Mobile Service in Canada: Overpriced and Anti-Competitive [Study]
In a recent report called Long Term Evolutionary Challenge: Limiting Wireless Carrier Gluttony, Seabord Group argues that Canada must stimulate competition in the mobile services sector. Consumers complain about high prices and the lack of choice in the Canadian mobile market, composed mainly of an oligopoly between Bell, Rogers, and Telus.
Seabord reports that there is an antipathetic movement toward big mobile telcos since consumers have few phone device choices. Thus, it translates into a lower penetration of mobiles services in Canada versus OECD countries and also many emergent countries.
Mobile operators suggest that Canada is the second largest country in the world for higher mobile prices. However, just 15% of the country is covered by mobile services, according to the report. For instance, in the USA where mobile prices are lower and the area is around 90% the size of Canada, there are 27 times more wireless antennas than in Canada.
Seabord suggests that the implementation of mobile services in Canada cost around $196 per user from the beginning of operations until 2000 versus $292 per user in the US. In 2008, mobile operators Bell and Telus indicated that they would invest around $500 million in a new HSPA network. However, in New Zealand, a country 37 times smaller than Canada, a similar network cost $400 million. Thus, the arguments of higher operating costs due to geography are not accurate.
Operating costs on revenue was 69% in 2002 in Canada versus 52% in 2007 and remains low. In the US, it was 67% in 2002 versus 63% in 2004 and remains high.
MORE COMPETITION REQUIRED
Canada is lagging OECD countries and several emergent countries in mobile penetration because of a lack of dynamic competition, according to Seabord.
Competition wars appeared in the past with Clearnet (Mike) and Microcell (Fido) at the end of the 1990s. Several customers adopted aggressive mobile plans, such as City Fido, where customers cut the fixed line over an unlimited mobile voice plan. However, those two aggressive competitors were acquired later by Telus and Rogers and the market returned to an oligopoly with no intense competition.
“The number of players doesn’t mean anything; it is the type of players with their particular interests which dictates the shape and the future of the mobile market,” said Seabord Group. In an oligopoly market where interests are aligned for mobile operators, the status quo is the main strategy and competitive pressures remain low.
The federal government has started a few policies to increase competition such as number portability. However, several obstacles to lower prices still persist—such as penalties and duration of contracts, monopoly of wireless standards, and high costs of devices.
The report concluded that new competitors since 2009 have had some beneficial consequences for consumers—but the Canadian mobile market is still a real oligopoly where consumers have few legitimate alternatives.
