2016 Price Comparison Study of Telecommunications Services in Canada and Select Foreign Jurisdictions

Prepared for: The Canadian Radio-television and Telecommunications Commission (CRTC)

Prepared by: NGL Nordicity Group Ltd. (Nordicity)

ISSN 2371-4212

Nordicity Group Limited NOTE:The views expressed in this Study are solely those of Nordicity Group Limited and do not necessarily represent views of the Canadian Radio-television and Telecommunications Commission

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Overview

This Study, commissioned by the Canadian Radio-television and Telecommunications Commission (CRTC) and prepared by Nordicity Group Limited, is the 9th (2016) edition of the annual telecommunications services price comparison Study. The purpose of this Study is to provide a detailed comparative price analysis of telecommunications services in Canada vis-à-vis the US and six other countries.

Key Parameters

As in previous years, the telecommunications services examined in this Study were classified in five main categories. Individual service baskets were defined according to increasing levels of service usage and feature availability under each category. The total number of service baskets under each category was based on distinct levels of service usage, the availability of feature offerings, as well as their associated prices. Prices were measured for different pre-defined service baskets under each category.

Service baskets used for each category of telecommunications services are listed below:

Fixed Telephony Footnote 1 : Level 1 to Level 3 – same as last year;

: Level 1 to Level 3 – same as last year; Mobile Wireless Telephony : Level 1 to Level 5 - same as last year. However, Level 6 was added this year to capture family share plans, referred to as ‘family basket’;

: Level 1 to Level 5 - same as last year. However, Level 6 was added this year to capture family share plans, referred to as ‘family basket’; Fixed Broadband Internet : Level 1 to Level 4 - same as last year. However, Level 1 and Level 2 were re-defined (speeds increased) to reflect the current trends in available speed offerings;

: Level 1 to Level 4 - same as last year. However, Level 1 and Level 2 were re-defined (speeds increased) to reflect the current trends in available speed offerings; Mobile Wireless Internet Footnote 2 : Level 1 and Level 2 - same as last year. However, Level 3 was also added to capture higher data usage; and

: Level 1 and Level 2 - same as last year. However, Level 3 was also added to capture higher data usage; and Bundled Services: Level 1 to Level 3 - same as last year.

As in the previous year’s Study, country specific average prices in equivalent Canadian dollars were determined for the above service baskets, based on a survey of known service providers in principal cities of eight jurisdictions: Canada, the US and six other countries:

Canada: Halifax (NS), Montreal (QC), Toronto (ON), Winnipeg (MB), Regina (SK) and Vancouver (BC) United States of America (US): Boston (MA), Kansas City (MO), Minneapolis (MN), and Seattle (WA) Australia: Sydney; United Kingdom (UK): London; France: Paris; Italy: Rome; Germany: Berlin and Japan: Tokyo

Key Findings

This section summarizes Nordicity’s key findings in each of the five categories of telecommunications services. For the purpose of comparing international price data, foreign currency prices were converted to Canadian dollars (CAD) using the Bank of Canada’s monthly average exchange for the month of February 2016. The prices were further adjusted for the purchasing power parity (PPP) differences between countries using the OECD’s PPP comparative price level indices for February, 2016.

Fixed Telephony: In the Fixed Telephony category, out of a total of 8 countries, Canada ranked amongst the least expensive (i.e. ranked sixth) in pricing in the Level 1 service basket. Australia was ranked 1st – the most expensive country in Level 1. Canada’s prices were 23.2% lower, relative to Australia’s prices, as indicated in the down arrow in the Table 1. Similarly, in the Level 2 and Level 3 service baskets, Canada also ranked amongst the least expensive (fifth from the highest) and its prices were 17.5% below those of Australia and 29.2% below those of Japan – the countries with the highest prices in Level 2 and Level 3, respectively.

Table 1: Fixed Telephony: International Price Comparison and Canada's Price Difference Relative to Foreign Jurisdictions Country Service Basket Level Level 1: 400 Minutes with 10% LD Level 2: 1,000 Minutes with 20% LD Level 3: 1,600 Minutes with 30% LD Canada $39.52 $55.78 $60.32 U.S.A. $42.03 6.0% $58.46 4.6% $77.05 21.7% Australia $51.43 23.2% $67.59 17.5% $72.23 16.5% U.K. $39.61 0.2% $50.59 -10.3% $59.28 -1.8% France $37.61 -5.1% n/a n/a $57.41 -5.1% Italy $42.40 6.8% $45.81 -21.8% $54.01 -11.7% Germany $42.93 7.9% $64.49 13.5% $77.11 21.8% Japan $34.91 -13.2% $57.46 2.9% $85.17 29.2% Canada's Rank, (from Highest) 6 5 5

Mobile Wireless Telephony: In the Mobile Wireless Telephony category, Canada ranked the highest in pricing in the Level 1 service basket, third in the Level 2 service basket and second in the Level 3, 4, 5 and 6 service baskets.

Table 2a: Mobile Wireless Telephony: International Price Comparison and Canada's Price Difference Relative to Foreign Jurisdictions Country Service Basket Level Level 1: 150 Minutes Level 2: 450 Minutes and 300 SMS Level 3: 1,200 Minutes, 300 SMS and 1 GB Data Canada $41.08 $48.77 $74.67 U.S.A. $27.00 -52.1% $51.64 5.6% $73.00 -2.3% Australia $28.19 -45.8% n/a n/a $30.91 -141.6% U.K. $20.84 -97.2% $25.79 -89.1% $30.13 -147.8% France $22.49 -82.7% $24.17 -101.8% $38.08 -96.1% Italy $17.70 -132.1% $24.41 -99.8% $34.79 -114.6% Germany $17.15 -139.6% $28.28 -72.5% $56.20 -32.9% Japan $29.06 -41.4% $48.78 0.0% $89.72 16.8% Canada's Rank, (from Highest) 1 3 2

Table 2b: Mobile Wireless Telephony: International Price Comparison and Canada's Price Difference Relative to Foreign Jurisdictions Country Service Basket Level Level 4: Unlimited Minutes, 300 SMS and 2 GB Data Level 5: Unlimited Minutes, SMS and 5 GB Data Level 6: Unlimited Minutes, SMS and 10 GB Data with 3 Lines Canada $81.05 $96.55 $231.99 U.S.A. $89.50 9.4% $117.33 17.7% $206.19 -12.5% Australia $44.78 -81.0% $66.67 -44.8% $198.50 -16.9% U.K. $35.55 -128.0% $42.22 -128.7% $99.31 -133.6% France $61.60 -31.6% $70.12 -37.7% n/a n/a Italy $49.42 -64.0% $61.02 -58.2% n/a n/a Germany $68.12 -19.0% $88.23 -9.4% $284.12 18.3% Japan n/a n/a n/a n/a n/a n/a Canada's Rank, (from Highest) 2 2 2

Fixed Broadband Internet: In the Fixed Broadband Internet category, Canada ranked third highest in pricing in the Level 1 and Level 3 service baskets, fourth in the Level 2 service basket and second in the Level 4 and Level 5 service baskets.

Table 3a: Fixed Broadband Internet: International Price Comparison and Canada's Price Difference Relative to Foreign Jurisdictions Country Service Basket Level Level 1: 3 to 9 Mbps Level 2: 10 to 15 Mbps Level 3: 16 to 40 Mbps Canada $41.94 $58.88 $63.48 U.S.A. $79.64 47.3% $83.85 29.8% $97.53 34.9% Australia $58.38 28.2% $54.49 -8.1% $57.41 -10.6% U.K. n/a n/a n/a n/a $40.43 -57.0% France n/a n/a $73.83 20.3% n/a n/a Italy n/a n/a $64.29 8.4% $41.77 -52.0% Germany $28.28 -48.3% n/a n/a $49.75 -27.6% Japan n/a n/a $51.75 -13.8% $71.52 11.2% Canada's Rank, (from Highest) 3 4 3

Table 3b: Fixed Broadband Internet: International Price Comparison and Canada's Price Difference Relative to Foreign Jurisdictions Country Service Basket Level Level 4: 41 to 100 Mbps Level 5: Over 100 Mbps Canada $78.77 $114.65 U.S.A. $112.30 29.9% $127.69 10.2% Australia $71.03 -10.9% n/a n/a U.K. $54.20 -45.3% $57.56 -99.2% France $63.80 -23.5% $70.54 -62.5% Italy $53.02 -48.6% n/a n/a Germany $61.78 -27.5% $56.57 -102.7% Japan $49.78 -58.3% $71.36 -60.7% Canada's Rank, (from Highest) 2 2

Mobile Wireless Internet: In the Mobile Wireless Internet category, Canada ranked third most expensive in all three service baskets.

Table 4: Mobile Wireless Broadband: International Price Comparison and Canada's Price Difference Relative to Foreign Jurisdictions Country Service Basket Level Level 1: 2 GB to less than 5 GB Level 2: 5 GB to less than 10 GB Level 3: 10 GB and more Canada $46.47 $63.30 $80.98 U.S.A. $50.68 8.3% $76.93 17.7% $110.38 26.6% Australia $15.57 -198.5% $29.67 -113.3% $48.17 -68.1% U.K. $17.61 -163.9% $21.07 -200.4% $24.47 -230.9% France $14.98 -210.1% $28.11 -125.2% $63.45 -27.6% Italy $14.35 -223.8% $21.71 -191.6% $31.58 -156.4% Germany $23.56 -97.3% $37.31 -69.7% n/a n/a Japan $51.81 10.3% $73.74 14.2% $87.09 7.0% Canada's Rank, (from Highest) 3 3 3

Bundled Services: In the Bundled Services category, Canada ranked most expensive in the Level 1 service basket and third in the Level 2 and Level 3 service baskets.

Table 5: Bundled Service: International Price Comparison and Canada's Price Difference Relative to Foreign Jurisdictions Country Bundled Service Level Level 1: Wireline, Wireless & Fixed Broadband Level 2: Wireline, Fixed Broadband & TV Level 3: Wireline, Wireless, Fixed Broadband & TV Canada $161.63 $135.60 $185.06 U.S.A. $141.40 -14.3% $145.92 7.1% $196.70 5.9% Australia n/a n/a $91.85 -47.6% $142.45 -29.9% U.K. $67.19 -140.5% $45.17 -200.2% $65.27 -183.5% France n/a n/a $60.55 -123.9% $98.63 -87.6% Italy n/a n/a $66.94 -102.6% $81.91 -125.9% Germany $116.68 -38.5% $63.54 -113.4% $127.15 -45.6% Japan $154.11 -4.9% $151.08 10.2% $198.54 6.8% Canada's Rank, (from Highest) 1 3 3

Caveats to the Interpretation of the Findings of this Study

As indicated above, the purpose of this Study is to provide a detailed comparative price analysis of telecommunications services in Canada vis-à-vis the US and six other countries. However, there are a number of caveats that should be taken into account by the reader in interpreting the findings of this and previous years’ Studies.

The price comparisons are based on price data collected through a survey conducted in January and February of this year. As prices for telecommunications services are constantly evolving, the prices cited in this Study represent a ‘snapshot’ of prices in time. Also, the price differentials found are highly sensitive to currency fluctuations.

The Canadian prices are based on a survey of service providers in 6 cities, the American prices on 4 cities and prices in the other 6 foreign jurisdictions are based on service providers found in their principal cities. Thus, the prices cited for Canada, US or the international jurisdictions are not meant to be statistically representative of the individual countries as a whole.

