Wireless prices expected to rise for first time in six years in 2014

Daniel Bader

September 25, 2012 10:23am

Despite sustained criticism by cellphone users that prices seem to always be increasing, the reality is that, due to increased competition, monthly fees have been dropping annually since 2008. Due to increased competition from Wind Mobile, Mobilicity, Public Mobile and Videotron, average incumbent Annual Revenue Per User (ARPU), one of the measures to determine how much a company is earning per subscriber, has actually dropped since four years ago. Much of that ARPU decline is due to a decrease in voice usage; that number has not yet been offset by increased data use, despite huge growth year over year.

But that trend will reverse, according to a study done by Convergence Consulting Group called Canadian Wireless: Assessing The Impact of New Entrants, prices are expected to rise for the firs time in six years in 2014. While the jump is only expected to be 0.4 percent, the number of Canadians addicted to smartphones — and therefore prodigiously expanding data plans — is growing.

Even the new entrants can’t keep up those low costs, says the study. While their existence has made a noticeable impact in the price of accessible voice and data plans, both Wind and Mobilicity have had to increase the cost of their “bottom” plans, excluding things like voicemail from the base cost. Still, the new entrants are said to undercut the incumbents by up to 80% on data costs, a number that isn’t sustainable in the long run. According to Convergence, some form of consolidation, either by merging Wind and Mobilicity, or an outright purchase by one company of the other, is posited as the only foreseeable outcome for a pseudo-national service that doesn’t seem to be expanding rapidly enough to compete with growing LTE networks from Rogers, Telus and Bell.

Higher prices, ultimately, may be the only way for the new entrants, in whatever form they take down the road, to continue competing with the incumbents who, together, own over 90% of the national wireless market. By the end of 2012, Convergence expects new entrants to own 6.3% of the market with just over 1.7 million national subscribers. That number is going to rise to 10.3%, or 3.2 million users, by the end of 2014.

And while 55% of Canadians are currently smartphone users, that number is expected to rise to 65% by the end of 2013, a staggering number if you take into account where the industry was just four years ago.

Source: Convergence

  • Beso

    WTF!!!

    • CRTC

      Obviously this “News” are Canada-Only, in the rest of the world 3 yrs are ILLEGAL and Fees ar Dropping; while in Canada they are Legal and fees keep increasing.

      The article sounds like the Incumbents “had” to reduce the ARPU due to competition of the new entrants, and because of that they have to now Increase the ARPU, to mitigate their losses..boo hoo!

      Funny how all you need to keep the Canadian incumbents on line is:
      -Talk about regulation( CID and VM includded in all plans; no ROAMING in Canada, NO SAF, ARGH etc)
      -Let the foreign Telcos in
      and 4 hrs later they lower their fees.

      CRTC:
      -Please Ban THREE YEAR contracts in Canada!
      -Let Foreign Telcos to come into Canada and we will see fees drop in Canada like Magic!!

    • boojay

      “the reality is that, due to increased competition, monthly fees have been dropping annually since 2008.”

      Wow, that statement is so absurdly false, I have no idea where to begin.

    • Darth Paton

      Monthly costs decreasing? They are increasing! Just look at Rogers, their $50 gives you 100 mb of data; it used to give you 500!

    • razkoe

      Darth…

      It also gave you evenings and weekends an 9PM (now 6) My5 OR Unlimited Messaging OR Early E/W OR Double Minutes. It now gives you all of those features, and you don’t have SAF/911/GRRF anymore, and Voice Mail and Caller ID are included, when they used to be $12.

      If you want to go really old school, I remember my first Smart Phone plan (Treo 650, circa 2005) for $45 + SAF + 911, I got 150 -ANYTIME- minutes, and 0.5 MB of data. Voicemail, call display and text were an extra $20 a month, and I didn’t get E/W free at all.

      Like it or not, prices are lower.

      And, FWIW, do the math, 0.4% works out to $0.26 per month. Just over a quarter.

  • HighClassFrenchCricket

    What the hell or who the hell is this ‘Convergence Consulting Group’ source? Oh I know, another spin-off formed by ex-big three executives whose sole purpose is to preserve the entity that made them a fat monopoly in the first place. These thieves need to be exposed. FULL STOP.

