Why are canadians happy to pay their cellphone bills in silence?
According to several tech analysts, talk isn't cheap here. Urban areas in Canada might enjoy a cellphone penetration of rate of 80 per cent, but Canucks are paying some of the highest prices in the world.
Technology research firm SeaBoard Group recently conducted a survey of the wireless market, studying price plans in 10 cities across Canada, the U.S. and Europe. They discovered that a heavy user in Canada who uses around 1,200 minutes a month pays 56 per cent more than the same user in the U.S.
And the bill of an average user, using 500 minutes monthly, pays a third more than a comparable U.S. wireless consumer.
So if Canadian wallets are hurting when the cell bill comes, that means the wireless industry must be robust at the very least. The numbers don't lie: in fiscal 2006, profits for the industry exceeded $4 billion on revenues of $12.8 billion an increase of 41.3 per cent over the previous year.
Providers are raking it in while consumers are forking it over. Part of the problem is the oh so mysterious "system access fee" Canadian wireless providers charge to every bill, says Kevin Restivo, who co-wrote the report for the SeaBoard Group. Typically amounting to $7, "this fee can't be found anywhere else in the developed world," Restivo points out.
Two years ago, CBC-TV's Marketplace investigated system access fees. While service providers frequently described it as a "government fee," the reporters learned that it was simply made up.
Depressed yet? Maybe a National Post story earlier this month will get you frowning. A typical cellphone user in Canada rings up an annual bill of $526, according to the Organization for Economic Co-operation and Development. With that kind of pricing, Canada is 22nd out of 30 OECD member countries.
Restivo blames the lack of competition for high rates.
"The industry likes to say there are dozens of regional brands in Canada," he says, "but all of them are really offshoots of the three major national providers."
We're not as bad off as the media claim, counters Ken Englehart, vice-president of regulatory affairs for Rogers Wireless.
"Most countries have two or three major wireless companies, so we're not much different," he says. "I'm a big fan of competition, so if someone wants to enter the market, I say go ahead."
He might be chewing on those words soon. Next year, the federal government will open an auction for radio airwaves to new entrants in the market.
In response to SeaBoard's report, Englehart relates a familial anecdote. "Rogers has a $20 plan that offers 200 daytime minutes and 1,000 minutes on evenings and weekends. When I took my daughter to a school in the U.S., I found that there's no wireless plan like that there. It would cost her at least $40 U.S. a month, loading her with lots of minutes and a long-distance plan. But where's the $20 plan?"
Englehart says scrapping the cheaper packages is bad business, and SeaBoard's numbers support his statement. Light cellphone consumers, using around 100 minutes a month, pay 27 per cent less than their American counterparts.
"Customers in Canada are getting a deal," affirms Peter Barnes, president of the Canadian Wireless Telecommunications Association. "In the last few months we've seen increased competition and the introduction of wireless number portability [permitting users to bring their cellphone number to another carrier]. Customers are winning because they have choice."
Sure, we have choice. And competition can lower prices. But the state of the industry isn't as shiny as users would like. Mobility has its costs, but I never knew it would run me $80 a month.