Toronto Life - The Informer

Insider intel on the politics and personalities shaping the city. Sign up for Preview newsletter for weekly updates

Features

14 Comments

Jesse Brown: how big wireless companies, the banks, and even the actors’ union are keeping our mobile bills the highest in the world

Give Us Your MoneyGetting gouged by cellphone providers is such a routine part of life in Canada that it barely seems worth complaining about. Yet we complain all the time. We trade tales of shocking bills and awful customer service at every opportunity. We complain to friends and we complain to strangers. I complain professionally. To be a technology journalist in Canada is to constantly feed the nation’s seething consumer outrage.

Yes, Canadians pay higher monthly wireless bills than citizens of any other country, according to a report by Bank of America Merrill Lynch. Yes, our data roaming fees are higher than those in any other country, according to the Organisation for Economic Co-operation and Development. Yes, a cartel of three carriers—Bell, Rogers and Telus—still controls 95 per cent of our market, despite the emergence of budget providers Wind, Public and Mobilicity. And yes, text message fees in Canada are ridiculously marked up, by as much as 4,900 per cent, according to academic estimates. Each story solidifies our right to kvetch. We truly are the most screwed-over cellphone users in the world.

Is there a way out? It turns out that this is an exceptionally difficult question to answer. Many people who claim expertise in the area (lawyers, consultants, academics) are either directly employed by the cartel or somehow financially connected to it. These analysts will shrug off piles of independent research, denying that we have a problem in the first place.

One exception is Hudson Janisch, a University of Toronto professor emeritus of telecommunications law and a highly respected figure in the Canadian phone industry. Janisch’s research was instrumental in the crafting of our Telecommunications Act, and his name is listed alongside Alexander Graham Bell’s in Canada’s Telecommunications Hall of Fame (yes, this exists). More importantly, semi-retired at 73, he has no links to the telecom providers. Janisch can speak freely, and he does. “Canada is horribly out of step,” he tells me. “The reason is, year after year, government hasn’t been able to make the basic decision to let foreign capital into the wireless industry.”

The costs involved in launching a new wireless brand are massive—frequency licences alone are auctioned off by Ottawa for billions, creating an instant debt load for new entrants, before they spend a penny on infrastructure or marketing. Previous homegrown, independent companies, such as Fido and Clearnet, ran out of money and were quickly gobbled up by the cartel.

With such a robust Canadian cellphone market, you would think that smaller start-ups could easily find additional financing through our banks. But Canadian banks, Janisch explains, do so well by Bell, Rogers and Telus that they see little upside in backing new competitors who stand to drive everyone’s profits down by waging price wars. The big three make more money than any other wireless providers in the world. Why would the banks mess with a good thing?

The only way we will have true competition in our wireless market—and probably lots of it—is with an injection of foreign capital. And Canada would have no shortage of worthy and well-heeled suitors. International wireless companies like Vodafone and Orange have recently partnered with governments in the unlikeliest of places—Africa, the Middle East, South America. With deep pockets, these companies build local networks and then reap the rewards. Wireless bandwidth is a limitless commodity. Unlike oil, there is no set cost per unit below which a provider would lose money. Once the infrastructure is in place, rates are pegged to whatever a population can afford. Profits are built not by hiking prices to the maximum customers will pay, but by dropping prices and improving service to attract as wide a subscriber base as possible. As a result of this business model, there are now more cellphones in India than toilets. Developing nations may not keep the lion’s share of the mobile profits they generate, but they’re left with state-of-the-art communications networks upon which new industries are built. Visit Slovakia and you can enjoy mobile data speeds twice as fast as we have here.

Why won’t Ottawa allow foreign companies to spend their money building up our networks while driving down costs to a point where every Canadian can afford a cellphone? As the Internet moves from desktops to handsets, there is globally recognized value—economic and cultural—in keeping a citizenship wired on the go. Canada’s mobile penetration rate is perhaps our most embarrassing statistic: only 75 per cent of Canadians subscribe to a wireless plan, placing us dead last among comparable nations. High bills are one thing; becoming a communications backwater, eclipsed by developing nations, is quite another.

  • Doug

    Reeeaching.

  • Serge

    Look, some facts that, spun right, might fit my thesis. Hey, it’s an argument! Hate those superpowered, muscly actors, always sticking it to the little guy — but looking forward to the lots ands lots of investment in extra phone companies I have learned will certainly be coming our way. We are 30 million, so four is not enough! So many new head offices!

