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The bottom line on wireless roaming rates

15 Jun

Last week saw the release of some statistics on wireless roaming prices that caused quite the stir. As usual, Canada came out looking like the worst of the bunch, with some of the highest rates in the developed world, according to the Organization for Economic Co-operation.

Some industry members and their defenders took to the usual tactics, which is to criticize the OECD’s methodology. Bell Canada, for one, said the Paris-based think tank’s report “selectively chose one ranking from a larger report that actually offers plenty of examples where Canadian roaming rates compare quite favourably internationally.”

Financial Post editor Terry Corcoran went into greater depth and explained how, as I’ve said before, statistics are indeed like a bikini (they reveal a lot but hide what’s most important). As he argued, if the stats are looked at a different way, Canada’s roaming rates are actually some of the lowest around.

But wait a second – what’s this about Telus agreeing with the OECD report? Indeed, as the Toronto Star reported: “‘We absolutely agree with the OECD’s findings,’ said Brent Johnston, vice-president of mobility marketing for Telus, referring to the report’s findings on prices. Canada lacked real competition in data roaming until 2009 when Rogers ceased to be the only company with the right technology, he noted.”

Michael Hennessy, Telus’s senior-vice president of regulatory and government affairs, expanded on that on Twitter, stating that while Telus disagrees with the OECD’s methodology, it does support the bottom line. The OECD report only counted the two biggest wireless carriers in each country and, with Telus being third, naturally its rates didn’t come into play. To further follow up, the company on Monday announced it was slashing its roaming rates by up to 60 per cent.

So, are Canada’s roaming rates – the money Canadian subscribers pay when using their phone abroad – higher than elsewhere? The answer is found in the bottom line, but before we get there, some anecdotes.

A few months ago, the producers of CBC Marketplace called me in to help out with their now-annual Canada’s Worst Cellphone Bill special, wherein they document the stories of some of the worst customer experiences they can find.

The producers had amassed thousands of submissions and needed help determining which were the absolute ugliest. The vast majority of complaints stemmed from astronomical roaming bills, where using a cellphone – particularly the data capabilities – resulted in hundreds or thousands of dollars owed (I remember there was one story about someone being in the hole for $60,000+). In almost every case, the customer said they simply had no idea that using their phone would rack up such huge charges. Many situations were also accidental, where customers didn’t know to turn off their data roaming.

I must admit that in helping cull the submissions, I wasn’t too sympathetic on the roaming cases. Most phones and carriers today provide some sorts of warnings, either through text messages or otherwise, that tell users they’ve crossed on to another network and that substantial charges can result. It’s probably safe to assume that in many of the submissions, users had simply ignored or overlooked such warnings. I was much more taken by the more heartless stories, such as the woman who was forced to pay off her dead husband’s early termination fee.

I also must admit to being considerably more educated on such issues. As such, I stress to everyone I know that they should buy an unlocked phone so they can pop in a local SIM card wherever they go and use local rates. I did just that last week in Los Angeles – I got a SIM card from T-Mobile for the grand total of $11, which gave me $25 of credit. Unlimited web access gobbled only $1.50 of that credit each day, so all of my needs were taken care of. For a measly $11.

Nevertheless, the majority of cellphone users don’t know they have such options and those thousands of stories contribute to some of the most solid wireless bottom lines in the world. I’ve written before about how Canadian carriers – Telus included – score very well on the Merrill Lynch Global Wireless Matrix, which measures just about every statistic, from minutes of use to percentage of revenue derived from data. The carriers don’t dispute these numbers – indeed, they tout them to investors as proof of how well they’re doing.

Below is the latest Matrix I could find that is publicly available, from September 2010 (click here if you can’t see it). Check out the key chart on page 2 – as usual, Canadian carriers have the highest average revenue per user at $57.09 and the second highest profit margin at 46.4%.

Average revenue per user, or ARPU, is the wireless industry’s key figure since it measures how much money each customer brings in. It’s also at the heart of this roaming issue. The fact is roaming rates are high everywhere, including Europe, which in many cases is the main explanation for why some countries have high penetration rates. Greece, for example, has a penetration rate of 163%, which means that every person carries 1.6 cellphones – or more likely 1.6 cellphone SIM cards. Since Europe is so small, when a cellphone user from one country enters another, rather than pay high roaming rates, they just slip in a SIM card from the new country and take advantage of local rates.

