Front Burner - Why your cell phone bill is so high and what can be done about it

Episode Date: March 14, 2019

Canada has some of the most expensive cell phone plans in the developed world. It has to do, in part, with access to the country's wireless spectrum. As another round of wireless spectrum gets auctioned by the Canadian government, CBC National Business Correspondent Peter Armstrong helps us understand why cell phone plans are so expensive, and what can be done about it.

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Hello, I'm Jamie Poisson, and my cell phone bill is very expensive. It costs me over $100 for a shared 8GB data plan and a 2GB top-up. If I lived in virtually any other developed country, Australia, France, Finland, I would be paying less money, like up to 50%. And so would you. One of the big reasons you and I pay more, way more, here in Canada, has to do with which companies get access to something called wireless spectrum. Well, this week the federal government is starting to auction off the next round of our wireless spectrum. More spectrum means fewer dropped calls and faster download speeds.

But don't expect your cell phone bill to go down. Wireless companies spend billions of dollars to get their hands on new spectrum. Today, what's keeping cell phone bills so expensive here? And what can we learn from how Israel solved a very similar problem? This is FrontBurner. Today I'm talking to Peter Armstrong, the CBC's National Business Correspondent. So Peter has looked into how high Canadian cell phone bills are quite a bit over the years, probably because you've been complaining about them for years. Peter, here is my cell phone bill.

It's over $100 a month. Why is it so expensive? I'm not happy about this. We're going to get into the weeds on this, I'm sure. And there's a lot to talk about. But at the end I'm sure. And there's a lot to talk about. But at the end of the day, there's not a lot to talk about. There's no competition. There's very little competition in this country.

And without competition, we know in all markets, prices remain high. So why is your cell phone bill high? Because there's not a lot of competition in this country. So we've got these big three, Rogers, Bell, Telus. But what about these smaller players that exist here? I mean, you can get a phone, a Virgin phone, you can get a Fido phone. You can, but you're getting a Bell and a Rogers phone, right? You look at all of the discount brands. Virgin is owned by Bell. Fido is owned by Rogers. Kudo, how do you say? Kudo, I think it's Kudo. Yeah. Is owned by TELUS. Mobility, if you're throwback to back in the day, that was Rogers.

Public Mobile is owned by TELUS. They're all fighter brands, a way of sort of having a division within your own company that competes with yourself to try to make it look like there's more competition out there. When really there's not. But even the ones that were initially actual legit competition, when they come in, they cause price disruption. Like people go to them. People look for it. Wynn did that. So let's talk about Wynn. I remember Wynn. Wynn was probably the best example, right? Of a company that came in and drove prices down because there was more competition.

They founded in 2008. They launched in 2009. We built our policies, our plans, and our products around the very things that our future customers ask for. All of Windmobile's plans include unlimited incoming text messages, no system access or activation fees, no 911 fees, and no cancellation fees or contracts to sign. And they took off. And it was a regional player then. But within a year, it had built itself up to more than 100,000 subscribers. Within a couple of years, it had built itself up to like 540,000, 550,000 subscribers. Like, it was a success story. There were fights about its ownership.

It was approved by an ordering council that went to the federal court that ended up, I think, at the Supreme Court to try to keep this company from existing. And at the end of the day, it gets gobbled up. Congratulations, my friend. All right, so exciting. For Shaw, it couldn't be a better fit. The deal is worth $1.6 billion. Wind is based mainly in a few large cities. It was struggling to finance an upgrade to a faster network,

and it wasn't a threat to become a fourth national carrier. What is it about our regulatory landscape here that allows this to happen compared to other places in the world? I think you've zeroed in on what to me anyways is the crux of this. I think it's really easy to get angry at the companies. Right. And I think that we all get very angry at the companies. And I don't think it's like, I don't blame Rogers Bell or Telus for trying to find a way to make the most profit they can. That's their business. That's what they do. My issue is much, much more with the regulator and with the government and with the empty promises that have been made for decades now to try to correct a problem that everybody knows exists. Canadians pay some of the highest wireless rates in the developed world.

