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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{ 9 comments… read them below or add one }

Andre January 6, 2011 at 5:36 pm

Here is my 2 cents… The big 3 are in bed with each other. They goble up any new comers to maintain their pricing structure. (Example: Bell bought Virgin) They simply give the allusion of competition.

I would like to see more REAL competition. AND I would like to see the hardware and services split up. The cell phone no longer be locked to a single provider. That is, it can be utilized with all simular GSM or CDMA providers. The service providers need only provide service.

Tony March 12, 2011 at 1:49 am

OK
Here is my take on it. I have just arrived here from Europe and I am still amazed at just how bad and uncompetitive the Canadian system is. This starts from the moment you even walk into a shop where the customer service assistants are so self satisfied that they don’t even try and find out about the phones they are selling nor do they try and sell you a decent phone and if your phone goes wrong they couldn’t do less to be more unhelpful unless they died. I thought such bad customer service dissappeared with the end of communist Russia but it must have come here. Canadian consumers seem to be like sheep wanting to put up with quite how bad the service from their phone companies are. I cannot believe you pay to receive phone calls. In the UK there was even one phone company that was offering cheap phone deals to people with more than 100 people in their address book because they realised long ago that these people create the most business. Monopolies are always bad and Canadian phone companies need far more regulation until you have a truly free market. Canadians should be demonstrating in the streets at how bad their mobile phone companies are. Your phones are expensive, your roaming charges are exorbitant, your data plans are naked profiteering and your phone calls are so expensive that even Africa gets cheaper phone calls. Andre is right in his prescription.

H. Xavier March 20, 2011 at 12:57 pm

Canadian mobile phone companies offer poor, apathetic, uncompetitive and expensive service because of government regulation. Government regulation, specifically the Canadian Radio-Television & Telecommunications Commission, has created a government-enforced oligopoly of the three biggest wireless carriers and makes it extremely difficult for any new wireless provider to enter the market. Government legislation cannot produce a free market, it destroys a free market. To suggest that government regulation is needed to “make the market more competitive” is ludicrous and contradictory. The government created the uncompetitive and restricted market, and the wireless companies provide poor service because they know that they have no real competition due to the government’s interference. They have no real competition because all these Canadian sheep are willing to sign three year contracts committing to the world’s most expensive cell phone service in order to get a “free” phone. Canadians need to understand that there is no such thing as a free phone!!! They are paying for it with their expensive contracts! If more people were to buy an unlocked phone from an independent retailer, pay up front for it, and then get a plan that does not require a contract, mobile phone companies would have to create a whole series of plans to gain and retain these users. By not being on contract, a user could jump to whatever provider offers the best value. But we need to tackle the government interference. Strip the CRTC of its oligopoly-creating powers and the marketplace will immediately become more competitive.

EZ July 23, 2011 at 4:58 pm

Government TAXES. Government owns airwaves. Nuff said.

bill romaniuk April 7, 2012 at 10:30 pm

who is allowing these corporate pigs to charge such outrageous cell ph charges in Canada? Can anyone explain this to me? I have had contracts with telus, bell , now rogers. I am not satisfied with any of them. Bell was the worst. Why am I being fucked up the ass by these corporate pig dogs? If I could fire bomb their fucking corporate offices and get away with it I would do it now. I am fucking pissed off. These lying fucking pigs should be hung. I defy anyone to explain to me a logical reason for these pigs to get away with what they do. someone explain to me how these shitheads get away with this. come on calm headed lawyer, explain it to me

Joe April 23, 2012 at 10:58 pm

First, you need to learn to spell (Andre). Goble is gobble and allusion is illusion. I’m ten years old and I get it. Why can’t you?

john May 31, 2012 at 3:51 pm

I made the mistake of not topping up my pay as you go cell phone yesterday with Rogers. I lost the balance ($5 this time). Or I should say that the balance was stolen by Rogers to be more precise. Last time it happened to me it was because Rogers computer was down on the day I needed to top up. I had to complain to a manager and threaten to chuck the phone away to have the $25 dollars back.
In Europe the EU called it theft and stopped companies stealing money like this as it is dishonest. That was about 10 years ago.
When are Canadians going to step up and start shouting at these abuses?

Andrew October 30, 2012 at 9:21 am

As long as the “big three” are controlled by the government, canadians won’t have a decent, free and competitive market. There will always be a monopoly and people will continue to pay, as they have no choice. It’s sad to see a country, rated as one of the best places to live, still uses the eastern European system to make money. Sometimes it’s sad to see that Romania, one of the worst economies in Europe, is waaaaay ahead Canada regarding mobile communications, internet and costs. Well that’s it! The only one capable of changing the system are the canadians, but they have to wake up and strongly demand it!!!

Jordan Richardson October 31, 2012 at 11:30 am

The Big Three are “controlled by the government?” Hardly.

For one thing, we have an oligopoly not a monopoly.

For another, there are a number of reasons Romania would be ahead of Canada in terms of mobile costs: population density, geographical area and increases in research and development. The telecommunications companies in Canada are insane, as has been documented on this site for years, but government control is far from the cause of these issues.

In fact, it is through government intervention and regulation that the cell phone companies have to be a lot more transparent with their contracts. And it is because of regulatory structures that Bell Canada wasn’t allowed to grab even more market share and push the media balance further in its direction.

Canadians have been fairly active and change has happened with government support. The entire usage-based billing fiasco is an example of that, with the Tories backing the public opinion. So things do happen and there are some reasons to be encouraged as a Canadian telecommunications customer.

There are moves that can be made to open things up, but there has to be balance. The upcoming spectrum auction is important, for one thing, and introducing some foreign investment to the sector is also not a bad idea if implemented within reason.

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