This is the same rationale that Canadian carriers have used to explain their own higher ARPU. In other words, if multiple SIM card use in countries with penetration rates of over 100% is accounted for, Canada doesn’t look that bad. The list below, which counts ARPU as multiplied by penetration rates in countries where it is more than 100%, shows that to be absolutely false.

  • Australia $52.08
  • NZ $59.69
  • Singapore $47.05
  • Austria $38.09
  • Denmark $38.19
  • Finland $42.36
  • Germany $25.24
  • Greece $30.28
  • Italy $36.96
  • Netherlands $40.44
  • Norway $53.86
  • Portugal $28.69
  • Spain $34.98
  • Sweden $$38.87
  • Switzerland $55.53
  • UK $34.68

With multiple SIM cards factored in, only New Zealand carriers surpass their Canadian brethren in terms of ARPU. Put another way, it’s cheaper to use 1.6 phones in Greece than it is to use one in Canada. In Portugal, it’s almost cheaper to use three phones than one in Canada.

In the end, ARPU and roaming both add up to profit – and in that measure Canada is (almost) king. Only Italian wireless carriers make a higher relative profit from customers, according to Merrill Lynch. The bikini statistics can therefore be looked at from a hundred different perspectives but the bottom line is pretty indisputable: Canadian carriers are raking it in thanks to high rates across the board, which includes roaming.

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6 Comments

Posted by on June 15, 2011 in mobile, telecommunications, telus

 

6 responses to “The bottom line on wireless roaming rates

  1. Marc Venot

    June 15, 2011 at 3:16 am

    “the company on Monday announced it was slashing its roaming rates by up to 60 per cent.”
    so are or were “raking it in thanks to high rates across the board, which includes roaming”?

    In the news Apple has just started to sell desimlocked iPhone in the USA. Will that improve the bottom line for customers?

     
    • Hub

      June 15, 2011 at 11:39 am

      Given that Apple has been selling unlocked iPhone in Canada since iPhone 4…..

       
  2. Randy

    June 15, 2011 at 1:20 pm

    Just to tickle your sympathy bone a little for some of the roaming bills, I lived for many years in a border town in New Brunswick, and many of us there had a constant battle with Wireless carriers because of “Incidental Roaming”.

    This would happen when the phone user was for instance driving down the T-Can and the phone would suddenly decide that the US tower was stronger and start using it. For outgoing calls you knew that you were roaming because you now needed to dial 1, but incoming calls were transparent to the user. You didn’t know you were roaming until the bill came in.

    Also, it could happen in some cases that the call started in Canada and as you either drove along the border, or stood talking and changing direction by turning around, the phone would jump from Rogers to US Cellular and back maybe multiple times during the call.

    This still happens today if you live in those areas, and it is a monthly ritual for many to have to call up the provider and go through the list of days on the bill that they were not actually in the US.

     
    • May

      June 20, 2011 at 3:23 am

      With so much of Canada being right on the border this happens all over the place. I wonder how many people are just so freaking tired of it that they have found themselves just paying up?

       
  3. Anonymoose

    June 20, 2011 at 1:07 am

    Apple throwing their exclusive carriers to the curb won’t make any difference at all to the user. You still have to buy a SIM card from the same cheats and liars you did before, and what does Steve Jobs care? He got his money from you up front!

    What Canada NEEDS is more CARRIERS. And not MVNOs – the Virgins, Chat-Rs, and Koodos which are just strawmen.. oh sorry, ‘brand-names’ for the same old crooks. More real independent carriers who have their own networks like Wind Mobile and Mobiicity, with support and investment from the large foreign carriers like T-Mobile, O2 or DoCoMo to break up the cozy oligopoly that Bell, Rogers and Telus have built themselves.

     
  4. Bill

    June 20, 2011 at 9:56 am

    I use Telus PayAsYou go. While there is an option to use a SIM card phone, it is not the same network as the other carriers, so there is probably no possibility to swap SIM cards for ROAMING. The thing about Canada though is you hit ROAMING almost as soon as you leave your home. Ten years ago, cell phones were moving away from the idea of local calls. When I first got my cell phone, it was nation wide calling at a fixed rate. Since then, the rates have effectively more than doubled as I’m slapped on additional charges whenever I’m too far away from my home to be a “local” call.

    Still I will never go back to a contract for a cell phone. At least I know with the pay as I go phone, if my charges get to high, my cell phone will automatically stop working. (So long as I don’t have automatic balance top-up enabled.)

     
 
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