New Telus Plans: The Good, The Bad And The Ugly

Telus is the first of Canada’s big three wireless carriers to officially unveil new pricing that will reflect the upcoming CRTC ban on three-year phone contracts. There’s good news and bad news to be found among the new plans.

Let’s start with the bad news. As predicted, the repricing means some pretty stiff hikes for any new customers (existing subscribers can continue on existing plans). With the CRTC effectively limiting wireless contracts to two years starting Dec. 2, carriers are having to sharpen their pencils and figure out how to extract the same amount of revenue (or more) from customers over that shortened period.

Bell and Rogers are expected to release similar re-pricing over the coming days, but more on that in a minute.

The image below shows Telus’s new plan options, effective July 30:

The minimum on-contract plan, with unlimited nation-wide talk and text and 250 MB of data, will thus cost $70. That’s a huge premium to Telus’s current minimum plan, which goes for $45. It’s actually 55 per cent higher.

On the plus side, customers will get a lot more for that 55-per-cent premium: minutes go up to nation-wide unlimited, from 200 local, and there’s an extra 100 MB of data included. But still, the increase will push a lot of lower-spending would-be customers into the relative stratosphere, meaning that price-conscious people are probably now effectively going to be priced out of being Telus subscribers. They’ll have to look elsewhere – perhaps the company’s flanker brand Koodo, which has also revised its prices, or the likes of Wind or Mobilicity.

Things are a lot more expensive at the higher end too. Under the old plans, the most expensive combination offered 1,000 local minutes and 6 GB of data for $110. The same data allotment with the only available talk and text option will now run $155, with the most expensive plan – which provides 10 GB of data – going for $205.

So what about the good news? Well, since these increases are ultimately tied to the subsidies that Telus gives subscribers on their phones, the plans will be considerably cheaper for those who don’t need them. If, for example, you pay the full cost of your iPhone upfront and effectively BYOD (bring your own device), your monthly bill will be $20 less. That creates a good deal of clarity on exactly what kind of subsidies Canadians are actually getting: according to Telus’s pricing, over a two-year span the subsidy amounts to $480.

It’s worthwhile to note, however, that even if you are BYOD’ing, you’re still going to pay more: the new minimum plan will cost $50, or $5 more than the existing minimum plan. Sure, there’s the extra minutes and data, but this is a clear case of Telus taking the opportunity to raise prices – and therefore average revenue per user (ARPU) – across the board. It’s a pretty strong counter-point to those arguing that high ARPU doesn’t necessarily reflect high prices.

Also, the other shoe – as in what customers will be paying upfront for their phones – has yet to drop. The smart money is that those prices will also be going up, although a Telus spokesperson tells me “that customers do prefer the low upfront cost of a device, so with that in mind device pricing will only change moderately.” The guys at MobileSyrup estimate this will be in the realm of $20 to $30.

MobileSyrup is also reporting that Bell will in fact be the first of the big carriers to actually enact new pricing, starting July 17. According to leaked documents, phone prices will also be going up and Bell will be offering three kinds of plans: voice, voice and data lite, and voice and data plus:

The basic Voice plans will be available in $30, $40 and $50/month offerings and give customers a various number of text and minutes from 200 to 1,000 minutes per month. The Voice and Data Lite plans range in price from $45 to $60/month and gives unlimited texts, 200 and unlimited calling, plus upward of 1GB data. The cost of the Voice and Data Plus are “for customers who use large amounts of data” and will be available from $60/month to $100/month, plus basically give unlimited calling, texts and 5GB of shareable data.

One reason to doubt the leak is that, if true, Bell’s plans might actually be heading downward. The company’s existing $60 plan, for example, gives subscribers 1,000 minutes and only 500 MB of data. The new $60, as per the leak, would bump that up to unlimited voice and 1 GB, which currently costs $70. Here are some of the old plans:

If the leak is accurate, there is the possibility that Bell is going in a different direction and will charge significantly higher upfront prices on phones rather than raising rates. But that seems unlike Canadian carriers, who tend to move like wildebeests: in the exact same direction. Telus is obviously going with one-size-fits-all pricing on voice and text, while Bell may be preserving choices. It doesn’t look like customers would get as much value with Bell – the new $60 plan, for example, would offer 1 GB of data and unlimited local calling as opposed to nation-wide – but they will have more options, which could ultimately be cheaper than Telus.

Rogers has been quiet so far on its plans, although a spokesperson told me the company will soon be announcing new offers as well.

The real good news is, now that the distorting influence of three-year contracts is on the way out, apples-to-apples price comparisons can be made and Canadian prices can in fact be judged against those in other countries more easily. MobileSyrup’s Dan Bader did just such a comparison with Telus and AT&T in the U.S., to find that the Canadian carrier is generally cheaper, except on the high end:

Of course, that brings us back to the bad news – or perhaps the ugly news, as it were – which is that the U.S. wireless market is not exactly one to aspire to. More to the point, as the latest Communications Outlook from the Organization for Economic Co-operation and Development reports, Canadian prices rank poorly by just about every measure.

