Why Canada’s cell phone and wireless cost a ton – and how people are hacking the system.

It’s no secret that Canada has some of the most expensive cell phone and internet plans of anywhere in the world, with even basic plans costing between $60 and $90, with a slew of heavy penalties if you exceed the data limit. Some people suggest that due to the sheer size of the country and the relatively low population in some rural areas, the infrastructure required to support Canadian cell networks simply costs can skyrocket really easily. This is not the case in similarly sparsely populated countries such as Australia, which makes some sense to be fair.

 

The Monopoly of the Big Three

There are three main cell providers in Canada, namely Rogers, Bell and Telus. Having only three main providers supplying the majority of Canada has arguably resulted in such a significant price difference from the rest of the developed world. It is in fact cheaper to have multiple cell phone subscriptions in European countries than it is to have one single contract in Canada, and consumers are less than thrilled with this.

 

Should the government intervene?

In cases where there is a single company or a handful of companies controlling the market for what is considered by many to be an essential utility, a government body or the ombudsman usually steps in to ensure that consumers are not getting an inordinately bad deal or being gouged by the suppliers, and that they are also getting an adequate service from the providers. Canada’s CRTC, also known as the Canadian Radio-television and Telecommunications Commission, a regulatory agency for broadcasting and telecommunications fulfils this duty, although they have little to do with mobile phone providers.  As such, the ‘big three’ incumbent cell phone providers in Canada enjoy the benefits of being the big fish in a very small pond.

 

Better value in the Prairie provinces

This is not so much the case in the Prairies of Canada, i,e, the western provinces including Manitoba and Saskatchewan.  Other cell phone providers MTS and Sasktel offer these provinces more options for cell phone packages which in turn leads to cheaper prices. The CRTC’s Communications Monitoring Report shows the average revenue per user, which is highest in the North at an eye-watering $92 per month, whereas further South in Quebec customers pay a more sensible $56. Ottawa-based consultancy Wall Communications published a report revealing that monthly wireless plans are between 30 per cent and 50 per cent cheaper in the prairie provinces due to the extra competition.

 

The CRTC’s report also revealed that wireless customers actually appear to spend slightly more on cell phone contracts in the Prairie provinces (about $64 per month on average) which sounds strange,  until you find out that these providers offer more competitive packages in terms of higher data allowance, free roaming, and more free minutes per month. These generous perks make for a tempting prospect to Canadians outside of the Prairies.

 

The smart (but below board) way to save on cell phone bills

The savings with these providers is so tempting that non-prairie dwellers have been seeking out access to these coveted plans, perhaps by less than legitimate means.  Private sellers on the black and grey markets have been offering cell phone plans with providers MTS and Sasktel to out-of-towners, which they can get around by using their generous free roaming plans. These private sellers will charge a little for their troubles,  but customers are happy to pay as they will still make this money back after a couple of months of cheaper bills. This kind of illegitimate trading is simply a result of supply and demand – not unlike the roaring black market in Russia’s Soviet Union for western goods such as denim jeans.  Someone known as ‘Tony’ offered monthly cell phone plans on selling app Kijiji for just $48 a month, which include unlimited nationwide phone calls and 5GB of data. Tony gets $100 per sale, he sends his customer a SIM for their handset, and away they go. Tony’s ad is long gone, but many Canadians are still finding ways to get on these cheaper cell phone plans day in day out.

 

How wireless providers could respond

This ingenious loophole which consumers can benefit from might not hurt anyone per se, although the cell phone providers take a dim view of people lying about where they live in order to obtain coverage. If they wanted to take steps to counter this behaviour, they may introduce roaming caps, in which customers must be within their catchment area at least 50% of the time, for example. In the meantime, enterprising Canadians continue to take advantage of the wireless black market.

 

Brand new app could mean the end of roaming charges

Another new development that could deal a death blow to roaming charges and expensive cell phone plans is operating with little disruption; two developers won $100,000 in an international ‘hackathon’ competition with their ‘mobile app’ that allows you to call and text without having any network access. Using multi-peer networking technologies, the app AirHop enables a device with no cellular connection to piggyback data using the connection of another device, and many devices can be linked together.

