Public Interest Advocacy Centre
Part 1 Application – Occasional-Use Wireless Services
13 April 2018
Page 1 of 20
BEFORE THE CANADIAN RADIO-TELEVISION AND
TELECOMMUNICATIONS COMMISSION
IN THE MATTER OF AN APPLICATION UNDER THE
TELECOMMUNICATIONS ACT BY
THE PUBLIC INTEREST ADVOCACY CENTRE AND
THE NATIONAL PENSIONERS FEDERATION
(APPLICANTS)
and
Rogers Communications Partnership,
Bell Mobility Inc and
TELUS Communications Company
(RESPONDENTS)
REGARDING Occasional-Use Wireless Services
13 April 2018
1.0Introduction
1.The Public Interest Advocacy Centre (PIAC) and National Pensioners Federation (NPF) file this Application under the Telecommunications Act[1] and pursuant to Part 1 the CRTC Rules of Practice and Procedure[2]regarding the market for occasional-useretail wireless services in Canada.By “occasional-use retail wireless services”, PIAC-NPF refer to plans serving low-volume users with variable demand, which have traditionally been paid for in advance (“prepaid”) and billed on the basis of actual usage (“pay-per-use” or “pay-as-you-go”).
2.This applicationasks the Commission toapply a condition of service, in accordance with section 24 of Telecommunications Act, to direct the national wireless carriers to make occasional-use retail wireless plans broadly available to consumers in the same manner as the Commission has proposed to implement such a condition of service to ensure that lower-cost data-only plans are widely available to Canadians in TNC CRTC 2018-98.
3.The present Application provides evidence of a lack of choice of innovative and affordable mobile wireless services, in particular with respect to the availability of occasional-use retail wireless options for consumers. Accordingly, we invite the Commission to determine that there is a gap in the market with respect to occasional-use retail wireless plans.
4.PIAC-NPF invite the Commission to apply the requested s. 24 condition of service to address the gap in the market with respect to occasional-use prepaid retail wireless options. PIAC’s goal is to have these plans made as broadly available as possible, and we therefore invite the Commission to consider that the focus of the process should be on the national wireless carriers, given their national wireless network coverage.
5.PIAC-NPF request that the present application be combined with the Telecom Notice of Consultation CRTC 2018-98, Lower-cost data-only plans for mobile wireless services (22 March 2018), according to the schedule suggested below. This applicationsraises issues that are also raised by that consultation proceeding. Combining the proceedings will avoid the re-litigation of those shared issues, resulting in a more efficient process and ensuring those shared issues are resolved in a consistent manner.
2.0Introduction
6.The Public Interest Advocacy Centre (PIAC) is a national non-profit organization and registered charity which represents consumer interests – and those of vulnerable consumers in particular – in the provision of important public services.
7.The National Pensioners Federation (NPF) is a national, not-profit, non-partisan, non-sectarian organization of 350 seniors’ chapters, clubs, groups, organizations and individual supporters across Canada with a collective membership of 1,000,000 seniors and retirees devoted entirely to the welfare and best interests of ageing Canadians, seniors and retirees.
8.Canadians, particularly aging Canadians, seniors and retirees, often rely on cellphones for occasional, low-volume use.
9.There is a noticeable gap in the market for occasional-use wireless services in Canada.As will be demonstrated below, some carriers are discontinuing pay-per-use service, while others charge excessive rates. Because pay-per-use service does not generate as much revenue as higher-end plans, service providers have a strong incentive to push customers towards higher revenue plans which may exceed the customer’s needs. These trends contrast with trends in the United States and United Kingdom, where occasional-use plans are available at a small fraction of the rates available in Canada and without minimum top-ups.
10.Telecom Decision CRTC 2018-97 indicates that the Commission’s preferred approach to addressing market failures arising from the nationalwireless service providers’wireless market power is to require the national wireless service providers to introduce new plans based on a public proceeding where plans are proposed by carriers and then subject to public comment. This is broadly consistent with the Commission’s approach to enhancing choice and affordability for broadcasting consumers by imposing a regulatory obligation requiring terrestrial broadcasting distribution undertakings to offer a skinny basic package for $25/month or less,[3]This application requests that the Commission follow that approach with regard to occasional-use wireless services.
