Are Canadian Cell Phone Wireless Costs Too High?

by Mike Holman

high1

It is a common perception that Canada has one of the highest wireless fees in the world. As a result, wireless penetration rate in Canada is only 62%, which is one of lowest in developed countries. Contrary to this common perception, Canadians enjoy one of the lowest wireless fees in the world through wireless retention plans from the Big Three (Bell, Rogers and Telus). I am going to discuss this using an OECD report on developed countries’ cell phone fees.

Methodology for OECP Report

OECD divides cell phone users into three groups: low, medium, and high usage. Voice minutes, text messages (SMS), and multimedia messages (MMS) are considered. The number of services is arbitrarily defined on annual usage. Important usage information is listed in Table 1 and is taken from here.

Brokerage wait time comparison:
BrokerAvg Wait Time (sec)
Qtrade12
Options Express14
Virtual Brokers21
Credential Direct26
Jitney Trade38
HSBC43
ShareOwner43
Questrade51
BMO53
TDW58
RBC63
Scotia68
National Bank84
IB85
Disnat95
CIBC IE107

Low Usage Comparison

Prepaid is fairly expensive in Canada. I will use SpeakOut Wireless in my analysis, since I determined it offers one of the best prepaid cell phone services in Canada.

Costs of SpeakOut Wireless using OECD low usage definitions:

  • Local Voice Minutes: 529 * $.20 = $105.80
  • National Voice Minutes (7% of calls are assumed national): 527 * .07 * $.16 = $5.90
  • SMS (SpeakOut Wireless charges $.04 for incoming and outgoing messages. To simplify things, I assume that for every outgoing text message, there is one incoming text message): 396 * ($.04 + $.04) = $31.68
  • MMS: Not available on SpeakOut Wireless to the best of my knowledge.
  • Fixed Charges (911 fee of $.79 a month): 12 * $.79 = $9.48
  • Total Cost: ($105.80 + $5.90 + $31.68 + $9.48)* 1.13 = 172.73 (5% GST, 8% PST)

OECD is estimation for low usage in Canada is $195.68 and Canada ranks 20th in terms of lowest cost in the 30 countries low usage comparison. My own calculation by using SpeakOut Wireless suggests that OECD’s calculation is representative for Canada. If my calculation is used instead OECD’s calculation, Canada would rank 19th in the low usage comparison. I conclude that Canada needs to have better prepaid options for people with low usage.

Medium Usage and High Usage

Here is where I would disagree with OECD methodology of calculating Canadian wireless fees. OECD used retail wireless plans in Canada, but in reality, most Canadians are able to get wireless retention plans from the Big 3 after a year of contract with any one of them or through retail promotions that occur once or twice a year.

Wait time improvements from last year:
BrokerAvg Wait Time (sec)Last yearImprovement
Questrade51219168
IB85224139
ShareOwner43151108
Disnat9518287
HSBC438643
CIBC IE10714740
Qtrade12197
Options Express14195
TDW58635
Jitney Trade38391
Credential Direct26271
RBC63630
Virtual Brokers2120-1
BMO5344-9
National Bank8464-20
Scotia6847-21

As seen from Table 2, a standard retention plan covers OECD medium usage and high usage definition. Annual total cost of this standard retention plan is $372.22.

Medium Usage Analysis

According to OECD’s medium usage analysis, Canada ranks 27th out of 29 countries in this section. If my calculation is used, Canada would rank 21th out of 29 countries. There is a big difference depending on the methodology used and it could be argued that there need to be better medium usage plans.

High Usage Analysis

According to OECD’s high usage analysis, Canada ranks 19th out of 30 countries in this section. If my calculation is used, Canada would rank 10th out of 30 countries. I believe this is the evidence that Canadian wireless fees are one of lowest in developed countries rather than the highest. Canadian retention plans have more features and are cheaper than US retail and retention plans. I believe that the high usage analysis is the most important and this is the category that most Canadian wireless users fall into.

Conclusions

If OECD introduces an ultra high usage comparison, I assume Canadian wireless cost based on retention plans would be among the top 5 in developed countries.

Canadian long distance can be very expensive, but retention plans usually come with either 100 or 1000 Canadian long distance minutes. In fact, there are Canadian long distance and North American long distance unlimited calling packages from retention departments. Canadian long distance should not be an issue on retentions, but Canadian long distance can be a real issue on regular retail plans.

Retention plans are really great and I use about 1000 to 2000 minutes and 100 text messages a month without any overages. It is possible to use even more minutes and text messages, but it needs to be used within the provisions of the retention plan like 6pm unlimited early evenings, unlimited network calling, unlimited incoming, or unlimited calling to 5 numbers. If you do not have a retention plan right now, do call in and ask for the retention department. It is very likely that you will be given a retention plan by just asking nicely.

Photo Credit: nutmeg15

Be Sociable, Share!

