Your Questions: Ask CBC

Why are cell phone plans so expensive in Canada compared to the rest of the world?

Peter Nowak: Hi Andrew — that's the multi-billion-dollar question, isn't it? Many industry observers believe it's because of ownership restrictions that prevent foreign companies from coming in and setting up shop. Many developed (and even developing) nations have a number of foreign players selling cellphone services. In the U.S., for example, you have Germany's T-Mobile and Britain's Vodafone in a half-owned venture with U.S.-based Verizon, while in Canada we have no foreign providers.

Closing your market to foreigners, especially when the cellphone industry has evolved to become a global market, makes it cozy for your domestic players. Without the threat of new competition coming in, there's no incentive to provide value for customers. The proof is pretty much in the pudding – while many cellphone companies in other countries are expanding outward and growing their potential markets, Canadian carriers are sitting still.

That's not to say the Canadian market is totally closed to foreign competitors, but they are limited to minority ownership and control, which makes it difficult to attract any big players.

The other main factor for why service is as it is in Canada is that all of the three big carriers — Bell, Rogers and Telus — also sell home phones. None of them are very interested in making cellphone service too appealing, because then people would cancel their home phones. They would rather have people buy both. Canada used to have two cellphone-only companies, Clearnet and Microcell/Fido, but they were swallowed up by Telus and Rogers, respectively. Many other countries continue to have cellphone-only companies that are driving people to abandon their home phones by providing competitive prices.

Reading about the Rogers iPhone plans have made me both confused and concerned. I am confused as to what 400MB of data transmission represents and how mobile the iPhone will be in Canada. I would like to be able to use the iPhone as I go about my daily affairs in Ottawa to check various news sites (e.g., CBC, CNN, Globe & Mail, Washington Post, Le Monde, etc) and the occassional news videos that can be found on these sites. Is this possible under Rogers 400MB plan? Also, can one use the internet features when on the streets of a city like Ottawa or does one have to find a "hot spot" (and buy the cup of coffee or whatever to use the hot spot). Finally, about the roaming charges, if one were to use the iPhone outside Canada, say while driving through the Eastern United States or when in Europe, just how expensive could these additional charges be?

Peter Nowak: Hi Duff – good questions. The numbers the phone companies provide on how many web pages you can surf or how many videos you can view with the allotted data transmission aren't always accurate. The iPhone uses an HTML web browser, which means you're seeing the web in the same way as you would on a computer, albeit slightly more compressed.

The intro pages of many websites, with photos, fancy Flash animations or streaming videos, often come in at over 1 megabyte, so with 400MB, you'd be able to view fewer than 400 such pages a month. I've seen a five-minute streamed video, like the kind you would see on YouTube, come in at about 80MB. With 400MB, you'd get about 25 minutes, or a handful of videos.

You can use the iPhone to connect to the internet anywhere you can get a cellphone signal, although this will use up your monthly data allowance. Alternatively, you can find a "hotspot," like those found in many cafes and airports, and use the iPhone's WiFi connection ability. This doesn't use up your data allowance but, in Canada, is not always the cheaper way to go. Many small businesses offer free Wi-Fi access but bigger places tend to charge for it.

Lastly, it is very easy to rack up hefty roaming charges for either talking or using internet capabilities on the iPhone, or any other device for that matter, when outside Canada. Check your provider's rates before doing so. On the iPhone, for example, you'll pay a whopping $3 per megabyte used.

In China, where I am pro tempore, cell phones are ubiquitous and cheap, at least in Canadian terms. There is no charge for incoming text. There is no charge for incoming calls. "Pay as you go" schemes do not have any per diem charges, you simply pay for what you call - or txt. No 'network access fee' or whatever nonsense. Caller ID is universal at no charge. And it works.

How did we in Canada end up with such an inferior system?

Cheers,
dba

Peter Nowak: China is an interesting comparison. I lived in Guangzhou, not far from Shenzhen, a few years ago and got a contract-free cellphone for $5 that came with a month's worth of free minutes. Of course, when you have an addressable market of more than one billion people, you can afford to make service that cheap.
For the most part, China is leapfrogging many western nations by going straight to cellphones and not even bothering with landlines.

Not so long ago, the average Chinese person couldn't afford a landline so not much infrastructure was built. Now, with incomes rising, people want a phone — and a cellphone network is much cheaper and more efficient to build than a landline network.

Canada has historically had an excellent landline system and, despite much griping, we have enjoyed some of the cheapest rates in the world. This was definitely a factor in holding back our cellphone development in the early days and part of the reason for why we are where we are now.