You have probably seen the federal government's ads. Its campaign, after all, did cost $9 million. But no one has seen the government come close to achieving its goal, robust wireless competition with four strong carriers in every region. And the companies are just existing within the regulatory environment that we create for them. So we've built up this place that protects that oligopoly, that makes it difficult for entrants to get into the market and succeed, right? Like you can kind of get in, they set aside some spectrum now and again, but the way in

which you have to be able to spend and compete to exist prices a lot of people out of the market. and compete to exist prices a lot of people out of the market. What do you think about that? About the price of your cell phone bill? I don't know why Canada can't have cheaper prices like everybody else. We have three phones on ours

and we're paying almost $500 a month. We're paying way too much. I think we're paying too much. What do you think? I definitely agree that we pay too much. My parents are in Florida half year and they pay like less than a half of what we pay up here. Yeah, I mean, the sad reality is we've got one of the world's biggest cellular footprints, but we've got one of the smallest customer bases to support it. So I know we're talking about a lack of competition in the country, but there are a few provinces where you can get cheaper cell phone rates.

Saskatchewan comes to mind. Saskatchewan, Quebec, and until recently, Manitoba. And there's something remarkable that stands out in all three of those provinces is there is competition there, right? You've got Videotron in Quebec that's offering a different option and a more home-based option. You had MTS in Manitoba, and SaskTel is one of the great success stories of Canadian innovation, and they've been taking on the big three. of the great success stories of Canadian innovation, and they've been taking on the big three. And where you have just one extra player, just one, to step in and say,

we can undercut you by even a little bit, then they undercut each other, and it goes down, and the consumer benefits. And we can see exactly how that plays out because MTS was just bought up by one of the big three in Manitoba. As of this morning, the sale of MTS to Bell is complete. The company will now be known as Bell MTS. The $3.9 billion takeover gives Bell over 700,000 customers. Bell is promising to spend

a billion dollars to improve broadband services throughout the province. And all of a sudden, within weeks of that merger, prices started going back up again. again. If you ask the companies, and I know they have an interest in not having other entrants enter the market, they say there are other reasons for why our bills are higher. You know, we're a very big country geographically. Two million square kilometers. The companies also make the point about the quality of our network, that essentially we have a better quality network. Here's a quote. We're paying for a Lexus, but it's worth a Lexus, is how the author of a conservative think tank put it. Listen, that is a terrible quote, but they have a point. We have really good service.

Where we have service in this country, it's incredibly good. You know, you can poke holes in a whole bunch of the things and a lot of the problems that are raised as a result of the lack of competition and of the pricing. On that one point, I think it's important to point out, these guys are spending like two and a half to three billion dollars a year to make the network work better, to make our calls cleaner, to get that data faster. And they should be applauded for that. A lot of that is, you know, that is a good, good thing for all of us. The big beef you get from, you know, the Rogers, the TELUS or the, or the, the bell people, when you do a story on this is that we don't factor in, you know, when we're on this, is that we don't factor in,

when we're looking at cost comparison, we don't factor in their promotions. We don't factor in their contract terms. We don't factor in population density. But, I mean, I can give you some pretty stark examples of what, at the end of the day, you end up paying versus what, at the end of the day, people we know in other countries pay. And when you look at that, man, it's shocking.

Australia is also a very big, sparsely populated country. And they pay half what we pay in cell phone bills. So Israel is a really interesting example in all of this. But I used to be the correspondent in Israel. So I was over there. And when I left at the end of 2009, that country was a disaster for cell phone bills. It was the exact same arguments I was coming home and hearing here when Global Live and Wynn was launching.

They've now changed all that. I think we'll get to that in a second. Our fixer in Israel has three kids. She pays 130 shekels a month for those three kids to have a plan that includes 30 gigs of data each. for those three kids to have a plan that includes 30 gigs of data each. So that's like 48 bucks. Right.

For three kids to have 38 gigs, 30 gigs of data. That's a lot because mine is over $100 for eight gigs with a two gig top up. Right. So she's paying less than 50 bucks for three people to get unlimited calls, unlimited texts, and 30 gigs of data a month. So what... I mean, come on. What happened in Israel to change the game there? So one of the things they did that has had lasting and profound impact was they decoupled the phone service, so like your data plan, from the selling of the actual hardware, the actual phone. Right, so that you're not like renting a phone for three years, you can't get out of it.

