High fees prompt Canadians to leave cellphones on hold
Usage here lags rest of developed world
The average cellphone bill is one-third more in Canada than in the United States, and although the price gap is closing, it continues to hinder the adoption of wireless communications in this country, a report to be released today says.
Just 56 per cent of Canadians have a mobile phone, compared with an average of about 90 per cent in the rest of the developed world. The discrepancy leaves the country at a competitive disadvantage when it comes to using a basic productivity tool that has become the world’s most common communications device.
“Canadian wireless adoption is a national disgrace,” concludes the telecommunications consultancy Seaboard Group, in a report entitled Lament for a Wireless Nation.
Twenty-four years after the federal government issued its first licences for cellphone service, only about one of every two Canadians has a device, compared with about three-quarters of the population in the United States, which began going mobile at the same time.
While Canada can boast to pioneering such technology as Research In Motion Ltd.’s BlackBerry wireless device, the country’s adoption rate for cellphones puts it on par with Tunisia (average per capita income of $8,600 U.S.) and slightly behind Turkey.
“Being the rump of the wireless world should not be our national dream,” said the report’s co-authors, Iain Grant, based in Montreal, and Kevin Restivo, of Toronto.
The report breaks the market into three categories of users. The high-end business user, who uses 1,200 minutes of voice plus data monthly, pays 150 per cent more than a subscriber in the United States.
The average user, defined as someone using 500 minutes a month, pays a 33-per-cent premium. And the light user, someone who keeps the phone packed away most of the month and spurns add-on features such as voice mail and call display, actually comes out ahead, paying 27 per cent less.
However, Canadians pay more in all three categories when compared with Europeans, the report said.
“Canadians aren’t tech laggards, as has been suggested in recent discussions on the country’s state of wireless phone competition. Instead, they are rational economic beings. Canadians hesitate to buy cellphones or to hit the send button on a cellphone knowing full well the cost at the end of the month will be breathtaking,” it said.
Seaboard suggests the government take several steps to improve the situation for Canadians, including allocating wireless spectrum for one or more new competitors. The spectrum could be awarded to a new national carrier or one or more regional operators. In the United States, regional phone companies such as Dallas-based MetroPCS Wireless Inc. have helped promote national competition. In addition, the report recommends that regulators consider minority foreign ownership in a new carrier.
Competition over wireless pricing in Canada has stalled since major operators swallowed the two independent companies; Vancouver-based Telus Corp. bought Clearnet Communications Inc. in 2000 for $6.6-billion (Canadian) and Toronto-based Rogers Wireless Communications Inc. purchased Microcell Telecommunications Inc. in 2004 for $1.4-billion. The government has an opportunity in its upcoming radio spectrum auction to fix that, and inject more competition in the market, the report said.
To give new entrants a fair chance, Seaboard also suggests the government require incumbents to share their tower space for a fee.
Among recommendations made to the industry itself, the report advised mobile phone companies to target new demographics, such as seniors, with appropriate pricing; eliminate long-distance charges; and focus on adding new customers rather than just trying to increase average revenue per user.
A report from the Canadian Radio-television and Telecommunications Commission last summer said phone companies for the first time generated more revenue in 2005 from wireless products than from local service, their traditional bread and butter. The Canadian Wireless Telecommunications Association says 47 per cent of all phone connections in Canada are wireless.