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by Archives November 4, 2008

Imagine this scenario: One morning, you open your cell phone bill to find you owe $742.69 in coverage charges. Your heart stops, sweat pours down your neck, and your fingers instinctively dial customer service. Apparently, the $15 data plan you have is only the “basic” package. You’re given three options – switch to the $30 plan and pay it every month for the next three years, pay the full overage charge today, or throw your now useless phone out the window.
You’ve just been raped by Rogers. In a free market it never would have happened. Too bad the Canadian wireless market isn’t free.
The new Harper government has a basic responsibility to protect consumers – and the free market’s vitality – by introducing the forces of competition into the Canadian wireless industry.
We can blame the current state of affairs on the Telecommunications Act of 1993. The act provides that “a Canadian carrier is eligible to operate as a telecommunications common carrier if it is a Canadian-owned and controlled corporation incorporated or continued under the laws of Canada or a province.” Essentially, it protects Canadian wireless providers from cross-border competition by outlawing foreign ownership.
Ostensibly, the legislation’s goal was to prevent us from becoming the wireless equivalent of a tin pot banana republic; where most of the countryside is owned by United Fruit Company or Panamanian Sugar. In practice, however, it merely fostered the creation of our very own, homegrown, made-in-Canada cell-phone cartel.
According to an industry report released by Merril Lynch, over 95 per cent of the wireless market in Canada is dominated by just three companies; Rogers Communications Inc., Bell Communications Inc., and Telus Corp. They have a staggering average profit margin of 45.9 per cent, as compared to the 33.1 per cent average margin for the golbal telecommunications industry, or the 32.1 per cent average margin for that in the United States. This gives Canada’s big three the dubious distinction of being among the most profitable wireless companies in the world.
They’ve accomplished this by raiding the pocketbooks of the Canadian consumer to the tune of $60.83 on average, per month, per cell-phone subscriber; which is second only to Ireland in the developed world.
In May of this year the Conservative federal government took baby steps towards addressing the problem by auctioning off licenses to use certain radio frequencies. They reserved 40 per cent of the new spectrum for ‘no frills’ start-ups that promise cheaper, simpler, service. This at least showed initiative.
But who knows how long any of these new companies will survive? The Canadian Competition Bureau has a long track record of rubber-stamping the aggressive consolidation of the market, as when they authorized the Rogers buyout of competitor Microcell in September 2004.
The only guaranteed way to reduce prices and improve service is to invite large foreign competitors, armed with the cash and wherewithal to fight, into the marketplace. And, the only way to do that is to amend the Telecommunications Act.
So, help prevent the rape of wallets across Canada; contact your parliamentary representative and convince them to make telecommunications reform an early priority.

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