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
<a href="http://www.huffingtonpost.ca/2013/02/21/rick-mercer-telus-stupidest-thing-ever-said_n_2734060.html" target="_blank">"I think a lot of customers don’t want a cap on their monthly cellphone bill."</a> -David Fuller, chief marketing officer for Telus
<a href="http://business.financialpost.com/2013/07/18/telus-darren-entwistle-wireless-spectrum-verizon/?__lsa=0b39-2f11" target="_blank">“There’s going to be a bloodbath, because people are not going to give up on getting that block."</a> -Darren Entwistle, Telus CEO, on what would happen if the government's rules for foreign companies who want to buy Canadian spectrum don't change.
<a href="http://www.huffingtonpost.ca/2013/08/20/james-moore-wireless-verizon_n_3784535.html" target="_blank">“It was foolish, stupid, arrogant."</a> -McGill University political scientist Richard Schultz, on a letter from Anthony Fell, Bell Canada’s BCE director, to Stephen Harper.
<a href="http://www.huffingtonpost.ca/2013/08/28/kevin-crull-bell-wireless-debate_n_3830589.html" target="_blank">“Kevin Crull our President wants us to give this report some coverage. It’s a report on phone charges in Canada." </a> -Excerpt from one of the alleged emails sent from senior Bell Media employees obtained by Carleton prof Dwayne Winseck. Winseck says Bell Media's president, Kevin Crull, pressured news directors from other outlets to provide favourable coverage of the CRTC's Wall report.
<a href="http://fullcomment.nationalpost.com/2013/08/21/full-pundit-call-a-wambulance-for-canadas-wireless-giants/" target="_blank">“Bell, Rogers and Telus … are accountable to Canadians for the airwaves we entrust to them in ways a foreign firm with 100 million customers back home could never be.” </a> -Toronto Star Publisher John Cruickshank on the consequences of Verizon's entry into Canada
<a href="http://www.huffingtonpost.ca/2013/08/07/verizon-canada-wireless-rules_n_3720880.html" target="_blank">“You suggest that ‘U.S. giants don’t need special help from the Canadian government,’ but that’s exactly how Bell got to where it is today."</a> -Blogger Ben Klass on Bell
<a href="http://www.huffingtonpost.ca/2013/08/09/stephen-harper-wireless-rules_n_3733569.html" target="_blank">"Given we've invested $100 billion in Canada since 2000, we've earned the equal right to bid on spectrum against a company with the deep pockets of Verizon."</a> - Josh Blair, chief corporate officer of Telus
<a href="http://www.huffingtonpost.ca/2013/08/22/ralph-nader-verizon-canada_n_3794205.html" target="_blank">"I don't think they have a commitment to rural Canada."</a> -Darren Entwistle, Telus CEO, on Verizon
<a href="http://www.huffingtonpost.ca/2013/08/20/james-moore-wireless-verizon_n_3784535.html" target="_blank">“Nobody believes that the incumbents want robust aggressive competition."</a> -Industry Minister James Moore on Rogers, Bell and Telus
<a href="http://windmobileblog.com/2013/08/time-to-separate-myth-and-reality/" target="_blank">"Over the past several weeks Canadians from coast to coast have been treated to a veritable all-you-can-eat buffet of misinformation on the state of the wireless industry."</a> - Anthony Lacavera, CEO of Wind Mobile on the Big Three's campaign
Canadians' Favourite And Least Favourite Cellphone Companies
The Top 5- Canada's Favourite Cellphone Companies
4. Public Mobile
3. WIND Mobile
Pictured: Wind Mobile CEO Anthony Lacavera
2. Virgin Mobile
1. Koodo Mobile
The Bottom 5- Canada's Least Favourite Cellphone Companies
What You Need To Know About Wireless Code of Conduct
How much of the code is new?