Prices in Canada and international jurisdictions are driven by a complex mix of a number of factors: cost of service, competitive positioning, technological advances, consumer behaviour and regulatory frameworks. As wireless technology is constantly improving and consumers demand ever more bandwidth and data caps, service providers are constantly increasing features. In the Study, these changes are reflected by the need to regularly update the definition of service baskets. Hence, price increases in those baskets may in part, simply reflect better service levels offered to consumers.

This Study did not take into account the network technologies deployed in the networks nor the speed or quality of service of those networks. Finally, this Study did not account for any cost of service or socio-economic factors that may be relevant for price differences across different domestic and international jurisdictions. Thus, factors such as population density, terrain and climate have significant impacts on the cost of service. Similarly, socio-economic factors such as affordability indicators (i.e. mobile prices in relation to disposable income), number of handsets per subscriber, number of minutes of usage per subscriber and other factors were not within the scope of this Study.

1. Introduction

This is the 9th (2016) edition of the annual telecommunications services price comparison Study since its inception in 2008. This Study was prepared by Nordicity for the CRTC. The purpose of this Study is to provide a detailed comparative price analysis of telecommunications services in Canada vis-à-vis the US and six other foreign jurisdictions.

As in previous years, telecommunications services in this Study are classified in five main categories, including:

Fixed Telephony;

Mobile Wireless Telephony Footnote 3 ;

; Fixed Broadband Internet;

Mobile Wireless Internet; and

Bundled Services.

Prices were measured for different pre-defined service baskets under each category. Individual service baskets were defined according to increasing level of service usage and feature availability under each category. The total number of service baskets under each category were established according to the availability of distinct levels of service usage and features offered as well as their associated prices.

In comparison to last year’s Study, no major changes were made with respect to the Study design or the scope of analysisFootnote 4. However, the following additions were made in this Study:

Analysis to show the comparison between Bring Your Own Device (BYOD) and Mobile Wireless Term Contract options (see Section 4.3) Canadian Voice over Internet Protocol (VoIP) bundle (Voice + Internet) price comparison (see Section 8) Finally, the following new service providers were added to different service baskets: Fixed Telephony Canada Teksavvy (Montreal, Toronto)

Mobile Wireless Telephony Canada Primus (Halifax, Winnipeg, Regina) Chatr (Montreal) Petro Canada (all cities) 7-Eleven Speakout (all cities) US T-Mobile (all cities) Foreign Jurisdictions O2 (London and Berlin) Three (London) Bouygues Telecom (Paris)

Mobile Wireless Internet US T-Mobile (all cities) Foreign Jurisdictions O2 (London and Berlin) Three (London) Bouygues Telecom (Paris)

VoIP Canada Teksavvy (all cities) Vonage (all cities) Primus (all cities)



This Study is organized as follows: Section 2 describes the Study Design as well as the methodology behind both the practices of data collection and data analysis. Sections 3 to 7 are dedicated to each of the five service categories.

Sections 3 to 7 provide a detailed definition of the service baskets, a description of changes made between last year’s Study and this year’s Study, a list of service providers surveyed in different jurisdictions and a detailed price comparison amongst both Canadian cities as well as between Canada and international jurisdictions in each respective service category. Section 8 provides a comparative analysis of Canadian VoIP bundled services.

2. Methodology

2.1 Service Basket Design

The methodology for the service basket design and prices in this year’s Study has been kept consistent with that used in last year’s Study with the exception of some modifications to reflect the increasing level of consumer usage amongst telecommunications services. These modifications are described below in greater detail.

The price comparison methodology used in this Study is based on a service basket approach where separate telecommunications service baskets are defined on the basis of increasing levels of service usage, features and, where applicable, performance:

Level 1: Entry-level or low-volume usage

Entry-level or low-volume usage Level 2 : Average or medium usage

: Average or medium usage Level 3 : Above average or high-volume usage

: Above average or high-volume usage Levels 4 and 5 : Very high-volume or unlimited usage

: Very high-volume or unlimited usage Level 6: Ultra high-volume or unlimited usage Footnote 5

The number of defined service basket levels for each of the stand-alone telecom services considered in this Study varies from three to six.

Fixed Telephony : Basket Levels 1 to 3

: Basket Levels 1 to 3 Mobile Wireless Telephony : Basket Levels 1 to 6

: Basket Levels 1 to 6 Fixed Broadband Internet : Basket Levels 1 to 5

: Basket Levels 1 to 5 Mobile Wireless Internet : Basket Levels 1 to 3

: Basket Levels 1 to 3 Bundles Services: Basket Levels 1 to 3

Table 6 below summarizes the service baskets that have been considered in the 2016 Study vis-à-vis last year’s Study. Note that no changes were made in the service basket levels for the Fixed Telephony or Bundled Services.

Table 6: Summary of Service Baskets in 2015’s Study in comparison to 2016’s Study Fixed Telephony Mobile Wireless Telephony Fixed Broadband Internet Mobile Wireless Internet Bundled Services 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 Level 1 Level 1 Level 1 Level 1 Level 1 Level 1 Level 1 Level 1 Level 1 Level 1 Level 2 Level 2 Level 2 Level 2 Level 2 Level 2 Level 2 Level 2 Level 2 Level 2 Level 3 Level 3 Level 3 Level 3 Level 3 Level 3 Level 3 Level 3 Level 3 Level 4 Level 4 Level 4 Level 4 Level 5 Level 5 Level 5 Level 6

The three levels of bundled services included were defined as follows:

Bundle 1: Fixed Telephony, Fixed Broadband Internet, and Mobile Wireless Telephony

Fixed Telephony, Fixed Broadband Internet, and Mobile Wireless Telephony Bundle 2: Fixed Telephony, Fixed Broadband, and Digital TV

Fixed Telephony, Fixed Broadband, and Digital TV Bundle 3: Fixed Telephony, Fixed Broadband, Mobile Wireless Telephony, and Digital TV

Consistent with last year’s Study, Level 2 stand-alone service baskets are generally used in each of the bundles. In some cases, however, there are restrictions on the specific service elements that are eligible for bundling discounts. In such cases, eligible service elements are included instead (which can involve including a Level 3 or 4 rather than Level 2 service element). For the Digital TV service component, a ‘basic’ digital television service packageFootnote 6 option is selected for inclusion in the applicable bundles.

The specific service elements included in each service basket are described in the following sections.

2.2 Canadian Price Data Collection

The Canadian price comparisons included in this year’s Study are based on the measurement of prices of pre-defined distinct service baskets, in six Canadian cities (Halifax, Montreal, Toronto, Winnipeg, Regina and Vancouver). Between two to seven services providers per service category were examined in each city, covering stand-alone and bundled service baskets, as applicable for each service provider.

The Canadian price data has been collected from a wide range of telecommunications service providers (TSPs) including incumbent telephone companies (for example: Bell Canada, MTS, SaskTel, and TELUS) and incumbent cable companies (for example: Eastlink, Videotron, Rogers, Shaw, and Cogeco). The Study also includes service price data from four service resellers, amongst them are Primus, PC Mobile, Petro-Canada Mobile and 7-Eleven Speakout. Furthermore, the Study includes services provided by flanker brands such as Koodo, Public Mobile, Chatr, Fido, Mobilicity and Virgin, as well as the ‘new’ (2008) entrants in the mobile market such as Videotron, Eastlink and WINDFootnote 7. Table A.1, in Appendix A provides a list of the Canadian service providers surveyed in this year's Study, broken down by city and by service basket.

City-specific prices for each of the stand-alone and bundled service baskets offered by the service providers listed in Table A.1 (Appendix A) were weighted according to each service provider’s respective estimated subscriber-based market share.Footnote 8 Similarly, in calculating Canada-wide market prices, city-specific prices were aggregated and weighted according to city population. Weighted average prices for each surveyed city and for Canada are provided in Appendix B for each of the service baskets and bundles included in this Study.

In order to maintain consistency with previous years' studies (2011 to 2015), the incumbents' flanker brand service prices were not included in the calculation of the aforementioned city-specific or national aggregate prices. However, Section 4.2 provides an additional analysis of the incumbents' flanker brand prices with incumbents' and new entrants' mobile wireless prices.

For the Mobile Wireless Telephony service analysis, this year’s Study also examined BYOD price discounts in contrast to the other device financing options available in the Canadian market.

The price data collected for this Study was drawn from the surveyed service providers’ websites and, where necessary, supplemented with further clarifications from consumer service representatives (CSRs).Footnote 9 The price data reflects currently advertised prices that are available to new consumers or existing consumers changing service plans. In all cases, the lowest available currently advertised regular or standard price was used to determine price of each service basket. Short-term promotional offers and prices were not taken into account.

2.3 International Price Data Collection

This year’s Study included seven foreign jurisdictions for the purpose of comparing telecommunications service prices with those offered in Canada. These seven jurisdictions included: the US, UK France, Germany, Italy, Japan and Australia. With the exception of the US, the price data was collected for the services available in each country’s largest city.

For the US, the following four cities were selected for collecting price data: Boston, MA; Kansas City, MO; Minneapolis, MN; Seattle, WA. In each case, price data was collected for the services provided by the major service providers in those cities.

Table A.2, in Appendix A provides a list of the international service providers included in the Study by city and service baskets.

To maintain consistency with last year’s Study, the US’s regional brand services prices were not included in the calculation of the US aggregate prices. Accordingly, this year’s Study has excluded the section pertaining to the US’s Incumbent and Regional Service Provider Prices.

For the remaining six jurisdictions, the collected price data corresponds to services provided by incumbent service providers.

For the purpose of comparing international price data, foreign currency prices were converted to Canadian dollars (CAD) using the Bank of Canada’s monthly average exchange for the month of February 2016Footnote 10. The prices were further adjusted for the purchasing power parity (PPP) differences between countries using the OECD’s PPP comparative price level indices for February, 2016.Footnote 11

2.4 Summary of Changes in Methodology

Relative to the previous year, the changes in methodology and updates made in this Study are outlined below:

Fixed Telephony: For this year’s Study, Teksavvy (reseller) was added (Montreal and Toronto only) to the list of Canadian Fixed Telephony service providers

For this year’s Study, Teksavvy (reseller) was added (Montreal and Toronto only) to the list of Canadian Fixed Telephony service providers Mobile Wireless Telephony This year, Mobilicity (Rogers) and Public Mobile (TELUS) were included as flanker brands rather than new entrants. Primus was added to the list of resellers for all Canadian cities. This year’s Study was based on the least expensive lite devices available from each service operator rather than the premium devices included in last year’s Study. New service Level 6 (Family Basket) was added. US long distance cost, previously included in Levels 2 and 3 was removed. Additional analysis on Bring Your Own Device (BYOD) added in this year’s Study.

Fixed Broadband Internet Service Teksavvy was removed from Winnipeg and Regina. Netago (broadband service provider) was added in analysis of rural markets of Canada. Level 1 advertised download speed range increased from 1 - 3 Mbps to 3 – 9 Mbps. Level 2 advertised download speed range increased from 3 - 10 Mbps to 10 – 15 Mbps.



Further details and the rationale with respect to above changes are provided in the respective sections of the five service categories.

3. Fixed Telephony Service

3.1 Fixed Telephony Service Baskets

Consistent with last year’s Study, the following service element charges were considered for Fixed Telephony service baskets:

Access line charges (including, as applicable, free calling allowances);

Local usage/calling charges (where applicable);

Long distance charges both domestic and international calls;

Optional feature charges (such as voicemail, call display, and other features); and

Other recurring charges, where applicable, such as 9-1-1, network access fees, and/or other surcharges or regulatory fees.