3.0Requested Releif
11.Procedurally, PIAC-NPF request that the Commission make an immediate order:
a)Combining this proceeding with Telecom Notice of Consultation CRTC 2018-98 under Rule 10(b) in recognition of the overlap between the issues raised in this application and that consultation;
b)Directing the national wireless carriers to file proposals for occasional-use wireless service plans by the same 23 April 2018 deadline as in that consultation, along with any explanation and argument regarding whether such offerings should be mandated, as set out in Telecom Notice of Consultation CRTC 2018-98 at para 15;
c)Allowing interested partiesan opportunity to comment by the same 23 May 2018 deadlineas in that consultation; and
d)Allowing the national wireless carriers to file reply comments by the same 7 July 2018 deadlineas in that consultation.
12.Substantively, PIAC-NPF request that the Commission apply a condition of service, in accordance with section 24 of Telecommunications Act, to direct the national wireless carriers to make occasional-use prepaid retail wireless plans broadly available to consumers, in the same manner as the Commission has proposed to implement such a condition of service to ensure that lower-cost data-only plans are widely available to Canadians in TNC CRTC 2018-98.
4.0the Occasional-Use Wireless Service Market
13.While the CRTC does not report the number of occasional-use wireless subscribers, the CRTC’s 2017 Communications Monitoring Report provides various indications that the occasional-use wireless services market remains substantial:
a)Canadians spent $932 million on prepaid plans in 2016, up 6% over 2015,[4]
b)9% of Anglophone Canadians and 13% of Francophone Canadians rely on cellphones which are not smartphones,[5] and
c)19% of mobile wireless subscribers do not have a data plan.[6]
14.Furthermore, 13% of Canadians still do not have cell phones, so some potential occasional users may not be current subscribers.[7] Some customers who only make occasional use of wireless services may also be subscribed to monthly plans which exceed their needs.
15.Canadian wireless carriers are not vigorously competing for the occasional-use market. From their websites, Bell, Rogers and Eastlink appear to have stopped offering pay-per-use service to new customers, or at least give a clear impression online that the customer must subscribe to a monthly plan.[8] Rogers Wireless also recently notified its pay-per-use customers that they will automatically be migrated to a $10/month Talk and Text plan effective March 2018, although customer are able to opt-out of that transfer.[9]
Figure 1: Rogers Prepaid Offerings in 2016 included pay by the minute talk plans
Figure 2: Rogers pay by the minute talk plan from 2016
Figure 3: Rogers Prepaid Offerings in 2018 consist solely of pay-by-the month plans.
Figure 4: Bell Prepaid Offerings in 2016 included this pay-per-use plan which no longer appears to be offered
16.The below table outlines the pay-per-use rates and terms offered by TELUS, and that were offered by Rogers and Bell in 2016:
National Carrier OfferingsRogers (2016)[10] / Bell (2016)[11] / TELUS (Current)[12]
Local Calling / $0.45/min local
$0.95/min Can/US / $0.50/min local
$1/min to Can/US / $0.50/min local
$1/min to Can/US
SMS / $0.30/msg local
Sent and Received / $0.30/msg local
Sent and Received / $0.30/msg local
Sent and Received
Data / Requires Add-On
Tiered, $10 for <= 100MB
$0.15/MB thereafter[13] / Tiered, $7.50 for <= 50 MB[14] / $2/MB
Terms / Must top up $100/y or $10/month / Must top up $100/y or
$10/month / Must top up $100/y or $10/month[15]
17.New entrants Freedom Mobile[16]Videotron[17], and Eastlink[18] do not offer pay-per-use service.
18.Among the sub brands of Canada’s national carriers:
a)Fido does not offer pay-per-use service[19],
b)Public Mobile does not offer pay-per-use service,[20]
c)Chatr does not offer pay-per-use service,[21]
d)Lucky Mobile does not offer pay-per-use service,[22]
e)Koodo does not offer pay-per-use service,[23]
f)Virgin offers pay-per-use service for $0.40/minute local calling, $0.30/text SMS, and $1/10MB for 24 hours of data,[24]
g)Speakout7eleven offers pay-per-use service for $0.30/minute local calling, $0.15/text SMS, $10/100 MB data (expires after 30 days).[25]
19.The pay-per-use rates and terms offered by Canada’s national wireless carriers are terrible compared to those available in other countries. A customer of US carrier Tello Mobile would pay just $0.03/min for US call, $0.01/SMS, and $0.02/MB (4G LTE on Sprint), with no activation fee and no expiry provided the phone is used once every three months (figures in US dollars). Even a Tello user roaming in Canada would pay a small fraction of what Canadians pay.
