Telecom companies are extremely worried about a campaign pledge to lower cellphone bills by a hefty 25 per cent, saying it will stall competition and investment in wireless networks.Fred Lum/The Globe and Mail
This week’s CRTC hearings will put a spotlight on the fierce fight under way between telecom companies and the federal government over the price of wireless services in Canada – with some executives suggesting the government is making unreasonable, conflicting demands.
Telecom companies are extremely worried about a campaign pledge to lower cellphone bills by a hefty 25 per cent, saying it will stall competition and investment in wireless networks. But given longstanding national gripes about phone and data costs – and backed by studies showing Canadian prices are among the highest in the world – the government is standing by its promise.
“Canadians are fortunate to benefit from one of the best and most reliable wireless networks in the world. When we consider our vast country this is an undeniable achievement, but the concerns around pricing are significant," said Navdeep Bains, the Minister of Innovation, Science and Industry, in an interview.
Many industry insiders say prices have already come down significantly in the past few years, so they’re confused about the starting point for the prices they are being asked to lower. For instance, Vancouver-based Telus Corp. says the plans it currently offers already meet or beat the “stated benchmark for affordability” outlined by the Liberal Party during the election campaign. The Liberals said they wanted to bring prices down to just below $3,000 annually for a family of four. Telus says the current annual cost of four of its unlimited data plans, with a family discount, comes to $2,880 a year.
But Mr. Bains has only doubled down on the campaign promise. In an interview with The Canadian Press last month, he said the 25-per-cent rate reductions he has been mandated to achieve over the next two years are on top of any price reductions introduced before the election.
Telecom executives counter that it seems the government has not even decided how it plans to define wireless prices – whether it’ll be looking at the prices of specific plans, the per-gigabyte price of data or the average user’s bill.
And Ottawa seems to want it all – lower prices and much-improved service across the country – the telecoms point out.
“The government seems to have all these conflicting policy objectives,” said Robert Malcolmson, chief regulatory officer at BCE Inc. “They want low cellphone prices, they want us to build out 5G, they want us to build connectivity in rural areas. We’re doing all of those things, but it has to be funded by revenue, and revenue comes from the provision of services. The government’s singular focus on wireless prices has implications for other objectives they’re trying to accomplish.”
One of the tools the government plans to use is forcing carriers to sell network access to wireless resellers that lack their own infrastructure, referred to as mobile virtual network operators, or MVNOs. The issue will come before the CRTC on Tuesday for nine days of hearings in Gatineau. The regulator has said the benefits of a well-developed MVNO market would likely outweigh any negative impacts, although the rates, terms and conditions need to be ironed out.
The chief executives of both BCE Inc. and Rogers Communications Inc. have emphasized the impact of such regulatory policies on network investments, with Joe Natale warning that Rogers could significantly cut the almost $3-billion it plans to spend on infrastructure this year if regulations become overly punitive.
Another industry executive, who is not being identified by The Globe and Mail because they are not authorized to discuss the matter publicly, said their company has been thrown into contingency planning mode, mapping out the kinds of cuts they would have to make – not only to infrastructure investments but to their retail footprints and call centre staffing levels – to meet the 25-per-cent price reduction.
Last summer’s introduction of data plans with no overage fees – which slow down speeds when a customer’s data limit has been reached – was a paradigm shift for an industry that previously had gleaned roughly 5 per cent of its annual wireless revenues – roughly $1-billion – from overage fees.
However, not all customers are seeing their monthly bills go down on the new plans. After launching its “Infinite" offering last June, Rogers said about 60 per cent of customers moving to the new plans were actually upgrading from cheaper ones. Although the price of data has been on the decline for years, data consumption has been climbing steadily. Statistics Canada says that in 2017, Canadian households spent an average of $101 a month on mobile services – a year-over-year increase of 9.7 per cent.
monthly prices for mobile services in canada
Average prices urban and rural
Level 1: 150 min./no data
Level 2: 450 min./300 SMS/1 GB data
Level 3: 1,200 min./300 SMS/2 GB data
Level 4: Unlimited min.,SMS/5 GB data
$80
70
60
50
40
30
20
2016
2017
2018
monthly prices for mobile services in canada
Average prices urban and rural
Level 1: 150 min./no data
Level 2: 450 min./300 SMS/1 GB data
Level 3: 1,200 min./300 SMS/2 GB data
Level 4: Unlimited min.,SMS/5 GB data
$80
70
60
50
40
30
20
2016
2017
2018
monthly prices for mobile services in canada
Average prices urban and rural
Level 1: 150 min./no data
Level 3: 1,200 min./300 SMS/2 GB data
Level 2: 450 min./300 SMS/1 GB data
Level 4: Unlimited min.,SMS/5 GB data
$80
70
60
50
40
30
20
2016
2017
2018
There are indications, though, that the government’s practice of setting aside spectrum for regional players such as Freedom (previously Wind Mobile) and Quebecor Inc.'s Videotron, as well as other measures, is beginning to bear fruit. According to a study published by the CRTC last year, the prices of wireless plans offering two gigabytes of data or more fell about 32 per cent between 2016 and 2018. And in its submission to the CRTC ahead of the wireless hearings, the Competition Bureau says it found prices are 35 to 40 per cent lower in markets where so-called wireless disruptors have achieved a market share above 5.5 per cent.
“That’s really a reflection of our policies," Mr. Bains said, adding, “but we have more to do.”