  • mauricio

    there might be other new carriers by 2014 or 2015 so we never know what will happen

    • Wind LTE

      Eastlink and LycaMobile are expected to launch by the end of this year. :) Expect Eastlink to be Atlantic-focused, however.

  • 45

    Makes sense… people who don’t have data plans will be adding data plans.

  • bobfreeze

    This illustrates exactly why we need competition in the industry. Yes – WIND may not be your cup of tea, but is it crucial to better service and prices for everyone so please think about this as you make purchase decisions and post your comments in various forums.

  • Curious

    Maybe someone can answer this question, why does it seem like its more expensive to run a telecom business in Canada than in many other countries where they seem successful despite charging customers considerably less per month and offering much shorter contracts? I just moved back to Canada after many years in Europe and I couldn’t believe the cost of cell phone service, especially given it didn’t even include many of the features that are just automatically included there. If these prices in Canada are only just barely profitable, what is the difference between the way they are doing business that is costing them so much more than others?

    • Ron

      Yeah, I’d say the prices are pretty ridiculous. It just seems that this news is implying they don’t make as much per customer, but on the whole I swear they’re making more. I didn’t even have a cell phone at the age my younger brother got his. Maybe if the providers didn’t try to subsidize and lock every phone then they might have a better chance, but then again, we don’t have as many people willing to dish out a couple hundred dollars to get a new phone as much as the more populated countries. But with how apple sells iPhones now , and how well they sell, it doesn’t seem to me that people really care about subsidized phones. People want the phone they like, and they’ll buy it for they price it is, or save up for it. Lower priced plans will probably allow people to switch phones more frequently and not complain about being locked in and etc.

    • Josh

      I’d imagine the size of the country poses a problem, especially because there are a number of areas that are neither dense nor sparse enough to ignore entirely.

    • Justin

      Don’t quote me on this but I’ve heard the margin is roughly 50% for the big 3 here, which is still quite profitable. The reason that prices will remain high here is that cost of infrastructure development per person is higher because our population density is so low. When you build a cell tower in Europe it’ll probably hit way more people on average than here, so each one is more cost effective. It sucks, but its the same logic behind why our broadband is terrible and roads are falling apart.

      That being said a 50% profit margin is obviously pretty high, so calling in to complain or suggesting that you received a better offer from one of the other guys goes a surprisingly long way to lowering your bill (especially if you’re near the end of contract).

    • bob

      Coming from other areas of the world, you have to remember that canada is a huge country. If you want service along the trans canada highway for example, you have maybe 5 regular cusotmers along that highway per few miles. I’m making up numbers but I’m just trying to get the point across that most people who benifit from that service don’t actually live their. So the cost of having a large coverage area is a lot larger. Canada has roughly the population of California, with a size second only to russia, you think its easy to build towers where the only people who benefit are people who pass by. this cost must be spread amongst all customers. So unless your willing to have a small area of service, don’t b***h about prices. You can’t have your cake and eat it to.

    • Yeria

      @Josh
      There was a report only a month or two ago that 99% of Canadians have access to wireless network while the network only has about 15% or less of geographical coverage.

      So we know that’s just BS created by the big 3.

    • c

      Put it this way…. you can fit 20 “Europes” in Canada. That is MASSIVE infrastructure for any carrier.

    • g

      Put it this way… You can fit 20 “Europes” in Canada.
      This requires MASSIVE infrastructure. I’m still against them though.. they’ve reaped enough money from us to gain better infrastructure, but it just goes into their wallets

    • HO

      The formal excuze is around this lines, “Canada is very a very big country and is extremely expensive to build infrastructure”…then I wonder how is that companies do in countries where the only thing everywhere is “Jungle” or “Mountains”, imagine that, a company like Rogers find it expensive here, how would it be in one of those countries…no wonder they are only local to Canada…

  • EddieWinslow

    IS Convergence Owned by Robellus? How can they say they are not making money? I am pretty sure Bell, Rogers, Telus each year since 2008 since the so called “price drops” have earned more revenue then ever. We as Canadians already get anal raped by these guys as it is, now they are saying they are not making enough money?

