Why are cell phone plans so expensive in Canada?

• Canadians benefit from high-quality cell phone networks that offer good coverage and speeds, but we pay considerably more than other countries for the same level of service.
• Canadians pay 20% more than Americans and 170% more than Australians on their cell phone plans on average. For unlimited talk & text and 2 GB of data, we spend an average of $74/month, compared to $60/month in the US and $22/month in Australia. For 5 GB, we spend $87, compared to $63 in the US and $27 in Australia.
• The Big 3 Canadian telecom companies (Bell, Rogers and Telus) own 90% of the market and charge higher prices due to a lack of competition.
• The CRTC’s review of wireless services found the prices charged by Bell, Rogers, Telus and SaskTel and their profits are higher than in other countries. New providers trying to enter the market face barriers in launching services, and consumers face barriers in switching providers. Both of these factors limit competition. They state this prominently on their own website.
• In their submission to the CRTC, the Competition Bureau found that prices are in the range of 35% to 40% lower in the parts of Canada where a 4th, strong regional competitor has achieved a market share above 5.5%.
• The lack of competition is due to a wide variety of factors including the industry’s high barrier to entry, restricted foreign investment, limited access to the wireless spectrum, potential for price coordination and history of privatization and acquisitions.
• The national telecom companies have a go-to list of reasons why prices are high, commissioning their own studies to try and disprove the cost disparity by pointing to the size of Canada, how much they’ve invested, and trying to discredit independent studies – those not paid for by Canadian telecoms – by claiming their methods are flawed.
• Year after year, the federal government studies the industry, acknowledges that prices are high, commits to new approaches, directs the CRTC to prioritize the consumer, yet they capitulate when it comes time to assert their authority and decide in favour of consumers. The actions taken by the government and CRTC over the years to address industry competition, affordability and consumer choice have brought about slow, impermanent or even regressive progress.

Are cell phone plans expensive in Canada?

Ask any Canadian and they’ll likely tell you: yes – we pay more for our mobile service than other countries – particularly for data. But how much more do we actually pay compared to similar countries such as the US and Australia?

Despite using different methodologies and different datasets, all of these studies point to a similar and consistent conclusion: Canada has higher retail prices.

• Average cell phone bill in Canada vs other countries
• According to Sweden-based Tefficient
• According to Finland-based Rewheel Research
• According to studies commissioned by the Canadian government
• According to the US Federal Communications Commission (FCC)
• According to Korean government-funded research

Average cell phone bill in Canada vs other countries

For reference, the average Canadian uses a little over 2GB per month, but this number is likely artificially low due to higher data plans not being financially realistic for many Canadians. We are conditioned to think twice before opening a YouTube video, know we can’t watch much Netflix and end up hitting our limit or going over because we left our Spotify on. We would all like to be using much more – I know I would.

For comparison, mobile customers in Finland had the highest average usage at 23.5 GB of data per month, according to a 2019 report by Tefficient, a Swedish consultancy that tracks 116 operators around the world. In Austria, monthly data consumption was around 22 GB per month and in Taiwan it is 17GB. Americans use 8.5 GB per month. Canada is falling behind.

Unlimited data plans

In September 2019, the Big 3 significantly revised their pricing approach by introducing new ‘unlimited’ data plans at lower prices compared to their previous large data plans and dropping their more affordable plans with lower data caps – leaving them to their flanker brands.

No cap plans are a step in the right direction and should help with the usage and affordability of mobile data in Canada.

Bell, Rogers, Telus and Freedom and all offer ‘unlimited’ data plans. However, there is still a hidden soft data cap after which your speed is throttled to 256 kbps to 512 kbps until your bill rolls over into the next month. For reference, 512 kbps is fast enough to:

• load a mobile web page in 7 seconds.
• play 360p YouTube videos after a few seconds of buffering.
• stream a song on Spotify after a few seconds of buffering.
• load Instagram pictures in 5 to 10 seconds.

If you need more than 10GB per month, an unlimited data plan is worth considering.

The following studies confirm what Canadians already know:

Report by Sweden-based Tefficient

In 2018, their report showed that Canadian mobile operators drive the highest revenues per gigabyte in the world among a subscriber base that uses little data.

“Our country analysis shows that mobile customers in Canada pay very much for the data they consume.”

Tefficient

However, in 2019, Canada is missing from their reports.

Why?

Due to the:

“fact that the data is reported so late for Canada (and since none of the carriers report data traffic or usage) we aren’t too interested in incorporating Canada in our analyses going forward,”

“another reason is the workload created when lobbyists try to shoot down the credibility of the whole report because they don’t like to see Canada presented as an outlier. We have no business in Canada and have, unlike lobbyists, no agenda.”

Fredrik Jungermann, founder of Tefficient on Canadian telecom pricing data (emphasis ours)

CRTC data published with a year’s delay

The CRTC’s 2019 Communications Monitoring Report is based completely on 2018 data and was published on January 21, 2020 – a full year after the reported data was current.

Report by Finland-based Rewheel Research

In their April 2019 report Canada’s 4G wireless data is ranked as one of the most expensive compared to other countries in the developed world that have multiple network operators. Median prices per GB are considerably higher than in competitive large European markets with 4 carriers or the very competitive 5 carrier market in Israel.

