Archived — The Expansion of Cellphone Services
Archived information is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please contact us to request a format other than those available.
[ Main Menu ]
This Update describes the growing presence of cellphones in Canadian consumers' telecommunications activities, and highlights related consumer issues. More Canadians own cellphones, use them more intensely and for varied purposes, and are even starting to rely on cellphone service alone for their telephone needs. Technological developments and enhanced service offerings have brought a number of benefits to consumers, while also creating some confusion and marketplace difficulties. Consumer protection considerations will further evolve and require sustained attention as new entrants to the cellphone market, and the transition to ever more sophisticated mobile devices, change Canadians' interaction with the wireless market.
Cellphones have become ubiquitous in today's society and are now an important part of most of Canadians' telecommunications activities. At the end of the first quarter of 2006, there were 16.8 million wireless subscribers in Canada, implying a strong and sustained year-over-year growth rate of 11.9% (Statistics Canada 2006)1. There has also been a sharp increase over the last decade in the percentage of households that report having a cellular phone for personal use-from 22% in 1997 to 59% in 20042. The trend toward increased cellphone use has cut across all income levels; indeed, ownership rates experienced the strongest growth among households in the lowest income quintile (Figure 1).
Source: Data obtained from Statistics Canada, Income Statistics Division.
On a global scale, however, Canada's rate of adoption of wireless telecommunications3 is lagging, with just under 52 subscribers per 100 inhabitants at the end of the first quarter of 2006, a level reached by the United States in the second half of 2003 (Statistics Canada 2006). On average, Organisation for Economic Co-operation and Development (OECD) countries had 53.5 subscribers per 100 at the end of 2001-more than four years ago (Statistics Canada 2006). The OECD average is buoyed by early adopting countries such as Luxembourg, the United Kingdom and Finland; for these nations, in 2004, the number of mobile wireless subscribers per 100 inhabitants was 119.4, 102.8 and 95.6 respectively (Industry Canada 2006, figure 1-6). Canada also lags in terms of the number of wireless carriers where, "although 94 percent of the Canadian population has access to three or more wireless service providers, the maximum number of wireless carriers in any given area is three"4 (Industry Canada 2006, 1-21). In contrast, 87% of Americans live in areas with five or more mobile providers, and 41% live in areas with at least six (Industry Canada 2006, 1-21). Consumers will soon benefit, however, from the opportunity that wireless number portability will give them to switch service providers; providers will be required to make such portability available by March 14, 2007 (CRTC 2005). As noted by consumer representatives, "having to change [a] telephone number is inconvenient, disruptive, and potentially costly. In turn, this discourages customers from switching to a different mobile service provider, and hampers competition" (PIAC 2005, 3).
Notwithstanding this international perspective, the rate of Canadians' adoption of cellphones is growing. In a 2006 survey, among those households which owned or had access to a wireless phone, 57% reported actually having access to two or more wireless phones, up from 25% in 1997 (Decima Research 2006). Furthermore, as of December 2005, 4.8% of households reported relying only on cellular, as opposed to landline, phones-this compares to 1.9% in mid-2003 (Statistics Canada 2006b). The trend is stronger for lower income Canadians, as 7.7% of households below Statistics Canada's low-income cutoff relied solely on a cellular phone at the end of 2005 (Statistics Canada 2006b). Another indication of Canadians' growing use of wireless services is provided in Figure 2, which shows the increase in the number of minutes billed per subscriber.
Source: Data obtained from Statistics Canada, Science, Innovation and Electronic Information Division.
Further insight on cellular uptake in Canada is obtained from the demographic analysis provided in a 2006 wireless market study (Figure 3). As might be expected, wireless ownership is significantly higher among Canadians aged 18-54 than those 55 and over. However, it appears that older Canadians have been doing some catching up since 1997, as demonstrated by the relatively stronger growth illustrated in Figure 3. Age also affects the intensity of wireless usage, as younger wireless users report spending almost twice as much time on the phone as those 55 and over. Other sources have examined cellphone trends among children and teens.
Source: Decima Research, Usage of Wireless Technologies in Canada, prepared for: Canadian Wireless Telecommunications Association (CWTA) (April 2006).