  • Leobikerider

    It’s all a direct result of government pandering to communication lobby groups and over-regulating/ meddling with the free market. I cite the following: It starts off with the appearance of choice with three, sometimes four political parties federally. Follow this pattern in the logic–whenever government gets into the business of subsidizing a particular programme, the cost is hyper-inflated as a result. Cost of medications have gone up–the whole pharmaceutical system lacks competition for the same reason telecoms can’t enter the market. Government subsidizes health care costs and what follows? Well we don’t get to see the price tag but if you peek at the bill, you quickly discover that the price of health care spending is grossly overpriced. Lastly, tuition costs…you guessed it, as government backs loans or provide subsidy the result is an increase in tuition cost and not neccesarily quality. I think we have to rethink a few things and look for an approach that gets the government out over regulating the market. Another example…booze.

  • David, Toronto

    Yes indeed, I have worked as a Director at 2 of the 3 major telcos. There is definately a controlled oligopoly. While we push for competitive ‘share steal’ with one hand, other departments are working to maintain strong profits – eg: disabling things like Skype on handsets, and many other technologies that would flatten the telecom space, but make costs for end users so much lower.

  • walkerp

    Fantastic article. Should be read by every Canadian who has a cellphone or internet connection. There needs to be more and sustained outrage against these companies and the government that caters to them. This must end.

  • Jonathan

    Great article but I disagree with this sentence: “There’s no reason we shouldn’t have 20 or 30 wireless companies operating in the country.”

    Even countries with healthy wireless sectors don’t have that many carriers. Canada has such a small population that splitting the pie in 20 to 30 pieces would just not work. The three new carriers are barely getting by as it is. Wind for instance, has 360,000 customers currently and set a goal early on to reach 1.5 million by the end of next year (not going to happen). The other new entrants are hovering around the same sorts of numbers. Compare that to 9.2 million for Rogers. Granted, the foreign ownership issue is the primary reason the new entrants have had trouble making a big dent in the marketplace.

    But even with new foreign capital, Canada isn’t nearly as attractive to investors as a country like India, that easily eclipses our population, or countries in Africa that don’t have big homegrown companies in the wireless market already. With more foreign investment I think the best we can hope for is one or two strong companies to compete with the big 3.

  • Rob

    High data costs and low bandwidth caps…these are exactly the reasons I do not have a data plan nor do I have a smart phone, which I consider useless without a robust data plan. I have a basic web enable phoned that I pay 10 cents a page. I use it solely to check my movies, on a web page a generate specifically for this purpose, to ensure I don’t buy doubles. That’s the extent of my mobile computing. I can easily afford it, but I simply cannot justify the cost.

    75%? To be honest, I would have thought it was even lower than this.

    Great article!!

  • Ian Lenathen

    It is sickening how Canadians are tied up and held back by these Telephants who control the actions of the banks, the government and the CRTC… and now apparently the 700 MHz auctions as well.
    Companies like WIND are breath of fresh air (pun intended) and we should be encouraging this type of competition.
    When the Canadian Government allowed Bell and Rogers to become 50% partners in Inukshuk, a company meant to provide pre WiMAX and WiMAX service to the rural areas of Canada. The strategic advantage both Bell and Roger’s gained from this government given deal is the use of both 3.5 GHz and 2.5GHz spectrum… 3.5GHz is not suitable for mobile operations and is mainly deployed in Canada as a fixed WiMAX network offering. Even though 3.5 GHz is on the LTE spectrum chart, it will never be used in a mobile network due to comparitive non competitive costs involved. 2.5GHz though is golden as an North American LTE spectrum candidate. Though Bell and Rogers leased their 3.5GHz spectrum provided under the rules of Inukshuk to “use it or lose it”, to smaller operators who’s business plans were about offering fixed Internet service to rural communities, they would never think about leasing their 2.5 GHz spectrum. Both 2.5GHz and the upcoming options for the 700MHz spectrum auction is a magnificent combination to provide both high density (2.5GHz) and lower density (700MHz) LTE network solutions… The companies controlling these 2 private spectrum issues will control the Canadian wireless market for the next 15 years. Bell and Rogers and to a lesser degree Telus, want to own and control these spectrum issues and they are not shy in their pursuit of doing so. LTE will also provide the bandwidth to provide a content rich experience for subscribers, so Bell and Rogers are also slowly but surely strangling any possible competitive threat by also buying up and controlling the distribution channels offering Canadian Content.
    It is sad to me indeed that the 700 MHz spectrum does not have competitive protection rules allowing innovative companies like WIND to gain enough bandwidth in this spectrum to launch a competitive LTE network.
    It is time Canada grew up and stopped protecting assets which should benefit the people of Canada rather than the three Telephants trying to steal these assets and control these assets for their own benefit and profit.
    By the way. the companies who have leased the 3.5GHz spectrum from Inukshuk will have a four year business case, since Bell was able to change the CRTC ruling regarding fixed and mobile offerings in rural Canada. The Telephants can now provide Fixed service from a Mobile platform. 700 MHz LTE in rural Canada will blow away the 3.5GHz network offerings both in Total Cost of Ownership and Capacity delivered… The Telephants will purchase the companies they leased their 3.5 GHz spectrum to, then load the towers with the LTE technology… 3.5GHz (and the 3.65MHz as well) will not survive.
    Open your eyes Canadians — the Telephents are hosers!!!

