News and views on the Canadian telecom industry, and tips and tricks for saving on your cell phone bill.

Saturday, March 6, 2010

Canadian Telecom: Burn It Down, Then Build it Up.

In Response to:'s "Telecom Ownership Rules May be Loosened"

As Canadians, we expect, are aware and appreciate the natural challenges that building truly 'national' programs and organizations in this country present. This is what MacDonald's National Policy was all about: to build a railway from sea to sea. A crowning accomplishment to unite the country with a system of transportation to mobilize people, goods and ideas.

It didn't matter whether one was in Capreol, Ontario, Melville, Saskatchewan or Vancouver, British Columbia. The same rail bed had to connect from coast to coast independent of population density and populations served. Stemming from that initial challenge in the infancy of this country have come similar examples of companies investing heavily in order to service the country.

Since then similar reasoning has been applied to justify a single postage rate 'zone' in Canada. The argument being that a letter going from Toronto to Hamilton ought to cost the same as a letter going from Vancouver to Yellowknife: Simply put: You shouldn't be penalized for where you chose, or didn't choose to live.

We have come to expect with our national airlines that flights from Toronto to Montreal and Toronto to Heathrow although artificially inflated, help subsidize the price of the fares from Thunder Bay, Ontario to Winnipeg and other less served markets. Our nationalized companies look out for the interests of not only the majority but also that of the minority.

Telecom Comes In

As one client once told me: "You gotta respect the guys who put up the telephone poles first." (When describing his loyalty to Bell Mobility despite higher prices than the competition).

When the Big Three telecom companies began this path of investing in cell phone infrastructure not just for cities, but also rural coverage Canadians accepted higher cell rates from their carriers as being the cost one needed to pay to receive truly national coverage. (To say nothing of the fact that dead spots along the 401 still exist today).

And the culprit at the centre of these high rates?

The Long Distance Concept and the Local Calling Area

Both Long Distance and the LCA have been invented to created premium pricing on wireless airtime. And somewhat incongruent to other national brands wireless airtime does penalized based on location.

An example:

One makes a long distance call from Toronto (416) to Oshawa (905). Distance: 50Kms. Wireless rate per minute: 35 cents.

One makes a call from Regina (306) to North Battleford, SK (306). Distance: 400 kms.
Wireless rate per minute: 0: included as airtime.

The difference with our wireless rates is that we are penalizing those living in the more densely populated areas with greater numbers of area codes.

Ring a bell Ontario cell phone user?

Imagine if gas cost more in the Quebec City- Windsor corridor simply because we had more towns in between.

Opening Up the Market

There was a time when wireless costs included representatives hired for customer service, new towers for coverage and other costs. However, the nature of the game is changing. Predominantly users under the age of 30 would sooner change their plan using online billing than calling a representative.

Some users don't need coverage outside of metropolitan areas, or don't need a phone to work in Capreol, ON or Melville, SK. There will still be a market for rural coverage.

However, this market need not be serviced by penalizing those calling locally within province or within a city. Competition will bring less complicated billing formulas and free up the Canadian wireless user. Reduced communication costs will help small business and entrepreneurs take advantage of this technology which Canadians have embraced but only partially with the threat of an expensive phone bill in mind.

Within the next 4 years there will be companies with unlimited plans, and those without. And the ones without will be left behind if they don't change their pricing.

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