    If Wind Mobile, and Mobilicity were not making money, how is it that Wind is expanding at the rate they are? So tired of hearing about the Big 3 whining and complaining about how time are tough. Try being a Middle class Canadian citizen and having to pay 75-80 bucks a month for a mediocre cell phone plan simply because Wind Mobile is not available in our area.

    I hope this is just a scare tactic for them to get people to Lock into a 3 year contract, so they make as much money as possible.

    the Big 3 need a good punch in the neck.

  • Sean

    Frankly I would be all right with Wind buying Mobilicity as they would then gain their network, customers and assets and that would help them push forward and become a true fourth national carrier.

    Though we need two of them to keep themselves in check, if there’s only one what’s to stop them from becoming the fourth

    • STY

      Why should Wind waste money like that? Just let Mobi go under and get their customers free, and at a better ARPU. Nothing Mobi has, like equipment or spectrum, is of any value.

  • Netguru

    Their client list, which can be viewed online, includes Bell, Rogers, Telus and…drum roll please..the CRTC. Talk about a biased report.

  • Arthur

    Guys it is just a research not a prediction. Yes market is changing and things like wireless, home phone and internet prices will go down due to competition. Increase will be in gas price, real estate and on top debt ratio will also go up for us canadians

  • shoo

    To be honest, Wind’s $40 is probably unsustainable. It’s probably priced low to compensate for the immature network. When winds network improves they might have to raise prices to fund lower density expansions. Honestly, who here would mind paying $50 or $55 or maybe even $60 for unlimited talk text and data if wind’s network was mature?

    • Wind LTE

      It will likely be a smaller mobile Internet allowance (2 GB full speed instead of 5 GB) and perhaps less minutes (say 1000) for the same price, with a lower-end and higher-end plan including more features.

    • CRTC

      $40 unlimited is not unsustainable:
      It only shows you how much ROBELLUS overcharges us!
      One minute of Voice in DATA:
      One minute of voice withthe G.729 codec, we will do the following calculation:
      G.729 takes 32 kilobits per second, which is 1920 kilobits (60 x 32) in one minute,which in turn is 240 kilobytes (KB) per minute (1 byte is 8 bits)

      Now that’s only for the data going out. Inbound data (which also counts) takes the same load, so we double the figure to 480 KB.
      Finally, we can round the value to 0.5 MB per minute of conversation.

      That takes care of your Voice plan with 1,000 is 500MB (Who talks 1,000 mins per month these days?) That will cover the CID (That operators actually HAVE TO DISCONNECT if you don’t want it) evnings nad weekends, In-network calls, incoming calls your fave-5 or 10, national or provincial or National!
      add another 500MB for a total of 1GB and that will cover your voice, CID, VM, SMS, MMS, and email needs; add 5 times that ( For a total of 6GB) and you can watch content online, youtube,and use the apps you want.

      What we need in Canada is the 6GB data plan for $30 and give $10 to the Telcos if you want to keep the number for a total of $40 for 6GB EVERYTHING IS DATA in OCT 2012!!
      or a $30 -6GB plan and get a skype, Dell voice, Google voice number for $30 per yr and you are set!

      The TELcos just release a $73 plan and are still complaining?? LOL!!!

      Beel just called me with a special offer for cable:
      $80/month plus the box, plus HD Fees-My reply: no thanks, I have Netflix, and internet $15 per month and not enough time to watch all that crap!

    • aliwhatsit

      A while back I got the cheapest android phone I could find, got a flex tablet plan from telus and used only VOIP for inbound and outbound calls. I stopped because it was a pain in the a*s having a different number for sms than with voice. But this option is getting more and more viable.

  • Anonymous

    You’ve shown no sources for these numbers you’re pulling out of your arseholes. Stop spewing out statistics like you guys have a clue about the market trends.

    Show me some data, maybe then you might be believable.

  • Betty

    the prices are already high enough, how can they get higher? time to go buy a bucket of lube and bend over….

  • wtk

    Oh CEOs and execs not making enough money? Let’s raise prices! Because why not!

  • Colin

    Just one consultants predictions of the future, and we all know how those go. LOL

  • sicpuppy

    And I thought they had raised prices NOW ….sheesh

  • 5Gs

    I kept saying this and will say that again. For those of you who thought WIND will be history. Now you do believe it that it will make a history ;-) instead of being history.