Yet consumers, for the most part, seem unaware of all that. Only 16 per cent of the 1,208 Canadians surveyed via telephone late last year for a CRTC report agreed that the cost of cellphone plans has gone down in the past three years. And two-thirds said they think cellphone prices in Canada are higher than in other countries.
perception of cellphone services in canada
Q: Please tell me if you agree or disagree with each of the
following statements using a scale of one to five
Strongly agree
Agree
Neither
Disagree
Strongly disagree
My cell phone calls are almost never dropped
47%
26
13
7
6
I’m happy with upload/download speeds
32%
34
17
5
4
I rarely experience dead zones with my cell phone provider
34%
27
16
10
10
I have a good selection of cellphone providers in my region
39%
19
17
10
10
I get good value for money from my cellphone provider
22%
24
26
14
12
Cost of cellphone plans has decreased in the last three years
8%
8
17
18
40
Base: n=1,208; all respondents.
Don’t know/refused: ranged from 1% to 9%.
JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE:
crtc; wall communications
perception of cellphone services in canada
Q: Please tell me if you agree or disagree with each of the
following statements using a scale of one to five
Strongly agree
Agree
Neither
Disagree
Strongly disagree
My cell phone calls are almost never dropped
47%
26
13
7
6
I’m happy with upload/download speeds
32%
34
17
5
4
I rarely experience dead zones with my cellphone provider
34%
27
16
10
10
I have a good selection of cell phone providers in my region
39%
19
17
10
10
I get good value for money from my cellphone provider
22%
24
26
14
12
Cost of cellphone plans has decreased in the last three years
8%
8
17
18
40
Base: n=1,208; all respondents.
Don’t know/refused: ranged from 1% to 9%.
JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE: crtc;
wall communications
survey: perception of cellphone services in canada
Q: Please tell me if you agree or disagree with each of the following statements
using a scale of one to five
Strongly agree
Agree
Neither
Disagree
Strongly disagree
My cell phone calls are almost never dropped
47%
26
13
7
6
I’m happy with upload/download speeds
32%
34
17
5
4
I rarely experience dead zones with my cellphone provider
34%
27
16
10
10
I have a good selection of cellphone providers in my region
39%
19
17
10
10
I get good value for money from my cellphone provider
22%
24
26
14
12
Cost of cell phone plans has decreased in the last three years
8%
8
17
18
40
Base: n=1,208; all respondents. Don’t know/refused: ranged from 1% to 9%.
JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE: crtc; wall communications
And industry analysts caution that allowing low-cost competitors to piggyback on the networks of larger carriers will create a disincentive for companies to invest in infrastructure – which could stunt advanced network roll out in rural areas and put Canada behind in the global 5G race. Canadians, who currently enjoy high quality networks, may soon find themselves dealing with slower speeds and poorer coverage than their peers around the world, they say.
“We’ve seen examples of that in Europe," Desjardins analyst Maher Yaghi said. “When regulation for MVNOs is implemented, all these companies pull back on [capital expenditure], because that’s the easiest way to protect your free cash flow.”
international mobile price comparison
Canadian dollars, purchasing power parity adjusted, 2018
Canada
U.S.
Britain
France
Germany
Australia
$80
70
60
50
40
30
20
10
*
*
*
*
*
*
0
Level 1
Level 2
Level 3
Level 4
Level 1: 150 min./no data
Level 2: 450 min./300 SMS
Level 3: 1,200 min./300 SMS/1 GB data
Level 4: Unlimited min.,SMS/2GB data
*Not available
international mobile price comparison
Canadian dollars, purchasing power parity adjusted, 2018
Canada
U.S.
Britain
France
Germany
Australia
$80
70
60
50
40
30
20
10
*
*
*
*
*
*
0
Level 1
Level 2
Level 3
Level 4
Level 1: 150 min./no data
Level 3: 1,200 min./300 SMS/1 GB data
Level 2: 450 min./300 SMS
Level 4: Unlimited min.,SMS/2GB data
*Not available
international mobile price comparison, 2018
Canadian dollars, purchasing power parity adjusted
Canada
U.S.
Britain
France
Germany
Australia
$80
70
60
50
40
30
20
10
*
*
*
*
*
*
0
Level 1
Level 2
Level 3
Level 4
Level 1: 150 min./no data
Level 3: 1,200 min./300 SMS/1 GB data
Level 2: 450 min./300 SMS
Level 4: Unlimited min.,SMS/2GB data
*Not available
Ben Klass, a PhD candidate at Carleton University who studies wireless pricing, isn’t entirely convinced that carriers will cut back on network investments, since doing so is simply a smart business move.
“This is a familiar refrain to anyone who’s paid attention to this for a long time," Mr. Klass said. "I think that, to a large extent, it’s theatrics.”
One potential compromise would be to introduce a hybrid model such as the one proposed by the Competition Bureau. In a submission to the CRTC, the bureau suggests that the larger carriers should only be required to sell network access, on a temporary basis, to regional carriers who plan to invest in and expand their own networks.
At least one telecom provider is in favour. Cogeco Inc., which serves 850,000 internet customers in Ontario and Quebec, would love to be able to get into the wireless space, but the barriers to entry are too high.
“We need something in the middle – a little of what we have, with a twist of new regulation to increase competition and increase investment,” president and CEO Philippe Jetté said. “It’s always the same players that can play in the ecosystem. We need new players."
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