Since their introduction, the evolution in cellphone technology has radically changed the way that consumers use them. Short text messaging, wireless e-mail, personal digital assistant, MP3 player, Internet browser, digital camera are now common cellphone functions, in addition to traditional voice capability. Text messaging in particular has exploded, as the number of person-to-person text messages sent by Canadians reached 1.5 billion in 2005 (CWTA 2006), up from just 174 million in 2002 (CWTA 2005). On an international comparison basis, however, Canada's numbers remain relatively low.5
While only 4% of 1500 wireless users surveyed in 2006 reported checking for information on the Internet using their phone, about three-quarters of those respondents said they do so at least once a day (Decima Research 2006). According to analysts in the U.S., cellphone-based Internet use will only increase, as technologies such as voice activation support the expansion of Internet-search marketing. In the context of a two-inch mobile screen, "voice search is more accurate than other searches, which require too many clicks to get to the web or fail over spelling issues" (Cuneo 2006).
What is all this cellphone use costing Canadians? According to a 2005 study, the average Canadian wireless user was paying 60% more than what plans offer in the U.S., and 19% more than with European carriers (The SeaBoard Group 2005). For those Canadian households reporting spending on cellphones and other wireless services6, average annual expenditure reached $629 in 2004.7 In comparison, the average expenditure for conventional telephone services (including long distance) was $696, less than $70 more. In 1997, the gap in the average expenditure per reporting household exceeded $200, when comparing conventional ($738) and wireless services ($514).
Various reports suggest a number of other issues arising from Canadians' increasing interactions with the cellphone market. Cellphone information, in the form of both advertising and contracts, can be difficult to compare and decipher, leading to consumer confusion. Examples gathered in a 2004 report by the Service d'aide au consommateur (a Quebec-based consumer organization) included problems of complex and unclear information on costs, coverage, and cancellation clauses (SAC 2004).
In a follow-up report, the Service d'aide au consommateur highlighted further difficulties, such as an inability to obtain contract terms before concluding the transaction, billing problems, and poor quality of customer service (SAC 2006). The ability to evaluate contract terms is particularly important in the Canadian context, where close to 80% of cellphone users have post-paid, longer-term service contracts (CRTC 2006, 82). According to the Canadian Radio-television and Telecommunications Commission, "most wireless service providers have targeted the post-paid segment of the market in order to retain customers who are generally required to commit to the supplier for a fixed length of time, thus minimizing the churn rate" (CRTC 2006, 82). In comparison, pre-paid mobile subscriptions (about 20% of mobile subscriptions in Canada), where a consumer buys minutes on a pay-as-you-go basis rather than entering into a contract with monthly billing, are significantly higher globally (46% in 2004), and particularly so in Europe (62%) (ITU 2005).
The trend towards cross-bundling of services (with some or all of Internet, cable, and landline services) can further increase consumers' confusion when comparing offers. As noted during an OECD roundtable on demand-side economics for consumer policy, there may be cause for concern:
Utilities, such as electricity, gas, water and telecommunications stand out as a category of goods for which the full benefits of competition have not necessarily been achieved.
In theory, because in utilities the product characteristics are fixed, the search function should be reasonably simple, being confined to pricing aspects. In reality, however, there is stickiness in these markets – speakers presented empirical evidence from utility markets showing many consumers are not taking advantage of beneficial switching and, in some cases, are switching to higher-cost suppliers. The problem lies in what one speaker called "confusopoly", relating to the difficulties consumers have in comparing the different bundles of offers from utility firms – with different bases for charging fixed and volume-related fees and offering different bundles of related products (OECD 2006, 11).
The equipment itself appears to be more complicated, from consumers' perspective: 80% of users surveyed in 2006 felt that wireless communications devices are easy to use, compared to as many as 91% of users eight years earlier (Decima Research 2006). In fact, a recent U.S. study links the complexity of new wireless services and products to the steady climb in the number of wireless customers contacting their provider (J.D. Power and Associates 2006).
Cellular phones made the top 10 list of complaints and inquiries received by Ontario's Ministry of Government Services in 2004 and 2005 (Government of Ontario 2005 and 2006). Cellular phone service and supplies was also the business category for which Better Business Bureaus in Canada processed the most complaints in 2005 (CCBBB 2006). Wireless telecommunications are similarly the subject of consumer complaints in the United States. The main subjects of wireless complaints to the Federal Communications Commission (FCC) in the second quarter of 2006 included billing and rates, quality of phone service, early termination of contracts, and marketing and advertising practices (FCC 2006). The FCC has also cautioned consumers against cellphone subscriber fraud (i.e., subscriptions made using fraudulently obtained consumer information) and cellphone cloning fraud (where a legitimate user's bill is charged for a cloned phone's calls) (FCC 2005).
