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Canadians Pay Extra For Their Wireless Hardware

Posted by timothy on from the y'know-value-added-and-all dept.

Todd Alivoy writes "Looks like Canadian wireless subscribers have been getting hosed when looking to get new hardware. This isn't the first time Canadian carriers have managed to charge far more than thier US conterparts for the same services. Anyone up there know why? It sure isn't the exchange rates." The linked article shows the price disparity for 14 phones available in both markets.

28 of 352 comments (clear)

  1. Basic economics... by WIAKywbfatw · · Score: 4, Insightful

    More competition = lower prices. Less competition = higher prices. (Duh.)

    Also:

    More customers = lower prices. Fewer customers = higher prices. (Less overhead per customer.)

    --

    "Accept that some days you are the pigeon, and some days you are the statue." - David Brent, Wernham Hogg
    1. Re:Basic economics... by Fred+IV · · Score: 3, Interesting

      Exactly. Also, just because a US consumer pays $99.00 for a phone doesn't mean that the phone costs $99.00. Usually the cell phone company pays a substaintial amount of the handset and tries to make their money back during the life of a contract.

      Heavy competition in the US following Number Portability has set the stage for a messy little price war between carriers trying to win business from each other...great for consumers, bad for the carriers

  2. Routers at a premium but Zoloft on the cheap! by tenzig_112 · · Score: 3, Funny

    Perhaps they will set up store-front re-import shops where Canadians can buy cheap wireless gear from the US.

    Some will argue that the US should not be able to get the stuff so inexpensively, that the reduced cost raises prices elsewhere. Others will argue that Canadian research firms put a lot of money into the wireless industry, and price controls would kill the industry.

  3. Simple by dolo666 · · Score: 3, Insightful

    Canada is much bigger than the states, but with far less people. The cost of having towers running is a nobrainer.

    1. Re:Simple by ergo98 · · Score: 5, Insightful

      Canada is much bigger than the states...

      Only barely, and this comes up in the next point... ...but with far less people

      It's a common misconception of Canada that we're vastly spread out evenly across 10 million square kilometers. In reality the vast majority of us are clustered in a couple of relatively (I mean relative to Canada, although still quite huge compared to most nations) small areas. Outside of this it's sparsely distributed settlements, often related to natural resources, throughout the rest.

      For instance Rogers claims "Our digital TDMA and Analog cellular phone network covers up to 93% of the Canadian population with over 85% digital coverage.". I suspect that 93% of Canadians live in (far) less than 10% of the land mass.

    2. Re:Simple by Anonymous Coward · · Score: 5, Insightful

      That is a good point, but what does making a phone have to do with maintaing the service towers?

      Everything. A cellphone being sold with a service package has much of the cost of the phone bundled in the term of the contract. For example, a $50 US phone does not *cost* $49 (or less) - it probably costs much more than $49, but a portion of the cost of the phone is amortized across the term of the contract. Let's say that amount is $10 per month (nice round numbers) for a two-year contract.

      We did that because the phone actually cost us $180. We're going to make $240 over 24 months on the $10 amount, plus the initial $50. While it sounds like we did fine making $290 for a $180 phone, there's a good amount of self-insurance cost (people that break phones and want another without paying the real $180), there's financing costs, and other costs that factor in here.

      Our service rate is $50/month gross, so after phone costs of $10, there's $40/month left for the basic service.

      Here's where the Canada problem enters. In the US, there are many more subscribers per cell - greater density that we can distribute fixed costs (towers, facilities, backoffice, etc.) over a much larger base. Assuming our $50 per month price, the fixed costs in Canada eat up much more of that $50 than they do in the US. This leaves much less room for things like phone internal financing. So we have to charge a up-front price that more closely reflects the cost of the equipment - Canadian customers (we hope) should just be happy to have service.