As University of Ottawa professor Michael Geist puts it in his take of the report, “Canada ranks among the ten most expensive countries within the OECD in virtually every category and among the three most expensive countries for several standard data only plans.”

Telus had its own take on the findings, trotting out some rationalizations – including geography, population density, multiple device/SIM card ownership in other countries, and supposedly high Canadian usage – that I’ve spent a good deal of digital ink poking holes in (here and here and here). In between taking potentially defamatory shots at Geist and his alleged “vested interest,” Telus’s senior vice-president of government and regulatory affairs Ted Woodhead points out that despite all that, “Canada really SHOULD be the most expensive country for wireless service in the OECD, but we’re not. That’s a great success story we should be celebrating.”

All of this ought to give new Industry Minister James Moore, who is thankfully replacing the invisible Christian Paradis in that role, some good food for thought during a key time in Canadian wireless. The next few months will likely see the industry transformed, if U.S. carrier Verizon does indeed enter the country as a hungry challenger. The good news is, if that does come to pass, some of these higher prices being announced may just be a temporary thing.

10 Myths From Usage Based Billing Supporters

The usage-based billing fracas has calmed down considerably over the past few weeks, but a few people continue to beat the drum in support of it despite the fact that it’s looking dead in the water. UBB is, if you’ve forgotten, essentially an increase in prices by big internet providers on a wholesale service they provide to smaller rivals. The increase means it’ll be a lot more expensive, if not impossible, for smaller ISPs to offer the large internet usage buckets they’ve been selling.

People got freaked out over this and hundreds of thousands signed an online petition, prompting the government to promise it will overturn the plan if the regulator, the CRTC, doesn’t do so first. The CRTC is going back to the drawing board and UBB is in a holding pattern until this all gets resolved, if it ever does.

Still, some folks – like the editorial writers at Maclean’s – continue to maintain that UBB is the right way to go. Supporters usually latch on to one or both of the arguments of fairness – that heavy internet users should be forced to pay more – or that bandwidth is like a utility. Many commentators, myself included, have argued against these talking points but evidently they still continue to percolate. Here then, are 10 reasons why the arguments for UBB don’t hold water.

10. Data is not a utility. There have been many attempts, including by the CRTC, to equate internet usage to a utility such as electricity or gas. Very simply put: it is not. The electrons that make up the data that passes to and fro over the internet are limitless and are not consumed and destroyed every time a YouTube video is watched. The “pipes” and other equipment over which these electrons flow are, of course, finite and therefore need to be continually expanded as the amount of traffic grows. These are two very different things, however. In electric-bill parlance, we’re talking about delivery and usage – the nice people at the hydro company bill us for both and the big ISPs would like to do the same. The difference is, the actual kilowatts that go over the hydro company’s pipes ARE finite and ARE destroyed once they are used. If you want to talk about fairness, then yes, it is okay to charge internet users for delivery, but how is it fair to charge for consuming a non-consumable?

9. Delivery cost is paying for expansion. In 2003, the average Canadian household spent $170 a year for an internet connection while in 2009, it was $340. There was a big shift by many from dial-up to broadband over that time, but the fact remains: the price we pay for delivery has doubled in six years. That’s a higher increase than just about any service over that time, with the possible exception of television, which not coincidentally is sold by the same companies. Shouldn’t this tremendous increase cover the cost of all the necessary network upgrades?

8. Congestion has not been proven. Okay, so the amount of data going over ISPs’ pipes is growing continually, which means that unless they’re expanded, they’re going to get congested, right? Well, the big ISPs like to tell us about the billions they invest in their networks, so the expansion is presumably happening. The congestion issue was at the forefront a few years ago during the whole related throttling/net neutrality hearing before the CRTC, where Bell Canada was being investigated for slowing peer-to-peer software usage. Bell argued that it needed to slow down greedy peer-to-peer users because they were congesting the network, yet all of the data presented to the CRTC that supposedly proved this congestion was heavily redacted for “competitive reasons.” No one but the CRTC has seen this data, so we have only the word of Bell and the regulator that congestion did exist, and that it continues to. Given that the throttling seems to be in effect 24 hours a day, including during the middle of the night when presumably very few people are using the network, this seems to suggest that congestion is not a problem and that these measures are in place for an entirely different reason.

7. Investment is not making big ISPs poor. In fact, it’s anything but. Bell just posted a 13% increase in annual profit over last year, driven by “strong growth in its wireless, internet and television subscribers.” Indeed, the number of Bell internet subscribers grew by 2% from last year. The song the company likes to sing is “boo hoo, all these heavy users are forcing us to spend zillions on upgrading our infrastructure,” but that investment doesn’t appear to be hurting the bottom line. If anything, it’s helping.

