Poor customer service. Hidden fees and charges. People being charged for wireless services after cancelling them. Fluctuating charges from month to month. Suspicions and allegations of price-fixing.
Those are just a few of the many complaints HuffPost Canada readers shared with us about their wireless services, when we carried out an informal poll last month. The theme was confirmed by a report from the telecommunications complaints watchdog last week, noting that complaints against wireless companies -- most of them having to do with billing -- had more than doubled in the past year.
And the single most common refrain among our readers? We pay among the highest wireless prices in the world, for some of the worst service.
That’s certainly a trope we’ve all heard. But here’s a question: Is it true? Do we actually pay the highest rates for some of the crappiest service?
When we dig into the data and talk to the experts, the image of Canada’s wireless prices becomes a little more complicated.
Some things aren’t in doubt. It’s an accepted fact that Canada lagged much of the developed world in building out its wireless network. While Europeans were chatting away on their cellphones in the 1990s, in Canada mobile technology was still in its infancy.
And what’s clear is that the arrival of the smartphone -- and possibly the arrival Canada’s small wireless carriers, now in danger of extinction -- changed everything.
There have been “phenomenal” changes in Canada’s wireless industry in the past five years, says Amit Kaminer, a research analyst with the Seaboard Group who has been studying Canada’s wireless market for years.
The public’s perception that Canada has the highest rates and among the worst service is several years old, Kaminer says, and no longer applies today.
Kaminer says the incumbent players have become much more competitive in their pricing. He notes that today, on average, wireless firms charge $25 per gigabyte of data, compared to $3,000 per gigabyte in 2007 (before the arrival of the smartphone caused data usage to skyrocket).
“In 2007, the word ‘unlimited’ was obscene” to the big telcos, he says, but today unlimited plans for voice and text are making their way into wireless plans.
Kaminer attributes this primarily to one thing: The arrival of the small wireless entrants (Mobilicity, Public Mobile, Wind Mobile) in 2008, thanks to the government’s reworking of wireless rules to enhance competition in the market.
“Just the threat of market entry has made Bell, Rogers, Telus better,” Kaminer says, adding that the companies “learned some humility along the way.”
Did they really? The “Fair for Canada” campaign that the Big Three incumbents launched this summer, in an effort to keep Verizon from coming to Canada under favourable new-entrant rules, was seen by many market observers as a shockingly aggressive move to limit competition.
It also launched a public war of words with the Harper government, with both Prime Minister Stephen Harper and Industry Minister James Moore taking shots at the Big Three’s arguments.
The Harper government has staked its reputation on the wireless file on a simple policy: Increase the number of major wireless players in every region of Canada from three to four, with the ensuing increased competition resulting in lower prices and better customer service.
But right now, things are going in the opposite direction: The number of wireless companies is shrinking, with Telus’ recent purchase of Public Mobile, and Mobilicity in receivership.
Kaminer worries that the apparent collapse of the small players (with the exception of Wind, which is hanging in there for now) could result in higher wireless prices. The competitive pressures that drove the Big Three to be more competitive could still reverse themselves.
“We could easily end up where we were in 2007 if the Big Three buy up the competition,” he says.
But where are we today? The Harper government’s ad campaign pushing its wireless agenda says Canadians “pay among the highest rates” for wireless. A recent report prepared for the CRTC and Industry Canada compared Canada with the U.S., U.K., France, Australia and Japan found that, overall, Canada’s wireless prices are indeed at the high end, though in every category the U.S. was considerably more expensive than Canada.
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That report found a typical basket of wireless services in Canada had fallen in price by 13 per cent in the past year. But another report, from J.D. Power and released around the same time, said the exact opposite -- that wireless prices had gone up by 13 per cent. When it comes to data on our wireless market, confusion reigns.
And maybe that confusion is intentional. Tech blogger Peter Nowak recently unearthed a telling quote from a former CEO of New Zealand Telecom, Teresa Gattung:
Think about pricing. What has every telco in the world done in the past? It’s used confusion as its chief marketing tool. And that’s fine. You could argue that that’s how all of us keep calling prices up and get those revenues, high-margin businesses, keep them going for a lot longer than would have been the case. But at some level, whether they consciously articulate or not, customers know that’s what the game has been. They know we’re not being straight up.
Anyone who’s tried to compare wireless service plans knows exactly what Gattung is talking about. What’s a better deal: 100 free minutes for $30 per month, with $1 per minute afterwards, or 250 free minutes for $45, with $0.50 a minute afterwards? Good luck working that out.