It should be noted that one-time service charges, such as installation and activation fees were excluded from the comparison.

Fixed Telephony service basket definitions in this year’s Study are identical to those used in last year’s Study with the exception of the removal of VoIP plans from our analysisFootnote 12. Accordingly, the three Fixed Telephony service baskets included in this Study were defined as below:

Level 1: 400 incoming and outgoing minutes per month, with 10% of outgoing minutes treated as long distance, and no optional features.

400 incoming and outgoing minutes per month, with 10% of outgoing minutes treated as long distance, and no optional features. Level 2: 1,000 incoming and outgoing minutes per month, with 20% of outgoing minutes treated as long distance, and two optional features (voice mail and call display).

1,000 incoming and outgoing minutes per month, with 20% of outgoing minutes treated as long distance, and two optional features (voice mail and call display). Level 3: 1,600 incoming and outgoing minutes per month, with 30% of outgoing minutes treated as long distance, and a full set of optional features.

Table B.1 in Appendix B provides a detailed summary of the service elements used for the fixed wireline telephony price comparison.

3.2 Canadian Fixed Telephony Service Prices

Figure 1 (Canadian Fixed Telephony Service Prices) below, provides an overview of the changes in Level 1, 2 and 3 service basket prices since 2015. On average, Fixed Telephony prices portray a decreasing trend - overall prices decreased by 2.8% (Level 1), 7.1% (Level 2), and, 6.2% (Level 3). The decreases are reflected in all surveyed cities, except Halifax (Levels 1-3), Vancouver (Level 1) and Winnipeg (Level 1).

Figure 1: Year-over-Year (YoY) Change in Canadian Fixed Telephony Prices (2015-2016)

Figure 2 below, provides a summary of the average Canadian monthly prices for each of the three Fixed Telephony service baskets for the period of 2011 to 2016. Detailed Fixed Telephony prices for the period of 2008 to 2016 by service basket and surveyed cities (i.e. Halifax, Montreal, Toronto, Winnipeg, Regina and Vancouver) are provided in Figure C.1 and Table C.1 in Appendix C.

Figure 2: Average Canadian Fixed Telephony Prices by Service Baskets (2011-2016)

Key trends in Canadian Fixed Telephony prices for three service baskets over the last six years are summarized below.

Level 1 prices decreased from $40.64 in 2015 to $39.52 in 2016, a decrease of 2.8%. Average 2016 Level 1 prices varied widely by city, ranging from as low as $24.50 in Regina to $45.52 in Toronto. Since 2008, Level 1 prices increased at an average annual rate of 3.1%.

Level 2 prices decreased from $59.44 in 2015 to $55.78 in 2016, a decrease of 6.2%. Average 2016 Level 2 prices also varied widely by city, ranging from $39.20 in Regina to $61.49 in Toronto. Over the period of 2008 to 2016, Level 2 prices have increased at average annual rate of 1.9%.

Lastly, Level 3 prices decreased from $64.96 in 2015 to $60.32 in 2016, a decrease of 7.1%. In this case, the lowest average Level 3 price was found in Vancouver at $45.98 and the highest price was in Halifax at $71.38. For Level 3 there has been no change in prices since 2008, on an annual rate basis.

3.3 International Fixed Telephony Service Prices

When comparing international prices for Fixed Telephony services, many pricing variables were taken into account. These variables are described below:

Price Structure : Wireline rate structures in many foreign jurisdictions differ significantly in comparison to Canada (as well as the US) where unlimited local calling is the norm. Local phone service rates in Europe, Japan and Australia are often set on a usage basis. In the case of local calls, per minute charges apply along with a per call set-up or connection fee, both of which can vary depending on the selected service plan. Footnote 13 Charges also vary depending on whether a call is made to a landline or mobile number (and can also vary by mobile service provider). Local and national per minute and per call rates are generally the same; as a result, there is typically no price difference between local and domestic long distance calling rates. Footnote 14 However, new service plans or add-ons are increasingly available in the examined foreign jurisdictions. Many of these plans offer unlimited national fixed and/or mobile calling options.

: Wireline rate structures in many foreign jurisdictions differ significantly in comparison to Canada (as well as the US) where unlimited local calling is the norm. Local phone service rates in Europe, Japan and Australia are often set on a usage basis. In the case of local calls, per minute charges apply along with a per call set-up or connection fee, both of which can vary depending on the selected service plan. Charges also vary depending on whether a call is made to a landline or mobile number (and can also vary by mobile service provider). Local and national per minute and per call rates are generally the same; as a result, there is typically no price difference between local and domestic long distance calling rates. However, new service plans or add-ons are increasingly available in the examined foreign jurisdictions. Many of these plans offer unlimited national fixed and/or mobile calling options. Integrated VoIP and Broadband Service: In some areas of Europe, Fixed VoIP Telephony service is not offered as a standalone service. Instead Fixed VoIP services are integrated with broadband services offerings. As part of broadband service offerings, such VoIP plans often include unlimited national calling to fixed and/or mobile lines as well as relatively low cost international calling plans.

In some areas of Europe, Fixed VoIP Telephony service is not offered as a standalone service. Instead Fixed VoIP services are integrated with broadband services offerings. As part of broadband service offerings, such VoIP plans often include unlimited national calling to fixed and/or mobile lines as well as relatively low cost international calling plans. Regulatory Fees: In the US, there are a number of unique regulatory fees and surcharges (other than sales taxes). These include, among other things, the federal subscriber line charge (SLC) and universal service fund (USF) charges. Collectively, these fees can add up to as much as $4 to $24 per month over and above a service provider’s local, long distance and feature charges. The range and magnitude of these charges, however, vary by state and municipality. Footnote 15 As in previous years' studies, the principal surcharges applied in the US, namely the SLC and USF, are included in the Study. In most of the surveyed countries, including the US, emergency 911 fees apply and, therefore, they are also included in the Study.

Figure 3 below, provides a year-over-year representation of changes in international Fixed Telephony prices from 2015 to 2016.

Figure 3: Change in International Fixed Telephony Prices for Level 1 to 3 Service Baskets Since 2015

Level 1 service basket prices showed an increasing trend in the case of foreign jurisdictions with the exception of France. The major increases in Level 1 prices within the last year were in Japan (15%), Germany (11%) and the US (9%). Most of these price variations are attributable to differences in the currency exchange rates and PPP adjustment factors relative to the previous year. For example, in original currencies, the Level 1 price in Japan actually decreased by 2% and in Germany the increase was only 4% over the past year.

In the Level 2 and Level 3 service baskets, the trend in price change over the past year was mixed. For example, Level 2 prices increased in Germany (9%), UK (10%), and, Australia (5%) whereas Level 2 prices decreased in Italy (12%), US (9%) and Japan (1%). Level 3 prices increased in Germany (23%), France (21%), US (6%), and Australia (2%) whereas Level 3 prices decreased in Italy (19%), Japan (6%) and UK (1%). Level 2 and Level 3 price variations in foreign jurisdictions are also attributable to a difference in currency conversion rates and PPP adjustment factors relative to the previous year. For example, in original currency, prices in Germany only increased by 1.7% (Level 2) and 14.5% (Level 3).

Figure 4 below, provides a comparison of current average Fixed Telephony prices between Canada and the seven foreign jurisdictions for each of the three service baskets. All prices are expressed in PPP-adjusted Canadian dollars and exclude taxes (e.g., VAT or GST). Figure D.1 and Table D.1 in Appendix D provide detailed historical international wireline service basket information for the period of 2008 to 2016.

Figure 4: 2016 International Fixed Telephony Price Comparison (PPP-adjusted CA$)

The key findings are outlined below:

For the Level 1 Fixed Telephony service basket, the average price paid by Canadians was $39.52 per month, which was 4% lower than the average of $41.31 of the eight surveyed countries. The average Level 1 price in Canada was 3rd least expensive, only higher than those of France and Japan.

For the Level 2 Fixed Telephony service basket, the average price paid by Canadian consumers was $55.78 per month, which was 2% lower than the average of $57.17 for the seven surveyed countries Footnote 16 . The average Level 2 price in Canada was 3rd least expensive, only higher than those of the UK and Italy.

. The average Level 2 price in Canada was 3rd least expensive, only higher than those of the UK and Italy. For the Level 3 Fixed Telephony service basket, the average price paid by Canadian consumers was $60.32 per month, which was 11% lower than the average of $67.82 for the eight surveyed countries. The average Level 2 price in Canada was 4 th least expensive, only higher than those of the UK, France, and Italy.

least expensive, only higher than those of the UK, France, and Italy. In summary, Canadian Fixed Telephony service prices were on the lower end of the group of surveyed countries in the Level 1, 2 and 3 service baskets.

4. Mobile Wireless Telephony Service

4.1 Mobile Wireless Telephony Service Baskets

For Mobile Wireless Telephony, this year’s Study included the following six service baskets:

Level 1: 150 incoming & outgoing minutes per month, with 10% of outgoing minutes treated as long distance, and no optional features.

150 incoming & outgoing minutes per month, with 10% of outgoing minutes treated as long distance, and no optional features. Level 2: 450 incoming & outgoing minutes per month, with 10% of outgoing minutes treated as domestic long distance; two optional features including voice mail and call display; and 300 text messages.

450 incoming & outgoing minutes per month, with 10% of outgoing minutes treated as domestic long distance; two optional features including voice mail and call display; and 300 text messages. Level 3: 1,200 incoming & outgoing minutes per month, with 15% of outgoing minutes treated as domestic long distance; more than two optional features, including voice mail and call display; 300 text messages; and 1 GB data usage per month.

1,200 incoming & outgoing minutes per month, with 15% of outgoing minutes treated as domestic long distance; more than two optional features, including voice mail and call display; 300 text messages; and 1 GB data usage per month. Level 4: Unlimited nationwide talk and text (no international and US calling included); more than two optional features, including voice mail and call display; and 2 GB data usage per month.

Unlimited nationwide talk and text (no international and US calling included); more than two optional features, including voice mail and call display; and 2 GB data usage per month. Level 5: Unlimited nationwide talk and text (no international and US calling included); more than two optional features, including voice mail and call display; and 5 GB data usage per month.

Unlimited nationwide talk and text (no international and US calling included); more than two optional features, including voice mail and call display; and 5 GB data usage per month. Level 6: Newly added this year, ‘family basket’ - Unlimited nationwide talk and text (no international and US calling included); more than two optional features, including voice mail and call display; and 10 GB data usage per month.

In relation to the previous year, the following changes were introduced to the current Study:

Devices : This year’s Study was based on the least expensive lite devices available from each service operator rather than the premium devices included in last year’s Study.

: This year’s Study was based on the least expensive lite devices available from each service operator rather than the premium devices included in last year’s Study. Added family basket (Level 6) : The following Wireless Service Providers (WSP) offer a shared plan, referred to as a ‘family basket’ in this Study. All incumbents (i.e. Rogers, Bell, and TELUS) offer shared plans in all cities and Eastlink in Halifax, NS. All US service providers (i.e. AT&T, Verizon, T-Mobile) offer shared plans with a maximum number of additional lines ranging from six to ten. In other international jurisdictions, share plans are also typically offered with a maximum of 10 additional lines. These service providers offer consumers the sharing of additional lines and data by family members – as an add-on to their main account. While the number of lines ranged from two and nine additional lines, the majority offer up to a maximum of 5 lines with a data sharing plan ranging from 500MB to 15 GB.

