Four answers to Rational Pricing

by alec on April 15, 2007

Amid the rising chorus of criticism over Canadian cellular pricing, yesterday's Globe has provided a useful explanation.  Debt, and dividends.  In the fall of 2004, Rogers went on a buying spree, cranking debt to the sky with its purchase of Microcell.  At the time, bankers shook their heads.  Today he looks like a tactical genius.

BCE shareholders demand their dividends, and their network is ancient and slow and inferior to the cablecos'. They need their cash flow and aren't about to lose it in a silly pursuit of market share. Mr. Rogers understood that if everyone stays rational, prices will go up, not down — so it was safe to ratchet up the debt and buy Microcell, a deal BCE might have done if management were capable of making a decision without thinking it over for 18 months.

It's not quite collusion to fix prices.  Rather, it's the telecom equivalent of mutual assured destruction, with no detente anywhere in sight. 

Mark Evans points out that Rogers doesn't need a price war to gain share, and Bell and Telus can't afford a price war. Andy Abramson thinks that VoIP, and the emergence of global carrier groups will force the war upon them, anyway.  Rob Hyndman's view is a little more measured.  He acknowledges what Andy sees, but views "services that are used by a miniscule fraction of the Canadian population" as no threat. He thinks deregulation will send prices up!

So what can you, the poor abused Canadian consumer, do?

  1. Ask yourself if you need a number with a Canadian area code.  If not, consider buying a cell phone from a US carrier. For an increasing number of Canadians, this is a viable option.   Verizon's North America's Choice calling plans offer 2000 minutes of calling from anywhere in North America to anywhere in North America for a paltry $120/month, with no roaming charges.  Converting that to Canadian dollars leaves you with a cost of just over $.07/minute.  Bell's most comparable plan, their 1600 minute Business North America, is $300, or about $.19/minute. But you know, even if you don't need the roaming and the North American LD coverage Bell's lowest rate for local calling is still $.10/minute.  If you think this is an option for you, next time you're in the US, visit a Verizon store.  Unless you have a US social security number, the credit check will take a couple of weeks, but the benefits just might be worth it. 
  2. Get yourself a phone with WiFi capabilities, and use Gizmo or Truphone.  The Nokia E60 (about $350 on the internet), E65 (about $500), N80 (about $450), N95 (pricey, but nice) and E61 BlackBerry knockoff (about $500).  Although initially pricey, because they are unlocked, each of these devices can save you hundreds of dollars per month in airtime charges by allowing you to make calls from WiFi hotspots, at pennies per minute.  It won't eliminate all of your on network calls, but if you're like the majority of cellular users, 80% or more of your calls are made from fixed locations like home, or office… where chances are, you have a hotspot available.
  3. Consider using a call back service.  Several of the Canadian carriers have deals offering cheap or unlimited incoming calls, with various restrictions.  While not ordinarily advertised, you can just call the customer service department at your carrier and ask about them.  When used in conjunction with call back services, like Jajah for mobile for example, they can reduce your calling costs dramatically.
  4. And lastly, both Rogers and Bell are running unlimited usage promotions with various kinds of restrictions.  Bell, for instance, offers unlimited calls between all Bell customers, including landline customers.  Check them out.  Perhaps it's worthwhile for you to consider persuading people you know to all standardize on the same carrier… of course, that's playing right into their hands, isn't it?

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