Telus rebuttal

An interesting article from Telus, partially debunking an article by Michael Geist concerning an OECD report on cellular service in Canada. It’s a good mix of information, some of which is entirely pertinent, other bits less so which I’m going to try and add a little bit more context from the point of view of a Canadian who has lived in the US and France and travelled for work in England and western Europe.

We’re not about to argue that Canada has the cheapest wireless rates in the world – that would be no more factual than the oft-repeated mythology that our prices are the highest. The facts, however, prove Canadians pay very competitive rates for some of the best wireless technology in the world – backed by very high investment by TELUS and our competitors.

A nice mix of truth and semi-truthfulness here. Canada clearly does not have the cheapest wireless rates, nor the highest. Competitiveness is in the eye of the analyst and it’s true that Telus and other Canadian telcos do invest a lot. It’s also worth noting that current investments are higher than normal due to the ongoing transition from existing networks to next generation LTE networks though so the investment figures need to be taken with a grain of salt.

One key fact – Canadian pricing is better than the U.S. in 12 of the 15 wireless pricing categories the report looks at. The U.S. has similar geography and economic conditions (including incomes) as Canada, though 10 times the population, and therefore makes for a better comparison than countries with far denser – and therefore less expensive to serve – populations and far lower average incomes.

Overall, I have to agree here that the US is the closest natural comparison economically. However, the vast bulk of western Europe is comparable in terms of economic activity and average income, albeit with generally higher average population densities.

A second fact – when you look at Mr. Geist’s chart, note we are being compared to countries like Slovenia, Slovakia, and Turkey – hardly a legitimate comparison when you consider their markets and economies are vastly different from ours. Despite that, if you focus on the high-usage tiers for smartphone service, which are the most relevant for comparison because that’s where the average Canadian sits, we finish 21st and 22nd out of 34 countries. That’s about average. If you compare us to just the G7 countries, which have more comparable economies, we finish third and fourth out of seven – right in the middle. As mentioned above, we do even better when compared to the U.S. one-to-one.

In general I have to agree with these statements. Slovenia, Slovakia and Turkey are emerging economies working withing vastly different economic conditions and regulatory frameworks.

A third key fact – the OECD report’s methodology is limited. It is not a comprehensive report, but rather it takes a random sampling of one or two plans for each country in each category and does not take into account the different flavour of services in countries. Their reports often end up comparing apples to oranges as a result.

Here I have to agree as the report methodology is non-optimal for this kind of comparison.

The wireless data-only plans are a good example of this. At first glance it looks like Canadian prices are high for these plans – which are typically used on a laptop with a thumb-sized wireless modem. However, scratch the surface and you find that Canadian data-only plans offer customers far better speeds than plans in other OECD countries do. The OECD itself notes that in the 10GB basket, the plan representing Finland only delivers up to 400Kbps, Estonia 1 Mbps, and Canada 100 Mbps! They’re more expensive because they’re better plans, on better networks, and deliver vastly superior customer experience.

It’s true that data only plans are badly regrouped in the report. I would note that this is worth revisiting in a couple of years once LTE is the predominant standard. For example, in France currently has 40% of their network running on LTE and there is no price differential between 3G and 4G access.

The OECD report also does not factor in the fact that most Canadian providers subsidize handsets for customers whereas that is uncommon or unknown in many OECD countries. Ignoring an upfront cost of $500 or more is not comparing apples to apples. It also does not factor in that typically Europeans pay for two or more wireless accounts because they frequently travel between countries or cannot get the all-in pricing North Americans take for granted – for example, one account for daytime calls, a second one for evening and weekend calls. That’s why you get penetration rates of 160 per cent in Norway – 1.6 wireless devices for every adult and child in the country.

This is actually untrue in western Europe. While there are many operators that offer unsubsidized plans, there is also a high mix of subsidized plans as well. However, I have yet to see significantly discounted plans in Canada for those people willing to pay up front for their terminal.

