StarBusiness

Cheap cellphones carry high costs

for Canada
Dave Coles, Tuesday November 23, 2010
Cheaper cellphones would be the consumer-beware loss leader if
the Conservative government goes ahead with plans to sell out
Canadas foreign ownership laws in the telecommunications and
media sectors.
Jobs, our position as a technology leader, and our distinct
Canadian media voice are the hidden costs.
And though cheaper wireless service could be a big selling feature
of a Conservative bill expected to be introduced by next spring,
there is something many Canadians dont know, and are not likely
to hear from any member of the arper government! Canadians
do not pay more for their cellphone service than consumers in
most other countries.
"or one thing, the widely #uoted $%C& study that consistently
ranks Canadas cellphone services among the priciest of its
member countries is seriously 'awed.
(t compares very di)erent plans, including *(+-only cards for
some countries and post-paid subscriptions in others.
(t excludes some signi,cant perks that can be found in current
Canadian subscriptions, such as unlimited night and weekend
calling, which %uropean countries generally dont o)er.
And most importantly, the choice of the -basket of services. used
by the $%C& includes only //0 minutes of talk and about 12 text
messages per month. 3he Canadian average is about 452 minutes
of outgoing talk 6or 122 minutes for both incoming and outgoing7
and 522 text messages.
8hen applying the Canadian average 9 452 minutes of talk, 522
text messages and ,ve multimedia text messages per month 9
Canada ranks ,fth out of 5: $%C& countries 6excluding *outh
;orea7 in terms of prices
%ven if Canadian pricing was way out of whack, creating more
competition wouldnt help. 8hen it comes to telecommunications,
the link between the number of companies and the level of
pricing is very tenuous.
Consider that Canada already has the most mobile network
operators in the $%C&, after the <nited *tates. 8ith nine
companies 6=ogers, >ell, 3elus, *ask3el, +3* Allstream, ?ideotron,
@ublic +obile, 8(A&, +obilicity7 and two more soon to launch
6*haw and %astlink7.
>esides @oland and Japan, no other $%C& country has more than
four competitors. 3his includes the few countries, such as *weden
and "inland, which have similar or lower prices than Canada.
8ireless is a natural monopoly because of high start-up costs 9
mainly the network infrastructure set-up.
3hose costs explain why there are only two to four companies
holding onto a total B1 per cent to :2 per cent market share in
most $%C& countries.
8ith more foreign investment, in the current regulatory
framework, new entrants will likely do one of three things!
C +erge to form a larger entity or consortium to provide a true
national service. (n other words, a foreign company such as A3D3
or ?odafone would probably take over a current Canadian
company rather than develop a full infrastructure parallel to the
existing ones.
C >e bought out by a larger company 9 as was the case with "ido
and Clearnet.
C Eo bankrupt because of inability to compete.
3hough prices wont be going down with more foreign
competition, Canadian Fobs and Canadas position as a technology
leader in this sector will be.
3housands of networking, switching, =D&, head oGce and support
services Fobs will go south or o)shore.
And the result of having foreign companies buying up chunks of
our wireless spectrum 9 there is very limited wireless spectrum
for the new generation of smart phones 9 means we could
#uickly fall behind in technology instead of being on the leading
edge as we are today.
"inally, it is impossible to let foreigners own telecom and cable 3?
without exposing our broadcast and media sectors to the same
fate.
>oth industries are deeply integrated and cannot be legislated
and regulated independently from each other.
3he four largest private television networks in Canada belong to a
telecommunications company! C3? to >ellH>C%, Elobal to *haw,
C(3I to =ogers and Juebecs 3?A to ?ideotronHJuebecor.
3hese companies need to stay in Canadian hands. 3he ability to
tell our own stories, listen to our own music and have a distinct
Canadian point of view is well worth ,ghting for. +uch more so
than the empty promise of a cheap cellphone.