Canadian consumers will look to pare back spending on cable TV and telecom services as the economy continues to weaken, but relatively few are likely to part ways with their cellphones.
Belt-tightening means consumers may cancel home phone lines and downgrade cable packages. New data from cable and telecom company Rogers Communications Inc. suggests home Internet access may also be seen as a luxury by the cost-conscious.
Users could dial back on pricey data plans that enable them to watch videos and surf the Internet on their mobile phones. What's not likely, however, is that cellphones and smartphones will be cut altogether. "Really, what it comes down to is what services are essential to our everyday lives," said independent industry analyst Carmi Levy. "Consumers are increasingly asking themselves that question now as they look for opportunities to save money."
Service providers such as Rogers and rivals BCE Inc. and Telus Corp. are closely watching how consumers adjust to the economic downturn and which services they decide to cut or scale back, as any such budget trimming by consumers means lower revenues for them.
Rogers this week said it is already seeing the economy hurt its cable business. Basic cable subscriber additions dropped to 4,000 in the quarter ended Dec. 31,down from 20,000 a year earlier, the Toronto-based company said. High-speed Internet additions fell to 19,000 from 46,000 a year earlier. Home phone subscriber growth fell to 40,000 from 65,000.
Meanwhile, postpaid wireless additions at Rogers held flat at 158,000, in line with analysts' expectations. This suggests that while wireless growth has stalled, it isn't plunging.
"The last thing standing among all of the subscription-based services increasingly looks like it'll be wireless access," Levy said.
For instance, as the economy darkens, a user with a home phone line and a cell-phone is likely to look at cancelling the landline, since having both means paying two bills for a duplicate service.
"I do think wireless is fairly resilient," said Troy Crandall, an analyst at MacDougall, MacDougall & MacTier.
"As time goes on, and if the economy gets tougher and tougher, I think you're going to get more and more cannibalization of land lines to the wireless side."
Wireless subscribers locked into long-term contracts will also likely think twice about cancelling their mobile phones since terminating such a contract early also often carries hefty monetary penalties, he added.
The magnitude of the drop in the high-speed Internet subscriber growth at Rogers in the fourth quarter surprised analysts. However, some say Internet access is a maturing market. This makes the impact of consumer cutbacks and the economy more difficult to judge.
And although Rogers said Internet subscriber additions have fallen, this may change as more job cuts hit Canadian companies and laid off workers are forced to look for new jobs from home or set up home offices.
As for television, while Rogers said basic cable additions plunged, it also reported digital cable subscriber growth held at 61,000 in the quarter, the same as the fourth quarter of 2007. Premium TV services could become more important as the recession prompts people to stay at home to save money.
"If you're not going out to restaurants, movies, whatever, outside . . . you actually value the quality of your television in a different way," said Amit Kaminer, an analyst at telecom consulting firm SeaBoard Group.