There is also the question of why many people have multiple devices in Europe. In many cases, employment legislation makes the use of “Bring Your Own Device” to the office non viable so employers furnish a telephone for work and people have their own personal devices. At the same time, à la carte offerings and no contract options make it possible for a higher percentage of people to have cellular plans for their iPads and Android tablets which bumps up the penetration rates.

The argument regarding all-in pricing is frankly bullshit. It’s worth noting that in most european countries, there is no notion of long distance calling, as price separation is set based on calls destined to land lines vs other cellular phones. To give the example, here is a resumé of the no-contract offering : - unlimited calls to cell phones in continental France, French islands and territories, USA, Canada, Hawaii - unlimited calls to land lines in France and 41 countries (USA, Canada, Belgium, England, …) - unlimited SMS to continental France, French islands and territories - unlimited MMS to continental France - unlimited use of Wifi hotspots (automatic connection via EAP-SIM) - 3 Gb of data in continental France (bandwidth reduction over this limit)

All of this for 20€/month. Note clearly that the european standard is moving to reduce bandwidth rather than surcharges for overage situations.

Which raises a fourth fact. The report highlights, and Mr. Geist ignores, that Canadian carriers invest almost twice as much in technology and infrastructure per customer than the OECD average. The only country that invests more is Australia, and that’s because they are undertaking a massive tax-payer funded infrastructure project. Our investment is all private, at no cost to taxpayers.

This is undeniably true. Part of this addresses the geographic constraints imposed by Canada’s huge size, but also must be considered in the light of the current infrastructure upgrades to LTE which are not being pursued with equal vigor in all countries, notably due to the economic issues affecting countries like Italy and Spain.

Consider that world-leading level of private investment in the context of population density, and the challenges that come with serving a vast, sparsely populated landscape. Canada has only 12 subscribers per square km, compared to an average of 37 in the U.S. and 312 in the UK. If you factor out the unpopulated areas of Canada that don’t have wireless networks and only include the geography that does have wireless service, we are still serving the 200th least densely-populated landmass in the world. Despite this, 99 per cent of Canadians have access to cutting-edge wireless technology.

While this is certainly true, when you map actual coverage to population density, Canada is a lot more like Europe than telcos would have you believe. Cellular coverage is destined primarily to urban environments where there is sufficient population to justify the investments. Extracting the unpopulated areas gets us closer to a reasonable comparison, but note that the density figures are not quoted in this comparison.

That investment back into service for our customers comes out of the profits we earn, and is directly responsible for the quality of the networks we offer. TELUS alone has invested $100 billion in Canada since 2000. On the back of that investment Nokia Siemens, an international telecom technology firm, found TELUS has the best 4G LTE network in the world – best quality, least dropped calls. I’m very proud of that, and the work that made that remarkable achievement possible.

So that’s a little less than $10B per year which is a perfectly reasonably outlay for covering a country like Canada. For reference, the 2012 investments by operators in France came to 10B€ and around 8B€ in 2011 so it looks like these numbers are pretty much par for the course.

When you consider our enormous investment, challenging geography, sparse population and outstanding networks Canada really SHOULD be the most expensive country for wireless service in the OECD, but we’re not. That’s a great success story we should be celebrating.

Agreed that the investment is proportional to the challenge, but the pricing is still significantly higher for equivalent service. The closest I’ve found according to Telus for a smartphone with 3Gb of data comes to $95 vs 20€ not including free international calling. If I consider the fact that I’m using a cellular equipped iPad plus an iPhone, I get to $165 vs 40€ in order to have 6Gb total.

Don’t let the critics with a vested interest in a well-established, but ill-informed, position spin you on this one. Scratch the surface of their arguments and get to the facts.

Scratch further and you get more contextualized facts.

PrintView Printer Friendly Version

EmailEmail Article to Friend

Reader Comments

There are no comments for this journal entry. To create a new comment, use the form below.

PostPost a New Comment

Enter your information below to add a new comment.

My response is on my own website »
Author Email (optional):
Author URL (optional):
Some HTML allowed: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <code> <em> <i> <strike> <strong>
« Understanding the value of software in storage | Main | Whither the Mac Mini? »