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Canadian Regulator Orders Telecoms To Tell Us What It Costs To Run Their Service

Posted by Soulskill on from the jig-is-up dept.

bshell writes "Canada's CRTC (like the FCC) has finally asked telecoms to provide information about how much their services actually cost. Quoting a Montreal Gazette story: 'In a report I wrote last year, I estimated the markup for Internet services was 6,452 per cent for Bell's Essential Plus plan, which provides a two-megabits-per-second speed for $28.95 (prices may have changed since last year).' The markup is likely similar in the U.S. It's about time that we consumers found out what it really costs to provide Internet service, and for that matter telephone and wireless services, so we can get a fair shake."

11 of 120 comments (clear)

  1. not really that simple. by queazocotal · · Score: 5, Insightful

    The cost of providing services can't ignore fixed costs.
    Sooner or later providers would need to install more hardware, or maintain the existing infrastructure.
    Costing is complex. Marginal cost is not the sole cost.

    1. Re:not really that simple. by Anonymous Coward · · Score: 5, Informative

      I don't get this issue here. Most of these companies are publicly traded, so you have access to their financials. Go look for yourself if you want to know what their operational profit margin is.

    2. Re:not really that simple. by Anonymous Coward · · Score: 4, Informative

      actuallly, most of the fixed costs that you would imagine telcos pay to secure rights of way, lay wire, etc. etc. is heavily subsidized by taxpayers, so effectively we're paying for that part, too, even if we don't subscribe to their ridiculously overpriced internet service

    3. Re:not really that simple. by ILongForDarkness · · Score: 4, Informative

      The markup is large but I suspect it is no where near that by the time you add in advertising (print, TV, cold/warm calls), collections activities, billing legal etc. The ISP business might very well be like Coke: 1% cost what is in the bottle and all the rest is branding and service around that. If investors really got to make 6000+% on there money the market would flood with people wanting those returns and the prices would drop.

    4. Re:not really that simple. by similar_name · · Score: 4, Interesting

      Large companies are complicated. AT&T for example recently posted $3.64 billion profit on $31.46 billion in revenue. Compared with the quarter before where profit was $3.62 billion (slightly lower) on $31.48 billion (slightly higher) in revenue. Two things to note. First is that cost in each quarter was different by about $40 million. Second is profit went up when revenue went down. New customers cost more so slow customer growth meant decreasing revenue but increasing profits. To make matters more complicated this is all while carrying $64.5 billion in debt.

    5. Re:not really that simple. by Anonymous Coward · · Score: 5, Insightful

      Fido and Virgin are terrible examples, considering they're owned by Rogers and Bell respectively...

    6. Re:not really that simple. by ShanghaiBill · · Score: 4, Interesting

      The markup is large but I suspect it is no where near that by the time you add in advertising (print, TV, cold/warm calls), collections activities, billing legal etc.

      Companies wouldn't pay for any of those things (other than legal) if they didn't provide a positive return on investment.

      Just because something has a positive ROI doesn't mean it doesn't drive up costs. My wife made an iPad app. Initially she sold it for 99 cents. But we were able to double sales by running some Google ads. But the Google ads cost 20 cents per click and only a quarter of those clicks resulted in a sale. So that means the advertising cost was 80 cents for a 99 cent sale, which is a 10 cent loss after Apple takes their 30% cut. So we raised the price to $2.99. Now one click in seven leads to a sale, but the price is high enough to pay for the advertising and still leave a profit. So the advertising has positive ROI, but only if we raise the price.

  2. Yawn... by NeutronCowboy · · Score: 4, Insightful

    What - did the regulator just find out that his industry is a natural monopoly, has a few very entrenched players facing almost no competition, and who are protected by near infinite barriers to entry? And did I mention that the service provided has morphed into a requirement on the order of electricity and roads?

    Welcome to market pricing when the market is not competitive and has highly inelastic demand. And if he tries to "get a fair shake", watch the telecoms pull out their infrastructure build-up costs from 30 years ago to justify pricing now. I expect that after the telecoms are done with their studies on their profit margins, they will lose $2000 on every byte they transmit.

    This is so doomed to fail.... I need to grab my popcorn.

    --
    Those who can, do. Those who can't, sue.
  3. I sense a great disturbance in the force... by fuzzyfuzzyfungus · · Score: 5, Funny

    As if hundreds of Hollywood accountants suddenly received job offers from Canadian Telcom companies...

  4. Re:That's not how prices works by sjames · · Score: 4, Insightful

    In a healthy market, market forces will drive you to price based on costs. Only an unhealthy market can support value based pricing.

    The fact that there's so much value based pricing out there is sending us a message.

  5. Kill the bidding for frequencies by EmperorOfCanada · · Score: 4, Insightful

    This whole bidding billions for frequencies is a crock. Only a company that raises the billions can hope to bid. So the incumbents issue a bond or whatnot and buy up huge chunks of spectrum.

    Also they need to block the mergers. The pattern in Canada is that some snot nosed upstart gives them a run for their money and they buy them out. I suspect that the big guys get upset that the customers even got a taste of freedom.

    These guys have had enough of a free run so first don't let them buy one ounce more spectrum. Next any spectrum that hasn't been used should be returned with 12 months of winning it. Eastlink in eastern Canada has been sitting on some spectrum with no explanation as to why they aren't using it. They are saying soon soon. How 'bout no; use it or loose it. Next the CRTC needs to be able to go after individual executives much like the SEC can hammer individual executives. So if some executive breaks the rules he is banned from the telco industry for X years just like finance types are banned from fiance for X years.

    And lastly CRTC people need to be apart from the telco industry. If you worked for the telco industry then you can't be in the CRTC. If you are in the CRTC then you can't work for a telco company for 10 years.

    Although the CRTC just nailed Bell good with their denial of Astral. Keep up the good work there.