: Given that share plans are offered across all jurisdictions, the family basket (Level 6) was added to this Study, which is defined as below: Service Plan: Additional lines may be added, in most cases, to any service plan within the definitions of Level 1 and Level 2, and in all Level 3 to Level 5 plans. For this Study we defined Family basket based on existing level 5 specifications, since it provides for maximum usage (10 GB data, unlimited minutes etc.) to be shared by the family members. Family Size: As noted above, any number of additional lines up to maximum of 10 to 15 can be added, according to available offers. To be specific, we relied on Statistics Canada data to establish the average family size of ~2.9 people. Accordingly, we specified a total of three lines including one for the main account and two additional family members. We believe this represents an optimum number of lines for the family basket.

International Long Distance Calling : In the previous year’s Study, international long distance calling was not included in any of the five service baskets. For consistency, in this year’s Study, international long distance calling is also excluded from all service baskets.

: In the previous year’s Study, international long distance calling was not included in any of the five service baskets. For consistency, in this year’s Study, international long distance calling is also excluded from all service baskets. US Long Distance Calling: In last year’s Study, US long distance was included in the price comparison. We believe US long distance calling between the jurisdictions included in the Study is not comparable. For example, long distance calling from London (UK) to Boston is classified as ‘International long distance’ whereas a call from Toronto to Boston is classified as ‘North American long distance’. For this reason, US long distance calling was also excluded from all six service baskets. Footnote 17 Effectively, this change materially impacted the Level 2 and Level 3 prices downwards, since these two levels had accounted for US long distance charges in previous years’ Studies.

In summary, the following Mobile Wireless Telephony service element charges, where applicable, are considered for price comparison purposes:

Network access/monthly plan charges, as applicable;

Additional calling charges, where applicable;

Optional feature charges, as applicable (e.g., voice mail, call display and others);

Domestic Long distance charges, where applicable;

Text message service (TMS), where applicable;

Data service charges, where applicable; and,

Any other applicable monthly service charges such as emergency, universal service and/or other regulatory fees.

The Study excludes several one-time charges such as activation fees, upfront handset or device costs, and roaming charges. However, section 4.3 provides a detailed analysis of BYOD (Bring Your Own Device) in contrast to the free device with term contract options available to consumers in Canada. Section 4.5 provides a detailed pricing comparison of roaming services available to Canadian and American consumers when travelling to the US and Canada, respectively.

Table B.2 provides a detailed summary of the service elements used for the ‘Mobile Wireless Telephony and text messaging’ service baskets as well as the usage assumptions.

For each of the six service baskets, prices are measured using standard mobile service plan rates offered by surveyed WSPs. This year’s Study was primarily based on post-paid plans. Pre-paid plans were only included in the comparison if post-paid price plans were not available for a particular service basket. In addition, among the pre-paid plans selected, monthly device costs were added in order to reflect the implicit device cost present in post-paid plans. This additional device cost was comparable to the particular service provider’s least expensive lite device amortized over a twenty-four-month periodFootnote 18.

Many WSPs offer post-paid plans on a no-contract or term-contract basis (the most common term being 24 months in the latter case). Term-contract service plans typically provide a means for subscribers to purchase a new handset or device at a discounted price. Such plans generally include an implicit or explicit handset cost recovery component in the service plan price. No-contract term, bring-your-own-device or SIM card only, service plans are also often available at lower price points given they do not include a handset cost recovery component. Consistent with previous years' studies, as applicable, the post-paid service plan prices collected for this Study are based on term-contract service plans.

4.2 Canadian Mobile Wireless Telephony and Prices

Figure 5 provides a historical view of the five Canadian Mobile Wireless Telephony service basketsFootnote 19.

Figure 5: Average Canadian Mobile Wireless Telephony Prices by Service Baskets (2008-2016)

Mobile Wireless Telephony prices showed mixed trends across Canadian cities. For example, Level 1 prices increased and Level 3 prices decreased in six cities within the past year. However, in Levels 2, 4 and 5 the trend was mixed: prices increased in some cities and decreased in others. Year-over-Year (YoY) average price changes in the six Canadian cities are presented in Figure 6 below.Footnote 20

Figure 6: YoY Change in Canadian Mobile Telephony Prices (2015-2016)

Major price changes occurred in Regina and Montreal, where Regina’s Level 2 price decreased by 12.9% and its Level 5 price increased by 25.2%. Montreal’s prices significantly decreased for Level 3 (24.1%) and Level 5 (16.1%)Footnote 21.

Figure C.2 and Table C.2, in Appendix C, provide a detailed overview of the Canadian wireless telephony and TMS service baskets prices for 2008-2016. As illustrated in Table C.2, the trends by city are similar to that of the national average for Levels 1-4. In the case of Level 5, Regina showed a significant increase in price (25%). Since major cities - Toronto and Montreal showed a decrease of over 10%, the national average also decreased by 10.2%.

4.2.1 Comparison of Incumbent and New Entrant Prices

With respect to the price difference between Mobile Wireless Telephony incumbents and new entrant offerings, the trends were generally similar to those a year ago. Since no new entrants were found in Winnipeg and Regina and there is only one new entrant in remaining cities: Eastlink (Halifax), Videotron (Montreal) and Wind (Toronto and Vancouver), the new entrant prices represent a single service provider’s price.

This comparison is based on the unweighted average of the price offerings of the three incumbents (TELUS, Rogers and Bell) for each city. Table 7 below, provides a summary of the price differencesFootnote 22.

Table 7: 2016 Mobile Wireless Price Comparison - Incumbent versus New Entrant City Service Provider Type Mobile Wireless Service Level Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 Average (City) Halifax Incumbents $38.76 $48.76 $77.10 $87.10 $108.76 $252.10 $102.10 New Entrant $30.55 $45.55 $70.55 $80.55 $110.55 $220.55 $93.05 Difference (%) -21.19% -6.59% -8.49% -7.52% 1.64% -12.51% -8.86% Montreal Incumbents $40.57 $44.40 $62.40 $70.40 $78.73 $190.40 $59.30 New Entrant $41.95 $41.95 $54.95 $64.95 $84.95 n/a $57.75 Difference (%) 3.41% -5.52% -11.94% -7.74% 7.90% n/a -2.61% Toronto Incumbents $42.17 $51.50 $80.00 $90.00 $110.00 $255.00 $74.73 New Entrant $25.00 $25.00 $35.00 $35.00 $50.00 n/a $34.00 Difference (%) -40.71% -51.46% -56.25% -61.11% -54.55% n/a -54.50% Vancouver Incumbents $42.17 $51.50 $80.00 $90.00 $110.00 $255.00 $74.73 New Entrant $25.00 $25.00 $35.00 $35.00 $50.00 n/a $34.00 Difference (%) -40.71% -51.46% -56.25% -61.11% -54.55% n/a -54.50% Average (Level) Incumbents $40.92 $49.04 $74.87 $84.37 $101.87 $252.10 $77.72 New Entrant $30.63 $34.38 $48.88 $53.88 $73.88 $220.55 $54.70 Difference (%) -25.15% -29.91% -34.72% -36.15% -27.48% -12.51% -29.62% No New Entrant was found in the other two cities: Winnipeg and Regina. Only one New Entrant was found in the above four cities - Eastlink (Halifax), Videotron (Montreal), Wind (Toronto and Vancouver). Telus, Rogers and Bell offer same price plan for Vancouver and Toronto. New entrant prices for Level 6 were available for Halifax. Therefore, Level 6 average reflect prices for Halifax only. Incumbents' prices represent the unweighted averages. If new entrant price was not available for a city, it was not included in the city average. If new entrant price was not available for a service level, it was not included in the level average.

Overall, new entrants’ prices were lower than the incumbents’ by a range of 25% to 36% for service basket Levels 1, 2, 3, 4 and 5. On average, the price differential decreased from last year, except for Level 2. For example, 29% versus 25% (Level 1), 37% versus 35% (Level 3), 38% versus 36% (Level 4) and 50% versus 27% (Level 5). For Level 2, the difference increased from 26% to 30%Footnote 23.

4.2.2 Comparison of Incumbents and Incumbent Flanker Brand Prices

This section further expands the analysis by including incumbents’ flanker brands such as Fido (Rogers), Chatr (Rogers), Mobilicity (Rogers), Virgin (Bell), Public Mobile (TELUS) and Koodo (TELUS). Chatr is only available in three cities (Montreal, Toronto and Vancouver), and Mobilicity was only available in Toronto and Vancouver. Table 8 below, provides a summary of the price comparison between incumbents versus flanker brands and flanker brands versus new entrants for service baskets Level 1 to 5. Flanker brand price plans for service Level 6 (family basket) were not found, and are therefore not included in the following comparison.

Overall, flanker prices are 14% lower than those of incumbents and new entrants’ prices were 20% lower than those of flanker brands. In Halifax, on average, there was no price difference between the flanker brands and the new entrants. However, for the higher Levels 3 to 5, new entrants’ prices were higher than those of the flanker brands. Similarly, in Montreal new entrants’ prices were higher relative to flanker brands. In all other cases, new entrants’ prices were lower than those of flanker brands.

Table 8: Mobile Wireless Price Comparison - Incumbent versus Flanker and Flanker versus New Entrant City Service Provider Type Mobile Wireless Service Basket Level Level 1 Level 2 Level 3 Level 4 Level 5 Average (City) Halifax Incumbents (I) $38.76 $48.76 $77.10 $87.10 $108.76 $72.10 Flanker (F) $42.10 $50.10 $62.93 $77.93 $101.68 $66.95 New Entrant (N) $30.55 $45.55 $70.55 $80.55 $110.55 $67.55 Difference: (F) vs (I) 8.60% 2.73% -18.38% -10.52% -6.51% -7.14% Difference: (N) vs (F) -27.43% -9.08% 12.11% 3.36% 8.72% 0.90% Montreal Incumbents (I) $40.57 $44.40 $62.40 $70.40 $78.73 $59.30 Flanker (F) $36.14 $41.26 $51.24 $64.24 $77.80 $54.14 New Entrant (N) $41.95 $41.95 $54.95 $64.95 $84.95 $57.75 Difference: (F) vs (I) -10.92% -7.07% -17.88% -8.75% -1.19% -8.71% Difference: (N) vs (F) 16.08% 1.67% 7.24% 1.11% 9.19% 6.68% Toronto Incumbents (I) $42.17 $51.50 $80.00 $90.00 $110.00 $74.73 Flanker (F) $36.20 $43.40 $60.24 $73.86 $89.76 $60.69 New Entrant (N) $25.00 $25.00 $35.00 $35.00 $50.00 $34.00 Difference: (F) vs (I) -14.15% -15.73% -24.70% -17.94% -18.40% -18.79% Difference: (N) vs (F) -30.94% -42.40% -41.90% -52.61% -44.30% -43.98% Vancouver Incumbents (I) $42.17 $51.50 $80.00 $90.00 $110.00 $74.73 Flanker (F) $36.20 $43.40 $60.24 $73.86 $89.76 $60.69 New Entrant (N) $25.00 $25.00 $35.00 $35.00 $50.00 $34.00 Difference: (F) vs (I) -14.15% -15.73% -24.70% -17.94% -18.40% -18.79% Difference: (N) vs (F) -30.94% -42.40% -41.90% -52.61% -44.30% -43.98% Average (Level) Incumbents (I) $40.92 $49.04 $74.87 $84.37 $101.87 $70.22 Flanker (F) $37.66 $44.54 $58.66 $72.47 $89.75 $60.62 New Entrant (N) $30.63 $34.38 $48.88 $53.88 $73.88 $48.33 Difference: (F) vs (I) -7.96% -9.18% -21.65% -14.11% -11.90% -13.67% Difference: (N) vs (F) -18.68% -22.82% -16.69% -25.66% -17.69% -20.28% No New Entrants were found in: Winnipeg and Regina and only one New Entrant was found in the following four cities - Eastlink (Halifax), Videotron (Montreal), Wind (Toronto and Vancouver). Telus, Rogers and Bell offer the same price plans for Vancouver and Toronto. Five flanker brands included Bell Virgin, Rogers Fido, Telus Koodo, Rogers Chatr, Mobilicity. Incumbents' prices represent the unweighted averages. If New Entrant prices was not available for a city, they were not included in the city average. If New Entrant prices were not available for a service level, they were not included in the level average.

