Lower-end telecom plans get biggest rate hikes: report

Telecommunications companies increased prices most, proportionally, over the last year for those subscribing to the lowest-end wireless, broadband-Internet and home-phone plans, according to a report released by the CRTC on Monday. The seventh annual report on telecom price comparisons, issued by Wall Communications Inc., found that over the past year, so-called Level 1 wireless services, which feature lower-than average calling volumes and no optional features, saw their average price rise 16 per cent to $35.70 a month. Level 2, which includes average call volume, two features and 300 texts a month, saw its average rate stay almost flat at $45.26, the report said. Level 3, which is categorized as providing high call volume, a full slate of features, 300 texts and up to one gigabyte of data, fell 15 per cent to an average price of $79.69 a month. The report featured a new wireless category this year, Level 4, which includes unlimited talk and text, plus up to 2 GB of data. The CRTC said the average price of this service was $92.99, though it had no comparison from a year earlier. The report said most of the prices was taken from February this year. Dvai Ghose, telecom analyst for Canaccord Genuity, said the report could reflect the fact that service providers are now trying to recover device subsidies within two years as opposed to three years, given the limits imposed by the CRTC's wireless code that kicked in on Dec. 2 last year. "After the three- to two-year contracts, all the prices were jacked up by $5 a month," Ghose said in a phone interview. "So, $5 a month on a $30 price plan is a greater percentage than on a $100 price plan." Still, he said the general idea of hiking prices the most on those with the lowest-end plans — who would presumably be more concerned with prices than those paying more for better service — seems somewhat counter-intuitive. "The guys at the higher end can afford the most," Ghose said. "And if penetration is an issue, because penetration in Canada has been stalled at 80 per cent for way too long, the incremental 20 per cent are not necessarily guys that want to spend 100 bucks anyways." Jeff Fan, telecom analyst with Scotia Capital, said raising prices on the lower-end plans might be a result of wireless carriers doing what they can to raise their average revenue per user (ARPU). "The carriers want to have higher ARPUs and the easiest way is to get the low-end customers to pay more," he said in an email. "That’s what it seems like." Troy Crandall, telecom analyst with 3Macs, agreed that adopting the provisions of the wireless code is a reason for some of the trends outlined in the report, as is the fact that applying price gains against a lower previous rate results in a higher percentage. Crandall added in an email that people who enter the wireless market with low-end plans tend go with cheaper phones at first and eventually graduate to "more advanced phones carrying higher prices." He added that prices are likely coming down for many plans as a result of long-distance being phased out as a separate cost on voice service. Industry Canada said in a press release Monday that the Wall report shows that overall wireless prices have declined 22 per cent since 2008, and more than 28 per cent for wireless packages that include data. "Our government has aggressively and consistently made decisions to support a healthy and competitive wireless industry for the benefit of Canadian consumers of wireless services," Industry Minister James Moore said in the release. "We are encouraged by the findings revealed in today's independent report, which confirm that our policies for more choice and lower prices are working to support Canadian families." The release noted the government has taken a number of actions affecting the wireless sector taken in recent years, including last week's announcement it would auction off AWS-3 spectrum next year and set aside most of the bandwidth for "operating new entrants," structuring past and future spectrum auctions to enable access for new entrants, recent legislation to cap domestic wholesale roaming prices and "use it or lose it" rules concerning spectrum. The Wall report said that, in the last five years, the average price for Level 1 wireless services has increased by five per cent, while Level 2 prices have declined 15 per cent and Level 3 prices have fallen 27 per cent. Moore’s spokeswoman Jessica Fletcher said in an email: “While we are encouraged by the findings revealed in today’s report, which confirm that our policies for more competition are working to decrease average prices for consumers, we will continue to stand up for consumer choice and robust competition in Canada’s wireless market.” Broadband Internet was also divided into four categories in the report. It said Level 1 service, which provides download speeds of up to three megabits per second and data usage of 7.5 GB a month, saw an average price hike of 29 per cent from a year earlier to $50 a month. Level 2, with download speeds between 4 and 15 Mbps and usage of 30 GB, saw a price gain of eight per cent to $55.10 a month. Level 3, with speeds of between 16 and 40 Mbps and usage of 75 GB, saw its average price rise of five per cent to $68.60. Level 4, with speeds faster than 40 Mbps and usage of 120 GB, was up four per cent to $86.46. Ghose said it was curious that wireless services get so much attention from government, despite this report showing steeper hikes in the pricing of Internet service. "The government's whole focus is on wireless, and yet Internet prices have gone up by as much as 29 per cent and they don't seem to be doing anything on that," he said. Fletcher said the government wants to “ensure that Canadians in all regions of the country have access to the latest wireless technologies and high-speed networks at the most affordable prices. That’s why this year’s budget included a major plan to connect nearly 300,000 Canadian households to broadband Internet at speeds of 5 Mbps.” For wireline phone service, the average price for the low-usage Level 1 services was up 10 per cent to $38.99 a month. Level 2, which represented average usage with two features, declined three per cent to $54.37 a month. Level 3, which includes high call volumes and a full set of features, fell two per cent to $60.29 a month. Bundled packages of telecommunications services were found to have increased in price for all three of the main categories covered by the report. The average price for Bundle 1, which would include home-phone, broadband Internet and wireless services, was up four per cent to $143.95 a month. Bundle 2, which puts together home-phone, Internet and basic digital-TV services, was up three per cent to $137.51. The third category, which includes all four services, was up three per cent to $181.70, according to the report. — With reporting by Derek Abma at dabma@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Lower-end telecom plans get biggest rate hikes: report

News | July 14, 2014

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us

Lower-end telecom plans get biggest rate hikes: report

News | July 14, 2014

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Related Stories

Freedom debuts LTE in Calgary and Edmonton

Freedom to at least quadruple handset offering by mid-2017: Shaw

Wind hits 1M subscribers in first quarterly report since 2014

Shaw says timing, current market dynamics made Wind deal attractive

Reuse & Permissions

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us