(Incidentally, Gattung’s jaw-dropping honesty was “the last straw” for New Zealand’s government, Nowak reports, which soon after broke up the company, leaving Gattung out of a job.)
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“The best [the industry] can say is we’re not as bad as the U.S.,” says Dwayne Winseck, a professor at Carleton University’s schools of journalism and communications.
Winseck says if competition isn’t working in Canada’s wireless market, it’s at least partly because the big telcos aren’t playing fair.
He says the Big Three did whatever they could to keep the new wireless entrants from enjoying a level playing field. He recounts anecdotes of large telcos’ technicians missing appointments to set up antennas on shared cellphone towers, then installing those antennas too low on the tower for good reception.
This sort of behaviour “is ingrained in the DNA of the incumbents,” he says. It’s always been like this, too, “all along the line back to the days when rival telegraph companies would cut each others’ wires.”
So what’s the solution? Robust government regulation, Winseck says.
Tories are on right track with their plan to increase competition, but they “need to use every tool in the toolbox to make the industry more responsive” and “bring conditions more into line with other countries,” he says.
“Until government get a spine on these matters, things aren’t going to change.”
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But some market analysts don’t see a problem here at all; they argue that, because of the nature of the business, things are as good as they’re likely going to get.
One such person is Jeffrey Church, an economics professor at the University of Calgary, who says a fourth wireless company won’t help matters -- or even survive.
“There seems to be a natural limit for number of players” in the wireless market, he says, and in Canada -- as in many countries -- that number is close to three.
Church authored a report released last month arguing that Canada’s wireless market is as competitive as it’s going to get, and any major fourth player in the market that pops up will eventually go bankrupt or get swallowed up by a competitor, bringing the number back to three.
His report talks heavily about economic concepts like “marginal cost,” but the bottom line of his argument is that, in order to compete, a fourth major player would have to lower its prices to a point where it can’t turn a profit, and therefore soon disappears.
That’s why the current generation of new wireless entrants is failing, he says, and why the last generation of entrants, a decade ago (remember Clearnet PCS or Microcell?) also failed. It’s simply the nature of the business, he says -- it costs a lot to build a wireless network, and to get your money back you need a lot of customers. There aren’t enough customers in any given area for four or more companies to make money.
As evidence there’s no room for more wireless players, Church points to Shaw Communications, which, as a new entrant, purchased wireless spectrum in an auction in 2008, but hasn’t used it, and has a deal to sell it to Rogers.
“Clearly, they see no room in the market,” he says. “So why would Verizon enter?”
(Since HuffPost carried out this interview with Church, it has emerged that Verizon is back and lobbying Ottawa again, raising the possibility the U.S. telecom giant hasn’t given up on coming to Canada.)
Church doesn’t dispute that Canadians pay a lot for wireless, but he says there is good reason for that: Canadians are the biggest users of smartphones, as a percentage of all cell phones, in the world, and we are among the largest users of wireless data.
“We use a lot of data because we have nice phones and a fast network,” he says.
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And he rejects the whole notion that the Big Three act together as a monopoly, setting prices however they want. Church’s study traced Rogers Wireless’ financial data back to the 1980s, when it was known as CanTel, and all that time, Church says, the prices it charged tracked the company’s costs. That doesn’t happen in a monopoly situation, Church says.
He also notes wireless markets are more concentrated in other countries. In Canada, Rogers is the market leader, with 34 per cent of the wireless market. Compare that to Australia, where one company (Telstra) controls 47 per cent of the market, or Switzerland, where Swisccom has 62 per cent of all wireless customers.
Consumers’ advocates reject this view, arguing that Canada’s Big Three telcos act as one, creating an effective monopoly (“RoBellUs” is the term commonly tossed around on the Internet to describe this “company.”)
The joint “Fair for Canada” campaign, run by all three big telcos, and the fact all three dropped prices nearly simultaneously this summer, are proof, critics say, the companies essentially act as one.
More competition -- especially from an outsider who would shake things up -- would change that, they argue.
But if Church’s analysis is right, even a get-tough-on-big-telecom attitude won’t result in the billing changes consumers want to see. With the failure of a second generation of new wireless entrants, the notion that a new wireless company can solve the problem seems increasingly in question.
Which means that, as far as wireless policy is concerned, Canada may soon be back to square one.
If the Harper government’s plan for more wireless companies is at risk of failure, what else can Canadians do to address high wireless prices?
Check out the next installment in HuffPost Canada’s Digital Divide series: 3 Radical Proposals For Reforming Canada’s Wireless Market
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