In response, Telus commissioned its own study which concluded that the Rewheel report is “unrealistic” and required a “complete redesign” because it assumes customers only care about price and not about factors like quality or network coverage.

They also argued that it doesn’t take into account factors like deploying a network in a large country, differences in regulatory regimes or purchasing power parity, and doesn’t include family and prepaid plans.

Their 2020 study ranked Telus, Bell, and Rogers as the 1st, 2nd, and 3rd most expensive amongst 168 wireless carriers operating in 48 countries around the world.

In their 2021 study “Is Canada the most expensive wireless market in the world?”, they found that the minimum monthly price for a smartphone plan that includes 20GB in Canada is the highest among 51 European, American, Asia Pacific, Middle East and African countries. Consumers in Canada pay 7x more every month than consumers in France for 20 GB.

Studies commissioned by the Canadian government

The 12th (2019) edition of the price comparison study commissioned by ISED showed that while Canadian wireless plan prices have continued to decrease, prices continued to be higher than compared to G7 countries (US, UK, France, Italy, Germany, Japan) and Australia. The 2018 edition indicated that prices in each basket were either the highest or second-highest and at least double that of Australia.

When you focus in on mobile internet, it paints a slightly different picture. Canada’s average prices are comparable to the US and Japan, but noticeably higher than all other countries:

Prices have fallen slightly at the 2-5 GB level since 2010, but not as quickly as other G7 countries. Prices remained stagnant at the 5-10 GB and 10 GB+ levels since 2012 and 2016 respectively (similar to the US) while other countries’ prices have decreased considerably.

In response, Telus commissioned its own report claiming that the report was flawed. It concluded that “communications services in Canada are cheaper than the prices foreign providers would charge for the same plans.” The report criticised the price comparisons because the plans didn’t have the exact same offerings. For example, it said it wasn’t fair to compare a more expensive 3 GB plan in Canada against a cheaper 2 GB plan in the U.S.

They are likely referring to how mobile internet services were grouped into 3 data baskets for comparison that represent a typical Canadian’s low, “average” and high usage:

• Level 1: 2 to 5 GB (low)
• Level 2: 5 to 10 GB (middle)
• Level 3 10+ GB (high)

It’s true that it would be ideal to break things down even further by using 5 service baskets instead of 3 as they did to compare wireless plans, however they did not argue that doing so would lead to different results.

They also argued that it doesn’t take into account factors like geography, labour costs, and the weather to ensure a “normalized” cost for wireless services.

Study by the US Federal Communications Commission’s (FCC)

Their 2018 study looked into international retail prices using an econometric model to correct for the potential effects of country-level differences in costs, demographics, and network quality. The study found that Canada had some of the most expensive retail prices in the 29 OECD countries surveyed. These two studies suggest that it is the lack of competition that drives Canadian retail prices to be among the highest in the world, and not other factors such as income, network costs, or network quality.

Korean government-funded study published in the journal Telecommunications Policy

In their 2019 study, “Quality-adjusted international price comparisons of mobile telecommunications services,” Telecommunications Policy, Seong Hun Yun, Yongjae Kim, and Minki Kim found that after controlling for factors other than competition (such as network quality), prices in Toronto are the highest or second highest among the 12 major cities analyzed for the study, which are located in 10 countries (i.e. all G7 countries plus Australia, Spain, and Sweden).

Why plans are expensive according to telecoms

• Canada’s low population density
• Top “world-class” network performance
• Large infrastructure investments
• “They’re affordable”
• “Prices are decreasing”

Low population density

Telecom companies often argue that Canada is a vast country and what we’re paying is simply the cost of their comprehensive coverage.

Canada does have one of the lowest population densities in the world at 4 people per km², but it’s similar to that of Australia: 3.2/km².

However, comparisons to other countries are often unfair because the population is quite concentrated and there are vast expanses of unpopulated land. This goes for Australia as well.

Taking a look at Bell’s coverage map for example, their LTE coverage covers less than a third (28.8%) of Canada’s landmass (28.8% for Telus, 19.9% for Rogers) which they confirmed reaches 99% of the Canadian population in their 2019 annual report.

According to data in a 2018 report by the Montreal Economic Institute (MEI), Australia has slightly greater geographical challenges than Canada after adjusting for network coverage in Canada (20%) and Australia (31%), but still offered cheaper plans across the board as outlined above.

Size of country and population density alone do not explain Canada’s high rates.

Top performance

Another common response from the Big 3 is that Canada’s networks provide some of the best coverage and speeds in the world.

Speeds in Canada do compare very favourably with speeds in other OECD countries. 2 of the 3 nationwide networks run on 4G-LTE networks exclusively and reach 99% of Canada’s population. Opensignal ranked Canada second for mobile network speed after South Korea and Speedtest ranks us 8th.

Large investments

Telecom companies also often cite how much they have to invest in their networks to keep them cutting edge.

From 1987 to April, 2019, Canada’s network operators have invested over $70 billion in building wireless networks – over $50 billion in infrastructure, $17.6 billion on spectrum acquisition, and the rest on annual license fees.

Between 2010 and 2016, Canadian companies invested on average $78 per connection, less than the average of $97 in the US. Based on 2016 Bank of America Merill Lynch data, Canada spent $67.48 per wireless subscriber – most out of the G7 countries and similar to $67.24 per subscriber by the US.

