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Seaboard's damning indictment of Canadian Cellular Providers

Seaboard Group popped a piece titled Lament for a Wireless Nation into my mailbox just as I was leaving on vacation. It's a 39 page indictment of Canadian cellular pricing models which leads off with the observation that Canada has the same market penetration for cellular that Botswana and Gabon do.  We lag the developed world dramatically.

Seaboard argues that the Canadian market has done well during periods of competition, noting the high growth that occurred while Clearnet and Microcell were still independent.  However, since their acquisition by Telus and Rogers, respectively, growth has once again stagnated.

Here in Mexico, I dropped into the local Telcel dealer earlier this week and bought a prepaid SIM for M$200, and a M$500 top up.  That puts my rate at M$2.2/minute for local calls and M$5.5 for long distance — roughly 24 cents Canadian and 60 cents for long distance.  Not cheap, but cheaper than Rogers rates in Canada.  Moreover, there is already a debate here about whether Mexican magnate Carlos Slim has too much power in the wireless industry.

And everywhere I look, Mexicans are carrying cellphones.  That's a huge difference from the last time we were here two years ago.

Seaboard's onto something.  Besides, what's not to like about the prospect of lower cellular bills?

{ 5 comments… add one }

  • Sean Saunders March 16, 2007, 9:27 am

    Hi Alec. Your skeptical brother here.

    Why does everyone need to carry cel phones? How come more Mexicans carrying cels is unquestionably a good thing? (I know your point is that lower rates make them more accessible, but I still think don't get why more cel phones — just, apparently, for the sake of having more cel phones — is a good thing.) And if Canadian market penetration is poor, man oh man, I'm not sure I want it to improve. They're everywhere here in Vancouver. If people could get their dogs to use them they would. Really. "Just a sec. It's Fluffy on the line. I said she should call if she couldn't find her chew toy, or if her water got stale."

  • Alec March 17, 2007, 6:10 am

    I make most of my calls from my cell phone, Sean. It's convenient, it has my address book built into it so I don't have to remember numbers anymore, and I am reachable when and how I choose. If actually sitting at my desk (the old fashioned option), I am frequently trying to get work which requires concentration done. A desk phone would be a nuisance.

    Moreover, it's my personal number. It's not shared with anyone else. You wouldn't have a shared email address, so why a shared phone number? It's a legacy of the old telecommunications network.

  • Sean Saunders March 17, 2007, 9:42 am

    Sure, the way you use a cel, particularly in connection with your business, makes sense. I'm not suggesting that nobody should have cels. My point is simply that more and more cels is not a virtue in and of itself. If market penetration is "poor," perhaps the people who need really need cels (plus the zillions who just want them) already have them. I don't need one, nor do I want one, and it would take a lot more than knowing that market penetration isn't what the industry wants it to be to convince me to get one.

    As for Canadian market penetration being equal only to that of Botswana and Gabon, there is a simple explanation for that: Canada has long history of well-established land lines that is absent in the developing world. In some ways, widespread cel phone ownership makes way more sense in developing countries than in the developed world.

  • Graham Fair March 20, 2007, 12:50 am

    Another sad fact about the antiquated cell system we get gouged for here in Canada. I'll tell you another hilarious story about gouging cell providers in Canada. Fido (while owned by Rogers), tried to charge me $250 to unlock my phone. When I asked them why, they replied "So you don't go to our competitors." Adding insult to injury, the idiot said this a few days after I comitted to another 2 year term with them (a fact I made clear to him earlier in the conversation). Equally, it was the same period of time after another Fido rep called me up and called me one of their best customers.

    If you stick with a cell company for the term of your contract, you are called a "best customer". This entitles you to:

    – None of the "freebies" that new subscribers get when you renew.
    – Attempted theft if you try to unlock your phone for use in other countries.
    – Data rates that are orders of magnitude greater than those found in Asia, Europe, and even in the US. (4 cents/KB here, 0.2 cents/KB from Helio for pay-as-you-go, unlimited data for $25/month more.

