Coronavirus crisis highlighting Ottawa’s misguided approach to reducing wireless prices

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The coronavirus crisis is underscoring how dependent Canadians are on their smartphones.

Data use is surging on wireless networks as more people work remotely, banks encourage customers to use mobile apps instead of visiting branches and Canadians of all ages turn to social media to stay connected and informed.

The federal government, meanwhile, has also asked the wireless industry for help. Carriers including Rogers Communications Inc., Bell Canada, Telus Communications, Videotron, Freedom Mobile Inc., Eastlink Inc. and SaskTel are sending text messages containing consular information to their subscribers who live or are travelling overseas. Prime Minister Justin Trudeau himself took to Twitter to assure consumers the texts weren’t spam: “It’s not fake – so don’t delete it!”

As the pandemic keeps Canadians glued to their smartphones at home and abroad, Ottawa’s decision earlier this month to ask the Big Three wireless carriers to reduce prices on mid-tier service (unlimited talk-and-text plans that offer two, four or six gigabytes of data) by 25 per cent over the next two years appears increasingly out of step with our growing data dependence and the coming 5G reality.

The current crisis is giving us a preview of what’s to come with data consumption. But the government’s demand of Rogers, Bell and Telus was based, in part, on backward-looking information, including a CRTC estimate that Canadians used an average of 2.5 GB mobile data a month in 2018.

It stands to reason that mobile data use has increased substantially (the CRTC has yet to release the year-over-year growth figure for 2018 to 2019, but there was a 23.4 per cent increase from 2017 to 2018 alone). It is expected to skyrocket over the coming years.

Cisco Systems Inc. is forecasting that Canadian mobile data traffic will increase by 500 per cent from 2016 to 2021. That means the mid-tier plans Ottawa is targeting for price reductions will become obsolete in the not-too-distant future, and the effort will be irrelevant to consumers in a 5G world.

“In two to four years, you’re not going to have two, four and six gig plans. You’re going to see much bigger data buckets and more unlimited plans just because of the nature of 5G," Jim Senko, president of mobility solutions for Telus, said in a recent interview.

He added that price constraints now could prevent Canada from becoming a world leader in 5G wireless networks.

“We’re just at the beginning of the 5G investment cycle. And a reduction in revenue will impact us," he said.

About 40 per cent of Canadians fell into the two-to-six GB plan range in 2018, according to a government estimate. Since that time, more consumers have upgraded to so-called unlimited data plans because they make more financial sense. For instance, my family now has three unlimited data plans that cost $60 per month each. We can each use 10 GB before the service slows down (there’s a discount for having three smartphones on the account), versus $85 a month each for three GB previously.

If you’re a consumer who’s determined to stick with a smaller plan, consider this example: Ottawa’s price target for a two GB plan is $37.50 in two years time. Last week, Public Mobile (which is owned by Telus) was offering a five-GB plan for $38, Mr. Senko said.

What’s more, Ottawa’s demand that large carriers reduce prices will also force new entrants such as Freedom Mobile, Videotron and Eastlink to reduce their prices or lose their competitive edge to their larger rivals. Can smaller carriers really afford that kind of revenue hit?

To be clear, the solution is not for Ottawa to target unlimited data plans. Rather, Canada needs to rethink its approach to stimulating market competition so it benefits the largest number of consumers. Relaxing the foreign investment rules for large telecoms is one such solution.

Telus is not the only major carrier to warn that price reductions for mid-tier plans will hurt investments in 5G. Even if you love to hate Rogers, Bell and Telus, this is not the time for Ottawa to impair their profitability.

The Liberal government has threatened regulatory action if the Big Three don’t do as they’re told. Those consequences could include forcing Rogers, Bell and Telus to open their networks to wireless resellers. That option needs to come off the table.

Coronavirus is devastating our economy. Wireless is a high-growth industry and one of Canada’s last industrial bright spots. The government’s target of a 25-per-cent price reduction always seemed arbitrary, but in light of the current crisis, it’s downright tone deaf. Ottawa should scrap it.