However, Australia invested more per capita on telecommunication services between 2005 and 2015 and as of 2018, had faster network speeds and lower prices.

It is estimated that, between 2020 and 2026, $26 billion will be spent in deploying 5G infrastructure in Canada. Canadian companies spent $3.5 billion on 5G wireless spectrum in 2019 and will likely spend even more in the 2021 auction. Telus has committing to spending $40 billion over the next 3 years in critical technology components to support the roll out of 5G, Bell and Rogers plan to spend $4 billion and $2.9 billion respectively over the course of 2020 alone.

After this flurry of investment, only time will tell how 5G phone plan prices compare.

“They’re affordable”

“Canadians spend less on wireless than Americans. It’s a myth that Canadians pay some of the highest wireless prices in the world. The average Canadian household spends just 1.6% of their disposable income on wireless versus 2.6% in the US. – PWC Canada.”

Industry regulator Ad Standards Canada found that this statement, in a full-page Telus newspaper ad published in Quebec contained misleading claims as it mixed up considerations of affordability and price to give the impression wireless prices were lower in Canada than other countries.

The study did support the claims that Canadians spend a smaller percentage of their disposable income and a lower total amount on their phone plans than Americans, it did not support back the claim that prices are lower in Canada compared to the world.

Canadians being able to afford something doesn’t necessarily make it a good deal.

And the “myth” claim is still on their website with the second part revised:

“They should be expensive”

In a 2013 blog post that has since been taken down, Ted Woodhead, the company’s Senior Vice President of Federal Government and Regulatory Affairs said:

“When you consider our enormous investment, challenging geography, sparse population and outstanding networks Canada really SHOULD be the most expensive country for wireless service in the OECD, but we’re not,” “That’s a great success story we should be celebrating.”

Ted Woodhead, Telus Senior Vice President of Federal Government and Regulatory Affairs

“Prices are decreasing”

A 2020 blog post on the Rogers Policy & Regulatory blog by the same Ted Woodhead now Senior Vice President, Regulatory said that by dividing Rogers, Fido and chatr revenue by data traffic to determine price per GB [used], you can see that the cost per GB [used] – has declined over 50% in the last 5 years and nearly 70% since 2013.

“Most coverage of this issue is missing key facts and provides an inaccurate view of the situation, suggesting that the price of wireless service in Canada, especially data, remains high and unchanging. In fact, the opposite is true. Wireless prices are declining, and consumers are receiving better value.”

Ted Woodhead, Rogers Senior Vice President, Regulatory

However, this does not mean that plans (actual bill payments) are getting cheaper or more affordable. They have been offering more data for the same or similar plan prices, so you’ll still pay a hefty fee if you want a plan with a useful amount of data.

For example, for unlimited talk and text and 4G data speed at Koodo in November 2020, the minimum monthly cost started at $50.85 (incl. tax) or $610.20 per year. In May 2022, the entry level price is around $42.38 (incl. tax) or $508.50 per year:

Koodo, November 2020

Koodo, May 2022

The 2019 price comparison report from the department of Innovation, Science and Economic Development (ISED) shows that prices are indeed coming down – between 8% and 22% from 2017 to 2019 for various levels of service. This was also reflected in the CRTC’s annual communications report which stated that wireless prices fell between 21% and 35% from 2016 to 2018.

However, if you focusing on comparing by mobile data alone, prices have remained relatively flat in the 2-5 GB, 5-10 GB and 10+ GB baskets.

This data also omits the fact that prices are dropping as fast or faster in other countries. For example, prices in the US decreased between 7% and 30% over the same period. This is thanks to, in part, improvements in wireless technology and economies of scale as can be seen in the dropping prices for the same quality of TVs, computers and cameras.

Still hungry for more, this results in Canadians across the board continue to increase their spending on wireless every year. From 2014 to 2018, the national average revenue per user (ARPU) increased from $61.03 to $69.61 per month, an average increase of 3.3% per year.

According to Statistics Canada’s cellular services price index, wireless prices have declined by 25.8% between March 2020 and March 2022. These stats have been widely touted by the government and reported by the media, but similar to the Price Comparison Report, they focus on the price per GB of data and don’t reflect the actual affordability of the monthly bill payment generated by the available plan options.

Canadians are receiving more data over time, but plans with useful, practical amounts of data continue to be pricey.

Why are plans actually so expensive?

Rogers, Bell and Telus have little incentive to lower their prices and undercut each other. They charge as much as they do simply because they can due to a lack of competition. Some of the factors limiting competition are:

• Large market share
• High barrier to entry
• Access to the wireless spectrum is finite
• Privitizations and acquisitions
• Reciprocal network sharing agreements
• Restricted foreign investment
• Size and profitability
• Aggressive or misleading sales tactics
• Potential for coordination

Large market share

Canada’s Big 3 telecoms Bell, Rogers and Telus have a high and stable market share. They receive 90.7% of the mobile market revenues which total $28.8 billion per year. This has not budged much since the first CRTC report in 2012:

Only 55% of Canadians had access to coverage from 3 or more networks and the only provinces where Canadians had access to 4 or more networks were Ontario and Quebec.

Freedom Mobile is the 4th largest carrier, but has only been able to roll out limited coverage to parts of Ontario, BC and Alberta and mostly in cities. Their acquisition by Shaw gave Shaw a foothold in the market and set the stage for a 4th national carrier to emerge. However, that potential progress would be erased if Rogers completes its acquisition of Shaw – ensuring the Big 3 does not become the Big 4.