  • Craig Wilson May 18, 2008, 8:46 pm

    The outrageous rates for data mentioned by Alec's blog are matched by Canada's regular cellphone rates, which rank at or near the highest in the OECD. While Sean's comments reflect his perspective that there are too many cellphones, the reality is that cellphones are a fundamental input to business costs and to daily social communication worldwide today – so when Canada's protected carriers set such high rates, this ensures Canadian businesses can not compete internationally, despite our dependence on foreign markets as a small, trade leveraged economy.
    The buyout of Bell last summer showed how out of line the Canadian market is – some 30 million subscribers were bought out for almost 60 billion. At the same time, some 60 million Italian subscribers were bought out with Italcom's sale for $ 30 billion. That's right, apparently the rates the Canadian market can charge result in a Canadian customer being worth about 4 times an Italian one, although Italians talk as much as we do on the phone. That is a clear economic signal of the Canadian market being over-priced…the lack of competition allowing our little market to achieve a record at the time for the largest priced takeover in history.

    I have lived 10 of the past 24 years in China and their cell rates are about the same as my brother-in-laws in Sweden – between 8 and 11 dollars a month for (a not-as-good) service that costs me over $ 50 a month here in Canada; and the overage charges for extra minutes/long distance are four times higher here in Canada. By the way, that cheap $ 70 phone Bell, Rogers or Telus will only sell to you along with their two or three year contract plan, costs about $ 30-50. on the street in China. The fight with Rogers over the Iphone rates, where Apple has been stymied in its push for a basic all-in $ 40 a month service to all Canadian customers, underlines how fat Canadian service providers have become – Rogers, etc. are preventing the Iphone from coming into the Canadian market until they get to extract more from Canadian consumers.

    Your only defence is to become a more demanding consumer, by complaining to the regulator of telecoms in Canada – the CRTC. Complaints in English are started at http://www.crtc.gc.ca/RapidsCCM/Register2.asp?lan… . If you are serious about getting rates down so your Iphone is only $ 40 a month, there needs to be sufficient complaints from consumers to the regulator, so that the senior decision-making levels are aware not only of telecoms providers desires, but also of complaints and what users who pay for this system truly think. The absence of complaints about the inflated price paid last year for the BCE takeover, means the CRTC will allow BCE to increase its charges to pay for the debt taken on to pay for the takeover by the Ontario Teachers Pension Plan, US and Canadian buyout experts, and Canadian banks.

    The only way to prevent these increasing costs being imposed on you, apart from moving elsewhere, or not using the service, is to let the regulator know it is unacceptable to consumers and for Canadian competitiveness to approve the highest telco rates in the world, or even in the OECD. At worst, the telco burden our businesses and consumers should be set at no more than middle of the OECD telecom rates, but preferably lower, so Canadians can continue to compete in a globalized world, and maintain the standard of living we enjoy today. As a suggestion, perhaps Alex Sauders might compile the feedback from his blog into a submission for the CRTC, since they will have to respond publicly and within a short time frame to a serious pricing service complaint. It is only by complaining that you can slow the costs increases of the high-cost Canadian telco system that the CRTC currently favours, or at least permits.

    In addition, the telephone service providers were forced last fall to participate in the hearings of a new independent telecommunications consumer agency, which will have transparent decisions to all complaints listed on their website (the CRTC decision is at http://www.crtc.gc.ca/archive/ENG/Decisions/2007/…. While I do not anticipate an early change in Canada's current bias for rent extraction by protected service providers (how do you think Mr. Rogers could afford to affix his name on the Roger's Centre?), the CRTC submission might be the basis for a complaint to this new agency – and by forcing these rates to be publicly defended and justified in any agency decision, it likely will lay the basis for a stronger consumer reaction….which will in turn generate the political pressure necessary to get Canada's costs back in line with the rest of the world, and allow you and me to get an Iphone (or our Blackberry, or our Nokia, LG, etc.) at about the same price price as our US, European and Asian friends and competitors. Your failure to join in the complaints will only ensure the current high rates continue.
    Alec, what think you?

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