Collusion is Killing Canadian Consumers

It’s really interesting to me how quickly Canadian consumers embrace new technology. Not even ten years smartphones were non-existent and just slightly more than the majority of people I worked with even had a cell phone. This was my cell phone in 2006, only to be upgraded in 2007 to a wonderful LG Rumor:

Today, it’s unfathomable that people wouldn’t have cell phones. The median age in my town is like 80* and everyone has a cell phone, and probably 90% are Telus customers. It’s fantastic to think though that in 2016 there are still households with cable and home phone subscriptions, but that’s a topic for another day. A service which is so ubiquitous in Canada (and the world) would surely have drawn competition from international markets or small-time competitors, no? Not in Canada.

Cell Phones for Canadian Consumers

Canada has three major players in the cell phone industry, aptly nicknamed, the Big Three. These nation-wide companies, Rogers, Telus and Bell, offer the latest phones and have the highest prices out of all the cell phone providers. Let’s say I want to get an iPhone 6 and I want unlimited calling and 1GB of data a month. This is a pretty decent cell phone package and not-too-expensive cell phone.

I love Excel so very much.

Bell offers plans with this hilarious line:

Unlimited access to the Canada’s largest Wi-Fi network, including participating McDonald’s®, Tim Hortons®, Indigo® and Chapters® locations

Like every single person who walks into those locations doesn’t have free unlimited access even without a Bell subscription.

My favourite thing about this exercise was having my hunch confirmed — once I had the numbers for B.C. numbers, I could have just copy/pasted my way through Alberta, Ontario and each of the maritime provinces. Unsurprisingly, despite huge differences in geography and population density, regional competitors were the only thing that affected cell phone prices.

If you look on the right-hand side, those numbers represent the total cost of a two-year cell phone plan, including phone. The worse packages offered were, nearly identical and offered by Bell and Rogers — two of the Big 3 — in B.C., Alberta, Ontario and the Maritimes. The best is Koodo’s 5GB plan in Manitoba. While more expensive than Virgin, the plan offers 5 times the data and costs 62% of what 1GB plan costs in the majority of the country.

It’s also interesting to note that each of the Big Three’s low-cost carriers were, in fact, the exact same price in the majority of Canada. The only notable differences were that Bell’s subsidiary Virgin Mobile and Rogers’ subsidiary Fido offered the phones for $0 on a two-year term, instead of $100.

Six different companies in 7/10 provinces charge the exact same price for cell phone service? 25 million people live in these provinces and aside from people who are financially able to purchase a cell phone outright, they have no option. Is How is that not collusion?

The industry is so small and incestuous that as recently as 2013 three companies — Wind, Moblicity and Public Mobile — withdrew from the Canadian Wireless Telecommunication Association because of unfair business practices. Today two of those three have been acquired by the Big Three and the third is owned by Shaw (a huge internet and cable company).

At this point — eight years after the CRTC tried to open the industry up to competitors and a year after the cell phone companies were forced to become more consumer-friendly, evidence of collusion remains rampant. The Canadian government needs to take serious action against the Big Three and their unfair business practices. We’ve reached a point where the government must step in and nationalize the cell phone networks into a not-for-profit Crown Corporation. In the meantime, buy shares.

Nationalization and Canadian Consumers

Generally I’m a huge fan of small government — especially since I’ve moved out of a major city. Government programs are mostly well-intended but are so difficult and expensive to manage that the private market can do a better job. When it comes to administering laws and policies, different parts of the country ought not to all be subject to the same wide-sweeping.

However. Industries which are vital to life do sometimes need a heavy dose of government intervention. In Canada, there are essential service laws which forbid policemen, paramedics, etc. from going on strike. Instead, the police find other, more creative ways to protest. A huge shock for me when I moved to Alberta was that electricity and heating weren’t nationalized,but rather run by private, for-profit companies. Forcing your residents to spend hundreds of dollars a month to heat their homes while non-residents reap the profits sounds as backwards to me as the American healthcare system. Essential services — heat, electricity, health care, education and cell phone service — should be nationalized or heavily regulated by the government.

Woah, woah, woah, crazy lady, that’s not a conservative thing to say. Yes, I get that. Nationalization is always a touchy subject but the benefits to residents are immense if done right. Rogers had $3.2 billion in profit from its wireless division in 2015 (PDF) which represents almost half of its mobile revenues. With 9.88 million subscribers each subscriber contributed about $325 to the bottom line. Eliminate the profit and instead of the 9.88 million subscribers paying an average bill of $102.44 a month (blended ARPU), cell phone bills can drop to $75.12 per month. $75 is still high but again, this is an average. Someone paying $70 could see their bill drop to $45, and so on.

Allowing more competition into the market is an idea that would only work if the barriers to entry weren’t so high. Regional competitors dominate in provinces which have long-standing infrastructure or in small, densely-packed areas. A new, strong competitor that can take on The Big Three isn’t going to happen. Instead, the government must step in to stop the collusion or nationalize the industry.