There are a number of Canadian telecommunications industry observers who seem to have trouble with basic mathematics. One of the areas they frequently confuse is mixing up “ARPU” (average revenue per user) with “prices”.

A number of financial analysts produce regular reports that have typically shown that Canadian wireless carriers enjoy some of the world’s highest ARPU, to which the knee jerk reaction is that this is evidence of Canadian prices being among the highest in the world.

There are a number of problems with this. If subscribing to wireless services was a binary purchase decision (either I subscribe, or I don’t), then ARPU might be a reasonable proxy for price.

But we don’t just subscribe to mobile. We choose a data plan, we choose certain feature options (long distance, US calling, unlimited text and messaging, roaming packages) and we choose whether we want a device subsidy bundled in. It is that mix of features that we add that leads to our monthly bill rising, resulting in aggregate to the carriers’ ARPU. Canadians and Americans are among the world’s biggest users of mobile data, so the data ARPUs will naturally be higher.

Price may contribute toward ARPU, but if the price rises too high for an option, demand drops and the overall ARPU can fall. I spend more at a certain store each month, than I do at another, precisely because their prices are lower. The ARPU for the first store is higher, but ARPU in that case is be a very bad proxy for comparing relative prices at the stores.

That explains why ARPU should not be used as a proxy for comparing prices.

But there are also differences in the way carriers recognize revenues. In a recent investor note related to the Shaw-Freedom “$0 iPhone”, Jeff Fan at Scotiabank observed:

Shaw’s Freedom ARPU and subsidy accounting difference. Under Shaw’s accounting methodology, subsidies are not expensed initially (booked as receivables that are amortized against future revenue). This means EBITDA is higher and reported ARPU will be lower.

The major carriers have been reporting that there will be a transition to International Financial Reporting Standards (IFRS 15), resulting in a substantial change in reported service revenues. For example, from Rogers’ latest annual report, we read:

We anticipate this will most significantly affect our Wireless arrangements that bundle equipment and service together into monthly service fees, which will result in an increase to equipment revenue recognized at contract inception and a decrease to service revenue recognized over the course of the contracts.
…
The standard is effective for annual periods beginning on or after January 1, 2018.

Similar notes appear in the annual reports for Bell and TELUS. In the near future, we are about to see significant drops in the ARPU being reported by the major carriers, solely because of this accounting change.

To what extent have accounting differences contributed to the general misunderstanding of Canadian ARPU rankings in global comparisons?

I took a look through the archives of my blog to see what I have written on Net Neutrality.

It strikes me that this issue has been open a long, long time.

The current furor in the US is over regulations that have only been in force for the past 2 years. Much of the hyperbole says that dismantling the US rules will mean the end of the internet as we know it, which is somewhat disingenuous, considering that most of the internet as we know it was developed in the absence of these regulations.

As I Storified from a Twitter rant earlier today, here are links to some highlights from my archives, reaching back more than 11 years.

The end of the internet as we know it? Hardly.

I wonder: in two years, will Canadians look at the state of the internet in the US and be happy with the CRTC’s internet regulatory framework, or seek the return of market-led development?

As reported in Cartt.ca, TELUS Health has partnered with Tunstall to launch remote patient monitoring, to reduce unnecessary hospital admissions and help patients living with chronic disease.

Tunstall’s ICP Integrated Care Platform allows clinicians to support patients managing chronic conditions while empowering them to stay active in the effective management of their own health and chronic conditions. By enabling them to track and upload their vital signs from the comfort of their own home, the Telus Home Health Monitoring solution powered by ICP will allow virtual care teams to maintain a close watch on biometrics in real-time and intervene before a health issue arises, regardless of where they are located.

E-Health is often cited as a major benefit of rural broadband expansion programs, since people living in more remote areas tend to have greater distances to travel to a hospital as well. How fast a connection is needed? As it turns out, not much speed is needed for these applications. According to TELUS Health, anything faster than a dial-up connection is all that is required for the Home Health Monitoring solution.

Much of the home monitoring is simple biometric data. We do not need remote reading of diagnostic imaging to start getting benefits of e-health care solutions. Improved patient outcomes can be achieved through incremental steps. Building a smart community, by getting a little bit smarter every day.