 

A change for the better

This method of communication could potentially spread across entire countries. In addition to dodging out-of-area roaming charges, it may one day mean that less people actually need to have a cell phone provider,  making phone contracts less essential. The AirHop technology could also be employed for social good, as countries with cell signals blocked by the government can still communicate with others. Currently AirHop only supports calls and text messages, but the same technology could allow for video and other applications in the near future. The two hackers hope to use the prize money they won in the Paypal-sponsored competition to further develop their app.

 

Why eSIMs pave the way for consumers to shop around

One of the reasons that consumers might be unwilling to shop around and look for a new cell phone plan is the amount of hassle involved with getting your SIM card changed over to a new network, which involves inconvenient waiting periods and potential for gaps in service. A new kind of virtual SIM known as an ‘eSIM’ could offer a potential solution to these problems. An eSIM is just like a regular SIM card for phones, but it is much, much smaller and cannot be removed from the device. Instead, the eSIM can be written and programmed remotely, meaning that consumers can easily and immediately change wireless providers whenever they feel like switching over. This technology is actually more convenient for wireless providers too, as they don’t have to activate them or train employees to do so.

 

How many phones have an eSIM?

Currently most cell phones do not have an eSIM, but some newer high-end cell phones and wearing tech such as smartwatches are already being sold with an eSIM inside, and this technology is expected to be introduced to more and more phones and other devices over the next couple of years. The Apple Sim is already available in some iPads and even new models of cars are equipped with an eSim.  Wireless providers will most likely have to do more to keep their existing customers if it becomes ever so simple to switch over, but only time will tell if this has a significant effect on pricing.

Emmet Kelly, Morgan Stanley’s head of European Telecoms research states that “Mobile customers would find it far easier to switch carriers at will, which likely will force carriers to find new ways to differentiate themselves to attract and keep business […] “The new model could also… [expand] their playing field to more hardware – from cameras and cars to the growing ecology of the Internet of Things.”

 

As consumers cut the cord, price hikes are inevitable

Another way that consumers are getting the short end of the stick is internet services – prices for accessing the internet are steadily rising, and it is thought to be due to ‘cord cutters’ – people who are abandoning their cable TV plans in favour of online content streaming services. It’s easy to see the appeal when compared to expensive, inflexible cable contracts from TV providers when services like Netflix offer so many shows and films that can be watched at your leisure. But, as interest in one service drops off, savvy suppliers are increasing their prices for internet to recoup their losses from their TV packages. Consumers already pay between $100 and $212 a month for their communication services, according to a report issued by the Public Interest Advocacy Centre (PIAC), an Ottawa-based consumer advocacy group. This could have a significant financial impact on low-income households and puts pressure on the government to curtail these price hikes.

 

CRTC to investigate

Much like wireless networks, the handful of companies supplying internet to consumers have monopolised the market to some extent, even smaller 3rd party companies still use the same networks and purchase them wholesale from the larger companies. The smaller ISPs are demanding more and more from the big providers – more infrastructure, access to newer tech including fibre optic broadband. In sum, the consumer will end up taking that financial hit regardless of who they choose as their supplier. This is likely to come under the jurisdiction of the CRTC and could prompt an investigation.

 

‘Internet tax’ scrapped by Trudeau and others

Recently, the CRTC made a controversial proposal that an ‘internet tax’ should be levied against consumers, a move that was shot down roundly by President Justin Trudeau, possibly earning him more approval in the Canadian populace pending the upcoming election. This is a baffling move by the CRTC, considering they have also recently ruled that the internet is a basic necessity for Canadians, and imposed a rule that providers must supply a basic package that costs no more than $25 per month.

Even though consumers are finding smart ways to save themselves money and get a better deal on their internet and wireless, unless the CRTC steps up its vigilance of the telecommunications industry.