January 19, 2016 3:26 pm
Updated: April 4, 2016 11:45 am

Big wireless carriers add ‘surcharge’ to rate plans as loonie drops

WATCH ABOVE: Canada's "Big Three" telecommunication companies say that because of the falling loonie they have to raise rates but industry critics are skeptical.

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The country’s biggest wireless providers are pointing to a falling currency to justify raising prices on some rate plans.

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Bell, the biggest telecom provider in Canada, has said it will begin charging $5 more for certain mobile plans for new customers, citing a “weakened dollar” as the reason. Bell, according to a spokesman in a published report, says it’s facing significant cost increases for things like smartphones and network gear, which are bought from foreign companies.

Telus is also reportedly introducing a $5 hike on rate plans as of Jan. 21, owing to “economic and market conditions,” factors that were also given by Rogers, which is making similar price hikes to monthly plans.

‘It makes superficial sense to the average person’

The claims are drawing fire from industry critics who say the increases aren’t as much a reflection of rising costs for the carriers, but diminishing competition in an industry dominated nationally by three established giants who historically have avoided competing on price.

The fast-falling dollar is now providing “a convenient excuse,” John Lawford, executive director at the Public Interest Advocacy Centre said. “It makes superficial sense to the average person.”

Lawford said recent consolidation in the wireless industry has given the national incumbents an opportunity to pressure pricing upward again.

Parallels

Still, a falling loonie is lifting costs for other big Canadian businesses that import hundreds of millions of dollars of goods into the country – ask retailers such as big supermarket chains.

The Canadian dollar has dropped a painful 24.4 per cent against the U.S. dollar since September 2014.

The costs for equipment for network upgrades and devices are typically converted to U.S. dollars, according to Iain Grant, a telecom analyst with SeaBoard Group.

“That said, these costs would have been ‘known knowns’ and a prudent carrier would have off-set much of those foreign currency obligations” with currency contracts and other hedges, Grant suggested.

“Another parallel that comes to mind is the ‘fuel surcharge’ charged by many airlines, even when oil prices are at their [current lows],” the analyst said.

The rate changes won’t affect subscribers in the provinces of Quebec, Saskatchewan or Manitoba where the Big Three compete with local cable and phone incumbents Videotron, SaskTel and MTS for wireless customers.

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