Pundits at odds over competitiveness of Canada’s wireless market

Where does Canada's mobile industry sit in the global competitive pecking order? Two opinions: one that the sector is terribly uncompetitive, the other that the industry fares well. They're so far apart at a glance - they can't both be right. Can they?Michael Geist, law professor at the University of Ottawa, says Canada's mobile industry is rife with uncompetitive pricing and practices that inflate consumers' bills. Not so, counters Peter Barnes, president of the Ottawa-based Canadian Wireless Telecommunications Association (CWTA) - Canadians enjoy wireless prices that are lower than most countries.People love to hate the wireless industry, but the supporting facts for these two positions warrant examination for bits of objective truth. "I think both of us can be right," says Geist in lawyerly fashion. "It depends on how you look at it."Number portability is a sore point. Geist claims carriers dragged their heels in spite of consumer clamor for more flexibility in switching, and notes it's already well-established in the US and Europe. "Let's be clear, the only reason we have it now is because it was inserted in the federal budget," he says. And once mandated by the government, he says the industry used a PricewaterhouseCoopers (PwC) feasibility study to extend the introduction to two years. "It was done in 18 months only because the CRTC told them to move it."But Barnes says PwC recommended the two-year timeline to avoid the service problems experienced in other countries. "There were horror stories in the US about customers' phone numbers being lost in the ether between carriers when portability was first introduced in 2003," he says. Moreover, he says the CRTC originally proposed a two-phased approach targeting major urban centres in the first 18 months, then less populous areas six months later. "We didn't want to treat Manitoba, Saskatchewan and those other regions as less important, so we did it all at once."Barnes says Canada is second only to the US in introducing wireline to wireless portability, according to OECD studies comparing 30 countries. "Others have one or the other but not full cross-over." While number portability has introduced some competitiveness into the Canadian market, Geist says carriers pad their bills with deceptive system access fees. "Their approach borders on unconscionable," he says. "I'm not aware of any other government that's actually had to step in to tell providers to stop characterizing these as government fees. And not only are these fees not going away but they're actually increasing," he says, pointing out MTS Mobility recently increased its system access fee to $107.70 per year.Barnes says the fee varies from carrier to carrier, as does the rationale for charging it, so he can't comment on carriers' behalf. "But these system access fees are included in the OECD comparisons and the marks they give us, which are pretty good," he says, noting that Canadian wireless rates are lower than the average for all of the 30 OECD countries, which includes US figures.However, Geist points out that a recent SeaBoard Group study, Lament for a Wireless Nation, indicates Canadians pay significantly higher rates compared to the US, particularly for high-end users.Which study is right? "It depends on where you look at pricing," says Geist. "The OECD looks at the low end, so apparently Canadian numbers look good there, but they're not so good at the high end."Barnes says he has many issues with SeaBoard's methodology. "In our view, the study is simplistic and some invalid assumptions are made," he says. For example, SeaBoard assumes the average Canadian customer uses 500 minutes per month. "That's way off - the OECD study uses 400 minutes per month."Barnes also says he has problems with the average US rate SeaBoard calculated, noting that it's derived by the average rates of three cities: New York, Los Angeles and Athens GA. "Including a small city like Athens, which has one carrier with low rates, gives it the same weight as New York - and skews the US average towards the low end." Making true apples-to-apples comparisons in these studies is always tough, he says. "But at least the OECD is comparing McIntosh to Cortland apples, unlike SeaBoard."But Kevin Restivo, a senior analyst at SeaBoard Group, says SeaBoard's average-minutes number is conservative. For instance, Rogers Wireless stated that customers used their phones an average of 556 minutes per month. "You could argue we underestimated the number of minutes a customer uses but certainly not that we overestimated," he says. As for using Athens, Restivo says his company wanted to include cities from various parts of the US. Athens in the south balanced Los Angeles in the west and New York in the North.He says he's baffled by Barnes' comment that Athens has just one carrier. The city has at least four: MetroPCS Wireless Inc., Verizon, Cingular/AT&T, and Virgin Mobile.The two sides aren't completely at odds. Barnes acknowledges Canadian rates are in fact higher at the very high end, which he defines as 2,000 minutes per month. "From what we've seen in OECD figures, US rates in this category are probably lower. But where Canadian prices are lowest on average compared to the US and Europe is at the entry level of 100-200 minutes per month."In looking at these issues, Geist says his focus is on ordinary consumers, not business users. "It's possible they're able to negotiate better rates."But Barnes says business customers don't get different rates, since carriers don't have business and residential categories for wireless as they do for wireline customers. "For wireline, the assumption is there's higher usage in the business category," he says. This is why business wireline connections cost more than residential wirelines. But he says that may not be a valid assumption for cellphones, so pricing is strictly based on number of minutes.

Pundits at odds over competitiveness of Canada’s wireless market

News | April 2, 2007

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