A cellphone by any other name smells like broadband

CBCNews.ca Staff

While cleaning out my inbox today, I came across Merrill Lynch's annual wireless matrix, a measure of cellphone revenues, prices and other statistics from around the world. Although the survey, which has near-Bible status in the wireless industry, was released in June, it's particularly pertinent given the report released today by Canada's biggest ISPs about how the country's broadband service is world-class by every measure. [UPDATE, Nov. 5: To clarify, the word "every" was used to sum up the fact that the report says Canada is a leader in all the major measures commonly used in international studies to compare broadband services among different countries - availability, user adoption, speed and price. It wasn't intended to be taken to mean literally every comparison that could possibly be made. You can read the full report, and its evaluation of a number of aspects of Canadian broadband as they compare to other services around the world, here.]

A few months ago, many of those same companies - Bell, Rogers, Telus - took umbrage with an OECD study that found Canadians pay some of the highest cellphone rates in the world. The OECD study found that medium users in Canada paid the third-highest rates, next to customers in the United States and Spain. Canadian carriers said the study used flawed methodology, which was based on European calling patterns. They cited Merrill Lynch's matrix as proof that prices were low - indeed, among the 22 developed countries rated by the bank, Canada had the fourth-lowest per-minute rate (about eight cents US). Canadians also have some of the highest monthly minutes of use in the study, with an average of 420 - third in the developed world, next to the United States and Hong Kong.

One thing the carriers didn't mention, though, is that Canada also scored third-highest in something called ARPU - or average revenue per user. ARPU is essentially how much monthly income a carrier earns per customer. Canada's $45.85 US rates third, next to the United States and Japan, according to Merrill Lynch. That third-highest ARPU certainly looks like the third-highest prices the OECD talked about (carriers in Germany, by comparison, earn an average of $19.81 from each customer, the lowest in Merrill Lynch's report).

Cellphone carriers have argued that high ARPU does not necessarily equal high prices - Canadians simply like to talk a lot, despite all the free calls they get on their landlines, so therefore they end up paying more for volume.

It's an argument that doesn't fly, though, when Canada is compared to countries with similarly low per-minute rates and high monthly usage, such as Hong Kong and Singapore. Both countries have comparatively low ARPU ($20.38 and $30.29, respectively). New Zealand is perhaps the best comparison to Canada. Customers there have free local calls on landlines and pay the exact same wireless rate per minute as we do - eight cents - yet only use 186 cellphone minutes per month. Monthly cellphone ARPU in New Zealand, however, is only $20.77 U.S., less than half Canada's.

What really makes the argument that high ARPU equals high prices in Canada is when gross domestic product per capita is figured in. Canada's GDP per capita, which is a general measure of a country's wealth per citizen, is $38,093 US, or nearly $10,000 lower than the U.S. or Japan, according to Merrill Lynch. In other words, while ARPU/prices in those two countries are higher than in Canada, so is the standard of living and, thereby, the disposable income.

None of this is even up for debate anymore, as the Canadian government decided our prices were indeed high nearly two years ago and moved to get new carriers to start up.

Merrill Lynch's wireless numbers are accepted by carriers while the OECD statistics are not, but ultimately they say the same thing. The ISPs are now similarly criticizing the OECD's findings on broadband. It's too bad Merrill Lynch doesn't have a broadband matrix because it'd be interesting to see if the same conclusions were reached there.