      I'd personally argue that if they're looking for greater densities, charging a higher nonrecurring fee is a bad way to approach this. High initial costs only prevent people from becoming your customer. But perhaps there are competitive issues in Canada per what the market expects from a monthly rate that don't let them push the Canadian costs into that category.

    3. Re:Simple by Bill_Royle · · Score: 5, Funny

      Call it clustering if you wish, I'll call it a prelude to an invasion.

    4. Re:Simple by mark*workfire · · Score: 4, Informative
      Its much simpler to do what I did.

      I wanted a Sony T68i phone. Rogers wanted $699 for it, or $399 with a 3 year contract. I don't do contracts since if I'm not happy with the service, I switch. So, off to eBay I went, and voila, for a grand total of $125 Canadian including shipping I bought myself a T68i *unlocked*.

      Off to Radio Shack for a Rogers SIM I signed up for an account and have been using it with no problem. Even better, I'm in Europe this month, and simply popped in a SIM from our office over here and have nice GSM service wherever I happen to go over here.

      Try that with a Rogers LOCKED Sony phone. Many thanks to eBay!!!

  4. Re:$699 for a phone? A SCO fee? by Pakaran2 · · Score: 5, Funny

    No, no... Finland is Lunix... Canada is OpenBSD, idiot.

    I wonder if you can run OpenBSD on a cellphone. the antenna would probably be off by default though...

  5. Certainly seems that way... by RobinH · · Score: 5, Funny

    I had a blackberry through Rogers/AT&T, and once I got the U.S. roaming package on there, it cost me $57 (CDN) per month. That's more than my 3000 kb/s cable modem internet connection (under $40 per month). I loved the blackberry, but decided to cancel the subscription.

    Then, the day after I decided to cancel it, we were broken into and they stole it off the table. Reporting it stolen actually saved me the cancellation charge (~$50), and I figure whoever ended up with the hot item is getting payback by paying the high fees.

    That's what I tell myself anyway. Maybe it was that Michael Moore guy... I heard he was snooping around Windsor opening people's doors.

    --
    "I have never let my schooling interfere with my education." - Mark Twain
  6. Carrier subsidies by Anonymous Coward · · Score: 3, Insightful

    It has a lot more to do with carrier subsidies for the phones. Most countries in the world don't have the same system that we do in the US, where your phone will only work on the network of the carrier that sold it to you.

    When a carrier gives you a discount on a phone, it makes a bet that writing off part of the cost of the phone will pay off with the contract you have to sign to use the phone on their network.

    Since GSM is now fairly prevelant in the US, I've taken to buying my phones and using whatever carrier I want (ok - there are only 3 choice right now) and allows me to use my unlocked phone with any carrier around the world, as long as my phone uses a frequency that is used in that country. Hence, I have 3 very high tech phones that I can choose between, depending on what I'm doing and where I am.

    That's what mobility is all about.

  7. Re:50lu710n by Mitreya · · Score: 4, Informative
    Solution: Buy phones in the US.

    I am not familiar with the way cell phones work in Canada, but I would guess your suggestion would not work. If I purchase a phone in US, I cannot transfer it to another US company because of the so called provider optimization (a.k.a. cell phone lockdown). I had two absolutely exactly same cell phones, one AT&T, another non-AT&T from a friend. Once my AT&T phone died, they would not switch my service to the other phone, claiming that it has been optimized for another provider. So I would not be surprised if cell phone companies found a way to block US-to-Canada phone transfer.

  8. Think Economics 1 Folks! by Anonymous Coward · · Score: 5, Insightful

    You don't think that this disparity is because of the ability of these companies to differentiate the cost legitimately? There is large fixed cost to be amortized in providing wireless infrastucture over such a large country, with such low population density.

    Here in Vermont we have the same problem with electricity - it costs a lot when you have few customers per mile of wire (or even wireless miles). For the national utilities (like Verizon Wireless and the wired long distance carriers) they lose money on rural areas in order to provide the same bundle to all customers within the country. In rural Alaska all your long-distance calls come over satellite to ground stations that might serve 1000 people who are paying 6.2 cents a minute for long-distance!!!

