How Canadian telecom companies rob 30 million people every day
My dad was recently in the market for a new phone. He previously had a low-end smartphone, and my entire family was trying to convince him for something with better quality (and also pricier).
He was extremely resistive. My dad was pretty stubborn about not buying a phone that cost him over $300, and he absolutely did not want to buy on a tab plan (for non-Canadian folks, that’s when you pay a bit of the price of the phone upfront, and the rest is spread up over 24 months in equal payments).
His reasoning was singular: IT’S TOO FREAKING EXPENSIVE (though, he didn’t say it like that lol).
I had already put some effort into convincing him to get the newest iPhone, and I wasn’t ready to back down.
So I tried finding the good (read: cheap) cell phone plans for him, ones that also had good coverage and other bells and whistles too.
Turns out: there is no well-priced good-value cell phone plan on the market
It’s a constant balancing act. If you want more data, you’re price jacks up like crazy. But if you just want the bare minimum, you don’t get a proportional discount.
Let’s Take a Look at Rogers
It might be just me, but something seems a little fishy.
Take a look at the image above for me, from the same source.
The last point says that if you go over your allotted data allowance, you will be charged $10/100 MB, or $100/GB. Which is weird, because the core plan itself is $115 for 7 GB.
AKA, THIS DOES NOT MAKE SENSE 💣
The only reason that these companies charge bills so erratically, is because they paid down their cost of goods already, and are fluctuating the price to maximize the bottom line and garner demand.
However, there is still a sliver of good news.
Combining new network technology like 5G infrastructure, and advanced technologies like free-space orbital communications, along with innovative pricing models, Canadians can save over 70% of their plan!
Canada has the Highest Cell Phone Plans in the World
Until recently, the idea of cell phone plans to be astronomical compared to what they cost never crossed my mind, and I bet they hadn’t crossed yours either.
But I don’t blame you. We’re habituated to believe that prices are (more or less) pretty reasonable.
Things like buying a pair of socks, or coffee from Tim Horton's, often give the impression of fair pricing. When some purchases are expensive, we understand that in most cases, it’s because it costs a lot to produce those goods.
So let me break it to you: cell phone plans, are neither cheap or understandably expensive.
I apologize in advance, but I’m going to throw some data at you; so brace yourself.
A 2017 study prepared for the Government of Canada analyzed prices of average cell phone plans in Canada and select other countries, based on creating ‘buckets’ of services. This means they compared the price among plans offering similar quantities of service.
For the sake of our analysis, we’re going to go with level 2, level 3, level 4 and level 5, as they are the common service offering of preference, here in Canada.
Level 2: 450 minutes talk time, and 300 texts. Canada’s average price at this level of service is $40.95 per month.
Level 3: 1200 minutes talk time, 300 texts, and 1 GB of data. Canada’s average price at this level of service is $70.70 per month.
Level 4: Unlimited talk time and text, and 2 GB of data. Canada’s average price at this level of service is $81.61 per month.
Level 5: Unlimited talk time and text, and 5 GB of data. Canada’s average price at this level of service is $104.49 per month.
If you just skipped over those graphs, (lol I would too), they tell us that, with the exception of level 2 services, Canada has the highest average price for every single level of service offering, among all 34 of OECD nations (the Organization for Economic Cooperation and Development for all you jargon-nerds).
The Actual Cost of Data
Ok so you understand that I’m pretty pissed about this whole telecom-overpriced thing, but let me prove to you that we pay way more than we need to.
The fact of the matter is that Rogers or Bell do not directly disclose the cost to them for gigabyte. Fortunately for us, smaller independent telecom companies do.
David Buffett, the CEO of Radiant Communications, a (not owned by Rogers) internet service provider in Vancouver wrote that the cellular network expense in their operations is pegged at “less than 5 cents per gigabyte, and falling fast”.
DATA COSTS LESS THAN $0.05/GB…HOLY SHIT…
Now note that this is a relatively small company, so when economies of scale play in (the concept that making more of something makes it cheaper per unit), the cost of data is much less for the bigger players.
Companies like Netflix claim the cost is more at $0.01 per gigabyte, while telcos claim the number to be higher. But we’ll stick with the 5 cents/GB figure, for simplicity sake.
Let me put this into perspective for you:
That $10/100 MB overage fee all the cellular service providers have? That’s an effective 200 000% price hike. Two hundred freaking thousand percent.
Rogers’ bare minimum plan available offers 150 talk minutes and 50 texts, for $25 per month.
Let’s assume an approximate (and overly-simplified) 8 kbps data transfer rate. Hence our talk time would yield about 0.00855 GB, for just talk time, because, remember that everything technically is data transfer.
50 plain text messages a month. Let’s pretend the average text message is 40 characters long. Assuming each character is 1 byte, we would have a data usage of about 1.86 x 10^(-6) GB (or 0.00000186 GB).
So you’re paying $25 (plus other fees, but we won’t look at that), for 0.008550186 GB of usage, per month.
THAT MEANS THAT ROGERS IS EFFECTIVELY CHARGING YOU AT THE RATE OF ~$2 930 PER GIGABYTE
Enough said.
And people have noticed
In the U.K., $27 can buy 300 minutes, unlimited texts, 300 MB of data — and functionality across the entire E.U.
Of course, Canadian telecom companies often remind us that they do in fact have $25 plans, but the offer is unattractive: Rogers’ $25 a month plan, for example, gets you 150 talk time minutes and just allows for just 50 texts. And yes, no data.
In France, $23 buys unlimited calls and texts across Europe, the US and even overseas French territories.
