Canadians love kvetching about wireless prices, but are so enamoured with smartphones that their “willingness to pay” for cellular services is actually higher than the sticker price charged by mobile carriers.
That is a key finding of a new study set to be released Monday by telecom consultancy Nordicity and the Canadian Wireless Telecommunications Association, the main lobby group for the $19-billion industry. Entitled the Benefit of the Wireless Telecommunications Industry to the Canadian Economy, the study calculates a concept called the “consumer surplus” which is the difference between the dollar value a consumer ascribes to a service and its going market rate.
It is estimated the wireless industry generated a $11.5-billion consumer surplus for 2011, including $9-billion for mobile voice and $2.5-billion for mobile broadband services. That consumer surplus is being fuelled by the growing popularity of data-hungry smartphones, coupled with a roughly 10-per-cent decline in wireless prices in recent years due to the burst of competition provided by upstart carriers.
The study bases its findings on 2011 data, a year when the majority of Canadian subscribers were still using old-fashioned devices like flip phones. Canada’s smartphone penetration rate, however, increased to 62 per cent from 45 per cent between December 2011 and December 2012, suggesting consumers placed an increasing value on the convenience of being constantly connected through those mini-computers. As of the first-quarter of 2013, one carrier had a smartphone adoption rate topping 70 per cent.
“It is a voluntary choice that Canadian consumers make,” said CWTA president Bernard Lord, who was scheduled to outline the study’s findings at the Canadian Telecom Summit on Monday.
Canada has the third-highest smartphone adoption rate among G8 nations (behind Spain and the UK), a trend the study attributes to modern networks and “competitive pricing” of devices and bandwidth. In that regard, it notes that consumer spending on mobile apps and content increased to $675-million in 2011 from $168-million in 2010.
When asked how the industry squares the idea of a consumer surplus with consistent complaints about wireless pricing, Mr. Lord stressed the prices for voice, text and data have fallen even though overall consumption of wireless services has increased.
“When I hear these groups, the detractors and the professional complainers, sometimes out there saying: ‘Oh, this is bad, and things are awful,’ somehow they are suggesting that maybe Canadians don’t know what they are doing,” he said. “Canadians are buying the most sophisticated devices ... and that’s because they see the value of it.”
Still, consumer complaints about wireless services have increased sharply in recent years, according to Canada's Commissioner for Complaints for Telecommunications Services.
And consumer groups, such as the Public Interest Advocacy Centre, have pressed the Canadian Radio-television and Telecommunications Commission to tackle thorny issues like roaming rates and clarity of advertised prices as part of its code of conduct for the wireless industry, which is scheduled to be released on Monday.
“With independent providers unable to gain a foothold in this country and offer real choice, the Big Three are able to raise prices at will and to trap Canadians in restrictive contracts with poor service,” OpenMedia.ca executive director Steve Anderson said recently. “This has been going on for too long, it’s getting worse, and it’s preventing our digital economy from thriving.”
Quick facts about the Canadian wireless industry:
- Generated $20.7-billion in direct GDP in 2011, up 15 per cent from 2010
- When taking into account other factors, including “multiplier effects,” overall economic benefit was $50.2-billion in 2011, up 16.7 per cent from 2010
- More than 90 per cent of Canadians over the age of 15 use a wireless device
- Provided the underpinning for 280,000 jobs in 2011, including direct employment, support staff and indirect positions
- Carriers spent $2.6-billion on capital investments in 2011