Many Canadians feel they pay too much for telephone, Internet and TV service. Moreover, the prices keep rising each year.
Is there any truth to these complaints?
The CRTC, Canada’s telecom regulator, confirms that telephone, Internet and TV rates are going up more quickly than inflation. The average Canadian household spent $203 a month on communications services in 2014, says the CRTC’s latest communications monitoring report.
That was an increase of 6.2 per cent from 2013 — three times higher than the increase of the consumer price index in the same period.
There are some interesting trends in telecom spending, the report reveals:
Canadian households spend more on wireless ($79.08) and subscription television services such as Netflix and video on demand ($53.95), compared to Internet ($38.91) and landline telephone services ($31.10).
Wireless spending grew by 14 per cent in 2014, while Internet spending went up 10 per cent. This may be driven by a group of Canadians who have upgraded their speeds.
Landline phone spending fell 5.3 per cent in 2014 (down to $31.10 a month from $32.85). Many households with a second or third landline phone seem to be eliminating these subscriptions and signing onto additional wireless subscriptions.
Landline phones accounted for 15 per cent of household spending on communications in 2014, compared to 39 per cent for wireless services.
More Canadian households have mobile phones (85 per cent) than landlines (79 per cent). This is a change from 10 years ago, when almost every household had a landline and just over half (54 per cent) had mobile phones.
For the first time, the number of households with only cell phones (20.4 per cent) is greater than households with only landlines (14.4 per cent). A decade ago, just 2.5 per cent of households had only cell phones and 44.5 per cent had only landlines.
Mark Goldberg, a telecom consultant, did a little arithmetic to expand on the CTRC data. Among his observations in his blog:
• Canadians spend 2.9 per cent of their annual average income on communications.
• Average spending per person (not household) on phone, Internet and TV is $82.42 a month — or just under $1,000 a year.
• Lower-income households have a greater tendency to be wireless only. It may be an affordability issue, but it also makes more sense for single-member households.
The telecom industry is growing quickly. So, why do Canadians pay three times the annual inflation rate for service? Market concentration is a big factor.
The top five broadcasting and telecom companies — Bell Canada, Quebecor, Rogers, TELUS and Shaw — together accounted for 84 per cent of total industry revenues in 2014, up one per cent from 2013.
“This market concentration plays a role in the rise of bundling,” says the CRTC report, “as the largest entities are well positioned to offer their customers discounts in exchange for subscribing to a range of services.”
The number of subscriptions with bundled services rose to 10.4 million (from 8.8 million) over the past five years.
But in 2014, there was no growth in bundled subscriptions, a signal that customers are more willing to shop around as bundling discounts become less attractive.
Will Canadians get any relief from high-priced communications in 2016?
The Shaw offer to buy Wind Mobile is a hopeful sign, says Goldberg, bringing a choice of four major players in each regional market.
“That kind of differentiation is good for consumers,” he said in a blog post. “There are four well-funded mobile service providers, each with integrated multi-service capabilities in various parts of their operating territories, helping to provide a measure of diversification.
“Each of the wireless companies is associated with a company that has been operating in parts of the Canadian communications industry for decades.
“This is helpful in an industry that needs annual capital investment measured in the hundreds of millions of dollars to stay ahead of users’ seemingly insatiable demand for more capacity.”
Another hopeful sign is the rise of new wireless services, such as Sugar Mobile. You can buy a $29 starter kit to use with an unlocked phone and pay only $19 a month for unlimited talk and text across Canada when your smart phone is connected to Wi-Fi.
Sugar Mobile is targeted at teens who want to save money, as well as seniors who want to replace their landlines. You don’t have to sign a long-term contract, unlike the wireless industry’s traditional business model.
Level 3: Read the CRTC report at http://www.crtc.gc.ca/eng/publications/reports/policymonitoring/2015/cmr2.htm
Read the Telecom Trends analysis: http://mhgoldberg.com/blog/?p=8770Telecom