Waiting for lower wireless phone rates

June 17 2008 by Ellen Roseman

We all know cellphones are costly in Canada, especially when used for long-distance calling or data transmission. Recently, I talked about the high prices we pay for wireless on CBC radio (the Business Network and the Sunday Edition).

Many people agreed with me. But Julie Smithers, a spokeswoman for Telus Mobility, had a more positive spin on the story. Here’s her response.

It is true that Canadians have embraced wireless – in fact, we LOVE to talk, and are at the head of the pack for minutes of use. What’s more, when you look at those who could actually use the services (i.e. not children, very old individuals and people living in extremely remote areas), the real penetration rate is well above 80 per cent.

In countries that appear to have higher penetration rates (for instance, Italy and most European countries), these figures are badly distorted due to the common practice of carrying multiple SIM cards to avoid hefty roaming fees. In Canada, users do not pay roaming fees when travelling within the country.

In Canada, competition for wireless subscribers is fierce, with more than two dozen carriers duking it out day-by-day to bring consumers the newest phones, best rates and fastest network technology available in the world. TELUS alone invests close to half a billion in the average year into our wireless business to make sure it is industry leading.

This year’s figure will be much higher, as we are currently in the bidding for advanced wireless spectrum to ensure that Canadians continue to get all the cool wireless services they want. Despite the obvious challenges of massive geography and low population density, Canadians were amongst the first in the world to benefit from a nationwide 3G network.

Some of the 3G applications that Canadians have been enjoying for years now include cellphone based GPS navigation, streaming XM radio and live TV broadcasts, to name a few. For convenience, these value added features can be charged directly to your cellphone bill, but are totally optional and independent of the voice and text use of a cellphone.

In the Merrill Lynch Q1 ’08 report on the Global wireless industry, you will see that Canadians are actually getting a great deal for their wireless service – just look at Revenue Per Minute, one of the best indicators of actual price. It shows Canadians are actually paying LESS than the average price in developed countries and most emerging markets. And our prices on the decline. In fact, since 2001, wireless prices have plummeted 45 per cent!

Smithers sent me a copy of the 190-page Merrill Lynch report. I found an interesting nugget inside, showing that Canadian wireless carriers have a high Average Revenue Per User of $61 (Canadian). Only Ireland is ahead of us at $63 (U.S.).

The ARPU leaders include Norway ($59 U.S.), Switzerland ($55 U.S.), Japan ($52 U.S.), the United States ($52 U.S.) and France ($49 U.S.). Hong Kong is the developed country market with the lowest ARPU ($22 U.S.).

The SeaBoard Group, a telecommunications consulting firm, published a terrific report last year, Lament for a Wireless Nation, A Cross-National Survey of Wireless Service Prices: Canada, the United States and Europe. You can find a summary online. It argues that Canada’s high cellphone prices have inhibited demand for wireless services.

The current auction of wireless spectrum will open the market to new players. But any new national carrier — Globalive seems the likely winner — will have to grab significant market share from the expensive, feature-packed offerings that Bell, Telus and Rogers provide.

Let’s hope that competition will result in lower wireless rates or even, dare I say, a price war. Meanwhile, we all wait breathlessly to hear if Rogers will drop its wireless data prices when it introduces the Apple iPhone on July 11.

14 comments

  1. Jen

    Jun 17 2008

    I can’t agree more with you, Ellen. I lived in Japan from 2000 through 2003, before cellular phones were widely used here (I think), and paid far less for superior service. Even though I have been back in Canada for almost five years, I am still shocked by how much I pay for service that doesn’t come close to what I had in 2000.

    Prices might have declined 45% since 2001, but Canadians are still paying too much and the services we are offered are far behind other countries. I’m looking forward to more competition and I’ll be one of the first to leave the major players as soon as someone new enters the market.

  2. Kathryn

    Jun 17 2008

    I am waiting for wireless costs to come down after the spectrum auction before switching carriers. I am a Fido customer, without a contract.

    I had a horrendous problem with Fido when wanting to cancel my late mother’s phone: no contract, but they wanted a death certificate. I will not remain a Fido customer. However, I want to change when it is beneficial for me.

    I recently suffered a telemarketing call from Bell Mobility. At first, the caller refused to identify the company he was calling from. His sales pitch was that the price would never be lower and that I ought to sign on for three years. When questioned about the spectrum, his behaviour was close to abusive.

    I cannot wait for the rates to come down and for the competition to begin.

  3. Rob in Madrid

    Jun 18 2008

    One thing that should be noted: In Europe, you pay to call a cellphone and receiving calls is free, which is why my wife always calls me from her work phone.

    The average is around 20 European cents (30 cents Canadian) and it adds up very quickly. Think what long distance used to cost.

    The cost of making calls depends on the country, Germany being very expensive and Spain cheaper. And it’s always cheaper after 8 pm and on weekends.

    Also roaming charges can be horrendous, around one Euro a minute.

    Rather suprisingly, everyone and their brothers has cellphones.

