According to a tweet from Greg O’Brien, CBC led off its coverage of the foreign ownership consultations with:
Everyone knows Canadians pay the highest rates in the world for cell phones
The budget cuts that forced the people’s network to sell off the chairs in the TV news studio might have reduced CBC’s research budget to the point that it just recycles populist drivel, without bothering to check facts. It couldn’t be that the news anchor was expressing an opinion, could it?
Maybe the CBC anchor was trying to demonstrate clearly why  we need an alternative news voice, such as the proposal for Sun TV News. But, that is another story.
Well, let’s see if the conventional media (or other commentators)Â take a look at a new report from BMO that says Canadians enjoy cheaper mobile data prices than our friends south of the border.
Interestingly, we highlight that Canadian postpaid data pricing is cheaper relative to AT&T for light and extremely heavy users. Given the competitive dynamics in Canada, we expect this trend to continue into 2011 as Canadian carriers focus on driving adoption of wireless data.
I found the last part of this to be the most significant. BMO expects this trend to continue into next year, as Canadian carriers focus on driving adoption of wireless data.
It will be interesting to see how many people will review a report that contradicts the populist perspective.
OK, I’ll accept that this BMO analyst is knowledgeable and that the statement is accurate.
However, consumers are not interested in the price of *data* for a *light* or *extremely heavy* user. What I would like to see is an analysis of the average monthly bill that is paid by the average user. Include data, but also include voice minutes, and especially include all of the up-sell extras for which Canadians pay that are built-in to the typical plan in the U.S.
Roaming charges, long distance charges, caller ID, non-crippled voice mail – these are all part of the standard basket of services for a U.S. subscriber.
As soon as any Canadian service provider (I welcome input from you Mark) can explain to me why it should cost the consumer $96 per year to display the telephone number of an incoming call – a service that has a marginal annual cost per user of what, 25 cents? – then we will stop complaining. I have no issue with paying a fair price for a service that provides value. But to pretend that the Canadian mobile customer is somehow in a better position than our neighbours to the south – well, it might not be populist, but it is no less drivel.
Ned – shop around. Services are competitive.
As to your comment about “why it should cost the consumer $96 per year to display the telephone number of an incoming call”, I would suggest that the price of most goods has little to do with costs. It is driven by the price people are willing to pay. Look at the price of soft drinks, whether it is in the store or especially at restaurants. Why do people pay outrageous amounts for bottled water?
Or consider your salary – do you charge for your services based on cost (eg. your mortgage plus a bit for food) or is it based on what the client or employer thinks you are worth.
Mark – I have shopped around. Oligopolistic practices in an oligopolistic marketplace.
You pointed to a quote from a BMO analyst indicating that data prices for users at the left and right ends of the use curve being better for Canadians than Americans is somehow indicative of the direction of the overall marketplace in Canada.
I have lived in both countries. American mobile users get more for their money. I believe this is a result of a non-competitive marketplace. However, this is my personal experience. I repeat, we need a study that compares the average monthly bill of a typical American smartphone user with the average monthly bill of a typical Canadian smartphone user.
Canadian carriers charge $8/month because they know that caller ID is a feature that people require to use their device effectively. Yes, it is what the market will bear because there is no substitute – in a restaurant I can drink water rather than soft drinks. It’s this same shortsighted approach to maximizing profits by American banks that led to our current economic state. Price gouging for necessities does not equate to value creation – “maximizing shareholder profit” is shortsighted. It leads to short-term decision making that is contrary to the long term needs of the company and the society that it serves.
The rest is straw man – no reaction necessary on my part. http://en.wikipedia.org/wiki/Straw_man
C’mon – how many providers does it take to move off the mantric refrain of ‘oligopoly’? 6 different facilities based licensees are operating now: Bell, Mobilicity, Public Mobile, Rogers, TELUS, Wind. Countless other non-facilities based competitive service providers and alternate brands with competing offers.
Thanks for the juxtaposition of the reference to the US banks together with a link to Wikipedia’s definition of ‘Straw Man’!
For any grown person who conducts business there are three legitimate choices. The rest are not sufficiently mature to have any significant impact on the marketplace just yet.
So you maintain that referencing the actions of the U.S. banks vis-a-vis short term thinking and profit maximization is a superficially similar yet invalid example? If that’s how you truly feel – well then, you’re welcome.
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Don’t put words in my mouth for me; I can do a good enough job speaking for myself.
Mark, it’s interesting and telling that you continue to float the narrative that there’s plenty of competition in Canada’s telecommunications sector. You bolster this argument by essentially playing semantics (that’s not a “phone” company, etc.), but even the most casual observer knows that three companies hold the keys to 95% of the market and those three companies supply similar if not equivalent models of service. To suggest that Canadian consumers have “options” or that there’s raw market competition based on this market structure is flat-out illogical. Instead, it smells like an agenda.
You are somewhat correct in suggesting that the price of goods is such because it’s what “people are willing to pay,” but this simply denies numerous other contributing factors to pricing. The supply and demand model has evolved to include marketing and the selling of a “brand” over a particular good or line of goods, creating entirely different market rules by which companies choose to abide. This is something I’m sure you’re familiar with.
Ned is correct to call for more comprehensive studies on the matter, yet all you seem to offer is a stylized version of “everything’s fine” couched in your political rhetoric. As a lobbyist or former lobbyist, this is hardly surprising. But it is disingenuous.
Ned says “it is what the market will bear because there is no substitute.”
This is also correct. The public is, to a large degree, handcuffed by faulty free market ideology that infers that competition will develop on its own and that all irregularities will simply eventually evolve their way out of the system. As Ned references the banks in the United States, there are countless comparable examples of similar situations to support the folly of such an idea. I’m sure I don’t need to provide examples.
So what we are arguing here is whether Canada has categorically the highest pricing in the world for all subscribers, or just pricing more-or-less on par with some of the other highest price carriers in the world? This is the important distinction we are arguing here right?
That being said, if they are the exact same price I’d much rather be on any Canadian carrier’s 3G network than AT&T’s.
The best you can say about the Canadian telecom industry is this: In a few short years we’ve gone from the most technologically laggardly and most expensive networks in the developed world to… being on par with some the most advanced while only remaining close to the most expensive.
That’s something like progress.
I am a bit dismayed. Isnât indeed one of the most fundamental outputs of a functioning market thought to be this relationship between prices and marginal costs? The main dynamic for this being of course market entry and balancing, no? Isnât this the whole explanation of the efficiency of market economy? Is it not? Now, unless I was always much mistaken about the foundational substance of network economics schools that rely on neoclassical economic thoughts, I would be inclined to think that perhaps your rhetoric has taken over your usual analytical apparatus when you stated that prices are structurally determined by what people are willing to pay for. In time, shouldnât this dynamic be secondary, if not completely subservient, to the logic of price-based competition? Isnât cost central to price-based competition? Or did I embarrassingly miss something here in economic thought that rendered moot the presumption of efficiency-driven markets with regard to costs? As there been a demand-side microeconomics revolution (not of the variety of âconnectivity âas-the-valuable-resource-in-network-economicsâ, which is of course macro) that I have missed? Or perhaps youâre referring to some value theory tweaks that bear some impact on the way we should think about markets? I would be delighted if you could clarify. I gather that you are trying to say that markets (think abstract relationships presumably resting on a pre-legal and pre-political matrix) always attain efficiencies with regard to prices (and so failures are impossible by definition) but that markets somehow do so by not being driven by price-translated efficiencies? As you can see, this seems like an untenable position, but I assume I must have some reasoning wrong.