Canadian wireless penetration is among the lowest in the industrialized world. Canada places 3rd last amongst the top 30 OECD countries. This paper sets out to assess whether Canadian wireless and wireline pricing is a factor. The research encompassed three separate customer profiles, as well as prepaid and wireline services in four cities in Canada, three in the U.S. and three in Europe. We look at three or four carrier offerings in each market.

Key findings:

• The average wireless customer in Canada pays 60% more than if they had used a U.S. plan. The average Canadian wireless customer also pays a 19% premium when compared with customers of European carriers when identical profiles are priced and adjusted for purchasing power parity.
• While Canada offers plans at parity rates for prepaid and low-end user profiles, Canada is significantly more expensive than the U.S. for plans that cover more than just ‘glove compartment usage’.
• For phone-a-holics there is no doubt – move to the U.S. U.S. carriers offer plans at significant discounts to plans crafted to meet identical profiles in either Canada or Europe. We note that U.S. company shareholders may well be leaving money on the table, but, still … Canadians pay a significant premium for the sound of Canadian wireless dialtone.
• For low-usage customers, London and Berlin carriers offered services for less then even the incumbent phone companies prices for wired service. Wireless for less – who knew?
  
• Low-cost access to wireless services has driven adoption in the past. But the cost of the alternative access, the wireline phone, is changing too. Wireline prices in both Europe and the U.S. have come down dramatically over the last three years. We believe the high wireline prices had been a driver for wireless penetration growth. The recent drops in wireline prices may provoke movement back to wireline services and this trend to wireline alternatives will be exacerbated by introduction of VoIP services which will make the wireline price advantages ever more compelling – especially in Canada and Europe due to expensive mobile LD plans.
• Within the prepaid market, Virgin Mobile Canada seems to be an anomaly among the Virgin mobile companies. Virgin’s Canadian prices are in the mid-range of market offerings, while in both LA and London, Virgin is a price leader –well below market competitors.
  • Rogers, with its Fido brand, has the most compelling Canadian strategy of having both the least expensive prepaid product in the market, while the primary Rogers brand, with its broader access reach, remains a higher price, higher value product.
• European and U.S. carriers all include “features” within plans. A move we counsel to Canadian carriers. Including customer-friendly and customer-empowering features, such as voice mail, call waiting and 3-way calling, makes the mobile phone more useful. It generates more revenue through increased usage. Virgin Mobile Canada deserves credit as the only Canadian carrier surveyed to adopt the strategy.

RECOMMENDATIONS:

• Canadian carriers need to encourage their customers to use their phones – not penalize them for use – and look to the U.S.; provide Canadians with less complex plans. Guaranteed maximum pricing, add-in the features and guess what? – usage will go up, our reliance on the mobile phones will increase, and migration from landline will take off.
• Worry less about the financial analysts. They really are a small market. They will be convinced by results – they can be trained to overcome their ARPU fixations. Grow your customer base. We have another 55% or more market penetration to achieve. The money will come.
• Long Distance in the wired world is creeping closer to free. Get with the programme. As the mobile phone becomes the key personal accessory reinforce the pattern. Stop penalizing users with long distance charges. Embrace the trend to free – include ‘long distance’ minutes in the general minute bucket. If your network architecture costs you too much, replace it with an IP fabric – but take the marketing high road.
  • For Rogers this is particularly compelling as long distance minutes moved to wireless picks the pocket of their biggest competitors, Bell and Telus.