  4. bylo

    Jun 18 2008

    It is true that Canadians have embraced wireless – in fact, we LOVE to talk, and are at the head of the pack for minutes of use. What’s more, when you look at those who could actually use the services (i.e. not children, very old individuals and people living in extremely remote areas), the real penetration rate is well above 80 per cent.

    Nonsense. The European penetration numbers also include kids, the elderly and people living in remote areas. Do an apple to apple comparison and the numbers tell the truth. Many Canadians can’t afford the rapacious rates and contracts that the “big-3” impose on Canadians.

    In countries that appear to have higher penetration rates (for instance, Italy and most European countries), these figures are badly distorted due to the common practice of carrying multiple SIM cards to avoid hefty roaming fees. In Canada, users do not pay roaming fees when travelling within the country.

    Bullshit! European roaming fees are hardly “hefty” compared to what Canadians pay when travelling to the US, let alone overseas. European roaming rates are regulated by the EU. They’re under 50c/minute. Compare that to what Telus charges when you call home from the US.

    And yes, Europeans carry multiple SIMs because their networks are all GSM, their phones are all unlocked and they can buy SIMs and airtime inexpensively everywhere. Telus, Bell and Rogers can’t (or won’t!) offer that because that would give Canadians the ability to minimize their cellphone costs.

    In Canada, competition for wireless subscribers is fierce, with more than two dozen carriers duking it out day-by-day to bring consumers the newest phones, best rates and fastest network technology available in the world. TELUS alone invests close to half a billion in the average year into our wireless business to make sure it is industry leading.

    Disingenuous. There are only three national carriers. They may not collude in violation of the Competition Act, but they certainly have an uncanny ability to raise rates in lock-step. The big-3 know that if they can all avoid price-cutting, they’ll all be able to maintain their high ARPUs.

    The other carriers are all MVNOs, who have to buy airtime from the incumbents and are at their mercy when it comes to wholesale rates. As for investments in infrastructure, are we to believe that the Europeans just woke up one day and found all their networks in place? Huh? And BTW, European cell networks are far more advanced than what’s available in Canada, even in our densest urban areas.

    This year’s figure will be much higher, as we are currently in the bidding for advanced wireless spectrum to ensure that Canadians continue to get all the cool wireless services they want. Despite the obvious challenges of massive geography and low population density, Canadians were amongst the first in the world to benefit from a nationwide 3G network.

    Translation: We missed the boat on GSM, so now we’re scrambling to catch up with the rest of the world. We at Telus are particularly concerned about missing all that juicy roaming revenue from all the overseas visitors to the Vancouver Olympics. That’s particularly embarrassing to us because those games will be held right in our back yards.

    Some of the 3G applications that Canadians have been enjoying for years now include cellphone based GPS navigation, streaming XM radio and live TV broadcasts, to name a few. For convenience, these value added features can be charged directly to your cellphone bill, but are totally optional and independent of the voice and text use of a cellphone.

    Have you looked at what Telus charges for those features? Have you compared them to what Europeans pay for the same service? D’oh!

    In the Merrill Lynch Q1 ‘08 report on the Global wireless industry, you will see that Canadians are actually getting a great deal for their wireless service – just look at Revenue Per Minute, one of the best indicators of actual price. It shows Canadians are actually paying LESS than the average price in developed countries and most emerging markets. And our prices on the decline. In fact, since 2001, wireless prices have plummeted 45 per cent!

    One only needs to spend five minutes in a European cellphone store to realize just how false those claims are.

  5. neil

    Jun 18 2008

    “competition for wireless subscribers is fierce, with more than two dozen carriers duking it out day-by-day”

    That there exist 12 carriers nationwide is not relevant; what matters is what carriers you have access to in your area. I submit this number should be closer to 2 or 3 in the GTA (Telus, Rogers, Bell).

    A greater concern for wireless users is the proposed copyright bill. My understanding is that this bill will make it illegal to unlock phones; in essence, criminalizing users who are fed up with a particular carrier, but don’t want to give up their number or data on the phone.

  6. Ken

    Jun 18 2008

    As with a lot of goods and services, the consumer costs are too high because businesses try to outdo each other with costly, intense, repetitive advertising.

    How much does it cost to display those colourful birds in newspapers, jumping up and down on TV and popping up on my computer screen every day of the year?

  7. Charles in Vancouver

    Jun 18 2008

    “In Canada, users do not pay roaming fees when travelling within the country.”

    Oh, no, she didn’t.

    Perhaps an “incoming long distance charge”, however, rings a bell? The vast majority of Canadian wireless users are charged an extra long-distance fee to receive calls outside of their home area. And the cost of this long-distance fee is non-negotiable: I cannot shift it to another long-distance carrier because it’s all internal. In my head, this is still a roaming charge.

    In the US cell market, most plans do away with national long distance completely. If I take my prepaid US cellphone from its Seattle home area to New York, I can call to the whole country and receive calls with only air time fees – no long distance at all.