Is there a good reason for not offering an unlimited data plan?

Is there logic behind the pricing of the plans or is Rogers simply charging as much as they can based on what the market will tolerate?

Peter Nowak: Hi Chris — the logic behind not offering an unlimited cellphone data plan seems to be rooted in what's happening with home high-speed internet access. In the early days, cable providers competed fiercely with phone companies to attract internet customers, and ever-increasing download limits were used as a key sales lure. Eventually, they got to offering unlimited downloading, and then soon after hit an equilibrium where they had signed up just about all the customers they could easily get.

Now, we're seeing the steady introduction of download limits and so-called "metered usage," where customers are increasingly paying for how much they download. This is an easier way of boosting revenue than going out and signing up the difficult-to-get customers, such as those living outside of major cities.

Of course, eliminating unlimited usage in home internet services has made many customers angry. The providers have been reluctant to offer unlimited downloading on cellphones so that customers don't get used to it, and thus repeat the situation they're currently facing on the home-internet front. So yes, it's very logical — for the carriers.

Seeing as Canadians are gouged across the board by the telecos, is there a government agency or group that can be realistically urged (via petition or otherwise) to investigate the extreme prices, lack of consumer satisfaction, and extreme lack of competition? Obviously the CRTC is a lame duck.

Peter Nowak: Unfortunately, the CRTC gets a lot of unwarranted flak. There are many bright men and women there who have nothing but the best interests of consumers at heart, but they must follow the law as spelled out in the Telecommunications Act, as well as the instructions handed down from the government. The CRTC on occasion does get a ruling wrong, but in most cases it is only doing what it is empowered to do — if there are problems, it is with the Act, which is sorely in need of an update, or an edict from the government, which can sometimes read consumer concerns incorrectly.

The current government in 2006 told the CRTC to be more "hands off" — to regulate less pro-actively and only get involved where a problem has been clearly demonstrated. A petition of suitable size would likely be enough to demonstrate that problem and thus the need for CRTC intervention.

The current dispute between Bell and several smaller service providers over the limiting of internet speeds is a good example — the public has displayed enough concern to prompt a CRTC investigation.

The Commissioner for Complaints for Telecommunications Services, set up a year ago to handle irate customers, also gets very little attention — probably because it's self-run by the industry, with some oversight from the CRTC. Because it is industry-run, the CCTS often needs to be cajoled into investigating a complaint but when it does, it is highly effective. Every complaint the agency takes on directly costs the respective telecom company $1,000, which is a very good way to get a gripe dealt with.

Why are Canadian carriers so averse to offer shorter (or nonexistent) contracts and SIM unlocking services, whereas other countries offer them either voluntarily or by legislation?

Peter Nowak: Hi Kelvin, the easiest answer is that shorter contracts and unlocked phones would make it easier for customers to switch providers. That would force carriers to compete harder against each other, which would mean lower prices and better services, and thus lower revenue.

Will Canada ever get a better network?When?
Would Canada ever let competition come in from other countries(China Mobile or AT&T) to lower prices?
With 4.5 Billion made in the Spectrum auction, does this mean that there will be 7 or 8 companies now charging 100$+ for cell phones?
(sorry about all the questions)

Peter Nowak: Hi Roland, answering those in order:

Yes, there will be several new providers starting up in the next year or so. These are likely to include EastLink, Videotron, Globalive/Yak and Shaw.

A government panel just tabled a report that advocates lifting the foreign ownership restrictions. A lot of Canadians are concerned that doing so would sell out our companies to foreign interests, but both the Liberals and Conservatives seem to be in favour of it. We'll see this fall when Parliament reconvenes whether the government intends to act on the panel's advice.

Some people — notably the existing cellphone providers — have suggested that higher spectrum costs will translate into higher bills from the new entrants. While their costs will undeniably be high, at least some of the new entrants will want to get a lot of customers on board, and fast, so they can start making some of their investment back. The only way to do that is with attractive rates and services. For many of them, going slowly with high prices won't make sense.

Are you able to purchase the iPhone at the retail price w/o signing a contract ?

I have done this before to avoid signing contracts but a few articles I read advised you cannot. Just want to verify the information THANKS!

Peter Nowak: Hi Katie, you're out of luck with the iPhone. Unlike in many countries, you can't buy it in Canada without a three-year contract, even though it won't work on Bell or Telus's network.

