Peter Nowak debunks many of the recent claims from Telus on capital investment and pricing in the Canadian market, concluding that Canadian carriers rank first in the world in average revenue per user, third in profit margin, and some of the highest consumer prices in the world.
Post Tagged with: "Wireless"
Competition Not Contracts: The Real Reason Canadian Wireless Prices Are on the Rise
This week, Telus and Bell announced new wireless pricing plans based on two-year contracts (Rogers has said their plans will be released shortly). Those plans – particularly those from Telus which seems to be taking its suggestion that Canada should be the most expensive wireless country seriously – feature higher prices, which some claim are the product of the shift from three-year contracts to what is effectively a two-year maximum under the new CRTC wireless code. The narrative behind these cost increases is that consumers are amortizing the cost of their device over a shorter period of time and therefore can expect higher monthly fees. This argument is perfect for the carriers as they get to blame the CRTC (and by extension, the Competition Bureau, consumer groups and consumers themselves) with an “I told you so” for the increased prices. Yet the higher costs are not strictly a function of shorter contracts, but rather a product of Canada’s uncompetitive marketplace.
Many other countries have two-year contracts with cheaper rates and bigger device subsidies. This is because consumer price is not primarily a function of contract length or device cost, but rather marketplace competition. For example, Spain’s wireless pricing has been dropping in recent months as their four major carriers find consumers more aggressively shopping for better prices or cancelling their wireless services altogether. In response, all four Spanish carriers are dropping prices to stop the churn and attract new customers. For example, BGR reports that Yoigo (owned by Telstra) has offered free iPhone 5’s on two-year contracts for as little as 25 euros (C$34) per month (the article emphasizes how competition through innovative pricing has led to profit declines at incumbent carriers). The decline in price is illustrative of why it is competition, not “regulatory costs” or device subsidies, that are the key factor to consider.
[Update 7/27: A commentator below helpfully points out an inaccuracy in the BGR article since the Yoigo price was for phone only and not service. A fuller comparison of the Spanish offer is as follows: Yoigo for 24 months of 25 euro phone + 25 euro service (unlimited voice + 1 GB data) is C$1636.24. Add another 12 months of service for C$409.56. Total three year cost is $2047.80. Bell’s current offer on an iPhone 5 with the same voice and data for three years is $179.95 for the phone, $35 for the activation, and $70 per month of the service for 36 months. Total three year cost (not including taxes) is $2734.95.]
Telus: Canada Should Be the Most Expensive Wireless Country in the OECD
Telus has responded to my post on the 2013 OECD Communications Outlook, which ranked Canada among the most expensive countries in the OECD for wireless services in virtually every category, with its own post claiming that Canadians should be celebrating our relatively high prices. The post notes the investment that Telus and other companies have made in Canada (Peter Nowak explains the reason behind much of that investment) and argues that:
When you consider our enormous investment, challenging geography, sparse population and outstanding networks Canada really SHOULD be the most expensive country for wireless service in the OECD, but we’re not. That’s a great success story we should be celebrating.
It is a testament to how out-of-touch Canada’s incumbent wireless providers have become that they think Canadians should be celebrating the fact that we are not the single most expensive wireless country in the developed economy world. Telus says that scratching below the surface of the OECD report will lead people to conclude that Canadians pay about the same as other developed countries. Yet in its own chart, Canada ranks among the more expensive countries within the G7 in every category but one.
OECD Report Confirms What Canadians Have Long Suspected: Wireless Pricing Among Highest in the World
The OECD last week released the 2013 Communications Outlook, a major international report issued once every two years with detailed comparative data on telecommunications throughout the developed economy world. Telus jumped on the report by posting its own release claiming that it “once again confirms that Canadian wireless pricing is extremely competitive internationally.” Notwithstanding those sunny comments, those that take the time to read the report (which must be purchased or accessed via an institutional subscription) will find that the reality is that the OECD reports that Canada is one of the most expensive countries for wireless services in the world. In fact, the OECD finds that not only do Canadian wireless services rank poorly when compared to the rest of the OECD, but so too do broadband Internet services (I’ll focus on broadband in a later post).
These wireless price rankings run from cheapest (1st) to most expensive (34th). Canada ranks among the most ten most expensive countries within the OECD in virtually every category and among the three most expensive countries for several standard data only plans.
Supreme Court of Canada To Hear Appeal of Warrantless Cellphone Search Case
The Supreme Court of Canada has granted leave to appeal in the Fearon case, which involved an Ontario Court of Appeal decision permitting a police search of a cellphone that was not password protected or locked during the course of an arrest. I referenced the case in a brief post […]
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