I spent a few days in Denmark last week doing research for my next book, Humans 3.0. One of the chapters will look at whether technological advance is making us happier as a whole, and with Denmark regularly ranking as the happiest country on the planet, I thought there might be some insights to be found. There definitely were and I’ll revisit this topic in future posts.
One of the contributing factors to Danes’ high satisfaction levels is surely the excellent state of their telecommunications services. Denmark has some of the fastest and cheapest wireline and wireless offerings in the world.
On the home broadband side, the country rates third overall in terms of overall value, according to Ookla’s Net Index. I almost wept tears of envy when doing speed tests at my friend’s house, where I was staying. I got even sadder when I learned that his ultra-fast, symmetrical download and uploads speeds (with unlimited usage) costs only about $15 a month. Similar service either doesn’t exist in Canada, or you have to break the bank to get it.
On the wireless side, with the debate currently stirred up again over whether Canada’s market is competitive, I thought it might be instructive to see how the Danes manage. In that vein, I ventured into a Telia store, pretending to be interested in buying an iPhone 5. Despite having only 6 million people, Denmark has four facilities-based wireless competitors: Telia, Telenor, 3 and TDC.
Here’s how buying the device works in Denmark. The first option is to buy the phone upfront. In the case of the iPhone 5, that costs 4,300 krone for the 16 gigabyte version, or about $760. That’s about $60 more than in Canada, which is a minor miracle given that just about everything is a lot more expensive in Denmark. The other option is to sign on to a payment plan, in which case you pay $9 up front, then divide up the balance over however many months you want, to a maximum of the contract term, or 24 months. At that minimum payment level, the phone costs about $30 a month.
After you choose how to pay for your phone, you pick a plan. Telia is currently pushing a $53 monthly plan that includes unlimited talk and text and a whopping 20 GB of data (caller ID, voice mail and all that stuff is free, as it is almost everywhere outside if North America). There’s a cheaper plan that offers the same, but with just 1 GB of data, for $31. A comparable plan from a Canadian incumbent is more than double, at $70.
Putting that together, an iPhone 5 with a decent plan from Telia costs a Dane a minimum of $62, or $1,497 over the course of their two-year deal. Canadian carriers are now selling the device at $99, so factoring that in, the total cost of the device with a comparable plan over the three-year contract here is $2,620. If that is averaged down to two years, it’s $1,746, or 15 per cent more.
The interesting thing about Denmark is that service contracts are limited to six months. You can buy your phone from a provider, then shop around for a better deal six months after. You still have to pay off your phone with the original provider, but the costs of the device and the service are kept strictly separate. The provider is also required to unlock the phone after those six months, free of charge.
This explains a number of things, illustrated in the comparison chart below: why average revenue per user and prices are much lower in Denmark, and why churn – a measure of how many customers defect to competing providers each month – is much higher (numbers are from the Bank of America Merrill Lynch Global Wireless Matrix). It also explains the big gulf in profitability between carriers in the two countries:
Another interesting thing about Denmark is that it has four national service providers. The Wireless Matrix says Canada has five, which is a generous counting of regional players such as MTS and Videotron and big-city-only new entrants Wind and Mobilicity. Canadian industry supporters have long maintained that the country can’t handle more than the existing three incumbents, which is an interesting claim given that a tiny country like Denmark somehow manages with four. Judging from average revenue per user and profit margin numbers, the Danish market certainly looks more competitive than Canada’s.
How did Denmark get to such a consumer-friendly position? The makeup of the competitors seems to tell much of the story. TDC is a Danish company while Telia is Swedish, Telenor is Norwegian and 3 is owned by Hong Kong-based Hutchison Whampoa; three quarters of the players are foreign owned. Like most countries, Denmark had the good sense to allow foreign investors into its telecom market long ago, before any of them could become entrenched.
With Wind and Mobilicity struggling, Canada is a case of the opposite. The government here clearly waited too long to open the market, which allowed Bell, Telus and Rogers to dig in. The next year will likely determine whether Wind – which is now apparently up for sale – and Mobilicity live or die, which will tell us whether it is indeed too late to hope for new competition. If that does prove to be the case, policy makers will likely have to turn to strict regulation to keep already high prices from going even higher.
The competitive wireless situation also extends to wireline broadband, where subscribers generally have a choice of three providers (Telia, Telenor and TDC), which is likely why Denmark ranks so highly in broadband speeds, value and overall broadband penetration (third in the developed world).
Low prices and great services, combined with government initiatives to get people online – including seniors, kids and poorer people – have resulted in Denmark being one of the most wired (and wireless) countries, with the digital divide we see everywhere here in North America virtually non-existent. This is one country that doesn’t have to worry about how to prepare for the future economy because it’s already set. Canada, on the other hand, is comparatively lost in the wilderness (probably looking for trees to chop down).
Denmark is a welfare state with high taxes and very little in common with Canada. But it’s these sorts of things that makes one wonder whether we’ve got it all wrong over here.