Why Are Cell Phone Plans so Expensive in Canada?

The talk of every Canadian town is the high price that we pay for cell phone networks. Quality cell phone networks with good coverage and fast speed come at a cost that is considerably higher than in other countries. (For instance, for 5 GB Canadians spend approximately $87 per month while US residents pay $63 and Australians $27.) There are a few reasons why our cell phone bills might strike with unexpectedly high prices: one of those is the lack of competition among the Big Three Canadian telecom companies. However, that is not the only one.   

Based on Federal government studies of the industry, independent experts’ analysis, databases of available plans and statistics of comparison with other countries across the world, we gathered a few ideas why Canadians pay a high price for their cell phones.   

By comparing Canadian plans to same-level plans in other developed countries, we can see that Canadian prices increase as data usage goes up. Canada’s monthly costs are much higher than France’s or Italy’s (it costs only a penny to refresh a social media app compared to $0.15 in Canada). Overall, it shows that Canadian cell phone plans are fairly affordable when used only for text and calls, while a high number of data makes the user pay way more. Meanwhile, other countries do not charge as much for the same data usage.   

Reason Number 1: Lack of Competition and Low Population Density   

There are three main telecom companies in the Canadian market: Rogers, Bell and Telus. They own at least 90% of the market, hence the high prices they charge can be explained due to a lack of competition. Such factors as limited access to the wireless spectrum, the industry’s high barrier to entry, and restricted foreign investment also contribute to a lack of competition, —only a few powerful companies can deal with the listed reasons.  

For instance, low population density has one of the greatest effects on cell phone plans. Canada has four people per kilometre—one of the largest countries with a low population density. That makes the consumer pay more simply to compensate for such sparsity.   

Meanwhile, high barriers to entry do not make it easier for other companies to establish healthy competition. For instance, the networks you and I use, along with the rest of 94% of Canadians, account for about 30% of the country’s geographic area. If a newly entering company would want to compete with such statistics, they would need a massive fund to purchase hardware, install new antennae and build towers. Still, they would have to charge even higher prices to compete with existing companies and make the investment worth all the required work.  

According to Cansumer, both lower- and higher-end cell phone plans in Canada can be 2-5 times higher than the same type of plan in European countries like France or Italy.  

Reason Number 2: What Do National Telecom Companies Have to Say  

As for those companies and their explanation of high prices, it would be the required investment that leads to price increases.   

At the same time large investments, claimed by big telecom companies, are large indeed for they have been poured out into infrastructure, licensing fees, innovation, and spectrum acquisition, all required to be able to provide high speed and coverage. However, it does not explain why the $70 billion Canadian telecom companies spent on development since 1987, cannot offer the same lower prices as Australia which invested a similar sum only in the past ten years. (Wireless Wizard)   

Although it sounds acceptable in theory, it does not satisfy a common consumer who is dreading going over the allowed data number. And how could it be otherwise if after watching a YouTube video or listening to music on the verge of limited data, one might receive a bill twice as high as the previous month? It becomes a vicious cycle: prices increase while Canadians can no longer afford to choose a plan with a higher data allowance, hence they have to either limit their internet usage (when out of Wi-Fi reach) or be ready to pay if data was overused.   

 Could Consumers Hope for a Change?   

However, high prices are not firm across Canada. And that is good news. Depending on the province you might be able to find a lower plan, especially during hot sale seasons. Still dictated by the Big Three telecom companies, smaller companies, for instance, Freedom Mobile sometimes can have better comprehensive coverage.   

Besides, there is a promise from the Canadian government to work on reducing the cost of cell phone plans. Some of the major companies also expect to introduce price drops over the next two years (at least for a 2GB data plan reduce by 25%).   

Finally, there is an option to shop around. Surely, with all the listed reasons it is rather limited, yet it is possible. For instance, you can always try MVNO (Mobile Virtual Network Operator). Those are companies that offer their own customer support and sales. However, they purchase services from the Big Three providers to sell them to customers at a lower price. 

To name a few would be Fido, Koodo, and Virgin Mobile (or even prepaid services from Chatr, Public Mobile, and Lucky Mobile). Surely, those companies are still owned and operated by Telus, Rogers and Bell. Yet they are able to provide more affordable options that are worth considering. Their prices vary from province to province and despite promising low cost, have their downsides. For instance, Freedom Mobile (one of those companies) only covers major cities in Ontario, BC and Alberta.  

Conclusion? High prices of the Big Three telecom companies should not discourage you from shopping around, trying to get the best deal and checking out not only the main providers’ shops but also such places as Walmart or Costco.