Figure 5: Tello pay-per-use rates
Figure 6: Tello pay-per-use rates for roaming in Canada
Figure 7: Tello expiry policy
20.Similarly customers of three.co.uk receive rates of 3p/min, 2p/text, and 1p/MB, with no expiry provided the phone is used at least once every 6 months.
Figure 8: Three Pay-per-use rates
Figure 9: Three Expiry Policy
21.Another point of comparison is the rates offered by SaskTel for pay-per-use service, which faces more competition than other wireless service providers. SaskTel offers prepaid service at 10¢/minute, 20¢/sent SMS (free received SMS), resulting in effective prices much lower than those offered by Bell, Rogers and TELUS nationally, although customers are still subject to minimum top-up requirements.[26]
22.Another point of comparison is wholesale rates. Those rates already include a markup of 40% over costs intended to encourage investment in networks.[27] Typical pay-per-use rates represent a 5,759% markup over voice costs, a 52,588% markup over SMS costs, and a 1,016% markup over data costs (generously using $0.10/MB rather than the $2/MB charged by TELUS).
Voice wholesale roaming rate per minute / SMS wholesale roaming rate per message / Data wholesale roaming rate per MBFinal wholesale mobile wireless roaming service tariffs
as approved in Telecom Order CRTC 2018-99
Bell Mobility / $0.0137 / $0.0006 / $0.0133
RCCI / $0.0071 / $0.0000 / $0.0140
TCI / $0.0157 / $0.0018 / $0.0141
Simplified illustrative calculation of approximate markup
Average tariffed rate[28] / $0.0122 / $0.0008 / $0.0138
Embedded markup (40%)[29] / $0.0035 / $0.0002 / $0.0039
Actual Costs (60%)[30] / $0.0087 / $0.0006 / $0.0098
Typical pay-per-use price / $0.50 / $0.30 / $0.10
Approximate markup of pay-per-use price over actual cost[31] / 5759% / 52588% / 1016%
23.Admittedly, there are costs associated with providing retail service which must be recovered through pay-per-use rates. However, the examples of Tello in the US and three.co.uk in the UK demonstrate that the costs of providing retail service likely do not justify rates pay-per-use rates nearly as high as those prevailing in the Canadian market. T-Mobile has addressed these service costs by offering very low monthly fees suitable for the occasional-use market–T-Mobile offers a $3/month plan which includes 30 mins or text messages with additional usage at 10¢/min or message.[32]
24.These pay-per-use rates understate the actual cost of pay-per-use wireless service because carriers require customers to make minimum top-ups to avoid expiry, resulting in minimum spending of $100 a year for what may be just a few minutes of calling. In contrast, foreign carriers are offering increasingly flexible pay-per-use options to the benefit of consumers. As noted above, Tello and three.co.uk have no monthly fee and no expiry (unless the phone is unused for 3-6 months).
25.The national carriers are worsening this situation by discontinuing their occasional-use plans, forcing new customers to subscribe to a monthly prepaid plan which further increases costs for low-volume users.[33]The national carriers’ monthly prepaid plans are not comparable to the occasional use services available internationally. Bell starts at $5/month for just 10 minutes of calling. Rogers starts at $10/month for 50 minutes of calling.Take as illustrative a customer who makes 20 minutes of calls every other month. Such a customer would pay:
a)$3.60/year if subscribed to three.co.uk in the UK or Tello in the US,
b)$60/year with a typical Canadian $0.50/min prepaid pay-per-use plan,
c)$120 year for prepaid monthly service from Rogers or
d)$90/year for prepaid monthly service from Bell.