    WIND is really the only company that stand by people. How i know that?? I am with them ever since they started.

    Go WIND Go!

  • Scott

    Let’s compare Canadian wireless rates against a country with similiar population density, like Australia… hmm, median rate in Oz is $387 (US dollars) per year vs $573 for Canada? This report is just a bunch of whining on behalf of the big 3. There is a LOT of fat that could be trimmed in a TRULY competitive market before rates would have to start rising. Time to really open it up CRTC!

  • Srsly Guys

    This researcher could have said wireless prices were going to drop by 10% guaranteed in 2014, and 90% of the people who comment here would have yelled “herpdy derp! They should drop by 50% and mail me a cheque every month! Robbing us blind they are! If you don’t buy a GS3 outright and use it on Wind you’re a sheep! Cell phone prices are too damn high!”

    Settle down everyone. Let the downvotes begin.

    • Wind LTE

      GS III is available subsidized at WIND.

    • Sun

      I agree with you.

      The philosophy here is simple… a dollar in your pocket should be a dollar in my pocket.
      That is what all telecom companies and almost every consumer lives by (at least in the telecom sphere).

      I just want to imagine the CEOs of these companies going infront of their shareholders and telling them that they have decided to cut back their Net Profit Margins from the 12-15% range to 4-5%. Watch what happens to the stock price.

      For those who think that telecom companies charge ridiculously high prices and have unjustifiably high profit margins (which are not 50% as some have suggested)… they should just buy telecom shares.

  • WHEELS

    don’t know what country your in but by cell bill has been going up not down over the past 5 years

  • John

    This is greed, pure and simple. When you look at the big 3’s stock performance over the last few years there’s no reason for this other than to line the pockets of shareholders. Which isn’t totally bad since I am a shareholder!

  • Zod

    I think they’ve already been moving upwards.

    The plan I bought through Virgin Mobile in July 2011 now costs $5 more and doesn’t have the favorite 10 attached to it anymore.

    I’m not sure what this article is talking about with price plans being lower. Smartphone plans keep going up. Maybe they are talking about non smartphone plans?

  • Zzz

    I would totally agree to increasing prices IF they wouldn’t have billions of dollars in profit (not revenue). Telcos just want to have a sustainable increase in profits and of course they need to increase prices now that the mandatory access fees have been removed

  • Allan

    Prices are driven by supply and demand. Plain and simple. I keep telling Canadians…if you think that cellular prices are too expensive, simply stop paying for the service then. Once demand drops, prices will fall. Currently, everyone and their mom is subscribing to a data plan…cellular companies have no reason to drop prices. I don’t blame them for rising prices, its just like any other business. You survived without a data plan 10 years ago…you don’t ‘need’ a data plan.

    • Mr. Reliable

      10 years ago, I wasn’t getting email on my phone to reach my boss’s/customers, i wasnt taking high resolution pictures and forwarding them to other people on the network, I didnt have access to all the homes Im selling over the internet like I do now.

      Needs change over time, and convenience has a premium price. I did not have cellular 3G 4 years ago, but I couldn’t live without it today.

    • Allan

      Mr. Reliable, that is perfectly fine that you need a data plan for business. That means companies and business people have made the calculated choice that they will make a profit after paying all their expenses (such as a data plan). However, you must understand that you are also driving the demand, which causes cell phone prices to rise. You’re in the business of selling homes, so you should know that you always sell to the highest bidder, not the lowest. Cellular companies do the same.

  • abc123

    It’s unsustainable only because we, as Canadians, are not used to low prices in the wireless sector.

    Doesn’t it seem odd that the Robellus is rolling out LTE across the country, yet their balance sheet doesn’t take a hit as a result? You would think that it costs quite a bit to roll out new technology, and hence, would dip into their profits… but no. they seem to do better regardless of any maintenance, upgrades, etc. each quarter. This just tells me that they have priced their plans high to maintain this practice.

    The results of this research, whether it has any truth or not, is certainly bad news for Canadians. I’m sure that similar research will be conducted funded by some anonymous source (ie. Robellus) that confirms this fallacy. In the end, if enough people believe it (esp. those that are in key positions), it will inevitibly become reality. The question is “If the majority of people believe it is true, does it become the truth?”

