Why Are Canadian Cell Phone Plans So Expensive?

by Gaurav Kheterpal on October 19, 2010

If you believe that you are being charged an obnoxious amount of money by Canadian carriers in the name of so-called “customer-friendly” cell phone plans, you are probably right. A recent report from The New America Foundation, a nonprofit public policy institute out of Washington D.C indicates that Canada holds the dubious distinction of being the world’s most expensive place to own a cellphone.

So, is the so-called “thriving wireless competition” in Canada a mere eye-wash? After all, competition usually means better services at a lower price. Or the Canadian wireless carriers are an exception to that rule? Whatever be the case, I believe that the findings of this report are certainly nothing to be proud of and don’t augur well for the future of wireless industry in Canada.

This survey done as part of The New America Foundation’s Open Technology Initiative (OTI) covered cell phone voice, text and data services for prepaid, regular postpaid, and unlimited postpaid plans provided by prominent cell phone carriers in 11 countries. For voice calls, Canada is the costliest worldwide with air time priced at $0.31 per minute followed by the U.S. and the U.K. In contrast, the emerging markets of India and Hong Kong offer the lowest per-minute rates.

The report also raises an interesting point related to charging of incoming calls. Canada and the U.S. are amongst the few countries where users get charged for both incoming and outgoing calls. It’s worth noting that most countries followed a similar model when their wireless industry was at a nascent stage but they moved on to “free incoming calls” as wireless density improved. The only saving grace for Canada is that it is one of only five countries that offer unlimited text plans.

I find the conclusion of this report particularly interesting. Though it references our cross-border neighbors, it is equally applicable to us as a nation.

“It is clear that some countries offer service at consistently lower prices than others. The United States tends to fall in a band of countries that charge higher prices to individual wireless consumers for everything except pure voice service where prices are comparable. Cost structures and business models undoubtedly vary as a result of the level of competition and innovation in each country and it is essential that in the countries that have high prices such as the U.S., we carefully consider additional steps that could be taken with respect to encouraging competition or imposing regulation such that the US becomes an engine of innovation for better and more competitively priced service offerings.”

While the Canadian wireless segment is still dominated by the “Big Three”, the emergence of new players such as Wind Mobile, Public Mobile, Mobilicity and Quebecor’s Videotron has ensured that it’s no longer a three horse race. I find it disturbing that despite the promise of unlimited calls, text and voice at the fraction of a price from several carriers, Canadians are yet to see significant price drops in their cell phone plans.

I’m at loss to explain this sorry state of pricing in Canada’s wireless industry. How about you? Do the results of this survey surprise you? Do you think the Canadian wireless industry seriously need pricing reforms? Please share your opinion by leaving a comment below this post.

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Written by: Gaurav Kheterpal. www.digitcom.ca >. Follow TheTelecomBlog.com > by: RSS>, Twitter >, Identi.ca >, or Friendfeed >

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