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A question of cost

A new survey suggests Canadians pay up to 60% more than Americans for mobile phone service.


September 1, 2005  


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For many years now, the Canadian wireless industry has quoted studies that declare Canadians enjoy some of the best prices for wireless in the world.

In fact, in its online facts and figures about the industry, the Canadian Wireless Telecommunications Association (CWTA) cites rankings from the Organization for Economic Co-operation and Development that place Canada in the top 10 of more than 30 OECD countries, and point out that our prices are “significantly lower than those in the U.S.” in two of three main OECD comparisons.

However, a new pricing survey from The SeaBoard Group (www.seaboardgroup.com) challenges that contention.

SeaBoard’s Lessons for Canada report, released in July, compares real prices — the bottom line on your monthly bill, not the advertised rate plans from wireless service providers. The telecommunications consultancy created three typical profiles for users and then went shopping in Canada, the United States, and Europe.

No deals here

SeaBoard found that the average wireless customer in Canada pays 19% more than similar customers in Europe, and a whopping 60% more than if they had used a U.S. plan.

In addition, SeaBoard says, Canadian power users, business users, for example, pay significantly more for wireless services than their U.S. counterparts.

Since the calling patterns of real users will be different, to varying degrees, from the typical customer profiles SeaBoard generated, it is quite possible that on a case-by-case basis Canadians are better (or worse) off than the survey suggests.

But regardless, it’s hard to ignore a number like 60%. So, why are wireless prices higher here, and what can Canadian businesses do about it?

In its report, SeaBoard notes that U.S. wireless companies have gone to market with less complex price plans that often include unlimited long distance and a host of features such as voicemail and calling line ID at no extra charge.

The result, SeaBoard says, is that Americans increasingly rely on their wireless phone as their primary means of communication. Mobile usage has gone up, pulling revenue up with it.

If Canadian carriers do the same thing here, SeaBoard argues, they will generate more revenue: Perhaps not a higher average revenue per user (ARPU), which is what financial analysts are fixated on, but more real cash in real terms.

Making wireless more attractive will increase market penetration in Canada, which at 45% is 14% behind the United States and amongst the lowest in the industrialized world.

Furthermore, plans with more built-in features, offered at more competitive prices, will encourage mobile users to indulge in what SeaBoard refers to as the “wireless habit” that citizens in so many other countries have embraced.

Disappearing border

The Canadian wireless industry will, no doubt, take issue with SeaBoard’s findings, and if you ask your service provider you’re sure to hear many reasons why Canada is a different market than the United States.

But as wireless technology continues to develop and U.S. companies continue to look for ways to beat their competition at home, the border between our two countries will effectively disappear.

For example, SeaBoard notes that Cingular offers a North America plan. This includes 500 anytime minutes, 1,000 minutes for nights and weekends, nationwide long distance and a full suite of features for US$59.99, with an additional 1000 anytime minutes tossed in for an extra US$10. The kicker? This plan can be used anywhere in the United States AND Canada.

Naturally, one must have a U.S. billing address and U.S. credit card to become a Cingular customer, requirements that put this plan out of reach for many Canadian individuals.

But what Canadian business of any significant size doesn’t have a U.S. presence? It would only take a bit of creativity on the part of these companies to generate significant savings on the cost of connecting their sales forces, executives and other power users – in short, the very people that bump up a carrier’s ARPU performance.

And that is something the Canadian wireless industry should worry about.

Trevor Marshall is a Toronto-based reporter, writer and observer of the Canadian wireless industry. He can be reached (on his mobile) at 416-878-7730 or trevor@words-tm.com.