4.2.3 Comparison of Incumbent and Reseller or MVNO Prices

Table 9 provides a price comparison between incumbent and resellers/MVNOs by each service basket level. Consistent with previous year’s Study, the prices reflect the national average based on the unweighted average in four cities (Halifax, Montreal, Toronto and Vancouver).

Table 9: Mobile Wireless Price Comparison - Incumbent versus Resellers/MVNOs Service Provider Type Mobile Wireless Service Basket Level Level 1 Level 2 Level 3 Level 4 Level 5 Average (Level) Incumbents $40.92 $49.04 $74.87 $84.37 $101.87 $70.22 Resellers/MVNO $26.98 $46.73 $64.21 $74.21 $104.21 $63.27 Difference (%) -34.06% -4.71% -14.25% -12.05% 2.29% -9.90% No reseller/MVNO was found for Level 6 (Family Basket). Resellers/MVNO include Primus, PC Mobile, Petro Canada Mobile and 7-Eleven-Speakout. For service baskets level 3, 4 and 5 only one MVNO was found - PC Mobile. Level 3 excludes two resellers/MVNOs due to abnormally high prices: Primus ($115.62) and Petro-Canada ($141.25). Incumbents' and Resellers/MVNO prices represent their respective unweighted averages.

Surveyed resellers/MVNOs include Primus, PC Mobile, Petro-Canada Mobile, and 7-Eleven. Primus and Petro-Canada were excluded from the service basket Level 3 average due to their abnormally high prices (Primus: $115.62 and Petro Canada Mobile: $141.25). The inclusion of Primus’ and Petro-Canada’s prices in the resellers/MVNOs would have distorted the Level 3 average and made the survey results less representative. For Level 4 and 5, a price for only one reseller/MVNO (PC Mobile) was available.

Overall, the price differential between incumbents and resellers/MVNOs increased in comparison to last year. For example, the difference in Level 1 increased from -14% last year to -34% this year. For Level 4 the difference increased from -9% to -12%. Last year resellers/MVNOs prices were higher by 22% in the case of Level 5, as compared to 2% this year. In the case of Levels 2 and 3, the price difference decreased from -25% to -5% and -21% to -14%, respectively.

4.3 Mobile Wireless Term Contract versus Bring Your Own Device

This section examines Bring Your Own Device (BYOD) discounts and device financing approaches in the Canadian market.

Traditionally, Canadian wireless service providers offered a handset (device) at no cost or with a certain upfront cost for a fixed term contract. Pursuant to the Canadian Wireless Code, WSPs may collect a contract cancellation fee for a maximum period of 24 months. Accordingly, the service providers mostly offer the maximum 24-month term, although some also offer one-year terms.

In recent years, service providers have also offered consumers the option to bring their own device. With a BYOD option, consumers are not subject to a fixed contract term and many providers offer discounts on post-paid plans - ranging from approximately $10.00 to $15.00 per month. Pre-paid plans imply that the consumer is bringing their own device.

In general, the incumbents and their flanker brands primarily offer two pricing models for BYOD options. The first of these is based on device distinctions, whereby premium devices (such as iPhone 6s, Samsung Galaxy N5 – priced over $700) are offered at a higher monthly rate than lite devices (such as a smartphone priced below $400) on a post-paid plan. Meanwhile, post-paid plans that include a lite device are often offered at a higher or equal monthly rate to post-paid plans - available to consumers who bring their own device.

The second pricing model is referred to as a ‘tab model’ whereby consumers can select a smartphone of their choice and pay one of a number of monthly rates that cover the cost of the particular device in addition to plan costs. The lower the monthly rate consumers select, the higher the upfront cost of the device. In this case, consumers are often able to select from a range of up-front costs. Other providers offer consumers an additional discount per month based on a percentage of monthly plan cost.

Table E.1 in Appendix E provides an overview of the BYOD versus Fixed Contract options offered by the Canadian wireless service providers. The comparison is based on two broad categories of devices: lite devices and premium devices. The offers by different service providers shown in the Table E.1 were selected from a range of different options advertised by the service providers. The selection was designed to fairly represent the two broad categories of the respective service provider.

Notable points, illustrated in Table E.1 (Appendix E), include:

Lite Device : The retail price of the device ranged between $290 and $350. No upfront fee or cost is paid by the consumer for a device covered under a fixed term contract, which is generally 24 months. In case of Incumbents (Bell, Rogers, MTS and SaskTel) the monthly rate with BYOD or without BYOD are the same.

: The retail price of the device ranged between $290 and $350. No upfront fee or cost is paid by the consumer for a device covered under a fixed term contract, which is generally 24 months. In case of Incumbents (Bell, Rogers, MTS and SaskTel) the monthly rate with BYOD or without BYOD are the same. Premium Device: The most common device is the iPhone 6s which has a retail price of $900+. Generally, an upfront fee of approximately $400 (about 45% of retail price) is paid by the consumer who opts for a fixed term plan with a premium device. Most of the service providers offer a discount (commonly $10 and $15) on the monthly rate if a consumer opts for a BYOD option.

To understand the underlying economics, key questions raised (regarding BYOD versus fixed term plan options) from the perspective of both consumer and the service provider are:

What is the cost of financing if consumer chooses fixed term (24 months) plan?

To what extent are the service providers subsidizing the cost of device if a consumer chooses a fixed (24 months) plan?

For this analysis, scenarios included a premium device (iPhone 6s) and the following key factors:

Wholesale Price of Device : Service providers normally make bulk purchases of devices, which allows them to realize a discounted wholesale price relative to retail price paid by a consumer. Based on industry average, the bulk discount could range between 10% and 20%. We assumed 15% (midpoint) for this analysis.

: Service providers normally make bulk purchases of devices, which allows them to realize a discounted wholesale price relative to retail price paid by a consumer. Based on industry average, the bulk discount could range between 10% and 20%. We assumed 15% (midpoint) for this analysis. Churn Rate : When a consumer subscribes to a 24-month term, it helps reduce the service provider’s churn rate. In a competitive environment, with the BYOD option, the consumer is free to switch from one service provider to another for best deals. Whereas, when a consumer is on a fixed term, he or she is likely to remain with the same service provider for the term period in order to avoid cancellation penalties. Churn results in higher ordering (service activation and cancellation) costs and dilution of the average revenue per unit (ARPU). Current average monthly churn rate ranges between 1.3% and 1.6% Footnote 24 . We assumed a 1.5% monthly churn rate for this analysis.

: When a consumer subscribes to a 24-month term, it helps reduce the service provider’s churn rate. In a competitive environment, with the BYOD option, the consumer is free to switch from one service provider to another for best deals. Whereas, when a consumer is on a fixed term, he or she is likely to remain with the same service provider for the term period in order to avoid cancellation penalties. Churn results in higher ordering (service activation and cancellation) costs and dilution of the average revenue per unit (ARPU). Current average monthly churn rate ranges between 1.3% and 1.6% . We assumed a 1.5% monthly churn rate for this analysis. Ordering Cost : At a 1.5% monthly churn rate, the number of orders (activation and cancellation) are 2.5 times higher over a 24-month period than they would be if a consumer were on a 24 month fixed contract (0% churn). Thus, if the same consumer is on a month-to-month term and thus free to switch from one service provider to the other, the service provider will need to add more consumers every month in order to maintain the same consumer base as it would be without churn. As a result, the service provider will have relatively higher order volumes. Based on a 1.5% monthly churn rate, the order volume is estimated to be 2.5 times higher. According to our research, a service activation plus cancellation cost to a typical service provider is about $100 per order. In this scenario, the service provider can save about $100 x 2.5 = $250 in case of a 24-month contract consumer relative to a month-to-month consumer.

: At a 1.5% monthly churn rate, the number of orders (activation and cancellation) are 2.5 times higher over a 24-month period than they would be if a consumer were on a 24 month fixed contract (0% churn). Thus, if the same consumer is on a month-to-month term and thus free to switch from one service provider to the other, the service provider will need to add more consumers every month in order to maintain the same consumer base as it would be without churn. As a result, the service provider will have relatively higher order volumes. Based on a 1.5% monthly churn rate, the order volume is estimated to be 2.5 times higher. According to our research, a service activation plus cancellation cost to a typical service provider is about $100 per order. In this scenario, the service provider can save about $100 x 2.5 = $250 in case of a 24-month contract consumer relative to a month-to-month consumer. ARPU and Consumer Base Protection: ARPU dilution is the second implication of higher churn rate. There are two reasons: In a competitive environment, the service provider has to make promotional offers to attract new consumers, which translates to lower ARPU rate; and With a higher churn rate, the average-in-service (AIS) consumer base decreases, if not offset by new activations. This results in lower total revenue. For major Canadian wireless service providers, the current ARPU is $62 and the earnings before interest, taxes, depreciation and amortization (EBITDA) margin, 40.6% Footnote 25 , or net margin of $25 (= $62 x 40.6%). Based on $25 margin and 1.5% monthly churn, we estimated that service providers can increase their per consumer EBITDA margin by $92 over a 24-month fixed contract term scenario.

ARPU dilution is the second implication of higher churn rate. There are two reasons: Monthly Savings: In certain cases, the consumer can save $10 - $15 per month with a BYOD option. For this analysis, we considered the mid-point of $12.50 per month and calculated its present value (worth) based on 24-month period, using a 2-year risk free bond yield, which is estimated to be 1.5% per annum.

In certain cases, the consumer can save $10 - $15 per month with a BYOD option. For this analysis, we considered the mid-point of $12.50 per month and calculated its present value (worth) based on 24-month period, using a 2-year risk free bond yield, which is estimated to be 1.5% per annum. Upfront Fee: Service providers typically charge consumers an upfront fee of $400 for a premium device. This was the cost considered in this analysis.

Based on the six factors discussed above, Table 10, below, provides a summary of the comparison between a BYOD option versus a Fixed Term Contract, providing the perspectives of both the consumer and service provider.