  • Frances

    One or two more players in the field would be of benefit to consumers, but I am not sure foreign dollars are required to make that happen: Where are the Canadian visionaries on this? Why isn’t the government (and us) demanding some innovation here, instead of the same old models, and as part of that, do some interesting experiments with the auction model.

    We are a small country, but so is Australia. So is New Zealand, although geography factors in as much as population.

    ACTRA’s involved? Good grief. Isn’t that the union that makes sure the available work is divided amongst the same 12 Canadian actors? (Only slightly exaggerating).

    How about instead of strongarming and lobbying, work differently: use good old pricing models: charge less to download Canadian programs, Canadian content, whatever that psychological price point would be. If Canadians don’t bite, that’s telling you something.

    Onthe other hand, Canadian culture can be defended in other ways, starting with the education systems. You know, the ones that are killing all of the arts programs? The ones that spend more time teaching world and American history and culture?

    There’s a balance to be struck between economic independence, as much as that is possible in this world without being protectionist, and providing what the market will bear. In a world where economic realities are not predictable for the forseeable future, I’m not sure there’s a clear answer, but surely it’s not the binary open it all up vs keep it all closed down to be carved between the evil trinity of Rogers and Bell and Telus. (I have tried them all in an effort to be cost conscious in inflationary times.) With Rogers and Bell, it’s not surprising that customer service sucks at each company since they are reputedly not good places to work, where employees are regularly terminated as business lurches from project to project.

    All that said, it’s not a simple policy, economic or infrastructure issue.

    As the infrastructure moves from wired to wireless…a HUGE cost to a country the size of Canada that’s hard wired down to the bedrock, the companies are going to pass that cost onto us, the consumers. How about a day of pretest over that? A day of no wireless use whatsoever..? Or an hour of protest every day?

    Wireless is the 21st century’s equivalent of 19th/early 20th century move to use oil to power the machinery. We haven’t figured out a way through that mess either.

    It’s frustrating. And symptomatic. And not sadly, not simple.

  • Johnathan Vrozos

    Fantastic article, thank you Jesse Brown.
    As a Bell Mobility client for 15 years I agree we are being overcharged but we have very little options (if any) and I would welcome ANY competition AND can’t wait for WIND to expand into north of the 407 corridor.
    But sadly what will happen is that in 2014 the Big 3 will buy up the the new players Wind, Mobilicity, etc.
    The Egyptian backer of Wind already has indicated his regrets of entering Canada.
    ACTRA supported by SOCAN are puppets of Rogers and Bell who braodcast their members (actors amd musicians) work and get royalties. They should not even comment!!
    Johnathan Vrozos

  • Cosmo Mannella

    You never win on your own with these guys..too much money and political power..cosmo mannella

  • Brat

    Well jesse fullfilled his role as a journalist by stirring things up by making wild accustions while providing no real research or references to back it up. If all you mindless puppets feel the telcos are making so much money, buy some shares.

    The fact is Canada can barely support three cell carriers. We have one of the lowest population densities on the planet and you whiners would be the first to complain that you don’t get tree bars while on an ice flow in the arctic.

    Mobile carriers in the USA are consolidating and their population density is 15 times that of Canada.

    Wind is 80% owned by Orascom, one of the biggest mobile companies in the world. That my friends is foreign ownership.

  • Todd Cod

    This is idiocy. This is a giant country with a low population. Sure Verizon may want to put towers in Toronto and Montreal, but no one is going to step in here and provide a lower cost service to customers in many of the smaller centres that the “Big 3″ are serving. Dream on. The only thing that has made any telephony service in Canada broadly affordable is the fact that we regulate everything half to death. So to summarize, if you live in Toronto, Yay Competition. If you live anywhere smaller thank your lucky stars the Government has maintained control or you wouldn’t be able to afford a fully deregulated, competitive service.

  • Todd Cod

    Oh- and by the way, we are generally always 10 years behind the US in terms of price. So chill, the prices will drop over time, as they have started to already. We now have near parity with LD rates, but it took some time to catch up.

 

Advertisement

Advertisement

Advertisement