Rogers, TELUS and Bell: Blame Lower Canadian Dollar for Price Hikes

Last week, Rogers, TELUS and Bell pretty much simultaneously raised prices across the board for new users on contract and diminished bring your own device (BYOD) benefits.

In statements to The Globe and Mail, wireless incumbents clarified why these price increases were justified.

Bell said its price increases were impacted by the lower Canadian dollar and its ongoing need to invest in network improvements, highlighting how it recently won several awards for wireless network performance.

Bell spokesman Mark Langton explained “Most equipment and smartphone suppliers are international companies and while having the best networks has been the key to Bell Mobility’s marketplace performance, we have also faced a significant increase in costs due to the weakened dollar.”

TELUS similarly linked price increases to the lower Loonie, along with “the annual multibillion-dollar investments required to keep up with the growing demand for wireless data.” Spokeswoman Emily Hamer clarified price changes only affect new contracts and not renewals.

As for Rogers, their spokesman Aaron Lazarus noted the same as their competitors, by saying “ongoing network and service investments along with current market conditions impacting our industry.”

While the Big 3 claim price adjustments allow for ongoing network investments, analysts believe the jumps were to make up for sagging average revenue per user (ARPU) growth, a closely watched industry metric.

RBC Dominion Securities analyst Drew McReynolds and Scotia Capital Inc.’s Jeff Fan both forecast average ARPU growth for incumbents to be roughly 1 per cent in 2016—down from estimates of 2.5 to 3 per cent growth for 2015.

A recent report by Fan suggested the fourth quarter of 2015 was a particularly competitive period for Rogers, TELUS and Bell, as the Big 3 offered large handset subsidies to fight for subscribers. Carriers are now taking a break from offering discounts.

As for why BYOD benefits have been eliminated? Fan explains “We think that is a signal that the free-agent base may be getting too big … and the carriers want to incentivize them to sign contracts.”

There you go—does that clarify why prices have jumped across the board?

Founder and Editor-in-Chief of iPhoneinCanada.ca. Follow me on Twitter, and @iPhoneinCanada, and on Google+.

  • Graham

    By that logic, were they lowering prices when the dollar was at par or above? Not really!

  • This Guy

    Sooooo, for the past 30 years what was their excuse?

  • Eric

    Aren’t they Canadian companies???

  • Corey Beazer

    I don’t get why just one of the majors just completely cuts the price in half for all their plans, everyone would jump on over to them and they’d be laughing. Doesn’t that make sense? Am I missing something (aside from them all being greedy crooks)?

  • Tim

    wit that excuse, the Canadian dollar must not have fallen in Quebec, Manitoba or Saskatchewan then.

  • voodoo_ca

    It is certainly a business plan idea – but it has challenges.
    First, the easiest answer is they don’t need to – as long as they are close to the others, people don’t have much choice.
    Next, at a certain point, to many customers will cause issues with everything from network abilities to customer service – You can’t just double your subscriber base and not change things like the network capabilities and the number of people you have ready to take calls.

  • JonathanM

    Two problems with this.

    1) They are Canadian companies, so I don’t see how our dollar tanking has any major impact on them

    2) They will certainly not reduce the prices when our dollar goes back up.

  • It’s Me

    Exactly. The vast majority of their expenses are right here at home in Canada. The small fraction of their costs that are from the US are unlikely enough to have any material impact and certainly not enough to even be close to justifying their massive increases over the years. This is a poor and desperate an excuse as when they blames 2 year terms for astronomical increases that were not related in anyway to the 2 year terms.

    The real reason is that with the new government having so many other priorities the carrier know they have free reign again to gouge, gouge, gouge and the government and regulators will completely ignore them. Just like the bad old days but now they are going to punish us for the few years they actually had to watch their step.

  • John W

    Load of crap, the problem is the Canadian sheeppole believe it. Like the 3$ charge on your land line for digital, when they can’t supply rotary

  • AF

    i should get a raise at work too! everything seems to be going up cause of the USD except my salary

  • Chris Kim

    Agreed. Also, if you were to cut your price in half, you’d effectively need twice the number of subscribers to get the same revenue. Similarly to get the same profit you’d probably need more than twice the # of subscribers given you’d have to increase network capabilities, technical support staff, etc. so your costs would increase.

    So on a financial perspective, you’d need to do a lot just to get to the same place you already are. Not to mention if that happened, the other carriers would drop their prices to compete, which would basically just leave the carriers in a worse position than they were. In an oligopoly like this, carriers understand implicitly that getting into a price war isn’t in their interest…

  • I’m me

    What about network equipments, devices that they buy from Apple/HTC/Samsung… Are these canadian products too? Of course not, the bills are all in USD

  • It’s Me

    And all of those devices from Apple/HTC/Samsung have had their list prices and contract prices increase in lockstep with the dollar falling, exactly as expected. Therefore, since the devices themselves are being priced higher, they are not an excuse for raising rate plans because the currency difference is already accounted for in the higher prices of the handset. Sorry, that just does work as an excuse. It’s weak. Not sure why anyone would even bring that up to be honest.

    Network equipment costs will have an effect, but (a) those costs are amortized over decades and (b) the portion applied in any given year is small compared to the rest of their costs. Their biggest expenses are payroll, rent, utilities, transportation, interest on loans and taxes and that’s all still in Canadian dollars. And (c) when the dollar was at par it should have driven prices down but it did not.

  • KIII

    Hmmm Something smells of ???? ????.

    New agendas in Canada- everyone up the prices then attempt to take on Netflix.

  • LouisDC

    This is sooo true… We’re doomed.

  • Brad Fortin

    You might want to look up the Wikipedia article for Tacit Collusion, but TL;DR: It’s more profitable *not* to compete on price, customer needs be damned.

  • Ashley Mann

    i should care but i dont. do you boys love me any less for that?

  • Widohmaker

    The F/X rate argument is bogus. I don’t remember prices going down when the C$ was more valuable then the US$ a few years back. They didn’t pass on any infrastructure investment savings to the consumer at that point. Secondly, if you want to incentivize people from signing contracts you are going to have to go back to offering ‘retention plans’ which they had mostly abandoned. This is purely a ‘cartel’ play.

  • gerry

    One word: Greed.

  • Goran Mihajlovi?

    Nevermind on par, how about when it was 10 cents over the USD? Just more bullshit.

  • hub2

    Rogers at least has to pay for their soon-to-be exclusive NHL deal and 4K broadcast equipment somehow…

  • Wall Man

    Yup. Companies like this hedge against rises and falls of the dollar so that they won’t see these kinds of huge swings. Will be interesting to see the December numbers and the F/X cost, if any. FYI, Telus booked a $4 M F/X gain in FY2014.

  • jawnee logik

    Good Idea. Tomorrow we should all go into work and, first thing, demand an adjustment in our pay because of the tanking CAD.

  • jawnee logik

    I’m sorry to have to say, but the problem is and always has been, stupid, apathetic, lazy Canadians. We as a society seem to have plenty of energy available for sitting around pissing and moaning about these “minor irritants,” but won’t lift a finger to actually do anything about it.

    Good customers are those that demand to receive what they pay for. Sometimes that means telling the seller to “Piss-off! I don’t want your sh!t and I’m not going to pay for it. Good bye!” You may be without cell service for a time, but so what. What did we do before?