Want to learn more about RESPs? Buy The Book:

Resp-Book

The RESP Book: The Simple Guide to Registered Education Savings Plans

Everything you need to know about RESPs.

See it on Amazon now

{ 7 comments… read them below or add one }

1 Andy Glad

I think everyone is getting a little fed up with mobile service and text messaging being so expensive. I use Send Free Text Messages to send text messages for free. I also can set it up to send to groups which is handy for work, group meetings and for sports teams. This way I don’t have to worry about the cost of sending these messages and it’s much easier to manage. I will continue to use sites such as this until the pricing gets back in line with what’s fair.

2 Henry

Andy Glad: I agree that wireless companies overcharge most people. According to an University of Waterloo professor, a text message costs the wireless carrier .03 cents or $.0003. When you round the costs of a text message, the cost is zero. Yet, wireless companies charge 15 cents or even 20 cents per text message and recently, wireless companies charge incoming text messages as well.

In Canada, there are 3 tier pricings on wireless usage. The best is retentions, second best is corporate plans, and absolutely worst is retail plans. A lot of people are stuck on retail plans. If you are an employee of a large company, you probably know or have access to a corporate plan. Some corporate plan are as good as retention plans. For most people, I would recommend retention plans for private use, because the retention plan can have things added on to it free of charge as your seniority with the wireless company grows. Even though, you might get a retail plan initially, you need to move to a corporate plan or retention plan as soon as possible.

3 Vasile

Hi!

I beg to differ on your disagreement 🙂 with the OECD methodology. Considering the regular plans in other countries against the discounted/retention plans in Ca is an orange-to-apples comparison. One can presume that the operators in those countries also have some retention plans, but that data is not readily available since they are not advertised .

I agree the retention plans are better than the retail ones, but how many people know about them ? How many people do you think are under these plans, personal finance blog readers included? 1%? 2%? I agree there’s a free market, but there’s no way I will shed a tear for the telecom companies. After all, they’re experts in fooling the regular Joe with hidden fees and outrageous contract terms hidden in pages of legalese. You can see the results in their profits.

Oh, and my pet peeve: the incredible markup on occasional SMS messages if you don’t have an “unlimited text” plan. 5c for 140 bytes of data? Give me a break! But again, maybe the markup can be compared with the potatoes turned into fries at McDonald’s :-).

Regards,
Vasile

4 pessimist

Hi. Thanks for this analysis. Can you tell me who is offering this retention plan? Have been with rogers for 2 years and the best price they’re giving me for the plan above is $40/month. Thanks.

5 Henry

Vasile: You are correct that some US carriers such as Sprint, AT&T, and T-mobile does have retention plans and what they do most of the time is give you another 200 minutes per month on $60 plan not a specialized plan. In Taiwan and Hong Kong, there are no such thing as retention plans and I have been able to confirm that. My observation is that some countries may have retentions, but a lot of countries do not. Many of top10 countries in OECD study use exclusively some form of prepaid and do not use monthly plans. I believe the likelihood of retention prepaid is very low for those countries due to lack of need to “keep the customers” and wireless charges are already extremely low. I think my angle on this issue is correct but controversial.

Half of young adults I have met are on some sort of retention plans. Occasionally, once or twice a year, Bell would offer retention plans to new customers. Retention plan is accessible to a normal person in Canada. A lot of people have retention plans, but they don’t know it and they often think it is a “special” deal just for them.

pessimist: Retention plans are given by Customer Relations Department and a regular Customer Service Representative does not have any power to give a retention plan. Actually $40/month including tax sound about right with Rogers due to unlimited incoming calls. Rogers is less willing to give out free unlimited incoming calls nowadays and charge customers $10 for it. You should be able to get it down to $31 a month including tax if you are willing to give up unlimited incoming calls. You will need to resign a 2yr or 3yr contract to get the retention plan unfortunately, but you can get a new phone at a subsidized price. If you don’t need a retention plan right now, you can wait until next year when Bell and Telus have their HSPA GSM network up and new carriers appear. The increased competition may give you leverage to get something better than what you can get now. It could be possible that Telus and Bell will have access to the next generation of iPhone next year.

6 Martina

Here’s a fantastic option for Canadians. I’m writing from Miami, in the US, where many of you vacation over the winter. Now, down here I use a pre-paid TracFone which is available at any Walmart. The TracFone is one of the cheapest cell options in the States and is available for long distance to Mexico and Canada for the same rates we pay. All you have to do is provide your family or friend with a local phone number in those countries to reach you at your TracFone in the U.S. Once you’re here, there’s no need for you to pay the exorbitant international long distance costs associated with travel. Bon Voyage!

7 Darkesha

I don’t agree on much of your points simply because of this paradox:
As time pass by the rates go up, and offered service goes down.

I am with fido for over 5 years (8 in total), without contract…and the plan is that much old. I look at what them and their competition offer today and it’s almost unbelievable. Five years ago you were able to get much more for much less.

Leave a Comment

Previous post:

Next post: