Higher Cable, Telecom Bills for Canadians
Canadians have been blessed with some of the lowest telecom prices in the world due to a combination of competition and regulation. Since the long-distance market was deregulation in the mid-1990s, prices have continued to tumble. In the high-speed Internet business, prices have been below those paid by U.S. consumers, while local telephone prices have been controlled by federal regulations My prediction is consumer-friendly landscape will crumble in 2007 even there this is “competition” in most markets. Let’s take a look at each business.
- Local telephone: The federal government has finally decided to reduce regulation in the $10-billion market, which means incumbent carriers such as Bell and Telus will have the freedom to raise or lower prices without seeking regulatory permission. There have some suggestions, there could be a price war as carriers battle to win back consumers who have left for bundles from cablecos. Truth be told, the carriers aren’t crying much over many of these consumers, who are seen as fickle, demanding and far from lucrative spenders. So rather than lower prices, look for the carriers to raise local prices to boost revenue - and the cablecos to go with the flow. Bell COO George Cope doesn’t have the word “discount” in his vocabulary and, instead, will depend on better marketing. Meanwhile, the cablecos (other than Videotron) have been happy to sell no-frills telephone service at premium prices to pick off the low-hanging fruit.
- Wireless: It’s all about the ARPU, baby! Sure, Virgin is playing on the edges with an appealing pay-as-you-go package and Bell is trying to make some noise in the low-cost, pre-paid market with Solo but the wireless industry is all about higher prices and pushing more services such as mobile e-mail and video.
Why? In Canada, there really is no wireless competition. There are three large national carriers (Telus, Rogers and Bell) selling wireless service but the market is far from saturated so demand is still healthy, which means price doesn’t have to be used as a major tool yet. This means carriers can continue to focus on selling based on devices, features and services.
- High-speed Internet: Again, a market with little competition: in most market, you either get high-speed cable or DSL from your carrier. Like the wireless market, high-speed providers are looking for higher ARPU to drive revenue. It has seen prices climb, although service providers have tried to hide it by putting the focus on higher speeds so you download free music…er, surf the Web faster. Earlier this year, Rogers raised the cost of its Extreme service by 16% - and the silence from consumers was deafening. The reality is Canadians love their high-speed Internet and have begun to regard it as a utility rather than a competitive service.
- TV: What ever happened to IP-TV and the idea of competition for cablecos? Telus has rolled out IP-TV on a limited basis in Calgary, Vancouver and Edmonton, while Bell is still in “trial mode”. Meanwhile, the cablecos are happily raising prices while Bell’s ExpressVu service has adopted the same approach to boost revenue while the number of subscribers remains relatively flat. With high-definition TV on the horizon, look for your average cable or satellite bill to keep climbing.
As a consumer, I’d like to see better and more competition to keep prices low and innovation high. Of course, this approach doesn’t always make for good business so it may be more of a dream than reality. That said, it would be good to see a fourth wireless carrier - one that’s not afraid to be aggressive and disruptive (Virgin on steroids, perhaps?). I’d also like to see SkypeIn be available in Canada if the concerns over 911 service can be resolved. I have little optimism for high-speed Internet even since Bell and Rogers took control of Inukshuk, which provides WiMax-like service. As for TV, Bell and Telus have declared they are not going to compete on price to gain a market foothold so don’t look for any deals from them or promotional specials from cablecos.