    Always look for a rational reason before you complain too much about conspiracies.

  9. Intense competition in the US, and economic forces by ComputerSlicer23 · · Score: 4, Insightful
    Well, in the US, most of the people who get cell phone plans, couldn't afford the hardware. Thus, some of the price is rolled into the 2 year contract that you have to pay an additional 150-300 dollars to get out of early.

    Most of the people I know who have Cell phones, couldn't afford $500 CDN, and pay more for minutes. Cell phone companies are trying to bring in new users, so they sell the phones cheap, figuring they'll make it up over time while they make a profit on the service.

    Second, the US market probably has more cell phones in the top 20-40 markets then Canada has people period. So a lot of fixed costs have to be amortized over fewer people in Canada.

    Finally, everything the in US wireless market appears to be about taking it in the shorts to gain market share, and to gain volume, to drive prices down. So they are investing (read losing their shirts) tons, and tons of money, trying to steal customers away from the other carriers, and make money on slim margins. Where as the Canadian market appears to be trying to sustain profitability at a much smaller volume. This means that Canadian service is probably a much better investment (from a business perspective). 5-10 years ago, cell service was a lot more expensive down here then it is now. Pricing for service is probably about the same. Not sure about the phone pricing.

    Kirby

  10. Simple explanation by chunkwhite86 · · Score: 3, Funny

    This isn't the first time Canadian carriers have managed to charge far more than thier US conterparts for the same services. Anyone up there know why?

    Well, I'm not entirely sure, but I get the distinct feeling it has something to do with Soviet Russia.

    --
    I'd rather be a conservative nutjob than a liberal with no nuts and no job.
  11. Rogers Wireless by va3atc · · Score: 5, Informative

    I have a Rogers AT&T (Canada) phone (Pay as you go) and I get charged airtime when someone calls to leave me a message on the voicemail.

    So I called up Rogers and asked them to deactive the voicemail, so they did. Now whenever someone calls they get "This costumer needs to setup there voicemail etc etc" and I still get charged airtime! (even when the phone is powered down)

    I've called around to all the other cellphone carriers and none of them are this freakin' crazy.

    Basically my plan of attack is sell the phone (brand new which seems like a waste) and go with someone like Bell or Telus.

    Anyone want a phone ;-)

    --
    Candle burns its brightest in the dark
  12. We get hosed ... by serialdj · · Score: 4, Informative
    Because unlike the U.S. we here in Canada have only four cellular carriers, and if you want to 1X, or GSM then there are only two carriers.

    No Competition means higher rates, no reason to lower them, who else are you going to go to.

  13. Interesting Stats for Canada by JumperCable · · Score: 4, Informative

    I don't know the answer but here are some interesting stats on Canadian wireless:

    http://www.cwta.ca/industry_guide/facts.php3

    ...maybe it's because the Canadian phones need to include both French & English?

    You know you could really save a lot of money if your country went ahead and consolidated to using just French.

  14. Re:50lu710n by InadequateCamel · · Score: 4, Interesting

    IIRC you can't use phones purchased in OZ in North America unless you buy a ghastly expensive tri-band phone. I had to sell my mobile when I left the UK for that reason. And it is the service that is the major problem, as they are selling the phones.

    Ah, how I miss my Virgin Mobile service...buying top-up cards when I needed them rather than paying a monthly fee for minutes I may or not use, and not getting charged for the calls that you receive?! I re-emphasise "service"; what a concept :-)

  15. Toilets by raider_red · · Score: 5, Funny

    Anyone want to arrange a deal where we trade cheap cel-phones for high-flow toilets? I think we could work something out.

    --
    It's good to use your head, but not as a battering ram.
  16. Nonsense! by Schlopper · · Score: 5, Interesting

    I don't know what the author is rambling on about.. I just bought a Fido phone (Siemens A56) with 3 months of service for $75 CDN.