The National Post reported in January, European analyst Tefficient released its latest report into worldwide mobile data and found that Canadians were paying more for mobile data than any other of 32 wealthy countries surveyed.
So basically, we have VERY expensive (if not the MOST expensive) cell phone plans, here in Canada. And there doesn’t seem to be a reasonable answer as to why this is the case, especially when compared to other countries.
What the Telecommunication Companies have to Say
When any of the Canadian telecommunications companies (read: thieves) are asked about their take on the issue, they deny it. And in the worst case, they say Canadians should be “celebrating” the speed and coverage of our systems.
Nice way to avoid answering, don’t ya think. And so, allow me to point out the flaws in these network giants’ arguments.
After a report broke ground, once again point fingers to Canada as having the highest cell phone plan, Micheal Geist, a professor at the University of Ottawa, got a response from Telus after he asked for their take on the claim.
Data from the Canadian Wireless Telecommunications Association, says that our cellular networks cover over two million km² (approximately the size of Mexico) and that Canadian telecom companies have invested over $2.5 billion a year in infrastructure.
But it’s interesting that Australia (a country with similar widespread pockets of people, that need to be covered) manages to stay out of the top 3 list for most expensive average cell phone plans 🤔.
In a 2017 CRTC price comparison, Australians pay as little as half of the Canadian prices, in numerous service offering baskets.
Ok, so maybe the big telcos don’t push that argument too much, and just default to claiming that all those reports are flawed when saying Canadian’s pay one of the most.
There did happen to be one report, compiled by a market research firm, that determined that Canadian’s don’t pay much in cell phone prices, and definitely pay less than Americans.
Would’ve been a compelling case, had Telus not been the corporate sponsor for the report.
In case you can’t see it, the report is saying,
T-Mobile and Sprint offer more attractively priced plans but these plans are less comparable due to network disadvantages
Interesting. So these guys are saying that Sprint and T-Mobile coverage is not as good as their AT&T or Verizon buddies huh.
So, I know we all aren’t are cartographers (and if you are, then, wow, I’m glad to know the cartography industry is taking a look at my Medium lol), but take a look at the following maps for me.
The first one is a US coverage map of Sprint’s service and the second is Verizon’s.
Now, sure the red looks more widespread than the yellow, but I would argue it’s not as huge of a difference, in that it would seem unfavourable to the average customer.
In fact, because of the Sprint and T-Mobile merger, combined with the fact that these networks piggyback off of AT&T networks when out of coverage, Sprint and T-Mobile offer competitive coverage to the larger US telcos. And hence, the Telus-commissioned report is misleading data, to say the least.
And why the heck would they even lower prices? It makes no sense.
The three biggest telcos, Rogers, Bell and Telus, own about 91% of the Canadian market through themselves and their subsidiaries (like Koodo and MTS Communications).
In May 2016 for example, Bell bought Manitoba’s primary telecom provider, MTC (for just shy of $4 billion, mind you) and raised prices by $5. What did Rogers do? They jacked their prices by $5 in the region a week later.
So that leads us to concluding that none of our Canadian telecommunication companies have a reasonable excuse as to why they make their prices higher than they should be; other than, because they can.
The Data Plan Black Market
Interestingly, all these skyrocketing prices create a nice gray zone, where Canada’s cellular black market flourishes.
A CBC article from 2016 featured a “third-party” dealer in Ontario who offers a Koodo or Fido plan with unlimited talk and text, with a hefty 5 GB of data, for just $48/month (on top of a $100 one-time service fee, of course).
The same plan goes for about $95 in most places; except in Saskatchewan and Manitoba, which is where the dealers source their product.
Jamie Walker, one of Toronto’s third-party dealers, explains the process, courtesy of CBC:
This is how it typically works: he has a customer — say in Toronto — keep her current cellular deal and also sign up for the $90 Koodo plan offered in Ontario.
Then, on Koodo’s website, Walker requests for the customer a Manitoba or Saskatchewan phone number. He says that qualifies the person for the lower $48 price for the same plan offered only in the Prairie provinces.
Walker then makes a request for Koodo to port or transfer the customer’s Toronto phone number from the person’s original phone plan. That process cancels the customer’s initial cellular deal.
So, according to Walker, the person winds up keeping her original Toronto phone number, but now it’s attached to a $48- a-month Koodo plan that should actually cost $90 a month — savings of $504 a year.
Walker says the process is so simple, people can do it themselves on Koodo’s website.
Telcos have caught up with the guise to some extent, and some like Rogers and Telus have made it much harder to complete the process.
Regardless, the method of porting one’s number from one province to another is both technically not-restricted, and accessible for individuals to complete.
Such an illegal market is a big threat to all parties in the equation: the government loses out on taxes that’ll fund infrastructure development, the industry regulation will feature loopholes and make it unsafe for consumers, and, it keeps telecommunication companies in poor health as funds for development are reduced (our country needs to keep advancing our infrastructure, as much as we hate those darn telcos).
Key Takeaways
- Three large Canadian telecommunications companies own 91% of the market, and because of such, they charge crazy and unreasonable prices for cell phone plans.
- Canada has the highest average cell phone plan cost in the world, for the most popular baskets of service (unlimited talk and text, and 2 GB); everywhere in the world there are better
- The actual cost of data (in $/GB) is minuscule compared to what’s charged — in the worst of cases, consumers are charged at the rate of thousands of dollars per gigabyte.
- The big telecom companies come up with a multitude of excuses and studies that tries to disprove such a huge cost disparity: everything from geographies to denying the truth.
- The big price injustice creates a gap for a cell phone black market; proving injustice to taxpayers, and putting customers at-risk to malicious services.