Table 10: BYOD versus 2-Year Contract Option Analysis Option Considerations Consumer Perspective Service Provider (SP) Perspective Remarks A: 24 Month Fixed Term Option Device Price (iPhone 6s) - $777.75 SP buys at 15% discount (wholesale) Upfront Fee paid by consumer $400.00 ($400.00) Upfront fee paid by consumer Net Cost (24 Month Fixed Term) $400.00 $377.75 B: BYOD Device Price (iPhone 6s) $915.00 - Consumer buys at retail price Monthly Plan Savings / discount ($295.36) $295.36 Present worth of $12.5 per month Additional Ordering Cost - $250.00 Based on 1.5% monthly churn Net Revenue Loss - $91.70 Based on 1.5% monthly churn Net Cost (BYOD) $619.64 $637.06 Cost Difference (A minus B) ($219.64) ($259.31) 24 Month Plan versus BYOD Difference (%) (54.91%) (68.65%)

According to the above analysis, BYOD appears to be more expensive from the perspective of both the service providers and the consumer. The consumer’s cost differential is 55%, which may reduce to break-even depending upon the amount of upfront fees and discounts that are charged on the consumer’s monthly rate plan. The service provider’s cost differential is slightly higher (69%). For service providers, the critical factors include the effect on monthly churn and its financial impacts in terms of ordering costs and revenues. Our analysis also indicates that with a 24-month contract term, both the consumer and service provider almost equally share the cost of the device ($400 versus $378), which may vary depending on the amount of upfront fee paid by the operator.

This analysis does not account for qualitative factors such as brand loyalty, quality of customer service, flexibility and the variety of choices that may be available to a consumer with or without BYOD option. It is pertinent to note that many consumers may not opt to purchase a new device in lieu of reusing an older device.

4.4 International Mobile Wireless Telephony

As noted in previous studies, there are a number of important pricing differences that should be considered when comparing Canadian and foreign Mobile Wireless Telephony prices.

Price Structure: The pricing of Mobile Wireless Telephony service plans in the UK, Germany, Italy, France, Australia and Japan differ significantly as compared to Canada (as well as the US). Mobile Wireless Telephony prices in Europe, Australia and Japan are set on a ‘calling party pays’ (CPP) basis, where consumers pay only for outgoing calls. On the other hand, Canadian and US pricing plans are based on a ‘receiving party pays’ (RPP) approach, under which consumers pay for incoming and outgoing calls. Unlike Canada and the US, some Mobile Wireless Telephony service plans in Europe, Australia and Japan also include per-call setup charges and/or different per-minute call rates to landline versus to mobile consumers, and/or as potentially different per-minute rates for on-net versus off-net mobile calls. However, as in Canada, unlimited national calling plans and service add-ons that cover calls to both fixed and mobile devices and allow for both on and off-net mobile lines, are now commonly available.

The pricing of Mobile Wireless Telephony service plans in the UK, Germany, Italy, France, Australia and Japan differ significantly as compared to Canada (as well as the US). Mobile Wireless Telephony prices in Europe, Australia and Japan are set on a ‘calling party pays’ (CPP) basis, where consumers pay only for outgoing calls. On the other hand, Canadian and US pricing plans are based on a ‘receiving party pays’ (RPP) approach, under which consumers pay for incoming and outgoing calls. Unlike Canada and the US, some Mobile Wireless Telephony service plans in Europe, Australia and Japan also include per-call setup charges and/or different per-minute call rates to landline versus to mobile consumers, and/or as potentially different per-minute rates for on-net versus off-net mobile calls. However, as in Canada, unlimited national calling plans and service add-ons that cover calls to both fixed and mobile devices and allow for both on and off-net mobile lines, are now commonly available. Regulatory Fees: Regulatory fees of one form or another apply in Canada, Japan and the US. In Canada, there is typically an explicit emergency 9-1-1 fee and, in some cases, universal service fees (as in the case of Japan). In the US, there are a variety of regulatory fees, federal and state USF surcharges and other fees. For this year's Study, we have estimated these regulatory charges based on updated information on USF fees and carrier-specific regulatory cost recovery charges and, where applicable, information collected in previous pricing studies.

Figure 7 below, provides a comparison of current Mobile Wireless Telephony prices between Canada and the surveyed seven foreign jurisdictions for each of the six service baskets. All prices are expressed in PPP-adjusted Canadian dollars and exclude retail sales taxes.

Canadian Mobile Wireless Telephony prices are, on average, higher than those in other international jurisdictions. For example, Canadian average prices are the highest for Level 1, the second highest for Levels 3-6 and the third highest for Level 2. The UK ranked lowest in Levels 3-6, Germany in Level 1 and Italy in Level 2.

Figure 7: 2016 International Mobile Wireless Telephony Price Comparison PPP-adjusted CD

Figure D.2 and Table D.2, in Appendix D, provide a detailed historical account of international Mobile Wireless prices for the period of 2008 to 2016 for each country and basket, as applicable.

Figure 8 below, provides an overview of the changes in the international Mobile Wireless prices since last year. All countries - except France (Levels 1, 4 and 5), Japan (Level 1 and 3), Italy, Germany, Australia (Level 1), showed a decrease in prices over the past year. The greatest price movement was in Level 3 prices ranging between -12.4% (Canada) and -55.8% (Australia). For Levels 4 and 5, the most significant decrease was in Australia and the UK. Canadian prices also decreased for service baskets 2, 4, and 5, but at a relatively low rate.

Figure 8: Year-over-Year (YoY) Change in International Mobile Wireless Telephony Prices (2015-2016)

4.5 Summary of Price Changes in Mobile Wireless Telephony

In this section, we summarize the reasons for the year-over-year price changes in the Mobile Wireless Telephony service baskets, both in Canada and internationally. This year’s Study was based on post-paid service plans. However, pre-paid plans were included in the comparison if there were no post-paid plans offered by a service provider within a particular service basket. This approach was based on the following factors:

Post-paid plans, particularly in Canada, are a far greater source of revenue for service operators than their pre-paid counterparts. The Commission’s 2015 Communication Monitoring Report indicates that post-paid revenues neared $17.2 billion while pre-paid revenues were close to $877.3 million. The magnitude of this difference suggests they are the preferred option for Canadian consumers.

Post-paid plans carry with them an implicit device cost. The vast majority of post-paid plans are on a contract term with a device discount - in contrast to pre-paid plans that are inherently no term with a BYOD implication.

The previous years’ Studies included the most popular premium devices such as iPhone 6. In this year’s Study, the methodology was modified to include the least expensive lite device available from each service operator. In some cases, this change in methodology resulted in a sharp decrease in prices as the service providers’ implicit device costs decreased significantly. This can be seen in the price decreases in Level 2 to Level 5 service baskets, for both Canadian and international prices.

It is pertinent to note that the Canadian incumbents increased prices by $5.00 across a number of plans in Level 3 to 6 services baskets in January 2016. However, a year-over-year comparison showed these plan prices actually decreased by $5.00. This decrease reflects the difference in price between incumbents’ plans including a lite device and those including a premium device. As aforementioned, last year’s Study opted for premium device plans whereas this year’s Study opted for lite device plans. This distinction also played a part in some price fluctuations in the international jurisdictions. For instance, the UK experienced some of the most severe price decreases within Level 2 to Level 5 service baskets. This can be accounted for by the high implicit device cost built into the monthly plan prices selected in the previous year’s Study. For example, in March 2016, a consumer selecting an identical plan from Virgin Mobile in the UK can opt to pay £32.00 per month for a plan including an iPhone 6s or £10.00 per month for a plan including a Samsung Galaxy Core Prime.

Finally, changes in market shares relative to the previous year’s Study also had an impact on particular Canadian cities’ overall average price. For example, MTS in Winnipeg, captured nearly 50% of Manitoba’s mobile wireless market share. This year, MTS’s post-paid plan for the Level 1 service basket is $40.00 per month, relative to the $30.00 plan included last year. In light of MTS’s currently offered plans, it appears as though the $30.00 plan selected last year was pre-paid. Due to MTS’s significant market share, the $10.00 difference was a major contributing factor in the average price increase in Winnipeg’s Mobile Wireless Telephony Level 1 service basket.

4.6 Canada-US Roaming Prices

To provide an overview of the roaming costs for a Canadian visiting the US and vice versa, rates for voice, text and data roaming were also collected in the survey. The survey included Canadian incumbents, incumbent flanker brands and new entrants who provide US roaming services. Likewise, US incumbents offering roaming services in Canada were also included. There is a wide range of roaming options offered by Canadian as well as US service providers. To ensure consistency with the previous year’s Study, this analysis was limited to the two most common roaming options for voice, text and data: (a) Pay-As-You-Go rates and (b) Stand-alone Add-on package.

Table 11 below, provides the comparison of the Pay-As-You-Go option. With respect to the pricing of the Canadian incumbents and flanker brandsFootnote 26, the roaming rates have declined on a year-over-year basis. For example, voice roaming rates declined from $1.49 to $1.20 (incumbents) and $1.23 to $1.02 (flanker). Similar trends were found for text and data in the case of the US incumbents. Canadian resellers’ voice, text and data prices were not included in the previous year’s Study.

In the case of the US incumbents, rates also decreased for voice, text and data. Overall, the two countries show a decreasing trend in Pay-As-You-Go roaming rates.

Table 11: Base Pay-As-You-Go Roaming Rates Services Canadian Carriers US Carriers Incumbents Flankers New Entrants Resellers Incumbents Voice (per minute) $1.20 $1.02 $0.32 $1.48 $1.08 Text (per text) $0.61 $0.44 $0.23 $0.68 $0.41 Data (per MB) $3.52 $3.75 $0.40 $3.00 $5.51 The above roaming rates are Pay-As-You-Go. Canadian Carriers' roaming rates (in Canadian $s) are for their customers while in the US. US Carriers' roaming rates (in PPP-adjusted Canadian $s) are for their customers while in Canada.

Table 12 below, provides a comparison of Stand-alone Add-on roaming rates between Canadian and US service providers. US implicit voice rates slightly increased (from $0.27 to $0.31 per minute) and implicit data rates increased (from 0.52 to 0.74 per MB). In the case of Canadian carriers, the incumbent’s implicit voice and text rates have increased in the past year. For example, voice per minute increased from $0.44 to $0.63 and text message from $0.10 to $0.14 per text. However, Canadian carrier data rates significantly decreased from $0.71 to only $0.11 per MB.

Table 12: Add-on Roaming Package Stand-Alone and Bundles Roaming Rates Services Canadian Carriers U.S. Carriers Incumbents Flankers New Entrants Incumbents Average Add-on Package Price: Stand-alone Voice Add-on $25.00 $12.50 $20.00 $6.82 Stand-alone Text Add-on $7.00 $11.67 $15.00 n/a Stand-alone Data Add-on $12.50 $7.50 $20.00 $40.97 Implicit Usage Price: Voice (per minute) $0.63 $0.20 $0.20 $0.31 Text (per text) $0.14 $0.03 $0.03 n/a Data (per MB) $0.11 $0.23 $0.20 $0.74 The above are unweighted average of the lowest cost stand-alone add-on package offered by the carriers. Canadian Carriers' roaming rates (in Canadian $s) are for their customers while in the US. US Carriers' roaming rates (in PPP-adjusted Canadian $s) are for their customers while in Canada. Implicit prices are per minute rate based add-on package price divided by the corresponding usage allowance, as applicable. The three major Canadian incumbents recently introduced unlimited rates on a daily basis, specifically targeting travelers. The details are provided in Table 13 below:

Table 13: Canadian Unlimited US Roaming - Daily Package Daily Package Rogers Bell TELUS Plan Name New Plan Roam Better US Easy Roam Price $5.00 $5.00 $7.00 Voice Unlimited 1000 Plan cap Text Unlimited Unlimited Plan cap Data Allowance (MB) Plan Cap 100 MB Plan cap Data Overage Rate (per/MB) Plan Cap Plan restarts $5.00

5. Fixed Broadband Internet Service

5.1 Fixed Broadband Internet Service Baskets

This year’s Study includes the following five Fixed Broadband Internet service baskets:

Level 1: Speed: ‘basic’ Internet service with advertised download speeds Footnote 27 of 3 to 9 Mbps Footnote 28 .