Regional competitor leads to lower prices

There are 4 areas in Canada where you’ll pay noticeably less for service: Saskatchewan, Thunder Bay and Quebec, which all have vast, unpopulated land. What else do all of them have in common? A strong regional carrier (SaskTel, Tbaytel, Videotron, respectively).

Based on the latest price comparison study, these regional providers offer mobile wireless prices that are 12% to 34% lower and mobile internet prices that are 19% to 31% lower than the national carriers.

In their submission to the CRTC, the Competition Bureau found that prices are in the range of 35% to 40% lower in the parts of Canada where a 4th competitor has achieved a market share above 5.5%.

Their nine-month review of BCE Inc.’s (Bell) 2017 acquisition of Manitoba Telecom Services (MTS), found that higher prices exist where there is no strong regional competitor, and were likely a result of softened competition among the three national wireless carriers.  Further, factors such as network quality and population density did not explain the price differences.

When only Bell, Rogers and Telus are available in an area, prices are higher.

More competition from regional carriers has proven to provide Canadians with lower prices.

High barrier to entry

Bell, Rogers and Telus 4G LTE and LTE-A networks cover 20% to 30% of Canada’s geographic area and provide coverage to 99% and 94% of the population respectively.

In order to enter the market and compete, a new challenger has to have a vast amount of capital available to spend big at wireless spectrum auctions, build a new nationwide network by installing antennae on existing towers and maintain them.

In 2008, the 2 Ghz wireless spectrum auction led to the creation of new companies Wind, Mobilicity and Public Mobile which spent large amounts of money provided by their investors to acquire licenses to allow them to launch cell networks to compete with the Big 3.

• Wind Mobile spent $442 million.
• Mobilicity spent $243 million
• Public Mobile spent $52 million.

This does not include the cost of hardware and installation, which were hundreds of millions more.

Access to the wireless spectrum is finite

Since 1999 Industry Canada has auctioned-off licences that assign blocks of access to the wireless spectrum over which information is transmitted long distances (eg. radio, TV and GPS) and in this case, for cellular communications.

The licence gives the holder the sole right to use those frequencies. Just like for a radio station broadcasting at 99.1 FM (MHz) only one station can transmit at that frequency in a given area, otherwise they’d cause interference with each other.

There has been a massive growth in demand due to the rise of smartphones, data usage, and faster technologies (LTE, 5G) but the spectrum is a finite, scarce resource – there is only so much of it to go around. This has resulted in over $16 billion being spent to acquire it in the past 20 years.

Canada’s 2008 Advanced Wireless Services auction raised $4.3 billion and the price per MHz per population was $1.34 for a 10 year licence. In 2014, $5.2 billion was raised with average price of $2.32 per MHz per population for a 20 year term.

The licences are valid for a standard 20 year term and there is a “high expectation” of renewal for an additional 20 unless the conditions have been breached or the spectrum needs to be used for something else. After that, the Minister of ISED determines the re-issuing process after a public consultation.

Reciprocal network sharing agreements

In 2001, Bell and Telus struck an agreement to share their networks which enabled them to cancel their plans to extend their wireless networks into rural areas (Bell in the West and Telus in Ontario and Quebec). This saved each company at least $500 million in network investment over 10 years.

3 months after the end of the 2008 spectrum auction that welcomed 3 new competitors, Bell and Telus announced that they would work together through a network sharing agreement that would involve each investing in upgrades to their own network and then overlaying the 2 networks to share the resulting widest-reaching network.

“We got Canada built out in less than one year — 98% covered — by basically splitting up the country and making it economical to do,” “That’s the benefit of having network sharing.”

Bob McFarlane, chief financial officer for Telus (source)

“Let’s make no mistake, Canada’s gone from three national networks to two and that is not a positive thing [for competition]. More networks are a good thing,” “This is not a modest sharing of the radio access network, this is a single network. They used to each have a network, now they share one,”

Ken Engelhart, senior vice-president of regulatory affairs for Rogers

More recently, Bell and Telus submitted a joint application to share licenses in the AWS-3 band which was approved by ISED after assessing the objectives and criteria in section 5.6 of the Licensing Procedure for Spectrum Licenses for Terrestrial Services and concluding that it wouldn’t impact “the ability of existing or future competitors to provide services in the relevant areas.”

In their September 2019 report on the root cause of weak competition in Canada, Rewheel Research found that:

Rogers, Bell and Telus engage in reciprocal network sharing, spectrum crosslicensing, subordination and joint spectrum acquisitions – measures that are most likely restrictive and anti-competitive.

Rewheel Research

The report states that Canada is not a 4-network market in the making with Bell, Rogers, Telus + Freedom on the rise. It is also not a true 3-network market where 3 carriers cover the entire country with an independent network.

Instead, it is a bunch of regional network monopolies and duopolies stitched together by extensive and possibly coordinated agreements.