And you can't get out of it. The biggest step that they took that I think other countries can look at is they changed the way they sell spectrum. And do we want to explain what spectrum is? Because it's kind of, it's a weird thing. Am I right? The way I think about spectrum is that they are airwaves that are for sale in the country. And this is what our data travels along. Exactly. Is that fair? 100%. It's the name for invisible electromagnetic waves.

Modern wireless devices like cell phones use one band of it to send and receive data. I mean, at the end of the day, it's a kind of spectrum that sends radio out into the terrestrial radio out into the world. But we didn't charge people for that. And this is really why we're talking today, because the government is auctioning, the Canadian government is auctioning off spectrum this week. Right. Before we get to that, let's talk about what happened in Israel with spectrum. OK, so what they did was they took all of this spectrum that's out there that countries can make inordinate amounts of money off of. They went to these small companies and said, basically, we'll give it to you for free. You'll pay for it now. But if you meet these

specific requirements, you have to have a 7% market capture within five years, and you have to cover 90% of the country within, I think it was seven or eight years. Okay. So they have goals that they have to hit. And if you don't meet those goals, then you have to pay for the spectrum. But if you do meet those goals, you get the spectrum free. Now, remember, Israel is like a little bit smaller than Lake Ontario. Like it's a tiny little country. So you could get 90% coverage, but I think you could adjust that in all different kinds

of ways we can get into that. The other thing they did was they lowered roaming rates. So companies that don't have spectrum can go in and can have roaming deals with the existing and big three and force them to lease out their networks to, they're called MVNOs. Okay. So that they can have competitive pricing plans with the big companies that own a lot of the spectrum. And then the other thing they did was they blocked a lot of mergers. And they said, you big companies can't go in and buy up these little companies.

I don't think they blocked all mergers, but they made it really difficult. And they made sure that there's regulatory approval. So you can't just do it to squash competition. Competition, antitrust laws at work. So, for example, here in Canada, is it possible that if we were taking this issue really seriously at the time and watching mergers, the Wynn Mobile merger might have been blocked here? I think in 2017, where the CRTC blocked what people wanted were these MVNOs, which is like mobile virtual network operators. It's essentially saying, I don't have spectrum, but everybody, all I want to be able to do is just sell your data through my plan, like people do with cable packages right now.

And if we can do that, then we can strike a partnership with one of the existing networks. Networks obviously don't want to do that. So they went to the CRTC to try to say, hey, let's force them to do this because it'll open up all kinds of new competition. And the CRTC ruled against it in 2017. The government went back to them and said, I'd like you to reconsider this, the Canadian government. Well, yesterday was supposed to bring a groundbreaking CRTC ruling that could have lowered cell bills for Canadians. Instead, though, the commission ruled again in favor of big telecoms. The decision gives them continuing control over existing wireless networks and delays hopes of more competition and cheaper plans in this country.

They did look at it and said, no, the ruling stands and blocked MVNOs. Had we taken some of those kinds of steps, not only would some of these mergers not happen, but a bunch of smaller companies would have been able to come up and work their way into the system. So this week, the government is auctioning off Spectrum. Right. And they are reserving 40% of the Spectrum for a new entrance. So is this a good thing? It's a great thing.

Is this comparative to what Israel? No. It's not even remotely. Is this comparative to what Israel? No, it's not even remotely. For a bunch of reasons. The main one is, let's say you, Jamie, are this small operator and you come in and you buy up a bunch of Spectrum, but it only gives you some regional coverage and you can't quite figure out how to make it. And then, what, five years from now, me, you know, one of the big companies comes in and says, Jamie, why don't you just sell me your spectrum at this enormous markup? You'll make

a ton of profit and you can take another crack at, you know, trying to figure out your way into the market when the next auction comes up. But right now this will give you a ton of operating capital and, you know, everybody gets rich and everybody's happy. It's a hard argument to turn down, especially when you can't seem to navigate your way into the market itself. So on the one hand that, and on the other hand, we're not incentivizing, we're allowing smaller players to buy in, but we're not giving them that access that Israel went after, they specifically went after. And they had to go up against, like we have, three big legacy companies that had sort of a third, a third, a third of the market

