Canadian wireless prices: Setting the record straight

  • National Newswatch

Imagine comparing what two people have to pay to lease a car, without informing us that the first is a highly-paid executive leasing a Lexus she uses every day, while the second is a low-income retiree leasing a Yaris that he uses once a week.The executive surely pays a lot more than the retiree, but can we say that she pays too much for the service she receives? A simple comparison of the prices paid in these two cases will not tell us much. We would have to take into account the quality of the car that is leased, how often it is used, the consumer's purchasing power, and a whole slew of other criteria before being able to draw such a conclusion.Yet this is just the kind of crude and simplistic comparison made regularly by critics who say Canadian wireless prices are “the highest in the world.” This claim is based on comparisons of Canadian telecommunications prices with those in seven other countries contained in the annual Nordicity study.That study has some serious methodological flaws. As indicated in a caveat in the 2016 edition—curiously absent from the 2017 edition even though its methodology has not changed—it does not account for the speed or quality of networks, or for geographical or socioeconomic factors that could explain  price differences such as population density, usage levels, consumers' capacity to pay, or other indicators related to affordability.In short, it's nothing more than a raw comparison of prices without any context. Ignoring all of these factors creates a systematic distortion that makes Canadian services seem more expensive than they actually are.The reality is that Canadians are among the biggest consumers of data in the world, and they pay for some of the best services in the world. In its latest report, OpenSignal states that “Canada has become quite the LTE powerhouse, especially in terms of speed. Some of the fastest speed measurements we're seeing globally are now coming out of the North American country. But raw speed isn't the only thing Canada can brag about. Access to LTE signals is excellent, and the country is laying a solid foundation for 5G.”What explains this excellent performance? Simply put, Canadian telecommunications companies invest more in their networks than companies in almost any other country. According to international studies, Canada is ahead of the G7 pack in terms of capital expenses per wireless subscriber, fifth among the 35 countries of the OECD in terms of investment per capita, and third out of 35 when it comes to investment as a percentage of company revenue.Moreover, the data the Nordicity study collects primarily reflect the most expensive service baskets. This limited set of data hides the simple reality that Canadians have many more affordable options. They can get similar service baskets at sometimes much cheaper prices by switching either to a flanker brand, a regional provider, or a reseller.The Nordicity study also ignores the fact that Canada has a relatively small population on the second largest landmass in the world. Even accounting for the fact that a substantial portion of the territory is uninhabited, the density of wireless connections per km2 in Canada, at just 14, is the fourth lowest among OECD countries. It's illogical to expect that the costs of deployment of a wireless network here will be the same as in South Korea, Japan, or the Netherlands, where this density exceeds 450, or in some large European countries, where it's above 100.Another of the critics' frequent arguments, that high prices are to be expected given that Bell, Telus, and Rogers control 90% of the market, is also flawed. Most industrialized countries have only three national players. The announcement last week of a merger between T-Mobile and Sprint will also bring the number of national players from four to three in the United States. Moreover, in Canada, each region also has a solid local player perfectly capable of competing with the big guys, like Videotron in Quebec or Free in Western Canada and Ontario.In short, Canadians are paying for a Lexus, not a Yaris. Rates correspond to the quality services that Canadians demand and obtain. And there is no reason for the government to continue to intervene in this sector with measures to artificially increase competition. This is what emerges from a detailed analysis of relevant factors as opposed to a crude and simplistic comparison.Martin Masse, author of the MEI's just released annual report on The State of Competition in Canada's Telecommunications Industry (