Statscan says cellphone bills are plunging. The truth is more complicated

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As households struggle with the largest bout of inflation in four decades, Statistics Canada says consumers are getting some relief from what is often a source of frustration: cellphone bills.

In 2023, cellular-service prices plunged by 27 per cent, according to Statscan’s consumer price index. This trend has been playing out for a while, with wireless prices down 50 per cent over five years.

The federal government has pointed to these figures as proof that its efforts to lower wireless prices – a pledge in the 2019 election campaign – are working. So too does the telecom industry, which is regularly criticized by consumer advocacy groups over a lack of competition and high costs.

After a CPI release last fall, Quebecor Inc. QBR-B-T chief executive Pierre Karl Péladeau took credit for lower prices.

“New data from Statistics Canada confirms what we have promised: Since its acquisition by Videotron, Freedom Mobile has been driving change and competitors are following suit,” he said in a press release. (Quebecor’s Videotron acquired Freedom in April, 2023. Canada’s fourth-largest wireless carrier was divested as part of Rogers Communications Inc.’s RCI-B-T $20-billion takeover of Shaw Communications Inc.)

But the truth of what’s happening to cellphone bills is more complex – and the Statscan numbers likely overstate the extent to which people are paying less.

In large part, this comes down to what Statscan can and can’t measure. Every month, workers at the agency visit wireless companies’ websites to record the advertised prices of their plans. They do not, however, have access to data on what Canadians actually spend on their cellphone plans from month to month.

As a result, Statscan’s index for cellular services is supposed to reflect the average price change that consumers would face if they resubscribed to the same or similar plans with their providers. It does not reflect the average actual change in people’s cellphone bills.

The index is thus heavily influenced by a couple factors: promotions and data. Telecoms generally offer a discount to new customers over a two-year contract. It depends on the plan, but often the customer will save $10 or $15 a month for the duration of the contract, then pay full freight. Statscan tracks the promo rates, and because it focuses solely on the plan, it doesn’t account for the activation fees – frequently $60 – that new clients face.

Wireless providers have also jacked up the data allowances in their plans, which has a dampening effect on prices. If a consumer pays the same for a plan with more data, Statscan would interpret this as a price cut. This is known as a quality adjustment and it’s a standard practice in price index methodologies.

“Short term, we have seen some price declines, notably on the flanker side of the industry,” said Andrew Barclay, an economist in Statscan’s consumer-prices division, referring to lower-cost brands owned by the big players. Some examples of flanker brands include Fido (owned by Rogers), Koodo (Telus Corp. T-T) and Virgin Plus (BCE Inc. BCE-T).

Longer term, “what we’re seeing is more data for roughly the same price,” Mr. Barclay added. “And that quality adjustment, in our world, is a price decline, because you’re getting more product for the same price.”

Other studies come to similar conclusions as Statscan. In 2022, prices for wireless plans fell by an average of 2.6 per cent from the previous year, according to a report commissioned by the federal Innovation Department and produced by Wall Communications Inc. Price declines were larger for plans offering higher data allowances.

The same report found that Canadian wireless plans were generally less expensive than those in the United States, after currency adjustments. However, Canadians are typically paying more for the same or comparable plans than consumers in Australia, Britain and Western Europe.

Still, the Statscan figures clash with other metrics. ARPU, or average revenue per user, is calculated by taking service revenue – the money earned by providing a particular service, such as wireless – and dividing it by the number of subscribers. It measures how much money a telecom earns per customer per month on the service in question, and it’s a popular indicator for how telecom companies are performing.

Rogers, BCE and Telus recently reported lower ARPU in their mobile-phone units in the fourth quarter of last year, when compared with the third quarter. Over two years, however, there has been little change in ARPU – a much different result than the plunging prices reported by Statscan.

John Lawford, executive director and general counsel of the Public Interest Advocacy Centre, an Ottawa-based consumer advocacy group, is not persuaded by the Statscan data, given the telcos’ financial results.

“Their ARPU doesn’t go down so I just don’t buy it,” he said.

Statscan is negotiating with wireless carriers for access to more data, including monthly charges. Chris Li, director of the consumer prices division at Statscan, said this would help the agency observe the impact of “winbacks” – situations where wireless providers offer better deals to retain or bring back customers.

“With the internet, we have a lot of information, but we don’t have all the information that we would like,” Ms. Li said.

But the enhanced data would also help the agency to track when people move off their promo deals to higher-priced plans, or when wireless providers raise rates for their existing customers. This latter scenario is playing out with Rogers and BCE recently announcing price hikes for some of their wireless customers.

Even so, the competitive landscape has shifted in recent years, allowing many consumers to shop around for cheaper plans or to extract a better deal from their provider.

National Bank Financial analyst Adam Shine wrote in a Jan. 15 research note that recent financial results of the major wireless carriers “clearly showed rising churn (greater competitive intensity) and lower ARPU (falling prices among other variables).” Churn refers to the rate of customer turnover on a monthly basis.

“All or nearly every Canadian could have found a better-priced plan in 2023,” he wrote.

Statscan was unable to say how much of the decline in cellular-service prices was owing to quality adjustments from higher data. Mr. Lawford, the consumer advocate, said that data allowances are now veering into excessive territory, relative to what a lot of people actually need.

“At a certain point, they can double my data, but I’m not gonna use it – so it shouldn’t notionally decrease the price,” he said. “Do you need 100 gigs a month?”