Canada is known as having some of the highest prices for telecom services on the planet. But the Canadian telecom industry is shifting, and it’s the consumers, and their changing habits, who seem to be calling the shots.
Prices in the telecommunications industry rose almost 5 per cent in 2014, driven most likely by increased charges in the wireless segment of the Canadian market. Canadian wireless providers -- now effectively limited to two-year fixed contracts after a ruling by the CRTC -- increased the price of monthly plans for renewing clients and new subscribers.
Consumers have responded by capping their spending on telecom services. To accommodate the sharp increase in the cost of monthly wireless plans, consumers reduced consumption of other types of telecom services, such as paid-TV and wired phone services. As a result, after removing the effects of price fluctuations, growth in spending on telecom services slowed markedly in 2014, with increases below 2 per cent.
Further evidence that consumers are being selective in their telecom services comes from the way that high-speed Internet services are completely changing the way people consume television content. The number of Netflix’s paid customers in Canada has risen from 1 million to nearly 4 million since 2011, and the share of Canadian households subscribing to paid-TV fell from 86.1 per cent in 2011 to 84.9 per cent in 2013. Canadian TV providers have recently introduced their own video-on-demand services -- including Rogers' and Shaw’s Shomi and Bell’s CraveTV -- to better compete with Netflix and protect their market share.
In 2015, budget-conscious consumers do not have much more to spend on telecom services. Furthermore, customers freed from three-year contracts will be free to shop around for the best deals. So what effects will this changing landscape have on the industry? And what can businesses and consumers expect in the near future?