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.