There has been “a sharp increase in prices” in telecom services, and with an economic slowdown and growing debt burdens hanging over consumers, Canadians will be in no mood for more, a new study says.
The Conference Board’s latest Outlook for Canada’s Telecommunications Industry reports that telecom prices rose 5 per cent in 2014, “most likely driven by wireless price increases.”
It links the price hikes to the CRTC’s introduction of a wireless code of conduct in 2013, which, among other things, limited wireless contract lengths to two years, ending the three-year contracts commonly seen in Canada.
"Although consumers’ thirst for wireless data is set to grow at a rapid pace for the foreseeable future, their capacity and willingness to spend more on telecommunications services will not follow suit,” Conference Board of Canada senior economist Kristelle Audet said in a statement.
"The amounts households are dedicating to TV, Internet and wireless services will continue to be constrained by slower growth in disposable income and high debt burdens.”
The report forecasts telecom revenues will grow 2.3 per cent this year, the slowest rate since the 2009 recession. It sees telecom prices rising another 3.7 per cent this year. But by next year, “the big telecom carriers will likely realize that consumers do not have room in their household budgets to bear higher wireless prices without decreasing demand for other telecom services,” the report said.
“Having to bear the sharp hike in the cost of monthly wireless plans, some consumers had no choice but to try to reduce their spending on other types of telecommunications services."
One area where many Canadians are reducing spending is cable TV. A recent study carried out for the CBC found 16 per cent of Canadians live without cable TV, up from 12 per cent three years ago. That outflow of customers has hurt Canadian telcos’ bottom line, but the Conference Board report notes the telcos are now working developing Netflix-style over-the-top streaming services such as Rogers and Shaw’s Shomi and Bell’s CraveTV.
“Increasing the variety of paid content available to all Internet users rather than TV subscribers alone is likely to help mitigate the impact of declining revenues from TV subscribers,” the Conference Board said.
All the same, it sees the wireless sector remaining strong and ending 2015 with $8.3 billion in profit.
“With little threat to the incumbent’s dominance in the wireless segment — by far the most profitable one — the industry will be able to sustain its high profit margin throughout the forecast period,” the report said.
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