Cellphones and other wireless devices now rule the Canadian telecommunications industry after leapfrogging the old-fashioned local telephone last year.
For the first time, phone companies generated more revenue in 2005 from wireless products than from local service, their traditional bread and butter, according to an annual report by the country's federal communications regulator.
The report, released Thursday, highlights the divergence between the two communications tools. In wireless, the number of subscribers continues to jump year after year as the cellphone becomes a must-have personal item. But subscriber growth isn't the only revenue source in this market as the wireless carriers add more bells and whistles, including ring tones, TV and radio.
It's a different picture in the local phone sector, where the number of lines has barely budged in recent years. While the vast majority of Canadian households still have a local phone line, some people have cancelled that service as they move from dial-up to high-speed Internet or rely solely on a cellphone.
“You see this gradual transformation from the concept of a household phone unit to a personal communications device unit,” said Kaan Yigit, president of Toronto consulting firm Solutions Research Group. “We're in the midstream of that.”
Over all, revenue from telecom services, which also include long-distance and Internet, rose 3.5 per cent to $34.5-billion in 2005, according to the report from the Canadian Radio-television and Telecommunications Commission.
A big part of that increase came from wireless.
Sales in the wireless sector climbed 16 per cent to reach nearly $11-billion from $9.45-billion a year earlier, the CRTC said.
New subscribers fuelled gains as the number of wireless customers at companies such as Bell Mobility, Rogers Wireless Inc. and Telus Corp. advanced 13 per cent to 17 million.
As a result, wireless is narrowing the gap with the 20 million local lines currently in use in homes and businesses.
Still, the percentage of Canadians who subscribe to wireless service is lower than in many other countries, and observers blame high prices, among other factors.
One emerging trend is that more Canadians are choosing to have just a cellphone, instead of also paying for a local line at home. In 2005, 4.8 per cent of households relied solely on a wireless device, compared with 2.7 per cent in 2004 and 1.1 per cent in 2000, according to the CRTC report.
Younger consumers are more likely to take that route, while older demographic groups are still willing to pay two phone bills each month as they view the traditional home phone as a sort of security blanket, according to Mr. Yigit.
Nevertheless, he believes that consumers' overall reliance on the home phone is declining. According to surveys conducted by Solutions Research Group, 48 per cent of respondents this year said they used their home phone more frequently than their cellphone, compared with 58 per cent just two years ago.
Next year's introduction of portable wireless numbers, a system the United States has had since 2003, may also translate into more homes opting for just wireless service, according to Genuity Capital Markets' Dvai Ghose.
“The implementation of number portability will make consumers more comfortable with using wireless as their primary phone,” Mr. Ghose explained.
For now, the industry is generating more local revenue, which rose 0.6 per cent last year to $9.51-billion, the CRTC said. The wholesale and business segments of this market expanded, while residential was little changed.
However, market share is shifting within this segment. The phone giants such as Bell and Telus are losing local phone lines to new competitors such as the cable operators. While the large phone companies saw their number of residential local lines in their home territories shrink by 4.3 per cent to 11.9 million last year, competitors saw theirs jump 130 per cent to 963,000, the CRTC said, attributing a big part of the gains to the cable firms.
With the loss of those highly profitable local lines and related services such as voice mail, the big phone companies are relying on cost cuts and new services like wireless to drive future growth.
“The losses that we may be incurring against the cable company we're offsetting with our growth businesses,” Manitoba Telecom Services Inc. chief executive officer Pierre Blouin said Thursday in a phone interview.
