$100 per year per mobile user

Canadian government policy for auctioning radio airwaves may be costing you $100 per year on your mobile phone bill.

That’s what Robert Crandall (a noted economist from the Technology Policy Institute in Washington) wrote in Policy Options last week. In “How Canada’s wireless spectrum policy drives up mobile rates”, Crandall says

Canada’s three national carriers have had to charge their subscribers an average of $74 per year – equal to 9.4 per cent of the average bill – just to cover the cost of acquiring these spectrum rights, which are long-term investments that must earn a return for their shareholders. The prices paid in July’s auction could add another 3.1 percentage points to the average bill, or $25 per subscriber per year, raising the total cost per subscriber to almost $100 per year.

In his article, Crandall calculates that Canada’s spectrum policies have driven national wireless service providers to end up paying “more than 15 times the prices paid by carriers in Germany, France or the United Kingdom” for the airwaves that carry our mobile calls and data. In 2020, he says this was effectively “a hidden tax on Canada’s mobile users of $1.76 billion”.

Crandall’s article reinforces the view from PwC that I discussed last week in “Looking at cost and quality of networks”. As I wrote,

The cost of wireless spectrum was found to be the main regulatory cost driver. When PwC reviewed the mid-band 5G spectrum auctions, it found that Canada’s national mobile operators paid $2.62 per MHz/pop nearly three times what was paid by US mobile operators ($0.94 MHz/pop). Even including the regional operators that benefited from set-aside spectrum discounts, Canada’s average of $1.81 per MHz/pop ranked highest in the world for 5G mid-band spectrum, ten to twenty times higher than European peers Germany ($0.19), France ($0.16), and the UK ($0.09).

Are government policies working at cross-purposes, seeking to lower consumer prices, while increasing costs for service providers? That’s a $100 per year question.

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