    The monthly plan is $25/month = 100 weekday minutes plus 1000 weekend/evening minutes AND all Fido-to-Fido calls and SMS are free. That's $19 USD per month.. AND a free phone.

    And to top it all off, Fido subsidizes all their handsets AND you're never locked into any contract - it's all on a monthly basis. No complaints here when it comes to cell phone prices or cell phone plans in Canada..

    - One Happy Fido Customer.

  17. Re:50lu710n by Lehk228 · · Score: 4, Informative

    Subsidy lockout exists because cell phones don't actually cost $50-$100, they are alot more and the provider pays most of that price counting on customers using their service long enough to make up their investment, if you buy a phone at it's actual cost you will be able to use it on any compatable network, but with the mess that is the current cell network in the US i'll stick to subsidy locked cheap phones for now.

    --
    Snowden and Manning are heroes.
  18. Access Fee Insanity by RedSynapse · · Score: 5, Informative

    I live in Canada and the one thing that made me give up my cell phone plan was the dreaded monthly "Access Fee."

    I had a plan that was $20 for 200 minutes any time, but on top of this EVERYONE is required to pay a $7.95 access fee regardless of what plan they're using. So if you're a businessperson with a $100 a month plan you end up paying what amounts to an 8% tax, but if you are a po' ass student like me you end up paying an insane %40 tax (plus you also have to pay %15 tax on top of the total amount). INSANE.

    All providers in Canada charge this fee. It seems to be governemnt mandated, although I think I read once that the individual providers are allowed to set what the fee is but they all decided to make it 7.95.

    IMHO this is why we don't have wider adoption of mobible phones in Canada.

    Also I'm not sure how it is in other countries but every text message you send with SMS costs 10 cents. So if you want to send a text message to your friend's mobile phone that says "Hi Jane how are you?" that's ten cents.. then if she replies "I'm good, yourself?" another ten cents, and on and on. My carrier (fido) had a "introductory period" where they gave away the text messaging for free and a lot of people were using it. Now that it's 10 cents per message (I think it's max 256 characters) NOBODY USES IT. I mean come on, does it really cost them 10 cents to transmit a 256 character max plain text message? I think if they charged 1 cent per message they would make more money because people would actually use the service.

  19. Canada doesn't have the McCaws... by barfy · · Score: 4, Insightful

    There is one and only one reason that phones are so cheap in the States. (It isn't that they are more expensive in Canada).

    Craig McCaw and bro's changed the rules of cellular in the United States. There belief was that it was "the subscriber" uber alles. That all else would just follow. In other words, you have to give away the expensive phones to get the subscriber. A large part of the cellular network has been paid on the backs of investors and lenders in Bankruptcy court, and the McCaws made billions selling out to ATT while the getting was good.

    It is going to be more difficult to get new players (capital) to play the same game and risk that kind of capital that would likely be lost in a massive buildup of customers. Canada, just doesn't have a McCaw to rock the boat, and force everyone to play a different game. They do have Canadian Tire money though!

  20. I always blame NASA by WebMasterJoe · · Score: 4, Funny

    The prices are obviously set by NASA. You see, in Canada, they use the metric system, and NASA thought they were going to go metric, but some of the guys didn't get that memo...

    It was an honest mistake, folks, really. It's like rocket science.

    Or maybe...

    The computer industry did it! I mean, when did you ever buy a 40 GB hard drive that actually was 40 GB? They might have told Samsung to charge $400 for a $372.52 phone and say they were measuring the price differently. Yeah. If you're the only ones who measure it that way, it isn't different - it's wrong.

    --
    I really hate signatures, but go to my website.
  21. I work for a Canadian wireless provider... by RhetoricalQuestion · · Score: 5, Informative

    ...a fact of which I am deeply ashamed.

    And the short answer is "it's more expensive because they can get away with it."

