This week the Organisation for Economic Co-operation and Development confirmed what Canadians have been saying for years: that we pay some of the highest prices for some of the worst cell phone service in the industrialized world. The new data was released on Monday and supports many of the findings from OpenMedia.ca’s community-driven report, Time for an Upgrade. Big Telecom can’t refuse to listen any more; the reality is that Canada’s cell phone market is dominated by just three service providers, leaving customers with little choice but to accept high prices.
Canadians price-gouged by three year contracts
Until recently, one of the biggest problems with the Big Three was their use of restrictive three-year contracts. Big Telecom claims that Canadians dislike pay-as-you-go services, with the implication being that we therefore choose expensive contracts. But pay-as-you-go services require that the customer buy their phone outright, and buying a device upfront is not an affordable option for many.
As the CRTC Chair Commissioner Blais pointed out, the reality is that customers have no choice -- when your options are a rock or a slightly-less-hard-place, what are you going to do? That’s why the CRTC’s Wireless Code sided with Canadians and reined in three year contracts.
Canada’s size has nothing to do with its high cell phone prices
It is a popular myth that high prices are due to Canada’s size and population density. But as technology consultants The Seaboard Group argue, “Canada’s carriers do not actually provide coverage across 90% of the land mass” because most of our population is concentrated in a small number of cities. As wireless providers are only serving a small percentage of this geography, the total size of Canada has little bearing on service costs. Big Telecom’s own lobby group, the CWTA, has noted that Canada has just 13,000 wireless towers -- a small fraction of the 52,000 found in the U.K., which is only 1/40th our size.
To be sure, there are high start-up costs for independent providers associated with establishing networks and spectrum. That’s why in our report, Time for an Upgrade, we made recommendations to Industry Canada that would facilitate the creation of a healthier and more robust wireless system with more choice and fairer prices.
Canadian carriers make more revenue off users than almost anywhere in the world
A great way to compare the cost of cell phones in Canada to the rest of the world is by looking at service provider revenue per user. As we’ve explained in the past, Canadian cell phone providers extract more revenue from cell phone users than anywhere else in the world.
While some would suggest this is because of our high usage of smartphones and data, award-winning journalist Peter Nowak has shown that other countries with data usage that’s as high or higher than Canada have lower revenue per user, which suggests that their data is cheaper.
It’s also worth bearing in mind that, until recently, many smartphones like the iPhone couldn’t be used with more affordable, independent carriers because new entrants didn’t have access to the right ‘spectrum’ -- forcing cell phone users to turn to the high-cost Big Three for their smartphone needs.
More choice and customer-friendly rules mean better prices
Service providers receive lower revenue from Quebec as compared to other provinces, highlighting the positive impact of more choice and fairer pricing on Quebec’s market. Over the last few years an increase in independent options has put pressure on the Big Three, resulting in the development of ‘Unlimited Quebec’ plans and lowered prices.
Since 2010, Quebec has also enjoyed different wireless rules from the rest of Canada, which limit service providers’ ability to price-gouge customers. So it shouldn’t be a surprise that this has an impact on Big Telecom’s revenue.
While positive steps have been taken, there’s clearly more that needs to be done. Canadians have laid out a clear road map forward -- and it’s time for the government to open up our networks to new service providers. Over to you, Minister Moore.
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