Wireless-related matters also raise compelling questions in other public policy domains. While crash risks are increased by many kinds of distractions while driving, it is recognized that "cell phones and other telematics are at the cutting edge of the issue for the public, legislators, and governments" (TIRF and CAA 2006, 11).9 The trend towards including GPS (global positioning system) features, which offer a range of location-based services such as information on the nearest restaurant or parental tracking of children's whereabouts (Shaw 2006), is raising privacy questions – one difficulty with such privacy and tracking issues, however, is that "most vehement complaining takes place after people feel they have been victimised by technology, and long after it has been popularised" (Arthur 2006). Potential safety hazards, following reports of cellphone equipment exploding, have also prompted work in the U.S. on consumer safety tips and standards for batteries (CPSC 2005). While participating in the World Health Organization's ongoing research project into the potential health risks from electromagnetic fields and radiofrequency exposure, Health Canada concludes that "there is currently no convincing evidence, from animal or human studies, that the energy from cell phones is enough to cause serious health effects, such as cancer, epileptic seizures or sleep disorders," and advises consumers to adapt their use of mobile phones to their personal tolerance for unknown risks (Health Canada 2005).
If, as some predict, technological developments expand mobile commerce use, an even more varied list of issues will likely emerge in the future (see text box).
This Update sought to outline the growing presence of cellphones in Canadian consumers' communications activities, and to highlight its related policy considerations. Further updates on marketplace trends of relevance to consumers will be published as new research becomes available and consumer protection policy evolves.
Arthur, Charles. 2006. "Follow you, follow me", The Guardian (September 14, 2006).
Bell Canada. 2006. Interesting Facts.
Bell Canada. 2006b. BCE – Sharpening our Commitment: Bell Canada Enterprises Corporate Responsibility 2005 Report Highlights (June 2006).
Bridis, Ted. 2006. "Cellphones Spill Secrets", globeandmail.com (August 30, 2006).
California Environmental Protection Agency. 2006. New Law for Recycling Cellular Phones – AB 2901: California's Cell Phone Recycling Act of 2004 (June 2006).
CCBBB, Canadian Council of Better Business Bureaus. 2006. Better Business Bureaus Provide Close to 90 Million Instances of Service in 2005 (March 20, 2006).
CPSC, Consumer Product Safety Commission. 2005. Cell Phone Batteries: CPSC, CTIA Working Together to Keep Consumers Safe (May 13, 2005).
CRTC, Canadian Radio-television and Telecommunications Commission. 2005. CRTC Extends Benefits of Number Portability to Wireless Consumers on a Timely Basis (December 20, 2005).
2006. CRTC Telecommunications Monitoring Report – Status of Competition in Canadian Telecommunications Markets (July 2006).
CTIA – The Wireless Association. 2006. Wireless Quick Facts – September 2006.
Cuneo, Alice Z. 2006. "Not Into Mobile Search? Just Wait a Couple Years", Ad Age Digital (August 28, 2006).
CWTA, Canadian Wireless Telecommunications Association. 2005. Canadians Now Sending 3.4 Million Text Messages Per Day (March 22, 2005).
Decima Research. 2006. Usage of Wireless Technologies in Canada, prepared for: Canadian Wireless Telecommunications Association (CWTA) (April 2006).
FCC, Federal Communications Commission. 2005. FCC Consumer Advisory – Cell Phone Fraud (September 26, 2005).
2006. Quarterly Report on Informal Consumer Inquiries and Complaints Released (September 7, 2006).
Finnish Consumer Agency and Ombudsman. 2006. "Clarity in Triangle Drama Between Operator, Service Provider and Minor", Current Issues on Consumer Law – The Finnish Consumer Ombudsman's Newsletter (6/2006).
Government of Ontario, Ministry of Government Services. 2005. McGuinty Government Strengthens Consumer Protection (July 20, 2005).
Top 10 2005 Consumer Complaints and Inquiries (June 27, 2006)
Health Canada. 2005. Safety and Safe Use of Cellular Phones.
Industry Canada. 2006. Telecommunications Policy Review Panel: Final Report - 2006 (March 2006).
ITU, International Telecommunications Union. 2005. Evaluating the Cost of The Handset and Mobile Telephony as a Barrier to Uptake (December 6, 2005).
