Cellphone use in Canada isn't taking off like in other parts of the world, and regulatory policy should be revamped in order to make rates more attractive and the wireless industry more competitive, the C.D. Howe Institute warns.
Wireless prices are less attractive because of the low cost of traditional land line phone service, which is subsidized, a Howe report says.
As a consequence, Canada ranks low on the list of wireless penetration among developed countries. In 2003, there were 41.68 wireless subscribers per 100 inhabitants in Canada, says the report, which cited the International Telecommunication Union. That's a big gap when compared with cellphone-crazy Italy, where the ratio surpassed 100.
The danger with such a lag is that investment in Canada's cellular network may suffer, the report says.
“The question is: Will we have the scale and scope of investments we see in other countries here?” Margaret Sanderson, a co-author of the report, said yesterday.
“What happens is you trade off low prices for the old technology, but that affects the extensiveness of the investments in the new technology,” Ms. Sanderson said in an interview. “We're going to get it eventually. But maybe we won't get as much of it or as quickly as otherwise.”
For example, third-generation advanced wireless services took longer to roll out in Canada than in other countries, according to Ms. Sanderson.
The C.D. Howe Institute proposes remedies, such as subsidizing low-income users rather than the land line service in order to narrow the price gap with wireless services. It also suggests the government take another look at restrictions on foreign ownership and wireless spectrum.
In recent years, the Canadian Radio-television and Telecommunications Commission (CRTC) has grown concerned about the state of competition in the traditional local phone market, which the former phone company monopolies still dominate in most regions.
Few Canadians are cancelling their land line, or wire line, service and switching to wireless, C.D. Howe said. That means the CRTC still doesn't view wireless as a direct substitute, according to the report. It has kept collecting fees from the industry to subsidize local phone service in rural areas, and has put restrictions on the former phone monopolies in areas such as contacting customers that leave.
“The CRTC has maintained regulatory control over retail and wholesale wire line rates and set local rates at very low levels — undermining the cellular market,” according to the C.D. Howe report.
Representatives of the CRTC was not available yesterday.
Other possible explanations cited in the report for Canada's lacklustre wireless performance include unlimited local wire line calling compared with per-minute charges in other countries.
And then there's the state of wireless competition in this country. There are more cellphone companies in the United States, which has a higher level of cellphone penetration. And another observer pointed out that wireless subscribers south of the border can keep their number when they switch carriers, a convenience that won't happen in Canada until 2007.
Nevertheless, the wireless market in Canada is growing. In the third quarter, the number of subscribers rose 12 per cent from the year-earlier period, according to statistics from the Canadian Wireless Telecommunications Association.
“We've got 95 per cent of the population covered” with cellphone access, association president Peter Barnes said Monday.