Data usage per month: 10 GB.

Speed: ‘basic’ Internet service with advertised download speeds of 3 to 9 Mbps . Data usage per month: 10 GB. Level 2: Speed: ‘average’ (Canadian) high-speed Internet service with advertised download speeds of 10 to 15 Mbps Footnote 29 .

Data usage per month: 50 GB.

Speed: ‘average’ (Canadian) high-speed Internet service with advertised download speeds of 10 to 15 Mbps . Data usage per month: 50 GB. Level 3: Speed: high-speed Internet service with advertised download speeds of 16 to 40 Mbps

Data usage per month: 100 GB.

Speed: high-speed Internet service with advertised download speeds of 16 to 40 Mbps Data usage per month: 100 GB. Level 4: Speed: high-speed Internet service with advertised download speeds of 41 to 100 Mbps range.

Data usage per month: 150 GB.

Speed: high-speed Internet service with advertised download speeds of 41 to 100 Mbps range. Data usage per month: 150 GB. Level 5: Speed: high-speed Internet service with advertised download speeds of over 100 Mbps (targeted speed in the 100-1,000 Mbps range).

Data usage per month: 500 GB.

In the 2015 Study, the Level 1 service basket represented < 3 Mbps prices. However, this service basket has been updated to reflect more common basic level service offerings currently available in the market. In 2016, only service providers in two cities (Halifax and Regina) currently advertise plans that offer <3 Mbps download speed. With the current market trends it can reasonably be assumed that there will not be a significant demand for <3 Mbps service in the future in the six major Canadian cities. In light of these trends, for the purposes of the current Study, Level 1 was redefined to represent prices for service speeds of equal to, or exceeding 3 Mbps and less than or equal to 9 Mbps.

The market trend also indicated that many Fixed Broadband Internet service providers in Canada (e.g. Bell, Eastlink, Videotron), as well as abroad, offer download speeds of more than 100 MbpsFootnote 30, with a data usage limit of 500 GB. In certain cities such as Toronto as well as in the metro areas of the US, and the other 6 foreign jurisdictions, download speeds of up to 1GB are also available. Therefore, the new service basket Level 5 has been added to this Study to represent prices for service speed over 100 Mbps.

The changes in service definition of each basket level since 2010 are summarized as follows:

Table 14: Summary of Fixed Broadband Internet Service Baskets Basket 2010 2011 2012 - 2015 2016 Level 1 < 1.5 Mbps < 1.5 Mbps < 3 Mbps 3 - 9 Mbps Level 2 2 – 9 Mbps 2 – 9 Mbps 4 – 15 Mbps 10 – 15 Mbps Level 3 10 – 19 Mbps 10 – 19 Mbps 16 – 40 Mbps 16 – 40 Mbps Level 4 - > 20 Mbps > 40 Mbps 41 – 100 Mbps Level 5 - - - > 100 Mbps

Consistent with last year’s Study, this year’s Study takes into account the modem rental fees as part of the price data for Fixed Broadband Internet service baskets in light of the fact that these rental fees are often mandatory. In other cases, where consumers are required to purchase a modem, it is assumed that the cost of the modem is amortized over 24 months. However, one-time installation or activation fees are excluded.

As noted in previous year’s Study, some ISPs apply data caps to their Fixed Broadband Internet plans. These caps are generally applied on a monthly usage basis (GB/month), and overage fees are charged ($/GB) for any additional data usage. Amongst the ISPs surveyed for this Study, only those in Canada, Australia and the US apply data caps, whereas none of the ISPs surveyed in Japan, Italy, France, Germany and the UK applied data caps.

In addition, for each of the Fixed Broadband Internet service baskets, plans with the lowest advertised rates that fulfill the data usage assumptions adopted for the defined service baskets were selected.

5.2 Canadian Fixed Broadband Internet Service Prices

Figure 9 below provides an overview of the average price trend (2011-16) for Levels 1 to 4 of the Fixed Broadband Internet services in CanadaFootnote 31.

The key trends are:

Canadian Fixed Broadband Internet service prices generally decreased over the past year. For example, there was a decrease in prices of 11.7% (Level 1), 6.4% (Level 3), and 2.3% (Level 4). Level 2 prices show an increase of 3.9%, which is mainly due to the fact that in this Study, Level 2 represented minimum prices for service speed of 10Mbps – 15Mpbs in comparison to last year’s data (4 Mbps - 15 Mbps).

Over the 2008-2016 period, the Compound Annual Growth Rate (CAGR) for Level 1, 2 and 4 were 3.1%, 3.0% and 0.3%, respectively. However, these increases mainly reflect 2012 major revision in service levels. That is, in 2012 Level 1 definition was revised from <1.5 Mbps to <3 Mbps, Level 2 from “2 Mbps – 9 Mbps” to “4 Mbps – 15 Mbps”, Level 3 from “10 Mbps – 19 Mbps” to “16 Mbps to 40 Mbps”, and Level 4 from >20 Mbps to > 40 Mbps.

Montreal prices were the lowest in Levels 2-4, and Toronto prices were the lowest in Levels 1 and 5.

Figure 9: Average Price Trend of Fixed Broadband Internet Service Baskets in Canada for the period 2011-2016 Footnote 32

Level 1: In comparison to 2015, the average price for Level 1 in 2016 showed a significant decrease of 11.7%. It is pertinent to note that the 2016 price reflects a revised service basket definition (3 to 9 Mbps) as compared to that of 2015 (< 3 Mbps). Due to a revision in service basket definition, the average price in Halifax increased from $55.13 to $88.73. In the other five major Canadian cities, Level 1 average price ranged between $33.63 (Toronto) to $55.80 (Winnipeg). Based on the previous year’s definition (< 3Mpbs), the 2015 prices for this service basket were available for only two cities, Halifax ($55.13) and Regina ($34.10). It should be noted that under the revised definition of service basket, there was a significantly higher price average in Halifax. The higher price was driven by the $94.45 charged by Bell Aliant, with competition only from TekSavvy ($45.08). Given multiple revisions in this service basket since 2008, the CAGR percentages (Halifax 12.4%, Montreal 3%, Toronto 1.8%, Winnipeg 8.1%, Regina 5.6%, and Vancouver 10.2%) should be read with the aforementioned caveats in mind.

Level 2: The average price showed an increase of 3.9% from 2015 to 2016. Although the increase is consistent with that of the previous year (2.8%), the relatively higher rate of year-over-year increase is driven by the revision in the definition of service basket. That is, the 2016 price represents 10-15 Mbps prices, whereas 2015 represented 4 – 15 Mbps prices Footnote 33 . With the revised definition, no service offerings met the Level 2 service basket definition in Halifax. For the other three cities, the prices in 2016 range from $51.75 (Montreal) to $62.60 (Winnipeg). For the same three cities the prices in 2015 ranged from $52.88 (Regina) to $59.90 (Vancouver). The CAGR over the period of 2008-2016, still shows an increasing trend in the prices for this service basket for all the Canadian cities captured in the survey: Montreal (0.7%), Regina (2.9%), Toronto (3%), Winnipeg (5.1%), Vancouver (5.3%), and Halifax (6.6%), over the period 2008-2016.

. With the revised definition, no service offerings met the Level 2 service basket definition in Halifax. For the other three cities, the prices in 2016 range from $51.75 (Montreal) to $62.60 (Winnipeg). For the same three cities the prices in 2015 ranged from $52.88 (Regina) to $59.90 (Vancouver). The CAGR over the period of 2008-2016, still shows an increasing trend in the prices for this service basket for all the Canadian cities captured in the survey: Montreal (0.7%), Regina (2.9%), Toronto (3%), Winnipeg (5.1%), Vancouver (5.3%), and Halifax (6.6%), over the period 2008-2016. Level 3: The average price for this Level showed a decrease of 6.4% from 2015 to 2016. There was no change in the definition of this service basket for this year. However, average prices for service basket (16 – 40 Mbps) were not found in Halifax, as this basket is currently not offered by any of the service providers surveyed. The 2016 prices range between $56.09 (Montreal) to $70.06 (Winnipeg) compared to $56.09 (Montreal) to $65.20 (Toronto). Similar to 2015, the CAGR reflecting 2016 prices showed an increasing price trend in Winnipeg (3.7%), Regina (1.5%), Vancouver (3.9%) while Montreal (-4.8%), and Toronto (-1.6%) witnessed a decreasing trend.

Level 4: This service basket was introduced in the 2011 Study. The average price showed a decrease of 2.3% in 2016 over 2015 in comparison to a 6.7% decrease in 2015 over 2014. The prices ranged between $72.21 (Montreal) and $89.90 (Winnipeg). For this service the CAGR decreased this year for Halifax (-0.1%), Montreal (-0.3%), Regina (-3.0%), and Vancouver (-0.5%). CAGR for the two cities showed an increasing trend: Toronto (0.8%) and Winnipeg (3.1%). Previous trend was: Halifax (4%), Montreal (0.4%), Toronto (2%), Winnipeg (n/a), Regina (1.4%), and Vancouver (-0.4%).

Level 5: Introduced this year, the average prices by city for this service basket were: Halifax ($133.10), Montreal ($138.80), Toronto ($92.91), Winnipeg ($123.00), Regina (n/a), and Vancouver ($123.00)

Figure C.3 and Table C.3 in Appendix C provide a more detailed historical overview of Canadian broadband Internet service price for the period 2008 to 2016 as applicable, for each of the five broadband service baskets.

5.2.1 Comparison of Incumbent and Reseller ISP Prices

While the previous section discussed the average prices of both incumbents and resellers, this section presents price differences between Canadian Fixed Broadband Internet incumbents and resellers. The resellers include Primus and TekSavvyFootnote 34.

Table 15 below, provides a summary of the differentials in the prices offered by the incumbents and the two resellers. This comparison is based on the minimum available prices offered by incumbents and resellers for each service basket level in each of the six major Canadian cities.

Table 15: Canadian Fixed Broadband Internet Prices – Incumbents versus Resellers Service Provider Fixed Broadband Internet Service Basket Level 1 Level 2 Level 3 Level 4 Level 5 Incumbent $52.89 $61.30 $62.78 $79.13 $112.47 Reseller $34.05 $36.10 $44.64 $66.10 n/a Difference (%) -35.61% -41.11% -28.89% -16.47% n/a Based on unweighted average of minimum incumbent’s and reseller's price in each city. Resellers include Primus and TekSavvy.

The price differential by each city is provided in Table C.4 in Appendix C. Some of the key findings are:

No resellers’ service basket offerings were available in Regina and Winnipeg

No resellers’ service basket offerings for over 100 Mbps (Level 5 Service Basket) were available in Canada.

On average, the price differential was significantly higher in lower level service baskets. For example, there was a differential of 36% for Level 1, 41% for Level 2, 29% for Level 3 and only 16% for Level 4. This implies that resellers were not as competitive in higher-level baskets Footnote 35 .

. One exception to the price differential trend noted above, was the price offered by a reseller in Vancouver for Level 4 basket – which was 7% higher than that of incumbent.

5.3 International Fixed Broadband Internet Service Prices

This section provides an international comparison of Fixed Broadband Internet prices offered by operators in each of the five service baskets. Figure 10 below provides an overview of the year over year changes (2015-2016) in average prices (Level 1 – 4).