J.D. Power and Associates. 2006. The Incidence of Wireless Users Contacting Their Carrier for Customer Care Issues Is at an All-Time High (July 26, 2006).
MDA, Mobile Data Association. 2006. August Texting Again Breaks UK Records (September 25, 2006).
Media Awareness Network. 2005. Young Canadians in a Wired World, Phase II – Student Survey (November 2005).
OECD, Organisation for Economic Co-operation and Development. 2006. Roundtable on Demand-Side Economics for Consumer Policy: Summary Report (April 20, 2006)
2006b. Consumer Policy: Recent Achievements and Current Challenges.
PIAC, Public Interest Advocacy Centre. 2005. Mobile Number Portability: Moving With The Times (November 2005).
Plantevin, Jérôme. 2006. "Les forfaits sans-fil, rien de moins simple! ", Journal Les Affaires (July 13, 2006).
Puxley, Chinta. 2006. "Bill Would Force Teen Drivers to Leave Their Toys Behind", globeandmail.com (October 1, 2006).
SAC, Service d'aide au consommateur. 2004. La téléphonie cellulaire : les pièges de la transaction.
2006. La téléphonie cellulaire… mise à nu.
SeaBoard Group, The. 2005. Key Highlights From Lessons For Canada: Wireless Pricing- A Cross-National Survey: U.S. Canada, and Europe.
Shaw, Gillian. 2006. "Phone GPS Lets You Track Your Kids: Parents Can Monitor Movements With an Electronic 'Bread Crumb' Trail", Vancouver Sun (October 5, 2006).
Statistics Canada. 2006. "Telecommunications Statistics, First Quarter 2006", The Daily, catalogue number 11-001-XIE (September 13, 2006).
2006b. "Residential Telephone Service Survey, December 2005", The Daily, catalogue number 11-001-XIE (April 5, 2006).
Telus Mobility. 2005. Bell Mobility, Rogers Wireless and TELUS Mobility Launch New M-Commerce Initiative (November 8, 2005).
TIRF, Traffic Injury Research Foundation and CAA, Canadian Automobile Association. 2006. International Conference on Distracted Driving – Summary of Proceedings and Recommendations, presented by CAA and Traffic Injury Research Foundation (April 2006).
TACD, Trans-Atlantic Consumer Dialogue. 2005. Resolution on Mobile Commerce (August 2005).
Warner, Jennifer. 2005. "Cell Phones Raise Stress", CBS News (December 14, 2005).
Yoon, Stella. 2006. "The Push for Mobile Commerce", globeandmail.com (March 17, 2006).
1 There are differences in the target population of the various surveys referenced in this report; sources should be consulted for more detailed explanations. For example, the wireless subscribers data from Statistics Canada's Survey of Telecommunications includes all subscriptions reported by service providers, whereas Statistics Canada's Survey of Household Spending measures ownership of cellular phones for personal use at the household level, i.e., among all household members. Back to text
3 In Statistics Canada's Quarterly Survey of Telecommunications, wireless telecommunications is defined as establishments engaged in operating and maintaining switching and transmission facilities to provide direct communications via the airwaves. This includes establishments that provide cellular phone services, paging services and personal communication services. Back to text
4 "A limited number of larger centres have resellers and MVNOs (mobile virtual network operators), but even these are not all independently owned from the three national carriers." (Industry Canada 2006, footnote 31) Back to text
5 In the month of June 2006 alone, the level of short text messaging reached 12.5 billion messages in the United States (CTIA 2006). In the United Kingdom, a total number of 3.6 billion messages were sent in August 2006 (MDA 2006). Back to text
6 When asking respondents about household expenditures, Statistics Canada's Survey of Household Spending includes pagers and handheld text messaging services in the same category as cell phone services. The total costs can include services for more than one cell phone, depending on the number of phones reported by the household, and it does not include expenditures on cellular phone equipment, or expenditures on bundled services if the cost breakdown is unavailable. Back to text
9 Newfoundland and Labrador is currently the only province prohibiting all drivers from using hand-held cellphones. Research has suggested that jurisdictions may wish to consider legislating to prohibit cellphone and other electronic communication device use by youth learner's permits or provisional licenses, a practice applied in a number of American states (TIRF and CAA 2006). A private member's bill on this subject was introduced in Ontario in 2006 (Puxley 2006). Back to text
- Date modified: