‘Surge’ in cellphone costs prompts tough choices for consumers

The amount households are paying for wireless, Internet, TV and phone services jumped sharply in the past year, a new report says, mainly because operators are charging more rather than customers using more.

Leading the rise in cost is wireless services, long the target of critics and regulators who deem the rates paid by Canadian mobile subscribers among the highest in the world.

The common defence from Canada’s big carriers – Rogers, Bell and Telus – is that customers are chewing through more; more voice calls, texts and bandwidth on their smartphones.

A Conference Board of Canada report suggests the past year’s “surge” in wireless costs wasn’t driven by consumption.

‘Sharp increase’

“The surge was mainly due to the sharp increase in prices, rather than to households consuming more,” the Conference Board report said.

The report suggests spending on “actual volume” of telecom services consumed (wireless, phone, Internet and TV) grew at a rate below 2 per cent, while household bills generally inflated by 8 per cent in the latest quarter.

Part of the rise in wireless costs stems from regulators themselves, who introduced a host of new consumer protections under a new Wireless Code. The code, implemented by the Canadian Radio-television and Telecommunications Commission, calls for capping cellphone contracts at two years (compared to the old three-year model).

MORE: 5 things to know about the CRTC’s new wireless code

Subsidy crunch

In order to continue selling expensive smartphones at an upfront discount – an iPhone for $150 compared to its full retail cost, for example – carriers like Rogers have raised monthly plans to recoup the balance within the new two-year window. The lost profits from contract cancellation fees are also shifting into higher rate plans.

“To compensate for the shorter amortization period and the limits on cancellation fees, Canadian wireless providers increased the price of monthly plans,” Conference Board report says.

The average amount of money collected by Rogers each month from one of its more than 8.1 million customers on a contract in the latest quarter was $66.21, up a buck from a year ago.

Out of room

The report concludes that rising wireless bills are forcing consumers to choose between paying for mobile services or other telecom products – a scenario that could become more apparent as the economy slows further.

Somewhat surprisingly, many younger households continue to own landline telephones, the report said. Nearly four in ten “millennial” households – defined as all members being 34 years or younger – were paying for home phone service in 2013.

But that number was down from six in ten in 2010, and given the trend in mobile costs, “the proportion of cellphone-only households will keep rising,” the report said.

WATCH: Millions of Canadian mobile customers are free to find a new provider thanks to changes in rules that take effect today. As Sean O’Shea reports, consumers may be able to find lower priced options.