BUSINESS
09/20/2011 02:11 EDT | Updated 11/20/2011 05:12 EST

Canada Wireless Industry: More Getting Rid Of Land Lines For Cell Phones

Alamy

MONTREAL - Several million Canadians will have only cellphone service by the end of the year as they increasingly ditch their more expensive landline telephones, suggests a new study.

About one in seven households — or two million in total — will have just cellphone service by the end of 2011, the Convergence Consulting Group said Tuesday.

"This is happening because prices have come down so radically," said Brahm Eiley, co-founder of the Toronto-based consulting firm.

Established wireless carriers Rogers (TSX:RCI.B), BCE (TSX:BCE) and Telus (TSX:T) started cutting prices for voice services on their discount-brand cellphones back in 2008 — in some cases by more than 50 per cent — in anticipation of new competition, Eiley said.

New players like Wind Mobile, Mobilicity and Public Mobile, which have all entered the market over the last two years, have also added "all-you-can-eat" voice plans, he said.

"So in effect, it's cheaper to have a wireless phone than it is to have a wireline phone," Eiley said.

"We're actually seeing an acceleration of wireless substitution in 2011, which we did not see previously in Canada."

Such trends are common in Europe, the U.S. and other parts of the world, where many younger consumers choose only wireless service.

BCE chief executive George Cope said most of his company's residential landline losses have been substituted with cellphones over the last year or so.

The loss of landlines was still down in the telecom company's second quarter year-over-year and "it looks like wireless substitution has increased as a result," Cope told a Goldman Sachs telecom conference in New York.

He also acknowledged price competition in voice plans from the new players.

"We're just going to have to see how that plays out in the coming quarters," Cope said via webcast.

By the end of 2014, the Convergence Group estimates 26 per cent of Canadian homes will have only have mobile phone service.

In 2009, just 8.9 per cent of Canadians had ditched their landlines at home for cellphones, the study says.

In the United States, 31 per cent, or about one in three households, will have cut the cord on their landlines for cellphone service by the end of 2011, the study said. Canada won't reach the one-third mark until 2016, Eiley said.

However, new wireless companies have undercut Rogers, Bell and Telus by more than 58 per cent on combined voice and data plans and by more than 83 per cent on data alone.

Data plans allow consumers to do things such as stream music, watch video and check email and social networks.

The study also estimated new wireless players like Wind Mobile, Mobilicity and Public Mobile will have four million or 12 per cent of Canadian subscribers by the end of 2014, up five per cent from year-end 2011.

But Eiley predicts only one of these three new wireless carriers will be left standing by 2014. It's expected Shaw Communications (TSX:SJB.B) will buy up coveted high-value wireless spectrum in the next auction of radio waves and enter the mobile phone market around that time, he said.

"At that point, whoever is left can start raising their prices because they don't have to worry about the competition," he said, adding Shaw is simply on the sidelines for now when it comes launching a wireless business.

"Shaw is not out. Chances are there will be less competitors and the prices will be higher."

The Calgary-based company recently announced it will build a Wi-Fi network to allow its tablet and laptops users Internet access on the go and not enter the mobile phone business at this time.