In New Zealand, for example, Vodafone is selling the iPhone without a contract even though it doesn't work on the only other competing network, from Telecom New Zealand. In Canada, many other phones are sold for full price without contracts but not the iPhone because, as Rogers says, it's "special."

How did the CRTC allow the sale of the other competing GSM technology (Fido Solutions) to Rogers, which is now a monopoly company for GSM technology which in turn leads to where we are now with the pricing of cell phone service?

Peter Nowak: Hi Rocky, unfortunately, this is another case where the CRTC gets some unfair blame. The CRTC actually had nothing to do with the sale, it was the Competition Bureau that allowed it. The bureau's thinking was that if it blocked the sale, Microcell/Fido would have gone belly up. Of course, one factor the bureau seems to have overlooked is that Telus also had an offer in for Fido. If Telus had bought the company, Canada would have continued to have at least two GSM providers.

I read on-line that Telus was considering switching to GSM. How quickly could this happen and would they be allowed to utilize Rogers's existing GSM network?

Peter Nowak: Telus has obviously wanted in to GSM ever since it tried to buy Fido. There are persistent rumours that the company is looking at converting, but at this point, who knows? Rogers has been trouncing both Bell and Telus, so it's a question of how long either of those two companies is willing to grin and bear it. I've heard that Telstra's recent GSM conversion in Australia took around eight months and cost between $500 million and $800 million.

What makes an iPhone more attractive than a high-end BlackBerry?

Peter Nowak>: Hi Jeremy, for many, it's a matter of taste. The BlackBerry, of course, has the full keyboard and proven push e-mail system going for it. The iPhone has a much bigger screen, which is better suited for showing off photos, watching videos or surfing the web, not to mention its touch capability. The best thing about the iPhone, I think, is that it uses the same kind of web browser you see on desktop computers, which means the websites you're looking at is what they normally look like, rather than the garbled, text-based variations you see on many devices.

Could someone explain to me what GSM is? Thanks!

Peter Nowak: Hi Carrie, there are two main cellphone technologies, Global System for Mobile communications (GSM — and don't ask me why the "C" isn't capitalized?!?) and Code Division Multiple Access (CDMA). In Canada, Rogers uses GSM while Bell and Telus use CDMA. Globally, more than 80 per cent of the world's carriers use GSM.

Basically, the two are like VHS and Beta videotapes, each having advantages and disadvantages over the other. GSM has emerged as the VHS of this battle. Unfortunately, the two are not compatible so GSM phones do not work on CDMA networks and vice versa. For consumers, GSM phones are preferable because they use tiny removable SIM cards. In countries with more than one GSM carrier, consumers can simply get a new SIM card when switching providers instead of having to purchase a new phone, which is what Canadians must do.

With the current spectrum auction winding down to a close. What was the reasoning of the federal government in not opening a small percentage of the spectrum to an international player?

I understand wanting to promote Canadian development, the issue is that current competition restrictions have failed to help the Canadian consumer.

Peter Nowak: Hi Duncan, again, it's an issue of foreign ownership restrictions. The government could have reserved some spectrum for foreign companies, but those firms wouldn't be allowed to own even 50 per cent of any company they wanted to set up. The ownership rules would have to be changed before such a concession could be made in an auction.

Isnt the internet available for free on the iPod Touch? Why is there a charge for this same service on the iPhone?

Peter Nowak: Hi Damien, yes, the iPod Touch has Wi-Fi capability so it can also connect to the internet. However, you have to get to a hotspot — like those in cafes — to do so, and there is sometimes a charge to use Wi-Fi in these places. The iPhone has Wi-Fi too, but can also connect to the internet using its cellular connection, which you can do just about anywhere.

I receive may files via email as part of my job. I like the idea of a mobile phone able to free me from my desk and make it possible to work anywhere.

Question - will the iPhone plan charge me for every file I receive via email in addition to the regular monthly plans and telephone charges?

Peter Nowak: Hi Bill, no, not if you use some sort of web mail, like Gmail or Hotmail. Emails through such accounts will only count against your regular monthly usage.

Why did they choose to only license thru one service provider and how does iPhone compare to RIM's Perl.

Peter Nowak: Unfortunately, the iPhone is only made to work on GSM networks, and Rogers is the only owner of such a thing in Canada (remember, Fido is owned by Rogers). Some countries, including Italy, Switzerland, Portugal and Australia, have multiple iPhone providers because they have several GSM carriers. As for the BlackBerry Pearl, again it's a matter of choice. The iPhone has the big screen and the nice web browser while BlackBerry has a full keyboard and a proven e-mail system.