTED ON CBC NEWS NETWORK LAST NIGHT AND THIS MORNING, CBC NEWS NETWORK REPORTED TELUS, BELL AND ROGERS ALL RAISED THEIR WIRELESS RATES AT THE SAME TIME OVER THE WEEKEND. IN FACT, TELUS RAISED ITS WIRELESS RATES IN JANUARY AND DECREASED THE COSTS SOME DATA ADD-ONS LAST WEEK SO WE APOLOGIZE FOR THE CONFUSION, IN SOME OF OUR PROGRAMS WE ASKED WHETHER SOME BELIEVED THIS TO BE AN EXAMPLE OF COLLUSION AND WE DID NOT MEAN TO IMPLY THAT AS FACT AND WE REGRET AND APOLOGIZE FOR THAT AS WELL.”

  13. schultzter says:

    Proving vs. Calling
    You can call it “price fixing” and “cartel” and “oligopoly” all you want. But until you can prove it (e-mails, phone recordings, etc.) you’re just another whiny Canadian. Sorry.

    And honestly, if Rogers raises their prices and makes more money then why shouldn’t Bell!? There’s no altruism in business, you don’t get people to invest to improve your services because you’re nice!

    Until there’s a threat of competition – we don’t even need the competition, just the prospect of it – then this will continue.

  14. Well don’t we all feel a little embarrassed for jumping on the “beat up the phone industry cartel” band wagon on the basis of an erroneous story by the CBC that they have subsequently corrected and apologized for. I think this aptly demonstrates that a lot of us have a hair trigger mindset when it comes to our Canadian telecom industry

  15. askandyoushallreceive says:

    what did everyone expect?
    with the new “improved” limits on 3 year agreements, which are essentially a micro-loan for your pricey new handset, why would anyone be surprised that the cost of the plan is now increasing. The carrier that gave you the 700 phone for 99 bux still wants to make its money back and the only way they can do that is to up the monthly cost. its pretty basic economics. Its a shame that instead of refusing to accept the “micro-loans” everyone cried to the govt and expected them to fix it. nobody took any accountability, responsibility or action as a consumer, so i dont have much sympathy. It would have been much more effective to push for lower rates when you bring your own device or purchase it outright. silly kids you got exactly what you asked for and are still choked about it. next time take a stand..dont expect someone to do it for you.and yeah telus increased these prices ages ago, shortly after the new 2 year max

    on a side note its not even fair to compare manitoba tel/sasktel vs the big 3. the amount of infrastructure they have to maintain is a fraction of the larger carriers, and try asking someone in rural manitoba how good their service is outside of winnipeg

    @mike easy solution..get a breadmaker it will pay for itself in a couple months

  16. Investigation Needed
    In my opinion it is a Wireless Carrier cartel that needs to be investigated by the Competition Bureau. When all of the Wireless Carriers are setting the same prices and increasing their prices on or around the same time, there is no competition in the market.

  17. Stop whining and take some responsibility people. They CAN because WE LET THEM. Scream loud enough and you get stupidly good deals! I did it, my mates did it, we’re happy. You’re sobbing. Sew some balls on yourselves, make a call and start yelling!

  18. >Scream loud enough and you get stupidly good deals! I did it, my mates did it, we’re happy. You’re sobbing. Sew some balls on yourselves, make a call and start yelling!

    So you’re like an abused wife? Scream at the wife beater to not hit you so much? Well I talked with my wallet and took my 3# from Rogers to Wind. Man did I save even with roaming on one of the numbers.

  19. End User – That’s The Dumbest Comparison
    I made myself NOT the victim.

  20. it’s a farce
    So they cut the contract length, that’s good and they raised the price of the handset that’s also fine. But they also Jack up the prices of plans, data prices have gone through the roof, a plan that cost 60 bucks now costs 100+, explain that.

  21. Be careful what you wish for
    For anyone calling for government intervention I have to say: be careful what you wish for. So far the government has screwed up everything they have touched telecom wise. They banned 3 year contract? Great, 2 years of service now costs the same as 3. They tried to foster a 4th competitor by blocking their sale to the big 3? Great, now no foreign companies want to enter the market because of the very real possibility of them being blocked from selling when things go sour.

    And for those calling for a nationalized telecom carrier? 2 words: Canada Post. They just jacked their rates up by 30% and cut home delivery, the thought of the government being involved in the delivery of services send a chill down my spine.

    The solution? I have no idea, we’re basically hooped.

  22. @schultzer March 18th

    “And honestly, if Rogers raises their prices and makes more money then why shouldn’t Bell!?”

    Because it’s smart business? Ever heard of that? i.e. Guess where people fed up with higher prices elsewhere will go to? Lower prices.

    Sorry if that amount of intelligence and logic blew your brain.