that lobbied and said, this is going to cost jobs, and there's no way that we'll go ahead with business investment. And did it cost jobs and did it affect investment? Interestingly, in the first year, it did cost jobs. They were the kinds of jobs that tend to have huge turnover. So it didn't have as profound an impact. And on business investment in the first year, it did cost jobs. They were the kinds of jobs that tend to have huge turnover. So it didn't have as profound an impact. And on business investment in the first year, yeah, people stopped spending as much money. But the next year, they started spending more money. And the year after that, they spend even more money. And by, I think, the third or fourth year, the country was spending more on business investment in that sector than they had

before the initial ruling had come down. So the arguments that this will cost jobs, it did for a little bit. The argument that this would cost business investment, it did for a little bit. And then things bounced back. OK, so here's the question that that I just can't figure out then. Why is this not a bigger political issues for the main parties? You would think here we are in a federal election year. Everyone is up in arms about carbon taxes, about increase in gas prices, which is legitimate. I can see why people don't want to pay higher gas prices. I can see why people are angry about additional taxes.

But the idea that you could pay half as much money a month on your cell phone bill is really appealing. And it's something that you would think every political party could campaign on. So why? It's a winning political argument. Why is it not? This drives me nuts. I don't get it. Let me turn it back on you.

Okay. You've got a cell phone bill that makes you crazy. So much so that you're doing an entire episode of a program about it. I'm doing an entire episode. And have you reached out to a politician about it? Have you called your MP? Have you called your MPP? No.

Right? And most people haven't. Yeah, that's fair. People get angry with the people get angry with the companies when we want to yell about our cell phone bills we call there there's a hotline to call there's poor people that work at the hotline well and and the and they're compiling all of these you know it's like broken telephone by the time it gets to the politician they're like wow you guys complain to them a lot. Glad you're not calling me.

It's a good point. I should mention, it's not that no politicians are taking up this cause. I did come up in the BC throne speech. This year, your government will take action to improve billing transparency, beginning with a consultation and legislative review, and encourage the federal government to deliver more affordable cell phone options for people. and encourage the federal government to deliver more affordable cell phone options for people. But at the end of the day, a lot of what can be done, it can be done by government. And if you look at so many different jurisdictions that have done so much over the years, and like Israel is a really good example.

Yes, it's the size of Lake Ontario. It's way smaller. But these are regulatory changes. And if they had a caveat in there that said, you have to reach 90% coverage of the entire country within seven years, we don't necessarily have to do that. We can say, you have to reach 90% of coverage of a certain geographical area. You have to cover from Sudbury to Toronto to Ottawa, like create these corridors where you have to have coverage and base it on data. Where do people travel? What do they need? And then set up deals where if you have coverage within that area, then the other telecoms have to give roaming rights to your customers when they

travel through your jurisdiction. Those are measurable changes that would have an immediate impact. And we've seen it and we know it. Right. And I should say this, the Trudeau government has recently sent a directive to the CRTC to encourage more competition and affordability in the cell phone landscape. I don't know if you think that will do anything, what these directives do. I would like to think I'll go into this with an open mind. I think you need one hand working with the other. And if you don't, you're never getting anything done. You've got to start making progress because what you're paying there, that bill is crazy. Peter, thank you so much for once again making this discussion so much more interesting than my university economics class.

Don't knock your university economics class. I like economics, but this is a little more fun. Well, I'm glad to help. I love the show. Thank you. I just mentioned that the CRTC is doing a review of the cell phone landscape here in Canada, and they want to hear from you. So if you've got something to say about how much you're paying for your cell phone bill, you can let them know by May 15th.

It's all on their website at crtc.gc.ca. That's it for today. I'm Jamie Poisson, and to cbc.ca slash podcasts. It's 2011 and the Arab Spring is raging. A lesbian activist in Syria starts a blog. She names it Gay Girl in Damascus. Am I crazy? Maybe. As her profile grows, so does the danger. The object of the email was, please read this while sitting down. It's like a genie came out of the bottle and you can't put it back.

Gay Girl Gone. Available now.