Telco Profits Are Skyrocketing Because of Mobile Data. Do They Charge Us Too Much?

Telus experienced a profit growth last quarter of 30% thanks to wireless data revenue increasing 53%.

This comes on the heels of Bell's profit jumping a remarkable 41% and Rogers' shooting up 38%—again, both driven by the rise in popularity of data plans.

At a time when most consumers think Canadian telcos are already too controlling and too profitable, is the new mobile trend—smartphones with data plans—further sweetening the Big Three's bottom line?

We all know text messages are one of the biggest rip-offs of all time, but what about wireless data? Because the idea of having full internet on a cellphone is still a relatively new concept, particularly to the mass market, there isn't a lot to confidently compare it to—that is to say, consumers don't know whether or not to think telcos are overcharging for mobile data. Which is exactly how they've been able to jack up texting costs by 7,000%.

Let's consider data-only mobile plans for a moment, because all data smartphone plans include other features like voice minutes, which can blur the cost of the data portion. To do this, we'll observe tablet plans. Right now, 5GB of data can be had for $35—that's $7 per GB, or 0.007 cents per MB. This is profitable to the telco but reasonable, somewhat, to the consumer.

So what's with these numbers, then: $20 for 500MB, $10 for 100MB, and $5 for 10MB (!). The first one equates to $40 per GB, or 0.4 cents per MB—nearly 6 times the amount of the tier mentioned above. The second one calculates to $100 per GB, or 1 cent per MB—now 14 times the amount. And the last one rings in your data at more than $500 per GB, or 5 cents per MB—71 times more expensive than the already-profitable $35 plan. That's like paying $1.5 million dollars for a 2012 Toyota Corolla when your neighbour bought his $21,000, same model and all. What gives?

As for smartphone plans, major telcos typically charge $50 for a voice and data plan with 500MB. Given that voice plans with the same minutes are $35, that's roughly $20 for 500 MB—the same as above, which as we noted is 6 times the amount of the highest-value plan tier (and which is still profitable for the company). And addons to basic voice plans start at $10 for 100MB—again, the same as above, where the cost is 14X.

Meanwhile, newcomers like Wind Mobile and Mobilicity offer unlimited mobile data for just $10—the price you pay for a paltry 100MB with the Big Three.

Now to compare this to home internet, just for fun. Let's select an ISP other than the Big Three because their pricing systems are highway robbery compared to those of most smaller companies like TekSavvy. In this instance, I'll use Novus, a Vancouver-based provider that allows for up to one terabyte of data per month for $103 on its FibrNet 300 plan. Doing the math, that's 1,000GB for $103, or 0.0001 cents per MB—just 1.4% the cost of the Big Three's cheapest mobile data, 0.02% the cost of the most cost-inefficient plan. Wow. And not only do you pay just 1.4% of the cost for the same amount of data, but data speeds are also up to 1,000% faster.

Now, you can't truly compare home internet to mobile internet and call the game fair. This is in many ways an apples-to-oranges battle. But ask yourself this: if mobile data were reasonably priced, would the profits of Telus, Rogers, and Bell all rise by more than on third—in a single quarter—simply because more people are buying data plans? Their average annual revenue per user is stagnant. Their prepaid revenues are actually on the decline. Subscriber momentum has receded. And yet, despite all this, profits are skyrocketing. Furthermore, why are those who don't need 5GB or more—and so very few of us do on a mobile device—punished by paying up a premium 7,100% for a few measly megabytes? And even when we're severely overcharged, they still try to squeeze more pennies from our pockets.

Just some food for thought.

Telus Corp.
Vancouver, British Columbia, Canada

Technology is a key enabler for TELUS and our customers, providing advantage and differentiation in the marketplace. By managing the life cycle of current technologies and the timely introduction of new technologies we deliver superior service value to our customers and long-term growth oriented investment performance to our shareholders. For investors, TELUS is succeeding in managing... more

Bell Canada
Vancouver, British Columbia, Canada

Bell is Canada's largest communications company, providing the most comprehensive and innovative suite of communication services to residential and business customers in Canada. Operating under the Bell brand, the Company's services include Bell Home Phone local and long distance services, Bell Mobility and Solo Mobile wireless, high-speed Bell Internet, Bell TV direct-to-home satellite and... more

Rogers Communications
Toronto, Ontario, Canada

We are a diversified Canadian communications and media company. We are engaged in wireless voice and data communications services through Wireless, Canada's largest wireless provider and the operator of the country's only national Global System for Mobile Communications ("GSM") based network. Through Cable we are one of Canada's largest providers of cable television services as well as... more

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Techvibes is Canada's leading technology media property.Founded in 2002, Techvibes covers technology and business news that impacts Canadians. We combine breaking local news with international coverage to deliver a unique balance of insight and information. The Techvibes Newsdesk covers a broad beat and publishes general news stories. If you have a story you would like covered, email... more

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