Tuesday, March 06, 2007
Distinguishing between cause and effect
The Globe and Mail discussed a new report, Lament for a Wireless Nation, from Seaboard Group, that concludes "Canadian wireless adoption is a national disgrace." The report says that Canada's adoption rate for cellphones puts it on par with Tunisia and slightly behind Turkey.According to the Globe and Mail account:
Seaboard suggests the government take several steps to improve the situation for Canadians, including allocating wireless spectrum for one or more new competitors. The spectrum could be awarded to a new national carrier or one or more regional operators.The newspaper says that the report is calling for new entrant incentives, such as a spectrum set-aside and mandated tower sharing.
Is Canada's wireless penetration rate lagging because of our pricing, or is more aggressive pricing the result of higher penetration rates? As I have written already, I am not convinced that government intervention can avoid unintended consequences from interfering with the normal workings of the marketplace. I don't think Seaboard's recommendations are able to be implemented without market distorions.
For example, the Seaboard study found that low volume users are better off in Canada, paying 27% less than their counterparts in the US. Not all rates in Canada are worse than US comparables.
It is somewhat hard to understand Seaboard's view that mobile phone companies should target new demographics, like seniors, with appropriate pricing. It appears that their own study shows Canada already has better standby emergency rate plans, despite the drag on carrier ARPU from these plans. When I wrote about the grey market for mobile last month, I was advocating big button, easy-to-use handsets, not critiquing the rates that are available.
It seems to me while heavier users may have the most to gain from Seaboard's recommendations, low volume users may have everything to lose.
Will low-income Canadians lose their price advantage as an unintended consequence of government manipulation of the market to incent competition?
Technorati Tags:
Seaboard Group, spectrum, AWS, Globe and Mail, Industry Canada
Posted by Mark Goldberg @ 3/06/2007 06:05:00 AM 
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You ask "Is Canada's wireless penetration rate lagging because of our pricing, or is more aggressive pricing the result of higher penetration rates?". I would turn it around and say "Is Canada's wireless penetration rate lagging because of our pricing, and would more aggressive pricing result in higher penetration rates?".
Posted by 
: 8:09 AM, March 06, 2007
: 8:09 AM, March 06, 2007
Hooray for this post, Mark. In various industries I see analysts' focus being excessively skewed to high-volume users. I suspect that this is because the top customers are perceived to be those to whom it's easiest to sell more products and services, and perhaps because the analysts themselves tend to be big spenders which can cause unintentional bias. Selling more to the top customers might be the easiest (i.e. laziest) way to increase ARPU, but that doesn't mean it's the most effective one.
The Globe article begins "The average cellphone bill is one-third more in Canada than in the United States". Most likely this "average" is the mean, not the median, which means that it's skewed toward the big spenders. A true comparison of the typical bill requires the median, not the mean.
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The Globe article begins "The average cellphone bill is one-third more in Canada than in the United States". Most likely this "average" is the mean, not the median, which means that it's skewed toward the big spenders. A true comparison of the typical bill requires the median, not the mean.
Posted by 
Rohan Jayasekera : 3:14 PM, March 06, 2007
Rohan Jayasekera : 3:14 PM, March 06, 2007 << Home
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