A post by sheytoon on the Public Mobile community forums, explains how the network is shared in more detail:

• UE is your phone.
• E-UTRAN is the LTE Radio Access Network (RAN). In LTE, the RAN consists of the eNodeB (towers) that your phone talks to.
• Evolved Packet Core (EPC) is the LTE core network. This equipment is hosted in a few secure facilities across Canada. Data between RAN and core is carried by a “backhaul” network (not shown)

Bell and Telus only share the E-UTRAN network layer for 3G and LTE across Canada. In the west, Telus owns the towers, and Bell users are allowed to use it. In the east, it’s the other way around. This allows Bell and Telus to spend less money building out a network, while both benefiting from it.

In response, Telus and Rogers will argue that there is nothing stopping other operators from striking similar sharing agreements while at the same time refusing access to MVNOs. But without similar market power, what leverage does a smaller competitor have to get a reasonable deal on a network sharing agreement?

The CRTC has had to address 2 disputes between carriers and potential MVNOs (Ice Wireless and TNW Wireless) where the potential competitor was unable to negotiate an agreement with the wireless carrier. In both cases, the potential competitor decided to try using the wholesale roaming rate system as an alternate means of entering the market by and were eventually blocked from doing so by the CRTC.

Bell and Telus have drastically reduced infrastructure investment costs by sharing each other’s networks.

Privitizations, mergers and acquisitions

Acquisitions

August 2022 – Quebecor to acquire Freedom Mobile

Quebecor announced it would acquire Freedom Mobile, the 4th largest wireless carrier in Canada, from Shaw $2.85 billion. The company had 2,188,845 subscribers (Feb 2022) (6% market share), mostly in urban areas of Ontario, British Columbia and Alberta.

This paves the way for Rogers’ acquisition of Shaw TV and internet businesses. The transaction is conditional on Competition Bureau and ISED approval.

Founded in 2008 as the independent provider Wind Mobile, the company had previously been acquired by Shaw on March 2016. No regulatory action was taken on the transaction as it did not reduce the number of national wireless competitors and supposedly setting the stage for a 4th national carrier to emerge. (That sounds familiar)

Bell acquires Manitoba Telecom Services (MTS)

Regional telecom Manitoba Telecom Services (MTS) was privatized by the Government of Manitoba in 1996 and acquired by Bell on March 17, 2017 in a transaction valued at approximately $3.9 billion. It now operates as Bell MTS.

The Competition Bureau warned that the acquisition would likely increase prices and reduce options for consumers after a 9 month investigation into the deal.

A few years after they came into being, the companies that were hailed as the new wave of competition in the Canadian market (Wind, Mobilicity and Public Mobile) were acquired by major players and are now either a subsidiary or defunct:

Rogers acquires Mobilicity

Mobilicity launched in 2008, went bankrupt in 2013, and was acquired by Rogers June 24, 2015 after Telus was blocked from acquiring the company in 2013.

Telus acquires Public Mobile

Public Mobile launched in 2008, and was acquired by Telus October 2013. Competition Bureau statement

Rogers acquires Fido

Fido launched December 1996, and was acquired by Rogers November 2004.

Privatizations

Canada used to have more government-run telephone companies that directly regulated prices – to mixed success – similar to how our utilities are owned and operated now. Since the 1990s most of these companies have been privatizated or merged with the Big 3.

For example, in 1996, the Provincial Government of Manitoba sold Manitoba Telephone System (MTS) to private shareholders.

Telus Communications was formed in 1991 when Alberta Government Telephones – which had been a crown corporation since 1958 – was privatized by the province. They merged with BC Tel in 1999.

Foreign investment is restricted

In Canada, every major phone, internet and television provider is Canadian. A few foreign companies also offer services to a handful of customers, but they are all ultimately dependent on accessing Canadian firms’ infrastructure.

Since 1993, the Telecommunications Act has required that a carrier must be incorporated in Canada, 80% of its board of directors must be Canadian, 80% of its voting shares must be owned by Canadians, and it must not be otherwise controlled by foreign interests. Corporations investing in the operating carrier (holding companies) are considered to be Canadian if 66.67% of voting shares of that corporation are held by Canadians and it is not otherwise controlled in fact by non-Canadians.

Without the threat of a new, well-financed foreign company coming in to build its own networks and steal customers, Canadian service providers benefit from this protectionism.

Profitability and size create market power

Profitability and investments

Look no further than the Big 3’s annual financial reports. Bell, Rogers, Telus are consistently high-performing businesses and are amongst the largest and most profitable companies in Canada.

In 2019, Bell had just under 10 million wireless subscribers that brought in revenues of $9.14 billion and $3.84 billion in earnings (42% margin) for average earnings per subscriber of $385.42.

As publicly traded companies, the Big 3’s responsibility is to protect their interests and those of their shareholders – not necessarily to the Canadian consumer.

That said, their shareholders are in large part institutional investors with stakes of 47%, 48% and 53% respectively including mutual and pension funds. Their shareholders are also in large part the Canadian public, with stakes of 70%, 8% and 78% respectively, so in a roundabout way, they are beholden to many Canadians, but their growth and profitability are also of prime importance to those same people. Some consumers have jokingly referred to the high plan prices as a ‘forced savings plan’.

Major telecoms threatened to reduce their investments in improving rural networks if the government agreed with the CRTCs proposal to lower wholesale rates, leading the government to change their mind on wholesale internet prices. This has already led to higher internet bills.

Large employers

In addition to financial performance, they are large organizations that provide employment to many people in Canada. Interesting to note is that Canadian telecoms have 1.3 to 6 times more employees per dollar of revenue, even though the US has 9 times the population of Canada.

