Mediacheck

Sorry, Canadian Wireless Users Are Still Suckers

It's no time to declare victory in fight for wireless competition.

By Michael Geist 19 Mar 2013 | TheTyee.ca

Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can reached at mgeist@uottawa.ca or online at www.michaelgeist.ca.

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Global losers: We get high fees, locked phones, yet churn more revenue per capita for carriers than other nations. Image: Shutterstock.

Is the Canadian wireless market truly competitive? Earlier this month, Scotia Capital released a report maintaining that it is, arguing that "it is time for the regulators to declare victory on the policies they adopted five years ago." That advice may be news to the government and regulators, however, as Industry Minister Christian Paradis recently admitted that "there is much more to do" on wireless competition and the Competition Bureau lamented that "certain impediments continue to diminish the effect of competitive forces in this industry."

Paradis and the Bureau have good reason to be skeptical about prematurely declaring victory since Canadians continue to pay higher prices than those found in peer countries. Last year, the CRTC issued the 2012 Communications Monitoring Report, which canvassed wireless service pricing across three levels -- basic users, average users, and premium users -- in Canada, the U.S., UK, France, Australia, and Japan.

The CRTC report found that Canadian prices are on the higher end across each category. For basic users, Canada tied with the U.S. as the most expensive country. For average and premium users, Canadian prices were the third most expensive among the surveyed countries. Moreover, in August the U.S. Federal Communications Commission ranked Canada 26th out of 37 countries for the cost of smartphone data in plans with usage limits (with first being cheapest and 37th the most expensive).

The high Canadian costs are not limited to service plans. The incumbent Canadian carriers impose a 75 cent monthly charge for 911 service even though the actual cost of the service is closer to ten cents. Those same carriers also feature some of the highest roaming costs in the world, leading to horror stories of consumers running up tens of thousands of dollars in charges for streaming video while on holidays. Some carriers even impose a monthly "government regulatory cost" fee, which is nothing more than passing along the basic costs of doing business to their customers.

Canadians enrich carriers more than anywhere else

Given these high fees, it comes as little surprise to find that Canada is the most carrier-friendly market in the world as measured by average revenue per user or ARPU. The 2012 CRTC report showed Canadian ARPU as tied with Japan as the highest among eight leading economies (Canada, US, UK, France, Germany, Italy, Japan, and Australia). In fact, even the Scotia Capital report acknowledged that the incumbent carriers had largely managed to maintain their high ARPU rates in recent years despite the presence of several new entrants such as WindMobile and Mobilicity.

As a highly lucrative market, the carriers have worked hard to convince regulators that even the most disliked aspects of the market should be maintained. Canadians consistently object to the widespread use of three-year contracts, yet the Scotia Capital report claims that the lengthy contracts help spur smartphone adoption. However, recent studies show that countries with even higher smartphone adoption rates such as the U.K. and Spain do not have three-year contracts (the U.K. banned the practice in 2011).

The carriers have also sought to keep consumers locked in by arguing against mandatory unlocking of cellphones. Bell recently told the CRTC that mandatory unlocking could result in delayed entry of popular new devices (despite the fact that Apple launched the iPhone 5 in countries with mandatory unlocking at the same time as countries without it). In fact, Bell charges $75 to unlock a device, though it told the CRTC it "absolutely could do it for less. We choose not." The cost amounts to a $2 monthly fee for anyone on a three-year contract that wants an unlocked phone.

Billions of dollars at stake

The question of Canadian wireless competitiveness is more than just an academic debate. Billions of dollars hang in the balance as the CRTC seeks to develop a consumer wireless code and Paradis crafts the rules for a spectrum auction planned for later this year. Both initiatives require an assessment of the competitive state of the market. Despite several years of policies ostensibly designed to foster greater competition, the data suggests that Canada still lags behind other countries with consumers paying the price.  [Tyee]

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