Monday, November 15, 2010

UK wireless versus Canada

One of the first things I did when I arrived in the UK about two weeks ago was get myself some cellphone service. I friend of mine there lent me a SIM card from provider 3, which I popped into an unlocked Motorola Milestone smartphone I have. As soon as it was active, I got the following text message from 3:

"Get even more value with your next top-up. Top-up 10 pounds & convert it to All in One 10 for 100 mins, 3000 texts & 500 MB internet."

I actually ended up paying 15 pounds, or about $25 Canadian, for 500 megabytes of data usage and pretty much all the voice minutes and text messages I needed for my short time there. I ended up coming back home with lots of minutes, messages and data to spare.

Now, here's my typical monthly bill breakdown from Fido here in Canada (owned by Rogers):
  • iPhone Plan 60.00 
  • Credit: Monthly credit $10 -10.00 
  • Credit: Monthly credit of $10 -10.00 
  • Credit: Monthly credit of $5 -5.00 
  • 200 anytime minutes 10.00 
  • Call Display w/Name Display 7.00 
  • Minute Tracker 0.00 
  • 250 Weekday Minutes 0.00 
  • iPhone Data Access 500 MB 0.00 
  • Fido/Rogers Hotspot Access 0.00 
  • Unlimited Evenings/Weekends 0.00 
  • Unl. text messages 0.00 
  • Visual Voicemail 0.00 
  • Total before taxes: $52.00
For those who don't have the requisite PhD to read phone bills, what all of this means is that I have roughly the same service from Fido for more than double what it costs in the UK. Moreover, you'll notice all those ridiculous credits totaling $25, which are the result of me haggling for months. Without them, my bill would be triple its UK equivalent.

Not surprisingly, this manifests itself in the bottom lines of the wireless carriers. For the record, Canadian cellphone companies pull in an average of around $55 (US) per user per month, compared to about $32 (US) for UK carriers. This contributes to big-time profits for Canadian cellphone carriers - the highest in the developed world. Canadian cellphone carriers actually make about double the profit per capita of their UK counterparts (all these numbers come from the Bank of America Merrill Lynch Wireless Matrix, considered the bible of the industry).

I always found it really funny when our local oligopoly - Bell, Rogers and Telus - tried to convince people (and government ministers especially) that their rates weren't high. All it takes is a short trip outside of Canada to realize just how badly they lie.

So why do Canadian wireless carriers gouge their customers so outrageously? It's simple - it's because they're Canadian wireless carriers. In the UK, the major cellphone providers are Vodafone (British-owned), T-Mobile (German-owned), O2 (Spanish-owned) and 3 (Hong Kong-owned). Obviously, there's a common denominator there - three of the four are foreign-owned.

The Canadian government is currently mulling whether or not to liberalize our restrictive foreign ownership restrictions, which pretty much make impossible the sort of competitive situation the UK currently enjoys. Anybody with half a brain knows it's well past time to drop these restrictions since telecommunications is a global business, and when you keep it from being so, you get the ridiculous prices we have here in Canada.

What difference would allowing foreign cellphone companies into Canada make? Well, for one thing, it's worth noting that all four of the UK's big providers are primarily cellphone companies while the big three in Canada all also sell home phone service. Canadian companies have had no incentive to get people to ditch their home phones and go cellphone-only. Despite that fact, it's still happening - although it would be doing so at a much quicker rate had Canada historically had some wireless-only companies pushing for it.

A number of wireless-only companies have started up in the past year, beginning with Wind, but these are small firms that have had to claw together the money, skirt the rules and lobby our government hard in order to compete with the big boys. It doesn't take a math degree to figure out that these small, poorly funded providers aren't going to be able to stick it out against Bell, Rogers and Telus in the long run.

If the foreign-ownership rules aren't dropped, our new providers will inevitably go belly up. And we'll continue paying double to triple what other developed nations do.


Post a Comment