Mark Goldberg


www.mhgoldberg.com





The Canadian Telecom Summit

Fox Group Dispatch

Driving costs higher

The CRTC released its 2016 report comparing the price of telecommunications services in Canada to “select foreign jurisdictions.” Among the charts that seemed to attract the most interest from the media was the steady increase in entry level wireless rates in Canada:

Table D.2.1: International Wireless Telephony and Text Messaging Service (PPP-Adjusted CA$)- Level 1: 150 Minutes
Year Canada U.S.A. Australia U.K. France Italy Germany Japan
2008 $32.73 $40.92 $21.96 $26.57 $23.55 n/a n/a n/a
2009 $33.03 $42.51 $19.98 $24.33 $25.37 n/a n/a n/a
2010 $34.03 $40.43 $18.96 $23.31 $26.54 n/a n/a $24.20
2011 $33.73 $33.38 $20.95 $18.64 $26.13 n/a n/a $25.29
2012 $34.32 $33.78 $22.44 $17.21 $24.09 n/a n/a $25.53
2013 $30.71 $33.08 $21.82 $21.97 $20.24 n/a n/a $28.09
2014 $35.70 $30.34 $25.28 $26.46 $20.75 $10.85 $16.68 $28.88
2015 $37.29 $37.04 $25.35 $23.50 $14.26 $12.15 $15.23 $27.23
2016 $41.08 $27.00 $28.19 $20.84 $22.49 $17.70 $17.15 $29.06
CAGR 2.9% -5.1% 3.2% -3.0% -0.6% 12.0% 1.4% 3.1%

Looking at the point of inflection in 2013, I asked in a tweet earlier today, “Does anyone wonder what might have caused entry-level wireless prices to go up?”

In its zeal to appeal to consumers, the government has introduced measures that are actually increasing the cost of your phone service, not decreasing them.

I wrote about some of these a few years ago in a piece called “The cost of regulation“. I thought it might be time for an update.

Here are just some of the measures:

  • Removal of option for 3-year amortization on smartphones: It’s simple math: A $600 subsidy amortized over 2 years is 50% more than a $600 subsidy recovered over three.
  • 15 day trials: Under the Wireless Code, customers can get a new $1000 phone from a wireless carrier store and return it 15 days later, no questions asked. The wireless carrier now is stuck with a used phone that it cannot easily sell and it cannot charge a restocking fee. This adds costs to the carriers that are not incurred by competing retailers.
  • Banning paper bill charges: The government was shown that adoption of electronic billing was an order of magnitude higher in companies that pass on the increased cost of sending paper bills. Phone companies offered exemptions for people without internet, for seniors, and a number of other classes, including people with disabilities and veterans of the Canadian Armed Forces. Paper bills cost more, so your prices went up.
  • Disconnection rules: Under the Wireless Code, the CRTC has dramatically increased the amount of time that a wireless service provider has to continue to provide service to a customer who is not paying. The rules are reminiscent of the disconnection regime from a monopoly wireline world, when the local phone company was the only communications service provider. Is it unnecessarily raising the cost of service?
  • Regulatory proceeding cost awards: The Affordable Access Coalition filed a application for nearly half a million dollars to cover the cost of its participation in the CRTC’s recent Basic Service Obligation proceeding. Open Media asked for $170,000 for the same proceeding. That proceeding is just one of the hearings that attract cost awards, and it appears to be on track to set new records for the level of costs. If approved, these will be charged to all the telephone companies and can be expected to be recovered in your monthly bills.

Frequently, there are unintended consequences to measures that would or should have been predictable if only a bit of serious analysis was undertaken.

The CRTC has launched a proceeding to review the Wireless Code, with submissions due September 26 and an oral hearing in February 2017.

Will groups that represent the public interest seek to relax some of the regulatory measures that drive up costs for consumers?

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