Internet, phone bills in Canada too high, says consumer study

The federal government needs to take action to assess how escalating phone, internet and television bills are affecting Canadians, especially those earning the least income, a new study on affordability says.

Canadians are spending between $100 and $212 a month per household on communications services, according to the report issued Monday by the Public Interest Advocacy Centre (PIAC), an Ottawa-based consumer advocacy group.

While all Canadians are feeling the pinch, low-income households are getting particularly hard hit by the cost. These households account for between 8 and 15 per cent of the population, depending on the measure, and an average of 7.6 per cent of their total annual expenditures is going to communications, exceeding spending on clothing, health-care and education.

Many consider communications services essential, so they’re making cuts in other areas, such as food, as bills go up.

“Government and regulatory decision-makers have implemented ‘affordability’ policies that have focused on the availability and accessibility of communications services, rather than their true affordability,” the PIAC report says.

“Relying solely on competition has not, and likely will not, create the conditions needed to ensure that communications services truly are affordable for low-income Canadians.”

The study, titled No Consumer Left Behind, suggests five courses of action:

- The federal government should amend the Telecommunications, Broadcasting and Radiocommunications Acts to include “affordability” under universal service obligations

- Affordability in such cases should be calculated against other relevant expenditures to ensure Canadians don’t have to cut spending on other essentials

- The requirements should respect consumer control over expenses and choice of services as much as possible

- Any government policy or regulatory initiatives for low-income consumers should be designed with affordability in mind

- The Canadian Radio-television and Telecommunications Commission should conduct yearly research on the affordability of the four major services: landline, cellphone, internet and television

The study gathered data from focus groups and interviews with organizations such as food banks, Credit Canada Debt Solutions, the Salvation Army and ACORN Canada, an advocacy group for low-income families.

Defining 'affordability'

Using comparable studies from other countries such as the United Kingdom, the report suggests affordability of communications services can be defined as four to six per cent of monthly household expenditure. Current spending in Canada, depending on household size and income levels, ranges as high as eight per cent to as low as 1.7 per cent in the highest brackets.

However, affordability can’t be defined as just total expenditure, the report notes. The amount of control Canadians have over what they choose to spend on also matters.

Canadians in the lowest economic quintile – that is, with an average income of $17,300 - spent about $1,538 on communications services in 2012, a 3.6-per cent increase from 2010. Communications represented their fourth-largest expenditures, after shelter, transportation and food.

Average spending on some other goods and services - food, for example - has declined over recent years while communications expenditure has risen, suggesting consumers are making cuts elsewhere to pay their phone and internet bills.

“Phone (home or cellular) is a necessary service that clients would not cut. To make up for the expense, they might use food banks, clothing programs and other community resources,” said a survey respondent from the Ottawa-based Shepherds of Good Hope foundation for homelessness.

“This is hard, though, because clients want to feel normal. They want to be able to go to a store to buy things like everyone else.”

Onus on government?

PIAC researchers solicited input from the country’s major telecommunications providers, but received only two responses.

Toronto-based Rogers pointed to several of its services aimed at lower-income consumers, such as the Connected for Success program, which delivers inexpensive broadband to Toronto Community Housing, as well as cheaper wireless options for seniors.

The company also highlighted that the average per-megabit download price of its home broadband has declined significantly since 2009.

Regina-based SaskTel said the onus to meet social obligations falls to governments rather than to individual companies. The company also criticized “interventionist policies” such as the CRTC’s ban on three-year wireless contracts, implemented in 2013, which have not resulted in greater affordability of services.

SaskTel also suggested that broadband - and not wireless, home phone or television - is the only essential communications service. The company also pointed out it has some of the lowest cellphone service prices in the country.

Highest wireless bills in the world

A number of recent studies and analyses have also found Canadians’ communications bills to be high.

A 2014 study by Ottawa-based consultancy Wall Communications that looked at eight countries found high prices on bundles of the most basic communications services, especially compared to what many Europeans pay. A typical package of home phone, wireless, broadband and TV costs about $182 in Canada, compared to just $93 in France or $102 in the U.K., for example.

Canadians also pay the highest wireless bills in the world, at around $56 (U.S.) per month, according to the Bank of America Merrill Lynch Global Wireless Matrix. The average among developed countries is closer to $40, while in the U.S. it’s around $50.

The federal government and the CRTC have taken numerous steps in recent years to try and tame some of these costs, such as encouraging new cellphone carriers through special spectrum auctions and the implementation of the Wireless Code.

Last week, the CRTC also ordered television providers to offer basic packages by March 2016 for no more than $25 a month, with mandatory pick-and-pay channels at affordable rates following by the end of the year.

PIAC said the decision will improve affordability for Canadians, while Bay Street analysts expect per-customer revenue for TV providers to decline between $5 and $21.

However, with most providers also offering a host of communications services, observers believe the companies will move to recoup lost revenue through hikes in other areas.

"We believe that companies will be able to charge more for internet than what they're charging right now," said Desjardin Securities analyst Maher Yaghi, according to the Canadian Press.