Ben Klass post on those outrageous Big 3 mobile price hikes

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It appears Bell, Rogers and Telus are still not making a decent buck from Canada’s textbook wireless oligopoly. So they’ve raised their prices – again, all at once, all by the same amount.

To shed some light on the meaning of this further greed-is-good foray into price-gouging, I’ve asked Ben Klass to let me re-post the comments he made about the recent price hikes on his blog on March 17, under the title Wireless Carriers’ High Flying Prices. Ben documents the obvious and awful truth: out West where there’s competition, prices are… wait for it… lower!

Meanwhile, if you’d like to read a very persuasive set of empirical arguments showing just how concentrated and non-competitive our wireless sector really is, check out the study Dwayne Winseck has been piecing together over the last several months (I had a hand in the data analysis).

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The report – entitled Mobile Wireless in Canada: Recognizing the Problems and Approaching Solutions – is a detailed, exhaustive survey of the broadband markets in the 34 OECD countries, both wireline and wireless. Dwayne has provided lots of food for thought. First, there’s the study itself (I’ve uploaded the pdf here). In addition, the home site for the Canadian Media Concentration Research Project, headed up by Dwayne, has more material: an exec summary here; a slew of charts and tables here (covering the standard variables, penetration, speed and price, but lots of financials as well); and some cool “in the news” files like an audio report entitled “Professor Dwayne Winseck delivers a blistering indictment of Bell, Rogers, and Telus: it’s an attack that may have gotten him briefly kicked off Twitter” (here).

From the report’s Exec Summary:

[T]he stronger tendency amongst defenders of the status quo is to deny reality, even when incontrovertible evidence stares them in the face. This is symptomatic of a bigger problem, namely that in Canada the circles involved in discussing wireless issues are exceedingly small and they like to hear the sound of one another’s voices all too much. Their members do not look kindly on those who might rock the tight oligopoly that has ruled the industry from the get-go.

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Wireless Carriers’ High Flying Prices

(reposted by permission from Thoughts on networks, progress and Canada)

Last week, Mobile Syrup reported that the big 3′s flanker brands, VirginFido, and Koodo (including zombified competitor Public Mobile) would be raising prices on their wireless plans at the same time. Then, the news broke today that Bell, Rogers, and Telus, moving in lockstep, have quietly raised their prices for wireless services as well. Prices for plans (including the new changes) at each carrier appear to be identical.

These rate hikes come on the heels of the 700MHz auction results, which are shaping up to look like a continuation of the status quo – free range for the Canadian wireless oligopoly. Telus has purchased Public Mobile, Mobilicity is in creditor protection and is likely to be bought up shortly, while Wind’s financial backer seems to have had enough of its foray into Canada. Brace yourselves, consumers, it’s going to get worse before it gets better.

Wind is by no means out of the game – it has over 600,000 subscribers, and there is some speculation that part owner Tony Lacavera may make a disruptive play. But without additional capital or new spectrum, it seems as if its fate as a niche provider may be sealed.  Vidéotron has some analysts holding out hope for a new competitive champion in Ontario and westward, although representatives for the company have been decidedly ambiguous about its prospects for expansion. For the time being, it seems like the incumbents are taking advantage of their privileged position by putting the squeeze on customers who face few prospects for finding a fair deal elsewhere.

This isn’t exactly a shocker. What is interesting is that this strategic move pours fuel on a fire that started late last year. Following the summer’s theatrics, the CRTC got down to business by looking into discriminatory wholesale roaming practices on the part of the incumbents. During this process the Competition Bureau raised eyebrows with a strongly worded submission, which pointed out that:

“In the Bureau’s view, mobile wireless markets are characterized by high concentration and very high barriers to entry and expansion. Furthermore, Canadian mobile wireless markets are characterized by other factors that, when combined with high concentration and very high barriers to entry and expansion, create a risk of coordinated interaction in these markets.” (Emphasis added)

The Competition Bureau notes that those other factors include “the ready availability to market participants of information regarding prices, rival firms and market conditions”.

This weekend’s news removes all doubt (if there ever really was any) about the existence of such factors and highlights the incumbents’ facile willingness to capitalize on the sore lack of market discipline. Although it’s clear that Bell, Rogers, and Telus are collectively cocking a snook at the Canadian public, it remains to be seen how regulators will react – or if they will at all.

The decisive moment could be the CRTC’s upcoming hearing on wholesale wireless competition – open for comment until May 1 – but given how flagrantly the wireless carriers are flaunting their market power, something doesn’t smell right. The big three may, as Peter Nowak suggests, really just be acting dumb, dumb, dumb, or they may be courting regulation in the hope of shaping the process to ensure stability and security for future profit margins.

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At the moment, we’ll have to wait and see what happens. One thing, however, is certain – Canadians will for the time being feel the effects of price hikes, as anyone signing a new 2-year contract will have to grin and bear the consequences of unchecked anti-competitive maneuvering.

That is, unless you live in Manitoba or Saskatchewan, where voice and data plans cost nearly half as much in some cases as identical plans in other provinces. Unlimited voice with 1GB of data from Telus, for instance will cost a prairie customer $55 a month, or $1320 over 2 years. A Telus customer in Alberta, on the other hand, will pay $85 a month for the same plan, or $2,040 over the span of a 2 year contract.

1GB Telus plan – $720 off if you live in SK.

For those who rely on mobile data a bit more, Rogers offers prairie customers unlimited voice with 10GB of data for $75 a month, or $1800 over 2 years, while a Rogers customer in Ontario or Québec will pay $145 a month for the same plan, adding up to $3480 over two years.

10GB Rogers plan – $1680 discount for living in MB.

If you find yourself wishing your province had a competitive fourth provider, you could move to friendly Manitoba or set up shop under Saskatchewan’s living skies. But you wouldn’t have to stay for long. It’s hard to believe, but this is the truth: it’s cheaper to buy a roundtrip plane ticket to Regina or Winnipeg, subscribe to one of these plans and then use it back home, than it would be to sign a contract in Toronto or Calgary.

For the Telus 1GB plan, you could fly roundtrip from Calgary to Regina for $369 and save yourself $350 (after paying for the plane ticket) on a two year 1GB plan.

For the Rogers 10GB plan, you would save a whopping $1,180 dollars after the price of airfare if you flew from Toronto to Winnipeg and signed up for service there.

It might sound crazy, but check for yourself. If you decide to fly to Winnipeg, look me up. I’ll even pick you up at the airport.

Aside from pushing up demand for air travel, it’s hard to see how this kind of pricing is beneficial to anyone but the wireless carriers’ shareholders and management. Canadian carriers like Bell, Telus, and Rogers are supposed to be affected with the public interest – not opposed to it.

We as a country won’t even get close to having a fair market until you can walk, not fly, to a provider offering reasonably priced service.

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