<em>Answer from Marc Choma of the Canadian Wireless Telecommunications Association, the industry lobby group representing incumbent players:</em> A lot of these things are already common practice from carriers, but I think it’s good that consumers, on a national basis, know this and it applies to everybody. It’s going to supercede any provincial legislation and that was our main goal going into this because we were seeing a patchwork of regulations across provinces and it was costing the industry a lot of money to adapt their systems potentially 13 different ways.
Are there any restrictions in the code that will prevent the cost of two-year contracts going up as a result of the new rules?
<em>Answer from the CRTC:</em> The CRTC wireless code proceeding did not address pricing, as the Commission had previously determined that there is sufficient competition to protect consumer interests with respect to rates. Service providers are free to determine their rates for service and how much will be charged for phones up front. At the same time, improving consumers’ abilities to switch providers should push service providers to compete on price.
How will the shorter contract length affect handset costs?
<em>Answer from Steve Anderson, executive director of OpenMedia.ca, a wireless consumer advocacy group:</em> It’s unclear. There’s no market reason while the cell phone companies would suddenly raise the cost of cellphone service because people are on shorter contracts. So if they do that it’s really just price gouging. They could try and raise upfront handset costs, but the Canadian companies have higher revenue per user than any other telecom companies in the world and other places where we have two-year contracts, the device cost is not higher than it is in Canada, a great example is the U.S. (Pictured: Steve Anderson of OpenMedia)
<em>Answer from Lawford:</em> It’s call your bluff time. The CRTC is saying “let’s see if it’s true that really your costs are so high and that really you're subsidizing these devices so much, or is it that you’re locking people in so the contract is longer than the usable life of the device?” If we send people back in the market every two years is that going to make competition pick up the slack. If they all go up in lockstep, [then] the Competition Bureau should be looking into what’s going on. Pictured: John Lawford of PIAC
<em>Answer from Choma of CWTA:</em> Changing the length of the subsidy from three years to two years can actually raise the price of the upfront cost for your device. So before you had the option of putting it over three years and you could get a much lower rate for your phone, but now you’ve only got 24 months to earn that subsidy back. Obviously, carriers are going to have to adapt their business models to comply with that. But we’ll have to wait and see how carriers respond.
The new rules allow a fully purchased handset to be unlocked immediately or a subsidized handset to be unlocked in 90 days. What effect will this have?
<em>Answer from Anderson of OpenMedia.ca:</em> Unlocking the phone means it’s easier to switch carriers, easier to go international and use different services that aren’t Canadian, so it makes it more affordable. But I also think that area could have been better, for example they didn’t talk about what the cost of unlocking would be. And even the 90-day part could have been stronger. If I get a contract for a phone I should be able to do what I want with it. <em>Answer from Choma of CWTA:</em> Most carriers already do that now and some of them actually do it before 90 days now.
Are providers allowed to charge a fee to unlock a phone?
<em>Answer from CRTC:</em> Yes. Since the CRTC did not examine rates or prices, it is up to the provider to decide on their unlocking fee. However, as of December 2, that rate must be clearly identified in your contract and your critical information summary. <em>Answer from Shawn Hall, Telus spokesman:</em> We already do that – we charge $35 and allow unlocking after 90 days. That covers our costs of providing the service.
What are the effects of the new rules on people who are not on a contract or already have their phones unlocked?
<em>Answer from the CRTC:</em> People not currently on a contract will be covered if they sign a contract after December 2. If they are currently on an indeterminate or month-to-month contract, they will be covered as of December 2. <em>Answer from Marc Choma of the Canadian Wireless Telecommunications Association:</em> Most of the elements of the Code deal with contract services, so the impact on no-contract customers that already own their unlocked phone would be minimal.
Do the caps mean the carriers will cut off your data or roaming after a certain point?