    This discrepancy is ridiculous, given our higher rates.

  8. brad

    Jun 18 2008

    As consumers, we are helping to sustain these high rates by agreeing to pay them.

    Consider whether you really need mobile email and Web access on your cellphone; if you use it for work, that’s one thing. But if not, then you can live without it.

    And consider whether you really need a cellphone at all. I survived just fine for 46 years without a mobile phone, and while I have one now, I am considering ditching it. My girlfriend already got rid of hers and doesn’t miss it.

  9. Lior

    Jun 18 2008

    Julie Smithers from Telus said:

    “In countries that appear to have higher penetration rates (for instance, Italy and most European countries), these figures are badly distorted due to the common practice of carrying multiple SIM cards to avoid hefty roaming fees. In Canada, users do not pay roaming fees when travelling within the country.”

    The problem with her argument is that it has nothing to do with market penetration and everything to do with simple geography. Many European countries are small (some, like Monaco and Lichtenstein are tiny) and each country have their own wireless operators. So it’s perfectly understandable that users will carry several SIM cards with them if they travel throughout Europe, 90% buy so on a prepaid basis, to avoid hefty roaming charges. With the borders being wide open the way they are and the density of the population, it’s just a fact of life over there. But that it turn gives you a lot of choice as you have many operators.

    Here in Canada it’s a different story. We are are a huge country and we have only four (well, ok, three) major wireless companies who own towers [Bell and Telus who run on CDMA, Rogers and Fido (who’s owned by Rogers but run as a separate company) on GSM]. All the other smaller players like Virgin Mobile, PC Mobile, Seven-Eleven, Koodo (owned by Telus) are essentially piggy backing on the networks of these four major players. And that’s precisely why none of them have offer any fancier phones or PDAs, because they’re very limited of what they can do on someone else’s network. So they try to pass themselves as “no frills” mobility, which is true as long as all you need is a simple cellphone.

    Now we have the four major players dictating the rules of the game, they coerce together when it comes to price levels and fees (all of them except Fido charge an activation fee when you sign up, and all of them with no exceptions charge you a monthly “system access” fee). In addition, if you look at the pricing for extremely basic features such as caller ID and voice-mail, the prices among the 4 majors are virtually identical.

    When you look at it from that perspective, our choices in this country are very limited when it comes to wireless carriers. If you choose the smaller players you can get a reliable mobile but not a PDA and perhaps not the most high end or latest phones that you want. If you want those things, you need to sign up with one of the 4 major players who get together and rip you off with services charges and contracts and dreadful cancellation terms left and right before you even uttered a single word into your shiny new phone.

    What we need in this country, together with more stringent government regulations overlooking the wireless sector, are companies who will invest in a significant portion of spectrum space that will give way to new national carriers. Only when we have companies who actually own towers and run their own network will we have better competition and better value for mobile users.

    This is not what’s happening right now. Telus may be investing half a billion a year in their network, but that’s the cost of doing business. They are investing heavily now and building penetration and have been doing so for years, but when you really think about it, we the users are the ones paying for this penetration.

    It has been reported once that the wireless companies in Canada collect almost a billion dollars every year from system access fees alone. Couple that with activation fees, termination fees, ludicrous roaming fees, fees that are charged on top of your monthly plan, and it’s no wonder that despite the money they claim to be investing in their networks that virtually all the major players in the wireless sector are posting record revenues and net profits.

  10. bylo

    Jun 18 2008

    Re: Rob in Madrid, “Also roaming charges can be horrendous, around one Euro a minute.”

    Not under the Eurotariff where roaming is currently capped at 46¢ out and 26¢ in (about 70¢ and 40¢ in Canada.) Those are maximum rates. Some carriers charge less. Also the price trend is down.

    Contrast with what Telus and its roaming partners charge for calls from the US on a Telus phone.

  11. Aaron

    Jun 21 2008

    Go with a prepaid phone. I use Solo and I have unlimited internet, text messaging and local phone calls.

    However, I must admit my wife and I mostly text each other, rather than calling one another…

  12. Lior

    Jun 25 2008

    Well, pre-paid has its plus and minus, but if all you need is a phone and talk once in a while, even daily, pre-paid is well worth when it comes to saving headaches and extra fees that you get with the monthly plans.

  13. Cynthia

    Jun 25 2008

    I agree prepaid is sufficient for many users, the only down side is the expiring of minutes, that should not be allowed. Banks can’t say you didn’t spend all of your paycheque and 30 or 60 days has past, it’s now gone. I got a lame answer once about why minutes expire on a prepaid card. Can’t remember the exact details, but it was so no one could steal them. Either way they are stolen if you bought more mins then you use before the exiration date. Which reminds me, my top up date is june 30th!

  14. Jose HC

    Nov 15 2008

    Hi Ellen – I just stumbled upon this article as I was doing research on lowering cell phone bills for the enterprise. Unfortunately I think that as a Canadian consumer I still pay way too much for my cell phone… way too much. Our neighbours down south have it much better than we do.