Telecom Trends

I haven’t written in a while so I’ve taken the liberty of offering a few and lengthy thoughts on today’s posting. First of all, I also hate system access fees and I think it’s an issue that’s been allowed to fester for far too long. Secondly, there are the explanations of the three carriers as to what the revenue from the fee is used for. Bell and Rogers’ explanations are quite similar – operating, maintaining and upgrading their networks. Telus says the proceeds are used for a whole bunch of charges, costs and fees totally unassociated with operating, maintaining and upgrading a network and, if and only if there is anything left over, it is applied to these latter three purposes.

The questions that come to mind are from which revenue source does Rogers and Bell pay for the charges, fees and costs cited by Telus and from what revenue source does Telus draw funds to cover the cost of operating, maintaining and upgrading its network if the system access fee doesn’t produce enough funds to cover them. Perhaps the answer is that all of the costs, charges and fees cited by all three carriers in their explanations are really operational, maintenance and upgrading costs which, the last time I checked, are the costs of doing business.

If that’s the case, then why aren’t they built into the monthly user fees? Right now, wireless subscribers see separate charges on their statements for use and system access. What’s suspicious about this practice is that it is that very use of the network that drives most, if not all, of the operational, maintenance and upgrading costs. So, why are they separated out on billing statements? Think about it. Where else in the telecom services realm does this happen? Certainly not for basic residential telephony. And the same can be said for basic cable. There is a basic monthly charge that covers access and use. If you make long distance calls or watch a pay-per-view event, you pay extra. So why do wireless subscribers see two separate charges for access and use?

This leads me to my third point. I agree with you that it is unfair and unpalatable that, even though subscribers sign a contract for wireless service, the carriers adjust the system access fees during the contract period and are allowed to do this. You say this is a consumer protection issue and that the solution is to let the consumer protection folks in the provincial governments deal with it. That is one way to look at it.

However, there is another approach. The CRTC and the federal government licensed these folks and sold them spectrum and should, therefore be concerned about the issues you and others have raised. The fact that they have allowed this practice to continue and didn’t take any public action when the carriers said the fee was a government requirement leads people to believe that Industry Canada and the CRTC are like Eamon Hoey, as quoted in a recent Globe and Mail column, more interested in the carriers than they are in consumers. So, why don’t we start a petition to be sent to Mr. Bernier saying that as part of his pending review of the wireless industry he should force the carriers to eliminate the system access fee altogether and to folding the costs covered by revenues generated by the fee into a single monthly subscriber fee? This to me would produce the most fair and palatable results.

Lastly, I take issue with your contention that the CRTC has correctly concluded that since there is sufficient competition in the wireless industry there is no need to regulate prices. I, like some other observers out there, believe the opposite. One only has to look at the large number of players in the U.S. wireless industry and the resulting low prices and larger range of products and services than exists here in Canada to at least question your contention.

The wireless industry in Canada has been described by some as being brutally competitive. If it’s so brutally competitive the following questions have to be asked as were asked in a recent Globe and Mail column by Derek DeCloet. Why did Bell feel comfortable enough to recently jack up its monthly system access fee by 29%? Why has Rogers made almost 50 cents in EBITDA for every dollar in revenue in the third quarter? And, why do Canadian wireless carriers receive almost twice as much revenue for every minute of airtime as U.S. providers do?

DeCloet’s conclusion was that "this is an oligopoly at work" and there are lots of people who agree with that conclusion. As Eric Reguly also recently pointed out in a Globe and Mail column, meaningful competition can only be achieved through the presence of more players. In that way, the lavish profits the wireless companies are generating under a mythical fiction that there is enough competition would have to bow to better service, products and services for consumers. Mr. Bernier’s pending review of the wireless industry should take a close and hard look at this specific issue.
 

Mark,
I think you make some excellent points. The sooner the CRTC or the federal government addresses system access fees, the better.
 

I work at one of the 3 telecos .. System access fee helps pay for my annual bonus..

Thanks for the support to all those who pay System Access Fee.

Jokes apart..

If government allows Enbrige to charge Delivery Charge and a Supply Charge adding upto 30$ a month.. Mind u there is no choice here everybody has to go with Ebbridge or their local heat provider and pay it..

then how are they gonna stop 3 major competitors from building their own unique billing schemes..
 

Cell phone companies should state in their advertising what the actual cost on your statement will be for basic plans.

If the plans is 25.00 a month, then advertise that price.

I read a good example that states, car manufacturers don't sell you a car and the charge you for tires later.

However, companies will always charge you the maximum that they can while growing their business. That's fine, then let more competition in and get cell phones to the price level that the Europeans have them at. Remember what happened with flat screen TVs. They started off at prohibitive prices and have dropped so much that pretty much anyone can get one. And, those companies did not do it out of the goodness of their heart. They were forced to adjust their price point to where they could make money and where consumers would buy and they have.
 

I don't think your metaphors are applicable:

I suspect that you haven't bought a car from a car dealer, because if you ever do, you will notice that they also have their own system access fees. Car dealers call it PDI (pre-delivery inspection) and paperwork fees.

It is all the same - trying to squeeze a little more margin. Flat panels came down in price because costs dropped as production increased.