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Tuesday, July 22, 2008

Is Big Telco Taking Canadians for Granted?

The expectation is that we lowly consumers will start to get some price and service competition in the wireless services in Canada with the auction of the new spectrum and assuring some competition for the big three, Bell, Rogers and Telus who now receive 95% of cell phone revenues in Canada. The little guys have sure run up the bidding war for the spectrum licenses to $4.25 B - over three times the anticipated revenues. As much as I like to rag on the Harper government, if what I hear is true that they plan to apply this windfall to pay down part of the national debt – I say good on ‘em.


Big Telco has come under fire recently for prices that are usury. The Rogers small reduction in iPhone rates shows a modicum of marketplace responsiveness. The plan by Bell and Telus to charge $.15 per text message received, much of which is spam, is really offensive. The cell phone costs in Canada are ridiculous to the point it makes you wonder if there really is a competitive market in this service. I can get Internet and bundled services on the same wireless system for like $55 a month but some basic cell phone charges can run to $150 per month. What gives? And they wonder why Canada is lagging behind other countries in adopting of cell phones.

A friend just came back from a month in Austria, Hungry and Czechoslovakia! In the Czech Republic, some 20 years out of Communism, she could buy a cell phone for $20 and an unlimited access card for $20 per month. She used her Canadian cell phone service provider for the month instead and she expects about a $2,000 roaming bill. The service levels and costs are not competitive with other countries either. Canadian bandwidth comparables are 7.8 megabytes per second at a monthly cost of $6.54 per megabyte, better than Belgium, Netherlands and Iceland. In Japan you can get Bandwidth at 93.7 Mb/s at a cost of $.36 per Mb/second. France and South Korea provide Bandwidth at about 45 Mb/s at a cost between $.84 and $.97 per Mb/second. Astounding compared to Canada


The other high bandwidth low cost wireless service countries are Sweden, Finland, Australia and Norway. I don’t understand why Canadians are paying such uncompetitive wireless prices for such low levels of service and options. This is an individual rip off and a global competitiveness issue for Canada too. In a wired, globalized competitive knowledge based economy low taxes are nice but low costs are critical factors too.

So the Big Three in Canada used to be in the North American auto industry players of GM, Ford and Chrysler. No more are they dominant. IN fact they are barely surviving. Why? Because Japan, South Korea and Sweden – to name a few car making competitors, ate their lunch. I am all for the free market place where appropriate. Wireless service is one of those appropriate places. But the seeds of failure are planted in the success of the dominant players. It happened in cars and it can happen in cellular services too. Big Telco in Canada is clearly not as competitive as the free market players would have you believe. Nor are they as competitive as we consumers deserve.

I am not saying there is anything illegal going on like price fixing or collusion as in Quebec gasoline prices. I am saying Canadian wireless consumers are being taken for granted and we seem to be taking it gladly by not standing up against usury pricing when compared to others in the world.

I am pulling for the new players coming into the wireless spectrum and looking for options. I expect many more Canadians are with me in this quest.

10 comments:

  1. If you can't beat'em, join 'em. Look up DRIP Investing and buy some stock.

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  2. The CRTC is the problem. We don't have a free market. Thankfully the current federal government believes in action to limit the CRTCs (unwarranted) power.

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  3. Anonymous9:41 am

    Ken -

    I agree the plans in Canada are completley uncompetitive. Living in the US, I pay $50/month for unlimited blackberry data access, and typically another $25 or so a month for 1000 minutes of calling (including long-distance anywhere in the US).

    --TimG

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  4. Hey TJK - the wireless business is unregulated so far as I know. If I am right - how can the CRTC be a problem for this free market activity?

    The CRTC sure does not set cell phone rates.

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  5. And the telecom companies are starting to look more and more like Railway Barons...

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  6. Willy Lindstrom1:23 pm

    I've read somewhere that one of the reasons we're so ripped off is that Canada is not seen as an good (or easy) investment for international companies. Small population strung out along the US border. Europe is a piece of cake compared to Canada.
    Of course, the Swedes (Eriksson) and the Finns (Nokia) fly in the face of this. Yes, I'm aware of the difference between Nokia being a manufacturer and Rogers being a service provider, but those companies didn't develop in a wasteland. Well, maybe Finland.

    Would a company be able to only invest in some places like Windsor-Quebec City corridor and other pockets without having to provide service to rural areas?

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  7. Anonymous11:27 am

    tjk, the free market is mostly good but some government oversight is appropriate (eventhough the CRTC does none).

    Look at the USA. "Wall Street got drunk" (says Geo. Bush)and taxpayers and the economy is massively damaged. No oversight over the insane lending practices of greedy bankers is going to cost txpayers billions. Meanwhile the bankers got rich. It is essentially a transfer of wealth from taxpayers to greedy free marketeers (the bank executives) that rolled the dice. The bank employees got rich but the taxpayer lost.

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  8. Anonymous7:22 pm

    Complain and complain but offer up no solution(s). Typical liberal thinking.

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  9. ... As the rich get richer and the poor get poorer we drop our pretenses to humanitarian
    democracy, instead salute material excess, accept Darwinian business ethics, and pin up as our
    national polestar the most powerful corporations...


    www.johnprince.ca/greed-1.pdf

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  10. Anon - if we don't complain in the freemarket place why would it change. The solution is implicit in my post. We need to pressure the Big Telcos into reducing cell phone and wireless charges in Canada for reasons of keeping our country competative globally.

    Jim Prentice,as Minister of I{ndustry, is helping out by trying to reintroduce wireless competition in the recent and next wireless spectrum auctions. He is reserving spectrum space for new players. Good for him.

    Remember the last round of cell phone competitors, like Clearnet? They were bought up by the Big Telcos. So much for competition. That can happen again without some regulation or a true open market competition...the latter is my preference.

    As johnprince says in his comment, the big get richer and the poor pay for those who are priviledged. Is this the way the free market is supposed to work? If we don't complain - in the marketplace or in politics, we get the kind of crappy service and poor government we deserve.

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