This enables them to wield their employees as leverage in threats and warnings to government and regulators. For example, Telus said it would cut 5,000 jobs if CRTC approved MVNOs.

A PwC study released by the Canadian Wireless Telecommunications Association (CWTA) which represents the major wireless companies in Canada, including PwC itself, specifically highlighted that telecom in Canada directly employs over 120k people in high value, well-paying jobs.

The report concluded that Canada’s GDP would be reduced by $10 billion over 5 years, tax revenue would drop $2.5 billion and 94,000 jobs would be lost if MVNO access was mandated.

With size and profitability comes market power.

Aggressive or misleading sales practices

A study by the CRTC that included a public consultation, public opinion research and a 5 day hearing concluded that many Canadians have experienced misleading or aggressive sales practices by telecom companies and that these harmful practices “exist in all sales channels, including in store, online, over the phone, and door to door.”

Examples given include call centre employees adding services to a customer’s account without permission, retail store employees fudging contract details and door-to-door salespeople misrepresenting contract prices.

Potential for coordination

Canadians often note how similar providers’ plan prices are and quickly attribute it to the market being an oligopoly:

The Competition Bureau has stated that Canada’s wireless industry is highly susceptible to coordination and that it is likely that coordinated behaviour between the Big 3 exists.

Their investigation into Bell’s acquisition of Manitoba Telecom Services (MTS), found that as a result of coordinated behaviour among Bell, Telus and Rogers, wireless prices in Canada are higher in regions where they do not face competition from a strong regional competitor and that prices are substantially lower in areas a strong regional competitor can disrupt the effects of coordination among them.

Pricing signals can be communicated using public announcements and posted prices that are publicly available, closely monitored, and quickly reacted to.

Past investigations by authorities in Netherlands, Ireland and France have found that their wireless operators released unilateral public statements in the press or at conferences, coordinated on price and/or denying independent MVNOs network access.

Price-fixing vs price coordination

Price-fixing refers to written or verbal agreements or arrangements made between competitors to fix, maintain or control the price of a product or reduce competition in a market.

Price coordination refers to an a situational understanding or implication that exists between competitors that isn’t necessarily communicated or negotiated. It stems from a recognition that both companies can benefit by competing less aggressively.

While price-fixing is an indictable criminal offence under Section 45 of the Competition Act, price coordination is not.

Previously implemented solutions

Some progress has been made in fostering a more competitive mobile industry through a combination of regulatory initiatives including:

Limiting data overage fees

In 2017, the CRTC’s Wireless Code of Conduct limited data overage charges to $50 for single mobile phone bill and to international data roaming overage to $100 unless the user chooses to purchase more data. Unfortunately, these caps do not apply to minutes, texts or international calls.

Mandatory roaming and tower sharing

The CRTC made it mandatory for the Big 3 to provide national roaming services at regulated wholesale rates to regional mobile network operators including Freedom Mobile, Videotron and SaskTel.

This way, a regional operator can assure their customers will have national coverage when they leave their home regional network and connect to other networks as they travel across Canada – at a reasonable price to the regional operator. Unfortunately, this doesn’t apply to MVNOs.

Tower sharing was made mandatory in order to reduce the number of new cell towers being built and to make it quicker, easier and cheaper for competitors to enter and compete in new markets. It applies to all carriers in all bands and mandatory roaming applies to all operators with Cellular, PCS, AWS, MBS or BRS bands.

Auctioning the spectrum

Since 1999, Industry Canada has implemented an auction format to assign blocks of spectrum to telecom companies and has since implemented pro-competitive measures such as spectrum set-aside and caps.

Potential solutions to make plans less expensive

Mandated Mobile Virtual Network Operator (MVNO) access

Previously, it had been up to the national carriers to individually negotiate and agree on wholesale rates with MVNOs – which they haven’t been willing to do voluntarily or fairly.

Mandatory MVNO access would mean independent wireless companies would have access to providers’ networks via regulated wholesale rates and compete on prices, plans and customer service. This approach is already used for internet prices.

Redesign the wireless spectrum auction

Wireless spectrum is an increasingly valuable and finite resource. Access to it is vital for networks to provide reliable, high-speed and far-reaching mobile connectivity.

The first spectrum auction was held by Industry Canada in 1999 in a simultaneous multiple round auction (SMRA) format. Before that, most spectrum was assigned on a first-come, first-served basis with some allocations as early as 1995 taking into account the speed and extensiveness of coverage of the network planned by the applicant.

While changing to an auction format provided a number of benefits including providing a more open, objective and efficient process, there was also significant political motivation to increase government revenue without having to increase taxes by tapping the public resource. The auctions have raised billions of dollars that go directly to the Government’s revenue account – the same place as our taxes.

Since then, they have tested different auction formats and implemented additional pro-competitive measures including setting aside a chunk of spectrum that only smaller players can bid on and cap limits to ensure large players don’t buy it all up.

A spectrum set-aside ensures that a minimum amount of spectrum is reserved for a certain sub-set of entities – typically newer, smaller competitors.

A spectrum cap limits the amount of spectrum that each licensee is allowed to obtain, ensuring there are at least a few service providers in a given area.

Reserving space for small and regional companies has led to lower prices for consumers, but really only in the region they operate in (eg. Quebec, Saskatchewan, big cities). More spectrum should be set-aside in areas that do not have a strong regional carrier to help small companies get a foothold.