    • Scott

      The CRTC are doing Canadians a HUGE disservice by allowing consumers to be fleeced, all in the name of maintaining some kind of ephemeral “control” over the marketplace. It boils down to a cosy co-dependant relationship between the big 3 and the regulators!

  • OGOD

    BELL: I can only buy CTV….-___-”
    Rogers: I can only buy GM PLACE…-___-”
    Telus: I only have money…-____-”

    BIG3: We are poor, so let’s rise up the price. Everyone happy!!

    Everyone = BIG3

  • GENERAL WONG

    The main problem is spectrum. Spectrum in Canada is way too expensive. Therefore Big 3 will need to do a big profit margin on plans to pay for upcoming auctions. And all that money goes to Governement. What we need is spectrum freedom. Billions of dollars for a frequency is way too damn high.

    • Scott

      Sorry, I don’t buy this argument. The new entrants are paying the same price as the big 3 for spectrum, and somehow they are able to offer their services at HALF the price of the big boys. Not only that – the big 3 got all their original spectrum for FREE in the 1980’s!

  • Me Ted

    “Even the new entrants can’t keep up those low costs, says the study.”

    Unless you’re Wind and have the backing of $24b US in revenue and 200+ million subscribers behind you.

  • Falco

    In addition to being sick of all the iPhone snd BB hype I am tired of all the moaning about high Canadian mobile rates compared to Europe and the US where the demographics are totally different. Think about population density alone. If you set up one cell site in New York City, it can service the equivalent of the entire population of Canada. I have no idea how much one cell site costs to set up and service, but it doesn’t take a tech whiz to figure it’s very costly and that’s just one aspect of running a QUALITY mobile operation in Canada. I think we are getting a good deal. A CSR at Fido told me that I seem to be the only one who understands this. Well, it really isn’t rocket science. It’s business and as in any business producing and servicing s good product, you have to pay a fair price. And as far as the new entrants are concerned, consider their limited coverage area and you see what sneaky rip off artists they really are. When you leave their limited coverage areas, guess whose cell sites they suck on.

    • STY

      Falco has been drinking the Robelus kool-ade again.

  • Falco

    Hey, I haven’t been drinking or smoking anything. I’ve had cell phones since the first car-mounted units in 1985. My Motorola Dynatac cost about 4 grand. It made and received voice calls at 65 cents/min. You got first 30 mins free and that was it. No data, no lower weekends and eves, certainly no unlimited anything, no caller ID. BUT there was broad coverage already in place beyond your back yard. Even Microcell, now Fido, started with coverage along the 401 corridor and up the 400 to Barrie. And like it or not, it was Bell and Cantel, now Rogers, who established the fantastic infrastructure which we all enjoy and benefit from to-day, including the new guys who think they can fool us into thinking their rates are so great, which they may be if you don’t get out much. Generally the service from the big 3 is great. I find Fido’s customer service to be the standard I judge others by. Rates are great and coverage is vast with excellent reception. All things considered, I am in awe of the way the whole cellular system works and thatg rates are as low as they are. All you whineys should wake up and get out more. We’ve got it damn good here.

  • Falco

    Hey, I haven’t been drinking or smoking anything. I’ve had cell phones since the first car-mounted units in 1985. My Motorola Dynatac cost about 4 grand. It made and received voice calls at 65 cents/min. You got first 30 mins free and that was it. No data, no lower weekends and eves, certainly no unlimited anything, no caller ID. BUT there was broad coverage already in place beyond your back yard. Even Microcell, now Fido, started with coverage along the 401 corridor and up the 400 to Barrie. And like it or not, it was Bell and Cantel, now Rogers, who established the fantastic infrastructure which we all enjoy and benefit from to-day, including the new guys who think they can fool us into thinking their rates are so great, which they may be if you don’t get out much. Generally the service from the big 3 is great. I find Fido’s customer service to be the standard I judge others by. Rates are great and coverage is vast with excellent reception. All things considered, I am in awe of the way the whole cellular system works and thatg rates are as low as they are. All you whineys should wake up. We’ve got it damn good here.