Trouble in Paradise, Canadians held hostage

Free health care and enhanced social benefits come at a price. A more socially liberal government also brings a more financially liberal ecosystem as well. Stymied competition in the technosphere has always been a point of strong contention for Canadians. From anti-competitive pricing practices in the media-distribution business to a levy on physical media, America’s Hat continually receives the sharp end of the Loonie encrusted mace.

Canadians are a very connected population. 64% of the population uses a mobile phone, and in 2001 (StatsCanada) almost 50% of the country was connected via personal broadband. Interestingly, this connectedness is strictly controlled and maintained by a very small group of organizations. Canada is very exclusive when it comes to media-distribution service providers. While Bell, Telus and Rogers maintain nationwide cellular networks, their wired businesses tend to service specific regions of the country, with a fourth provider, Shaw, remaining insofar out of the cellular phone business. Heading up the West, Shaw and Telus manage Cable TV and telephone, respectively, while Rogers and Bell carry the same in the East. Until very recently, GSM cellular was exclusively Rogers territory, while Bellus (as it is so “affectionately” called) carried CDMA. With, in essence, a monopoly over their respective services, Canadians have been subjected to anti-competitive practices since the inception of service delivery. Recent entrants to the industry have attempted to shift the status quo, but due to coverage and adoption issues, newcomers such as WIND Mobile have yet to make a serious dent in the oligopolic market.

Currently, Canadian wireless providers offer 3G data that is capped post-paid at 5GB. While the combined network is among the best on the continent and capable of delivering service to over 90% of the population; Canadians are charged a substantial tariff by their providers, including up to $60 a month for their mediocre bandwidth limits. Combined with a “generous” voice plan, Canadians still cannot attain the attractive pricing that American providers have been touting as of late. Plans such as Sprint’s $99 unlimited package, leaves those North of the 49th parallel panting for more.

The price gouging is not only confined to the mobile market. The recent announcement of Netflix’s arrival to Canada has highlighted the broadband bandwidth issues that plague users from coast to coast. Rogers, who controls the cable Internet market east of Sault Ste Marie, has recently lowered their monthly data caps. Neowin has covered the changes in great detail, and quite obviously the changes are to protect their current investment in their own “On Demand” service that offers functionality similar to that of the American giant. Other providers offer soft-caps that either result in extra charges or a crippled connection until the end of a billing period. Western giant, Shaw, while offering a 25mbps connection, caps the user at 250gb a month while charging $4 short of a C-Note. As there is no competition between areas, the caps and pricing are just more hot coals on the road to connectivity. Furthermore the general market consensus on net neutrality is similar to that of the States, so high prices combined with crippled service are currently the norm.

The major issue seems to be with the de facto non-competition agreements between companies. With the privatization of the western telcos, and the deregulation of Bell in the East, the system was never designed with competition in mind. Telephone service in Canada was for a time, all about just making it happen, as the logistical difficulties involved discouraged overlapping expenditure, and government regulation further restricted the development of private enterprise in the industry. As the market has grown, the associated companies (whether it is cable, telephone, internet or wireless) seem to have maintained their regional affiliations rather than attempting to compete in regions historically controlled by other entities. This spread of service has enabled individual companies to set pricing relative to their profit margins rather than on a competitive scale, as is evident by the nearly even service pricing between areas and providers.

On the wireless side, Bell and Telus have recently begun to operate a cooperatively maintained HSPA+ network over much of their CDMA service area. Although supporting similar phones and offering true 3G services across much of the area they share with Rogers, prices have not yet fallen. Ideally with more than one provider offering service over a given area, individual providers may begin to set competitive pricing. Instead, companies cite infrastructure maintenance and expansion costs as the reason for their steadily increasing service costs. It is often argued that due to low market saturation and increased area, costs are increased, but if you were to peruse an actual total coverage map, it turns out that not only do our neighbours to the south manage infrastructure for many more clients, but also manage to do so over a larger contiguous area at a lower cost. Somehow the numbers don’t seem to add up.

Although high pricing and a definite lack of service variation between providers is frustrating to the consumer, it would be unfair to state that companies are not doing their part to drive innovation. With an expected LTE rollout in 2012, Bellus is set to have the most advanced network on the continent. Combined with the continual development of land based services such as Bell Fiber and its cable equivalents, Canadian users are not necessarily behind the eight ball. The ongoing net neutrality discussions coupled with a possible service shift due to smaller providers could be the push that is needed for fair delivery of the service desired by connected Canadians. In the meantime, it looks as though we will have to continue to grin and bear the current connectivity climate.

Image Credit: David Lea (Flickr)

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