There should also be a more well-defined licence renewal process that doesn’t lean as heavily on ISED considering a public consultation to determine the conditions and fees.

Based on the history of the auctions and the resulting fates of the telecom companies created and acquired over the years, increasing competition likely cannot be accomplished through adjustments to the spectrum auction alone, however, it is an important piece of the puzzle as the industry prepares for the next phase: 5G.

Timeline of actions by the government and CRTC

We put together this timeline of the actions taken by the CRTC, the Government and telecom companies to figure out where things currently stand and how we got here. Here’s generally how it goes:

• 2006 – Issue an order direction to the CRTC on implementing policy directives SOR/2006-355
• 2018 – Acknowledge prices are high, competition is low
• 2018 – Commission industry report
• 2019 – Issue a pro-consumer policy direction to the CRTC
• 2019 – Issue a pro-consumer policy direction to the CRTC
• 2019 – Acknowledge prices are high, competition is low
• 2019 – Commission industry report
• 2020 – Commission industry report
• 2021 – Commission industry report
• 2022 – Acknowledge prices are high, competition is low
• 2022 – Issue a pro-consumer policy direction to the CRTC
• 2023 – Issue a renewed approach to telecommunications policy direction to the CRTC, replacing the 2006 and 2019 directions

Let’s take a look at the timeline so far:

December 2019 – Liberal government promises to reduce cell phone bills by 25%

March 2020 – Liberal government gives Big 3 2 years to cut prices by 25%

The benchmark price, or the price to which the 25% reduction will apply, is based on prices advertised on company websites in early 2020 for post-paid, bring your own device (BYOD), unlimited talk and text 4G/LTE plans in the 2 GB to 6 GB range.

• $50 for 2GB down to $37.50
• $55 for 4GB down to $41.25
• $60 for 6GB down to $45

The government tracks and publishes the prices publicly in the Telecom quarterly report.

April 2021 – CRTC chooses facilities-based MVNO over wholesale MVNO model

The decision requires the Big 3 to sell access to their wireless networks at regulated wholesale rates, but only to regional providers that have invested in their own network infrastructure and spectrum, only for a period of 7 years and rates must be negotiated between the parties (rather than being set by the CRTC) – a true half-measure decision. It also requires the Big 3 to implement seamless roaming.

This will enable, but not require existing regional providers such as Videotron and Xplornet to immediately start serving new areas and competing for customers there while incentivizing them to build out their physical networks – essentially a glorified roaming agreement.

The CRTC hopes this will be enough to convince a regional provider to expand across Canada and become a national player.

The decision cuts out existing and would-be smaller, independent MVNOs from entering the market without first buying wireless spectrum – a scarce and expensive resource.

This seems odd considering how open wholesale access model has has some success in the internet services market – enabling independent wholesale ISPs to hold 7.2% of the market as of 2019 – up from 4.6% in 2013.

May 2021 – Big 3 partially satisfy the government’s 25% price reduction requirement

Bell, Rogers and Telus cut the cost of the 6 GB plans at their flanker brands Virgin, Fido and Koodo by ~25% to $45 in all provinces except Quebec, meeting the government’s objective. Instead of lowering the prices of their 2 GB or 4 GB plans, all 3 brands initially cut them out entirely:

May 2021 – TekSavvy withdraws from the spectrum auction

TekSavvy will not be taking part in the auction of wireless spectrum due to the internet rates decision, which would have meant a new competitor and more choice of mobile phone plans for consumers. They pointed to the wholesale internet rate decision as the reason.

Ian Scott makes it clear he personally prefers the tried and failed model of facilities-based competition.

November 2021 – Phone plan affordability no longer in Liberal platform

March 2022 – Big 3 meet the government’s 25% price reduction requirements (mostly)

Virgin, Fido and Koodo made 2 GB, 4 GB and 6 GB “Starter plans” available at the bottom of their plans pages, priced exactly to the required 25% reduction. The catch is that the plans are for new activations only, so it’s time to switch providers! Only time will tell how long these plans will be available.

March 2021-23 – Rogers acquires Shaw for $26 billion

Shaw’s home telephone, wireless and internet services are not subject to CRTC approval, but are being reviewed by the Competition Bureau and Innovation, Science and Economic Development Canada (ISED), which controls the usage of spectrum licenses used to provide wireless services.

The acquisition of Shaw’s broadcasting (TV) services was approved by the CRTC, with requirements that Rogers must:

• contribute $27.2 million across various funds including the Canada Media Fund (80%), the Independent Local News Fund, the Broadcasting Accessibility Fund and the Broadcasting Participation Fund
• create an Indigenous news team with journalists in all provinces where they deliver stories to First Nations, Métis and Inuit communities
• employ a higher number of journalists at its CityTV stations across the country
• produce an additional 48 news specials in prime time each year that reflect local communities
• distribute at least 45 independent English and French-language services on each of its cable and satellite services
• report annually on its commitments to increase its support for local news

Bell, which had made and later withdrew its own offer to buy Shaw, argued in its intervention to the CRTC that it would give Rogers “unprecedented market dominance” – 35.5% of national (47% of English-language) broadcasting distribution and revenues, and one of every three Internet connections in Canada – exceeding the 35% threshold the Bureau uses to identify transactions that may be anti-competitive.