Figure 10: Bell’s Entry-level Prepaid Monthly Plans (Current)[34]
Figure 11: Roger’s Entry-level Prepaid Monthly Plans (Current)[35]
26.Comparing the pay-per-use rates offered by Bell, Telus, and Rogers to the rates which Tello can offer suggeststhat more than 90% of Canadian carriers’ prices for occasional-use wireless service is pure profits attributable to market power. By making pay-per-use less appealing and available, it appears these carriers hope to shift customers to even higher revenue monthly plans. To some extent, the neglect of the pay-per-use market may also be motivated by a desire to improve Blended Average Revenue Per User, a key metric looked to by market analysts.
5.0Evidence of Market Power
27.The Commission, the Competition Bureau, and Cabinet have all acknowledged the existence of wireless market power at both the wholesale and retail level.
28.The Commission has already determined that wholesale MVNO access is essential. It flows from that conclusion that the Commission believes national carriers are exercisingwholesale and retail market power. Specifically, in Telecom Regulatory Policy CRTC2015-177, the Commission concluded that:
a) “wholesale network access to the GSM-based networks of the national wireless carriers is a required input for competitors in the downstream retail market.”
b)“denying competitors access to GSM-based wholesale network access services at a national level would likely result in a substantial lessening or prevention of competition in the downstream retail market.”
c)“the GSM-based mobile wireless networks of Bell Mobility, RCP, and TCC cannot be practically and feasibly duplicated by competitors in the short to medium term.”
d)“As such, the Commission determines that GSM-based wholesale roaming and MVNO access provided by Bell Mobility, RCP, and TCC are essential.”[36]
29.The Commission also noted in that decision that there has been little change in market shares, there are high barriers to entry, and smaller wireless carriers have struggled to access wholesale mobile wireless services at reasonable rates, terms and conditions from the national wireless carriers.[37]
30.Those conclusions stand. Moreover, of the new entrants and regional providers in existence at the time of that decision, three have been acquired (Public Mobile, Mobilicity, and MTS) which further reduced competition. The Commission’s optimism that new entrants would become a viable alternative source of supply for MVNOs has proven unfounded – there are no MVNOs on new entrant networks.[38]
31.The Competition Bureau has also concluded that market power exists and is being exercised in retail wireless markets:
The Commissioner submits that the incumbents possess market power in retail mobile wireless services markets in Canada. […]The evidence put forward in the Brattle Reportdemonstrates that Canadian retail mobile wireless services markets are characterized by above‑normal profits and comparatively low service penetration levels. These are both indicators of market power. In addition, Canadian retail mobile wireless services markets are characterized by high concentration and very high barriers to entry and expansion. Furthermore, such markets are characterized by other factors that, when combined with high concentration and high barriers to entry and expansion, create a risk of coordinated conduct in these markets.[39]
[A]s a result of coordinated behaviour among Bell, TELUS and Rogers, mobile wireless prices in Canada are higher in regions where Bell, TELUS and Rogers do not face competition from a strong regional competitor. Conversely, the Bureau concluded that where Bell, TELUS and Rogers face competition from a strong regional competitor, prices are substantially lower. The Bureau concluded that the lower prices are caused by the presence of a strong regional competitor who can disrupt the effects of coordination among Bell, TELUS and Rogers.[40]
32.The Competition Bureau also shared the Commission’s belief that the market power exists and is being exercised in wholesale wireless markets:
The economic incentive incumbents have to engage in vertical foreclosureresulting in the unjust discrimination and undue preference in respect of wholesale roaming remains ... Thus, it remains important to directly address, and ideally remove, the incumbents' incentive to engage in vertical foreclosure.[41]
33.Cabinet also expresses that view that prevailing wireless prices are high in recitals to their request for reconsideration of Telecom Decision CRTC 2017-56:
Whereas Canadians continue to pay high rates Whereas Canadians continue to pay high rates for mobile wireless telecommunications services; for mobile wireless telecommunications services;
Whereas Canada has among the lowest adoption rates for mobile wireless telecommunications services among industrialized countries;
Whereas Canadians with low household income in particular face challenges related to the affordability of telecommunications services;
34.The large stable market shares of Canada’s three national wireless carriers, their supra-competitive pricing, and their above normal profits all suggest the existence of substantial market power.