In just over two weeks, as of December 1, customers who purchased their phones from a Canadian carrier will have the have them unlocked at no charge, but many consumers likely have no idea that their phones may not be welcome on any network of their choosing.

At least one US carrier is restrictive about the devices it allows to connect to its network. Verizon will “refuse to provision devices it hasn’t tested or certified,” even if the unapproved phones may technically be compatible with Verizon’s LTE network, according to a recent article in PC Mag. Verizon says “customers tend to blame Verizon if their device fails, rather than going to the manufacturer.” So, like a number of other carriers, Verizon conducts network-compatibility testing on all phones it sells.

“If it was never tested on our network, it may not work well. You may make voice calls, but you won’t get the experience you come to expect from Verizon.”

Two months ago, I wrote a piece called “In case of emergency, who do you call?” There have been a few cases of devices being sold in Canada with compatibility issues that impact emergency calling. I asked a number of questions in that article:

• Did the CRTC even hear evidence about the ability for advanced features to operate correctly on devices moved from one service provider to another?
• Do consumers know that not all devices work on all networks?
• Are service providers expected to provide support for devices that have not been purchased from their stores?
• Has the CRTC created unrealistic user expectations?

I have been using unlocked devices for international travel for a number of years, but compatibility issues arise with advanced features on some carrier networks. It isn’t clear to me that most Canadian consumers are aware of what limitations may arise when bringing their own device. I suspect that we will be seeing a number of complaints arising from reality not matching expectations.

In order to improve their customers’ experiences, will any Canadian carriers follow Verizon’s lead and refuse to provision service on devices that have not been certified for compatibility?

I have been overseas for the past week, visiting Israel, one of the world’s most competitive mobile markets. I may share some perspectives on that market in future posts.

While I was gone, the CRTC released the 2017 edition of its Communications Monitoring Report (CMR) [pdf, 10 MB] and the usual suspects played mathematical gymnastics to misrepresent the findings of the Report, perhaps to advance their agendas, or to ask donors for funding or perhaps because they are simply mathematically illiterate.

For example, a writer who specializes in technology said “Internet & wireless prices in Canada continue to soar, as per today’s #CRTC report”

A so-called consumer advocacy group used the report to solicit support for donations, saying “Home Internet prices rose by nearly 10 per cent while mobile wireless prices increased by just over five per cent, as telecommunications price increases continue to far outpace the rate of inflation.”

In fact, what the CMR actually says is that “wireless prices generally declined”.

Canadians’ total household communications spending increased 1.7%, but people consumed significantly more data on their mobile and home connections. The CRTC showed that more people actively changed their subscriptions to higher speed plans. Bills didn’t soar. At 1.7%, how can a group honestly claim “telecommunications price increases continue to far outpace the rate of inflation.”

Now, of course we would like the prices to come down, but that is true for every product or service we buy. The data shows that value is increasing; Canadians are getting more for their communications dollars.

The discussion about Canada’s communications industry structure and regulatory framework isn’t helped by such purveyors of such fake news.

Unrelated to the CMR, I was away when news came that Canada’s Public Interest Advocacy Centre (PIAC) was teetering on financial collapse, in part because of changes to the CRTC’s cost awards process that now waits until a decision has been released before costs are awarded.

There have been a number of major consultations over the past few years and some consumer groups participated in a significant way. Some extremely large cost applications were filed, asking for unprecedented levels of cost reimbursement.

At the same time, the CRTC has taken longer and longer to release decisions, in part because of the complexity of the cases being taken on and no doubt, in part because of other distractions.

The result has been a completely unfair amount of time to provide directions for costs reimbursements.

I may not agree with many of the positions put forward by PIAC, but the organization usually brings an important perspective to the hearings in which it participates. I don’t believe it represents all consumers, and likely not even most consumers. But PIAC most often represents disadvantaged consumers who generally don’t have any other strong or credible voice in regulatory proceedings, and as such, the organization plays an important role in Canada’s regulatory processes.

The cost awards system is broken. It would be unfortunate if PIAC becomes a casualty of the regulatory process. We need to find a new model to ensure that PIAC’s stakeholders continue to be represented at the Commission.

[Update: November 24, 2018] You can make a tax deductible donation to PIAC here: http://j.mp/CanadaPIAC