The Competition Bureau filed court applications seeking to block the transaction, so Shaw announced it would sell off Freedom Mobile-branded phone and internet subscribers to Quebecor, and sell the remaining TV, internet businesses and Shaw-branded subscribers to Rogers in the hopes of getting regulator approval.

The Competition Bureau lost its appeal when the Competition Tribunal ruled that competition wouldn’t be substantially reduced.

Final approval was given by federal Innovation, Science and Industry Minster Francois-Philippe Champagne on March 31, 2023, saying that after years of high wireless prices, now he’s serious. If prices don’t come down, he’ll threaten them yet again. The deal finalized on April 3, 2023.

Rogers must follow these conditions subject to financial penalties of up to $1 billion for non-compliance:

• Creating 3,000 new jobs in Western Canada and maintaining them for a minimum of 10 years after the closing date;
• Establishing a Western headquarters in Calgary and maintaining it for a minimum of 10 years after the closing date;
• Investing $1 billion to expand broadband Internet access, at speeds of at least 50/10 megabits per second, and 5G mobile service in areas where it is not currently available;
• Investing at least $2.5 billion to enhance its 5G network in Western Canada, and $3 billion in additional network service expansion projects; and,
• Expanding access to low-cost broadband Internet plans and launching a new low-cost mobile offering for low-income Canadians.

Videotron must follow these conditions, subject to financial penalties of up to $200 million for non-compliance:

• Freedom Mobile, will be sold to Quebec-based Videotron while Rogers will keep Shaw Mobile, which operates mostly in Alberta and BC.
• Will offer plans that are comparable to those currently available in Quebec, and offer options at least 20% cheaper than those made available by the major players
• Cannot transfer the Freedom Mobile licences for a period of ten years
• Will have to expand its 5G wireless network in Freedom Mobile’s pre-existing operating territory within two years
• Will expand mobile service into Manitoba via the use of a signed Mobile Virtual Network Operator (MVNO) agreement or other means and offer plans comparable to what it offers in Quebec
• Will increase data allotments of existing Freedom Mobile customers by 10% as a near-term bonus while it invests to bring down prices overall.

Conclusion

Canadians pay considerably more for their phone plans than consumers in many other developed countries because there is little to no competition in most regions across the country.

While it’s easy to point the finger at the Big 3, they are public companies expected to maximize profits. At the end of the day, their playing field is determined by the regulatory bodies that exist to keep them in check: the government (ISED), CRTC, and Competition Bureau.

From auctioning spectrum to spectrum set-asides and mandatory tower sharing, the competitive changes over the past 20 years have little progress in the competitiveness of Canada’s wireless market. Strong, decisive action must be taken is necessary if any improvement is to be expected.

At a minimum, MVNOs should be implemented on a temporary basis to help regional providers expand their networks across the country with the condition that if it doesn’t lower prices for Canadians within a few years, that full MVNO access is mandated.

“The issue is not whether Canadian consumers pay some of the highest rates for wireless services anywhere in the developed world (in fact, Telus suggests Canada should have the highest prices in the world). Rather, it is what, if anything, Innovation, Science and Economic Development Minister Navdeep Bains and the CRTC are prepared to do about it.”

Michael Geist, law professor, Canada Research Chair in Internet and E-commerce Law at the University of Ottawa

Take action

Make your voice heard in 2 clicks

If any of the above doesn’t sit well with you and you want to see change including more competition and lower prices, you can email the Minister of Industry, Science and Economic Development and your MP (find yours here) and ask for government, CRTC and Competition Bureau intervention.

An example of what to write:

“Minister, I’m a Canadian deeply concerned with the flaws in the regulation of the wireless industry. We have a system where true competition is not present and as a Canadian I’m formally requesting you respond and am formally requesting this letter is sent to the Competition Bureau.

Thank you for hearing my concerns, I look forward to your response.

Regards,
Your Name“

Send a message to the Competition Bureau

Canadian consumers and stakeholders who wish to share their views on competition-related issues regarding a merger or acquisition transaction are invited to complete the following form.

Stay informed

• Know your rights by reading Canada’s Wireless Code of Conduct
• How to Make a Complaint About Your Telephone Service – CRTC
• CRTC public inquiries and complaints form
• Support the Public Interest Advocacy Centre

Sources

• Telecom quarterly report: Price collection data – Innovation, Science and Economic Development Canada
• CRTC’s Communications Monitoring Reports
• Review of Mobile Wireless Services (2019) – Competition Bureau
• Price Comparisons of Wireline, Wireless and Internet Services in Canada and with Foreign Jurisdictions (2018)
• Price Comparisons of Wireline, Wireless and Internet Services in Canada and with Foreign Jurisdictions (2019)
• Price Comparisons of Wireline, Wireless and Internet Services in Canada and with Foreign Jurisdictions (2020)
• THE STATE OF COMPETITION IN CANADA’S TELECOMMUNICATIONS INDUSTRY – 2018 – Montreal Economic Institute
• The state of 4G pricing (2018) – Digital Fuel Monitor, Rewheel
• Price Comparison Study of Telecommunications Services in Canada and Select Foreign Jurisdictions (2017) – Innovation, Science and Economic Development Canada

Over to you

How much do you pay for your phone plan and what do you get for that price? Let us know in the comments below!