Millions of Canadians will have only cellphone service by the end of the year as they increasingly replace their land-line telephones with cheaper wireless, suggests a new study.
About one in seven households — or two million in total — will have just cellphone service by the end of 2011, the Convergence Consulting Group said Tuesday.
"This is happening because prices have come down so radically," said Brahm Eiley, co-founder of the Toronto-based consulting firm.
Established wireless carriers Rogers (TSX:RCI.B), BCE (TSX:BCE) and Telus (TSX:T) starting cutting prices for voice services on their discount-brand cellphones back in 2008 — in some cases by more than 50 per cent — in anticipation of new competition, Eiley said.
New players like Wind Mobile, Mobilicity and Public Mobile, which have all entered the market over the last two years, have also added "all-you-can-eat" voice plans, he said.
"So in effect, it's cheaper to have a wireless phone than it is to have a wireline phone," Eiley said.
"We're actually seeing an acceleration of wireless substitution in 2011, which we did not see previously in Canada."
Such trends are common in Europe, the U.S. and other parts of the world, where many younger consumers choose only wireless service.
Convergence's findings about wireless and landline pricing in Canada appear to be inconsistent with a report from the Canadian Radio-Television and Telecommunications Commission, which found earlier this year that the average wireless revenue per user fell just $1 between 2009 and 2010 —from $58.81 to $57.86 per month. It is possible to get landline service for half that price and share it among multiple members of the household — something that is more difficult to do with cellphone service. However, the CRTC report did not include 2011 data.
By the end of 2014, the Convergence Group estimates that 26 per cent of Canadian homes will have only have mobile phone service.
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In 2009, just 8.9 per cent of Canadians had ditched their land-lines and cut the cord at home for cellphones, the Convergence study says.
1/3 households landline-free in U.S.
In the United States, 31 per cent or about one in three households will have cut the cord on their land-lines for cellphone service by the end of 2011, the study said. Canada won't reach one third of its households only having cellphone service until 2016, Eiley said.
However, the new wireless companies have undercut Rogers, Bell and Telus by more than 58 per cent on combined voice and data plans and by more than 83 per cent on data alone.
Data plans allow consumers to do things such as stream music, watch video and check email and social networks.
The study also estimated that new wireless players like Wind Mobile, Mobilicity and Public Mobile will have four million or 12 per cent of Canadian subscribers by the end of 2014, up five per cent from year-end 2011.
But Eiley expects that only one of the three new wireless carriers will be left standing by 2014. That's expected to mean that Shaw Communications (TSX:SJB.B) will buy up coveted high-value wireless spectrum in the next auction of radio waves and enter the mobile phone market around that time, he said.
"At that point, whoever is left can start raising their prices because they don't have to worry about the competition," he said, adding that Shaw is simply on the sidelines for now.
"Shaw is not out. Chances are there will be less competitors and the prices will be higher."
The Calgary-based company recently announced it will build a Wi-Fi network to allow its tablet and laptops users internet access on the go.