A few words on wireless substitution

This week, Statistics Canada released some results from its “Residential Telephone Service Survey.” Last conducted in 2010, the 2013 figures are notable because they show that “wireless substitution” is picking up steam, especially amongst those younger than 35 years of age.

The report notes that “Total cell phone use, whether used exclusively or in combination with other types of phone service, continues to grow in popularity in Canada. In 2013, 83% of Canadian households had an active cell phone, up from 78% in 2010.”

Growth in cell phone use by Canadians should not be a surprise — considering that it has for some time lagged behind the rest of the world, we’ve clearly got some catching up to do. In fact, Canada’s “penetration” rate – cell phones per 100 inhabitants – has been the lowest of 34 OECD countries since 2006, when it overtook Mexico for last place spot.

John Greenwood over at the National Post (who has so far done a good job filling Christine Dobby’s shoes following her departure for the Globe and Mail) reports that “The rise of wireless is a global phenomenon but it was relatively slow to gain traction in this country, due the relatively low population and vast infrastructure needed for a viable industry.”

While it is correct that Canada has been slow to move toward universal service for mobiles, the explanation offered is incorrect. For example, the CRTC’s “Status of Competition in Canadian Telecommunications Markets” report noted that “Mobile telephony reaches over 94% of the Canadian population” … back in 2001. Additionally, the industry actually spends about half as much on wireless as opposed to wired infrastructure in an average (non-auction) year to achieve near-universal coverage. I find it therefore hard to believe that there’s anything inherent to mobile networks that explains why wireless adoption remains stubbornly low compared to availability.

Greenwood hints at the actual reason behind Canada’s low wireless adoption, but stops short of making  a concrete connection. “The structure of the telecom industry is another factor in why cell phone use hasn’t taken off faster”, he notes, going on to suggest that that low-priced landline services are keeping people (immigrants are mentioned) from signing up for wireless service. (It is also interesting to note that StatsCan’s survey does not include the territories or people living on reserve.)

The implication of this argument is that wireless prices are too high for some people, who instead opt for an inferior product rather than forgo telecommunications services altogether.

This conclusion is further borne out by the evidence; the CRTC’s most recent monitoring report indicates that wireless adoption is strongly correlated with income. Low earning households subscribe to mobile services at a rate of about 55%, while adoption is close to 95% at the top of the scale.

Do we still view cell phones as a discretionary service? Are landlines an acceptable substitute for wireless? If not, how should policy respond to the obvious shortcomings of the current approach to ensuring affordable service?

These and other questions deserve consideration in the ongoing CRTC procedure on wireless wholesale competition, and in the upcoming basic service objective proceeding.  As wireless  substitution becomes more pronounced, it will become increasingly important for informed policy making to properly understand the meaning of this shift within the communications landscape.

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One comment

  1. Reblogged this on Rasta Rants and commented:
    It doesn’t make sense, No Cellular just an hour outside a major capitol city, and no payphones anymore, most of my friends have dropped landline for cellular only, and if they could provide coverage right outside the city as I drive, I would only need one phone. What we really need, is more competition. To drive down prices, and make them actually compete, not agree on pricing.

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