Canada is the world leader in cell phone bills

Don’t Believe We’re Getting Our Money’s Worth!

Written by Exequiel Octavio Bertaina, Staff Writer

Opinion

It’s that time of year again: the next iPhones are soon coming out of the factories ladies and gentlemen! Fortunately, my contract with Rogers expired  and I was free to look around and judge with which service provider I would like to be stuck with for another 2 years.

To my surprise, the Canadian Carriers’ world-leading 3 year overpriced contracts haven’t changed, and hopefully won’t leave your student bank account bankrupt faster than a US homeowner’s mortgage issues. Like many of you, I’m a full-time student with an income lower than what most adults spend on their household pets.

After shopping around, I noticed the service providers weren’t really competing with each other in terms of price wars. All of the contenders seemed to be forcing us into a three year contract or purchasing it at its whopping price (do you seriously consider spending $700 on a smartphone  an investment?).

This seems kind of odd, because we have all learned that in a perfectly competitive market, companies would be fairly undercutting the other in order to get an advantage and attract the rival’s clients. What’s oddly interesting is that none of them are offering a two-year contract for the latest shiny iPhone. Hence, after carefully scouting all of their plans and offers, I came to an awful conclusion.

This is not a perfect competitive market, but a (very poorly) hidden oligopoly. After looking up all of the recent notices by the CRTC, I noticed that none of them mention any issues of price fixing or anomalies in this “perfectly competitive market”. How do you know your market isn’t that competitive?  When you compare yourself to rest of the world! Thankfully, the 2010 first quarter BofA Merrill report clearly indicates what I had feared. We are paying way too much for what we get in return.This report was based on a survey of more than 50 developed and developing countries. The report itself contains data from the first quarter of 2010 and is based on monthly bills, before taxes. (Click the graph to enlarge)

 If you look carefully at the graph, it reveals we are paying more than any other of the G12 countries. How great is that!? Is it normal that North Americans are paying over 1/3 of the majority of the other European countries?  People can say what they want about Mexicans, but they’re still enjoying wireless freedom at 1/3 of our costs, on average.

Let’s do a reality check. There are three big operators in Canada: Bell Canada, Rogers Communication and TELUS. These Big Three serve about 95% of the country’s wireless subscribers (The Economist, 2011). They can easily control the pricing scheme because their power is tremendous and in case you didn’t know: Fido is owned by Rogers, Koodoo by Telus and Solo mobile by Bell communications.

It’s no surprise we pay so much for what we get in return. It takes one reunion between these three companies to ensure they are all heading in the right direction! May I remind you the big three have repeatedly attempted to put the brakes on Globalive, but thankfully the government was keen on encouraging new entrants in the “perfectly competitive market”.


I hope one day we will be able to read the data and say to ourselves how lucky we are to pay such low rates. Till then, I’ll keep my current iPhone and wait for the next iPhone with the hopes of having a better “bargain” that fits with my student budget.

ARB Team
Arbitrage Magazine
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