6. Heavy users are not all pirates. This is usually what the crux of the UBB argument comes down to. There’s a mistaken belief among UBB supporters that all the internet is good for is email, surfing the web and watching the occasional cat playing piano on YouTube, so 5 gigabytes a month or so should do it. Anyone who needs more is clearly a file-sharing pirate, so if the law can’t stop ‘em, maybe usage limits will – and should. That’s so wrong it’s not even funny.  There are no “heavy ” and “light” users, only early adopters and mainstream users. Yesterday’s Napster users are today’s iTunes customers, while yesterday’s peer-to-peer file-sharers are today’s Netflix subscribers. The proof is in the pudding: In a 2009 survey of Canadian internet users, Statscan found that 31% went online to download or watch television and movies, up from only 12% in 2005. More and more non-pirate Canadians are moving toward heavy-bandwidth services, such as online video, while more and more perfectly legal services that use lots of bandwidth are also coming online every day – things like internet radio, online video game service Steam, HD video-conferencing, and so on. This means more and more Canadians are becoming so-called “heavy users” every day. If UBB supporters want to punish these heavy users, they’re eventually going to punish themselves.

5. Pirates are not necessarily bad. Further to that, just as all virus creators and hackers are not necessarily evil because they do point out flaws in products, so too do illegal file-sharers actually perform a public service. The iTunes store would not have started if Napster’s success hadn’t concretely established public demand for online music. The same goes for Netflix and BitTorrent. File-sharers are often feathered and tarred for their questionably legal activities, which often result in heavy bandwidth consumption, but they do blaze economic and technological trails for new online business models.

4. Not all opponents of UBB are hogs. What bugged me most about the Maclean’s editorial was the claim that the government got involved because of “wild online outcries from the heaviest users and their internet service providers.” I’m not sure if I was included in that statement, but let me just say for the record: I’m a Rogers subscriber with a 60-gigabyte cap that I’ve never exceeded. I’m not what such people would consider a “heavy user,” even though I use Skype and play games on Xbox Live virtually daily, watch Netflix occasionally and generally rely on the internet for my livelihood. My concern, and I’m sure the concerns of many other such “non-hogs,” stems from the fact that if you limit internet usage in Canada then you limit the development and proliferation of new online business models. For months I’ve marveled at Netflix’s figurative balls of steel for entering Canada in the face of our small usage limits. But when the CEO publicly states that he’s wondering how they’re going to do here because of it, that’s not exactly a vote of confidence for other, similar services looking to start up here. In regards to video, services that millions of Canadians would love to have – such as Hulu – are already handcuffed by an extra layer of content licensing requirements from Canadian rights owners. This problem is now compounded by the perverse fact that those licensing roadblocks are now in the hands of the very same big ISPs that are trying to curtail internet usage (i.e. Shaw owns Global, Bell owns CTV). Through a series of well-orchestrated machinations, our big ISPs have made it virtually impossible for a service like Hulu to start up here without their involvement. UBB is just the icing on that cake.

3. Market forces won’t take care of problems. Part-time commentators on Canada’s telecommunications market like to pretend it is ultimately subject to Adam Smith’s “Invisible Hand” theory, where the nature of competition between companies will stamp out any issues that arise. If you’ve read just about anything I’ve written on this subject, you know that this is impossible in Canada because we do not have a proper, open market because of foreign ownership restrictions. Telecom is an expensive game to play and very few Canadian companies have the deep pockets to do it. The invisible hand cannot exist until ownership restrictions are done away with.

2. Facilities-based competition is not the holy grail. Lots of people, from the CRTC to media commentators, believe that so-called facilities-based competition – the cable company’s network versus the phone company’s network – is the way to go. An earlier Canadian Business editorial even suggested the entire open-access wholesale system we have, where smaller ISPs can use portions of incumbent networks, is completely stupid. Here’s the thing: both of these set-ups are yesterday’s models and they are both wrong in today’s world. Cable versus phone got Canada an early lead, but countries that adopted stronger open-access rules have over the past decade sprinted ahead as our facilities-based competitors stopped competing against each other. Now, as many countries are looking ahead to super-fast, next-generation fibre internet connections, a new trend is emerging: network-owning companies that are separate and independent of any access seller. The trend started in 2005 when BT created Openreach, a separate entity that owns the network and neutrally sells access to it to all comers. Australia and New Zealand have followed suit and several European countries are contemplating it too. Suggesting such an arrangement should be adopted in North America is akin to heresy, but it makes all kinds of sense. Heck, despite their public rhetoric, even the telecom companies themselves don’t actually think facilities-based competition makes logical sense any more. Why else would Bell and Telus jointly build their new wireless network?

1. Everyone else makes it work. I love pointing out how unlimited or practically unlimited internet usage is common in just about every other country because this disproves every argument there is in support of UBB. If ISPs in every OECD country except Canada, Australia and New Zealand can make it economical to give customers big or non-existent usage limits, why can’t we? (See OECD broadband portal, table 4g.) The price of bandwidth continues to fall globally, so those countries aren’t having conversations about whether the internet is like electricity or whether it’s fair to charge heavy users extra, they’re talking about how to make all of their citizens heavy users. The reason we’re not having that conversation is because all those other countries have something we don’t: competition and consumer choice between providers, which keeps prices reasonable and usage limits high.