Affordable telecom services making it difficult for companies to raise capital

Canadian consumers are getting a good deal on telecommunications, but it’s compromising their service provider’s ability to raise capital, a new survey finds. Compared to their counterparts in the United States, The Yankee Group in Canada reports that Canadian telecom companies are at a distinct disadvantage. "Canadians are enjoying a significant bargain—but there are hidden costs, too," the Yankee Group writes. "Canada’s communications companies are not reaping the returns from the consumer segment of the market that their U.S. counterparts enjoy. That puts Canada’s communications enterprise at a competitive disadvantage in the financial markets, for example, where all the communications enterprises compete for capital." The research company selected three user profiles to compare and contrast the pricing options across the continent in Canadian Consumer Communications Costs: Talk Is (Still) Cheap!. It defined subscribers as modest, typical or heavy users and assessed usage of local lines, local usage, voice mail, caller ID, call waiting, dial-up and DSL Internet access, and LD nationally, continentally and internationally. The report studied 17 Canadian cities in seven provinces served by every major ILEC except Manitoba Telecom Services. They ranged in size from the 20,100 residents in Powell River, BC to the more than 4 million in Toronto. It also looked at 11 American cities in nine states. The smallest was Victoria TX at 82,000 with Chicago’s 7.7 million residents being the largest group surveyed. "Where we may have had parity with our American brethren a decade ago, our increases have been parsimonious and few and far between compared to their own," Iain Grant, Yankee Group managing director, says. "The result of that regulation and the result of that political process is that consumers benefit. And they have—to the detriment of the industry as a whole." Heavy users in Canada experienced a differential rate – the difference between highest and lowest urban costs – of no more than six per cent, compared to an American rate of 13 per cent. Modest users in Canada have a differential rate of only 14 per cent while south of the border that could soar to as much as 40 per cent. Only typical users were about the same in both countries, at 20 per cent. CRTC chair David Colville sent Grant a letter, saying he regarded the report as a testament to what the commission has been doing for the past decade. "I think he’s put his finger on it," Grant offers. "Regulation here, due to political pressure or whatever, has really put a cap on rising telecommunications rates." This does not bode well for service providers, the study says. "If you were a new enterprise looking to establish operations, why would you ever consider opening a bureau in Toronto when, for the same service set, you would be rewarded 60 per cent more in Burlington VT?" the paper asks.

Affordable telecom services making it difficult for companies to raise capital

News | June 18, 2001

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