<em>Answer from Anderson of OpenMedia.ca:</em> What’s expected is once you hit your limit in data roaming charges, you’ll receive a text message notification asking if you’re okay with that and do you want to continue. <em>Answer from Choma of CWTA:</em> Most carriers already provide notifications when you are approaching your data limit, or provide you with notification that you are roaming and how to purchase roaming packages. With the new code, a customer's data services will be automatically suspended once the customer has reached $50 of usage, unless the customer expressly consents to override the $50 default limit. In the case of international roaming, a customer's service would be suspended after the customer has reached $100 of usage, again, unless the customer expressly consents to override the $100 default limit. <em>Answer from Telus:</em> Currently, Telus caps international data roaming at $200. We send customers a free text message when they hit that point letting them know (after a series of usage notifications starting at 2 MBs), and will only reactivate roaming if they ask us to. <em>Answer from the CRTC:</em> The code doesn’t prescribe how carriers should do it. The way the code is set, there is a maximum amount carriers can charge unless they make specific arrangements with the consumer or the cell user gives consent to continue after a notification is delivered.
Why did the CRTC decide on two-year contracts, rather than one year, the direction the rest of the world is taking?
<em>Answer from the CRTC:</em> The Commission looked at what would be best for Canadians. Many jurisdictions feature two-year contracts – we also heard evidence during the hearing that multi-year contracts with subsidized devices allow Canadians to get new, sophisticated devices at a lower upfront cost. <em>Answer from Lawford of PIAC:</em> We’re in Canada, so we’re always behind. They could have done that too, but then they would have almost certainly raised everybody’s rates, at least the cost of a handset quite a bit. I hope that as the two-year contract becomes standard the one-year will become a competitive offering.
Are the new rules on three-year contracts retroactive? Can I get out of a three-year contract today?
<em>Answer from CRTC:</em> The rules apply, as of December 2, to all new contracts. In addition, on June 3, 2015, all wireless customers are covered, regardless of when their contract was signed. In practice, that means that if someone signed a contract in May 2013, then on June 3rd 2015, they can cancel without penalty. <em>Answer from Choma of CWTA:</em> With most carriers right now, there isn’t a cancellation fee. If you want to cancel, you just cancel and pay off your device subsidy.
Can a consumer use the new rules as an argument to fight an "outrageous roaming bill" they receive before they are technically protected?
<em>Answer from CRTC:</em> Consumers are always free to contact their service provider to contest a bill. The service provider is not obligated to lower the bill simply because new rules are on the horizon. <em>Answer from Choma of CWTA:</em> Yes they could. However, the Commissioner for Complaints for Telecommunications Services (CCTS) is already available for consumers that have billing issues. The CCTS will also be the body responsible for enforcing the new Code. <em>Answer from Lawford of PIAC:</em> No. In the meantime you can go to the CCTS and say the rate being billed wasn’t made clear. The CCTS has a history of knocking those down unless the company can show the customer was made very aware of what was going on.
If you decide to get out of a three-year contract after 2 years, do you still have to pay fees like the cost of the handset?
<em>Answer from the CRTC:</em> If you currently have a contract and you want to exit, you will likely be charged a cancellation fee, which is determined by your service provider. Some provinces have rules setting out how these fees must be calculated. Once the code is in force, you will be able to exit after two years without any penalty or fee.
Sky high billing is the biggest concern in Canada. Why weren't rates per second and per megabyte addressed?
<em>Answer from CRTC:</em> The CRTC’s wireless code proceeding did not address pricing, as the Commission had previously determined that there is sufficient competition to protect consumer interests with respect to rates. The new rules will enable consumers to make informed decisions and shop around for the best deal that meets their needs. In addition, the rules around bill shock, including caps on data and roaming, will reduce the high bills that some consumers see. <em>Answer from Lawford of PIAC:</em> The code wasn’t intended to reduce rates or touch rates at all. The whole premise behind us even getting any rules was we’re not talking about rates because the CRTC says, "We’re not rate regulating, all we’re doing is putting in standards so everyone is treated relatively fairly." The Commission could regulate rates, but they don’t. But addressing high rates is the next step, so that [question is] onto something.
Will providers have to show separately the handset cost consumers pay each month?