Figure 10: Current Changes in International Fixed Broadband Internet Prices (2015-2016)

Figure D.3 and Table D.3 in Appendix D provide a detailed historical overview of the international Fixed Broadband Internet prices for the period of 2008 to 2016, for each of the five service baskets.

Figure 11 below, provides a 2016 ranking of Canada relative to seven foreign jurisdictions for the five Fixed Broadband Internet service baskets.

Figure 11: 2016 International Fixed Broadband Internet Price Comparison PPP-adjusted CDN$

The key findings are:

Offerings in the Level 1 service baskets (3Mpbs – 9 Mbps) were not available in three countries: the UK, France and Italy;

The prices in the US, UK, Germany and France increased;

Overall, the prices in Italy, Australia and Canada decreased;

Canadian Fixed Broadband Internet prices were among the top three highest prices, with the exception of service basket Level 2;

Canada’s prices were the second highest in higher service baskets Levels 4 and 5;

Germany, Japan or the UK have the lowest prices across all baskets;

US prices were the highest across all service Levels.

Canada had the second lowest average for Level 1, after Germany.

In Australia, lower priced plans with increased speed for Level 3 have become available since last year’s Study. For example, a download speed of 16 to 40 Mbps was available in this year’s Study at a price that was over 20% cheaper than that of last year Footnote 36 . It is also pertinent to note that in Australia consumers can pay AUD$70 a month to acquire a bundle with broadband, home phone and TV, as compared to standalone Fixed Broadband Internet service at a price of $80 per month. That is, a consumer can acquire TV and home phone services at no additional charge, while at the same time receiving a $10 discount to the broadband subscription.

. It is also pertinent to note that in Australia consumers can pay AUD$70 a month to acquire a bundle with broadband, home phone and TV, as compared to standalone Fixed Broadband Internet service at a price of $80 per month. That is, a consumer can acquire TV and home phone services at no additional charge, while at the same time receiving a $10 discount to the broadband subscription. UK service providers, specifically British Telecommunications (BT), increased their line access charge from £11.76 to £17.99. This mostly explains the overall 3% price increase in the UK within the past year.

In Japan, Fixed Broadband Internet service providers no longer offered lower service baskets levels relative to the previous year. For example, in the previous year, NTT and JCOM offered plans for service Levels 1 to 4. This year, NTT’s price plans were not available for Levels 1-4.

The price increases for France, the US and UK were mostly attributable to the changes in currency conversion rates and PPP adjustment factors relative to the previous year.

Table 16 below, provides an overview of the average download/upload speeds and data caps available in Canada versus the US and six other countries. This comparison is based on the unweighted average of the advertised speeds and data caps of the surveyed service providers for each basket level.

With respect to the minimum and maximum average ranges between countries, the difference was greater within higher service basket levels. For example, within Level 4, the download speed difference was approximately 75 Mbps (151%) ranging from 57.2 Mbps (Canada) to 125.3 Mbps (Japan). For service Level 2, the difference in download speed was 4.5 Mbps (41%) ranging from 10.8 Mbps (Italy) and 15.2 Mbps (US).

For Levels 2 and 3, Canada ranked amongst the top three in download speed averages. However, for Level 4, Canada placed amongst the bottom three with respect to download speed.

Table 16: Current International Fixed Broadband Internet Speed Comparison Average Speeds (2016) Canada U.S.A. Australia U.K. France Italy Germany Japan Level 1 Download 6.06 8.57 8.00 n/a n/a n/a 10.00 n/a Upload 0.87 0.97 n/a n/a n/a n/a 0.60 n/a Data Caps 87.22 250.00 100.00 n/a n/a n/a n/a n/a Level 2 Download 12.50 15.20 12.00 n/a 15.00 9.50 n/a 12.00 Upload 2.49 1.13 n/a n/a n/a 1.19 n/a 2.00 Data Caps 137.00 250.00 200.00 n/a n/a n/a n/a n/a Level 3 Download 24.25 21.60 30.00 17.00 n/a 20.00 20.50 40.00 Upload 5.34 1.20 2.00 n/a n/a 10.00 1.70 2.00 Data Caps 198.18 250.00 150.00 n/a n/a n/a n/a n/a Level 4 Download 57.22 63.75 50.00 54.67 100.00 100.00 75.00 50.00 Upload 10.39 27.75 20.00 6.00 50.00 20.00 21.00 n/a Data Caps 290.91 250.00 150.00 n/a n/a n/a n/a n/a Level 5 Download 260.00 262.86 n/a 200.00 200.00 n/a 200.00 605.25 Upload 35.00 390.00 n/a 12.00 50.00 n/a 12.00 505.00 Data Caps 650.00 250.00 n/a n/a n/a n/a n/a n/a Above average reflect the simple average of speed published by respective country's surveyed operators included in each service basket category. n/a: service basket not offered / information not available being not published by the operators. Level 5 averages for Canada and Japan reflect ~1 Gbps service offered by some operators.

There are some key notable differences in the way Fixed Broadband Internet is offered in some of the surveyed countries relative to Canada. These differences are described below.

Some operators only offer Fixed Broadband Internet in bundles with Fixed Telephony services. This is the case for example, with Verizon in Boston.

Similarly, for some of the surveyed European countries, in order to obtain a Fixed Broadband Internet connection on a stand-alone basis, the consumer must, in some cases, also lease a Fixed Telephony connection (and correspondingly, pay an additional access line charge).

Fibre and/or Digital Subscriber Line (DSL) based broadband services offered in the UK, France, Germany and Italy, generally include VoIP and/or Internet Protocol Television (IPTV) services for a single bundled price. The option of a pure stand-alone broadband Internet service is not available in some cases.

In Japan, Fixed Broadband Internet service typically consists of two separate service elements: (i) a network access facility (fibre or Asymmetric DSL), often obtained from NTT and (ii) an Internet access service provided by a third-party ISP. Therefore, there are two fees involved: the broadband access fee and the ISP fee.

5.4 International Rural and Remote Fixed Broadband Internet Service Prices

This section provides a comparison of rural region Fixed Broadband Internet prices in Canada relative to the three other foreign jurisdictions (US, UK and Australia)Footnote 37. Contrary to urban markets, rural markets are not dominated by a few large players. Recognizing this fact, where possible we have included larger ISPs that cover the broader segment of rural and remote Canadian population. We retained the four Canadian service providers included in the previous year’s Study - Xplornet, Storm, YourLink, and RuralWave. To better represent the province of Alberta in this Study, we also included Netago.

Accordingly, the following Canadian and International rural ISPs were surveyed:

Canada : Xplornet, Storm, YourLink, RuralWave and Netago

: Xplornet, Storm, YourLink, RuralWave and Netago US : Skybeam, Digis, and Digitalpath

: Skybeam, Digis, and Digitalpath Australia : SkyMesh, Active8me, and Aussie Broadband

: SkyMesh, Active8me, and Aussie Broadband UK: Vispa, WiSpire, and eXwavia

For the above service providers, we collected their current service data in terms of the following parameters:

Technology: Fixed Wireless (Microwave) technology generation (e.g. 4G or other) Footnote 38 ;

; Download and upload speeds: Range of service speeds in Mbps;

Data caps: Range of monthly usage allowance (in GB/month);

Service prices: Monthly service fees, equipment rental fees and data overage fees, as applicable; and

Contract terms: where applicable.

We applied the same service basket definitions specified for the Fixed Broadband Internet Service for this Study. According to our research, the service providers surveyed (or any other rural Fixed Broadband Internet service providers) do not offer service packages with 100Mbps download speed. Therefore, the Level 5 service basket was not included in this analysis.

Table 17 provides a summary of the average advertised download speeds and, where applicable, data caps for the surveyed rural & remote fixed wireless broadband services by service basket.

Table 17: Current International Rural Broadband Speed Comparison Average Speeds (2016) Canada U.S.A. Australia U.K. Level 1 Download 5.20 5.33 n/a 8.67 Upload 0.76 1.17 n/a 1.50 Data Caps 80.00 125.00 n/a 41.67 Level 2 Download 15.00 n/a 12.00 n/a Upload 2.00 n/a 1.00 n/a Data Caps 400.00 n/a 58.33 n/a Level 3 Download 25.00 20.00 25.00 22.00 Upload 4.33 3.00 5.00 0.45 Data Caps 366.67 250.00 156.67 100.00 Level 4 Download 50.00 n/a 50.00 80.00 Upload 10.00 n/a 20.00 20.00 Data Caps 300.00 n/a 246.67 n/a Above average reflect the simple average of speed published by respective country's surveyed operators included in each service basket category. n/a: service basket not offered / information not available being not published by the operators.

In service Level 3 (16 Mbps – 40 Mbps) Canada has the highest data caps and, alongside Australia the highest download speeds. With respect to the other three service baskets, Canada has an average speed or above average speed in relation to the surveyed foreign jurisdictions.

Canada’s maximum upload speed (Level 4) averages 10 Mbps in comparison to 20 Mbps in the case of Australia and the UK.

As shown in Figure 12, weighted average prices for rural Fixed Broadband Internet in the UK and Australia are significantly lower than those of Canada and the US in all four service basketsFootnote 39. Canada’s prices were the highest in Levels 2 and 4 and the second highest in Levels 1 and 3.

For Level 4, Canada’s average ($69.29) is lower than Levels 2 and 3. This is partly due to the fact that ISP Storm only offered service with download speeds of up to 50 Mbps with prices up to $39.00 (Level 1), $54.00 (Level 2), $59.00 (Level 3) and $69.00 (Level 4). The other four Canadian rural Fixed Broadband Internet providers (Xplornet, YourLink, RuralWave and Netago) surveyed offered services up to Level 3 at significantly higher prices.

Figure 12: 2016 International Rural Fixed Broadband Internet Price Comparison PPP-adjusted CDN$

6. Mobile Wireless Internet Service

6.1 Mobile Wireless Internet Service Baskets

The 2015 Study considered two Mobile Wireless Internet service baskets represented by Level 1 with 2 GB data usage/month and Level 2 with 5 GB data usage/month. This year’s Study adds another higher-level service basket – Level 3 – with 10 GB or more of data usage/month, as described below.

Level 1: 2 GB to less than 5 GB per month Footnote 40

2 GB to less than 5 GB per month Level 2: 5 GB to less than 10 GB per month

5 GB to less than 10 GB per month Level 3: 10 GB or more per month

The key Mobile Wireless Internet service information collected for each surveyed mobile wireless internet service provider was based on the following usage-based elements and service features:

Technology: 3 rd or 4 th generation (3G, 3G+/4G or 4G/LTE)

or 4 generation (3G, 3G+/4G or 4G/LTE) Service Speed: Advertised download speed Footnote 41

Data usage per month

Equipment: USB modem key (included with service on a no-charge, rental or purchase-basis)

One-time charges, such as installation costs, are excluded from price data.

6.2 Canadian Mobile Wireless Internet Service Prices

This section provides a summary of Mobile Wireless Internet prices offered in Canada by incumbents and compares such prices with those offered by MVNOs/resellers and new entrants.

Figure 13 below provides a picture of year-over-year change in Mobile Wireless Internet prices for Level 1 and 2 service baskets from 2015 to 2016.

For the Level 1 Mobile Wireless Internet service basket, the average prices in Canada showed an increase of 6.7% from 2015 to 2016. Level 1 increased for all cities ranging between 4.3% (Regina) and 7.7% (