Is the Canadian Wireless Pricing Competetive

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ECONOMIC NOTE

Is the Canadian Wireless Sector Competitive?

Nearly two decades after having decided that it was not necessary to regulate the wireless telephone sector, the Canadian Radio-television and Telecommunications Commission (CRTC) decided this past April to revisit its decision and hold public consultations on the matter. It should soon announce whether or not it believes that formal regulation is required to ensure that the sector remains competitive.1 Wireless telephony now includes data transmission and has become a competitive factor for businesses in an environment in which communications technologies are developing rapidly.

Some observers of the Canadian wireless sector, basing themselves on certain Canadian and international studies,2 maintain that the sector is not competitive enough and that more regulation is required to force providers to lower prices, increase download speeds and improve service quality. These critics also believe that Canadian consumers are at a disadvantage compared with consumers in other developed countries and that Canada is constantly losing ground in terms of innovation, penetration rates and investment in infrastructure. At a time the CRTC is asking itself whether it should regulate the wireless sector, it is appropriate to look at the state of this industry in Canada. Much higher prices than elsewhere? The studies carried out by the OECD are among those most often cited to lend support to the idea that the prices of wireless telephony in Canada are much higher than elsewhere. However, Canada does not look that bad in the most recent biannual report on the communications industry, published by the OECD in June 2011. In four out of six usage scenarios, in fact, prices are lower in

by Yves Rabeau

Canada than in the United States, although they remain higher than the OECD average. Furthermore, in the usage case including the most calls and text messages, Canada ranks as the fifth least expensive of 34 countries.3 Nonetheless, the main story to appear in many Canadian media outlets at the time was that Canada has higher roaming charges than all other OECD countries. This comparison is based on downloading 1 MB while roaming without a plan, which is a very unrealistic situation. Another comparison from the same study provides a better reflection of the reality of roaming, namely the cost of 20 MB in 20 sessions over a period of one month in the least expensive destination. For Canadians, this means the United States, where most travellers are headed when they leave the country for more than a day. In this situation, Canada ranks as the seventh least expensive of 34 countries.4 For the past few years, the CRTC has asked Wall Communications to provide an annual update of prices for wireline and wireless telephony and Internet access in Canada compared to cities in the United States and other countries with a comparable level of development (Boston, Kansas City, Seattle, London, Sydney, Paris and Tokyo). Based

September 2012 Regulation Series

This Economic Note was prepared by Yves Rabeau, associate professor in the faculty of management at the Université du Québec à Montréal (UQAM) and associate researcher at the Montreal Economic Institute.

Is the Canadian Wireless Sector Competitive?

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on the figures for 2012, Wall Communications concludes that the price of a basic wireless telephone plan in Canada is comparable to what is paid in American cities, but higher than in the other cities examined. For higher usage plans, Canadian prices are lower than those in the United States and comparable to the average of the other countries.5 So, when we use comparable figures to evaluate the prices charged by Canadian wireless companies, we can see that they are fairly close to the average of what we find in other developed countries. Canada is neither among the best, nor among the worst. Investment and technology Another common criticism is that Canada is...
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