    But yes, it does come down to basic economic, with the corporate greed angle tossed in. Canada is a smaller market, with fewer competitors (4 national, plus a few regional). So the wireless carriers CAN charge more because the consequences of doing so not as great. Plus, the major carriers tend to follow each other quite closely. If one finds a way to charge more for something and get away with it, the others will quickly follow -- why should the other guy be the only one to make more?

    IMO, the Canadian wireless industry is not particularly customer oriented -- they are competitor-oriented. It's not so much about "how can I win more customers through my excellent handsets and plan" as it is about "how can I get my ARPU higher than the competitors and my Churn lower, thus sticking it to the competition when the rankings are published." If the customer happens to benefit, it's a nice consequence.

    That's why the CityFido plan (you probably haven't heard of this unless you're in Vancouver, but you can transfer your landline number to a wireless number, and you get $40/month unlimited local calling) sent the Canadian wireless industry into a tizzy. The other 3 national carriers began running some pretty harsh Fido switch promotions -- particularly on the East coast, where Fido is based. Makes some sense on a competitor level (take out Fido where they are strongest) but not on a consumer level (Easterners who've never heard of CityFido can't understand why the big 3 carriers are all going after the little guy.)

    Mind you, Fido has had financial difficulties lately, so they probably had to pull a gutsy move like this. The rest of the industry doesn't see how Fido's model is sustainable.

    But on the other hand, some stuff just costs more here. Hence the people who cross the boarder every month to shop.

    --

    I can spell. I just can't type.

    1. Re:I work for a Canadian wireless provider... by Anonymous Coward · · Score: 5, Informative

      The model is sustainable because the majority of the CityFido subscribers are not actual Fido customers, they are NEW customers who are switching their landline to a mobile on the CityFido service.

      Also, most of them are spending a shitload of money on extras: LD bundles, Call Display, Voicemail, GPRS, etc.

      Believe me, CityFido is VERY sustainable for Fido because it doesn't affect another Fido's business, where as Telus Mobility can't really do that because its hurting Telus, Bell Mobility can't do the same because it'd be hurting Bell, and Rogers... well they're planning on launching local phones services too so...

      Also, most of CityFido customers don't have only one line, they have 3-5 for the whole house family.

      Before CityFido, I didn't encounter that many CONSUMER accounts with 4-5 lines and spending 400-500$ a month. It's quite usual now in Vancouver. (Yes, I'm a Fido CSR)

    2. Re:I work for a Canadian wireless provider... by RhetoricalQuestion · · Score: 3, Informative

      From an operational perspective, the wireless and wireline businesses of both Bell Mobility and Telus Mobility are entirely separate. One side doesn't pay much attention to the other. So the sustainability question is not around where the business is going to come from (that's obvious -- who wouldn't want $40 unlimited?) but about how Fido can become increasingly profitable while charging so little.

      That is, the big 3 are worried about CityFido pushing the precious ARPU down. Again, attracting new customers is important, but not at the cost of potentially making less per customer. For example, you may have noticed that all the wireless carriers have changed the Evenings clock to start later -- it increases overage minutes, thus increasing ARPU. Customer is screwed over, but hey, higher profits. And since all of them started doing this, competition benefits no one. (I saw a presentation on this a while back; did I mention I'm ashamed of where I work?)

      Then again, (just musing here) the sustainability issue may be simply be fear-mongering. Fido, having gone through financial trouble, is probably in the best position to sustain a lower ARPU model since (frankly) they don't need to worry as much about being less profitable than last year. (And with the lowest ARPU in Canada, the CityFido plan probably pushes the numbers up.)

      I'm not knocking Fido -- I think the CityFido plan is a good strategy. But the rest of the Canadian industry fear that this will bring profits down.

      Oh, just for those who think I flunked geography, I accidentally used internal language, where West Coast = BC+AB, East Coast = ON+PQ, Atlantic = NB+NS+PEI+NF, MB=MB and SK=SK. (It confused me when I started here.)

      --

      I can spell. I just can't type.