Mobile Wireless Rates Lower in Canada than in U.S.?! – Misinterpreted Data and Misleading Claims

CWTA Metro Ad

A bizarre thing happened on Wednesday, August 7, 2013 … I read the print version of the Metro newspaper. However foreign a printed newspaper may be for a digital native like myself,  I was  joyfully perusing through every section, that is until I hit a full-page advertisement from the Canadian Wireless Telecommunications Association (CWTA). This advertisement (see image to the left) has a simple message which reads:

 

DID YOU KNOW?

FACT:

Wireless rates in Canada are typically lower than in the U.S., in some cases up to 40% lower and smartphone monthly plans are actually less expensive in Canada than in the United States.

 

I don’t want to spend time arguing over the political purpose of this message (you can read about that here), but rather I want to clearly debate the so-called “fact” stated in the advertisement.

We conduct research at Abacus Data on a regular basis and are upheld to research industry Code of Conduct set by the Marketing Research and Intelligence Association (MRIA).  I take the Code of Conduct and my profession very seriously as a Certified Marketing Research Professional (CMRP). This is why I take great offense when I see possibly misinterpreted data from research reports and misleading claims made from that research.

I believe there are several issues with the statement that CWTA made in its advertisement, which I plan to discuss in greater detail. The following are the potential errors I caught based on my research training and experience:

  • Error #1 – Reporting findings from compared averages of a small sample that are based on potentially incorrect prices due to theoretical weighting.
  • Error #2 – Telling only part of the story, potentially misleading people into thinking something is true when it may not be.

 

Error #1 – Reporting findings from compared averages of a small sample that are based on potentially incorrect prices due to theoretical weighting.

Wall Communications is a well-respected economics consulting firm that often speaks before the CRTC on related issues. They also produce a report that was referenced as a source in the CWTA advertisement.

Here are links to the Press Release, Full Report and Methodology Report from Wall Communications:

I have to admit that it is no easy task to compare costs of products and services across companies, never mind the challenges of comparing them across markets.

The Wall report states that “three service baskets are also considered in the case of mobile wireless service: Level 1 includes low local and long distance call volumes, Level 2 includes average call volumes plus 2 features and 300 texts, and Level 3 includes high call volumes plus a full set of features, 300 texts and 1 GB of data usage per month.” These and other stated assumptions about the methodology are important to know. Keep in mind that a lot of secondary research was done by Wall Communications to develop the methodology and weights are based on actual mobile usage patterns of Canadians. Figure 4 below shows Wall’s findings comparing Canadian average prices against those from five other countries.

Wall Communications Report - Chart 1

… the U.S. prices shown by Wall appear incorrect …

Without reading into the details, I immediately noticed that the U.S. numbers appear incorrect. Where did Wall get data that shows people in the U.S. are paying $146 for 1200 minutes (15% long-distance), 300 texts, full set of optional features (voicemail, caller ID, 3-way calling, etc.) and 1 GB of data as shown in bucket Level 3? Well, this isn’t $146 as the typical consumer understands it, but rather a calculation based on PPP (Purchasing Power Parity). In order to provide a consumer-friendly analysis I decided to take a quick look at the 3 primary provider’s websites in the U.S. and in Canada to create my own comparisons, not including promotional offers or additional service fees (as of August 08, 2013):

U.S. Providers:

  • AT&T: Unlimited Nation-wide Talk, Unlimited Text, 2 GB of Data,  full set of optional features (voicemail, caller ID, 3-way calling, etc.) – $60 USD per month
  • Verizon: Unlimited Nation-wide Talk, Unlimited Text, 2 GB of Data,  full set of optional features (voicemail, caller ID, 3-way calling, etc.) – $60 USD per month
  • Sprint: Unlimited Nation-wide Talk, Unlimited Text, Unlimited Data,  full set of optional features (voicemail, caller ID, 3-way calling, etc.) – $70 USD per month
  • AVERAGE: $63.33 + 15.5% TAX (Illinois taxes – highest in the country) = $73.15 * 1.03 USD-CAD Exchange Rate = $75.34

Canadian Providers:

  • Rogers: Unlimited Nation-wide Talk, Unlimited Text, 1 GB of Data,  full set of optional features (voicemail, caller ID, 3-way calling, etc.) – $67 CAD per month
  • Bell: Unlimited Nation-wide Talk, Unlimited Text, 1 GB of Data,  full set of optional features (voicemail, caller ID, 3-way calling, etc.) – $85 CAD per month
  • TELUS: Unlimited Nation-wide Talk, Unlimited Text, 1 GB of Data,  full set of optional features (voicemail, caller ID, 3-way calling, etc.) – $75 CAD per month
  • AVERAGE: $75.67 + 13% HST = $85.50

Based on my simplified comparison of prices between the U.S. and Canada for the Level 3 bucket of mobile wireless services, you can see that I have very similar service prices for Canada when compared to Wall’s numbers ($85.50 vs. $94.00), but drastically different prices for service prices in the U.S. ($73.34 vs. $146.00). Please note that PPP is likely a major cause in Wall’s larger reported average price, so the U.S. prices shown by Wall are not representations of what prices are being paid in local currency but rather an attempt at making the price equivalent to what the value would be in Canada.

If you have another point of view on this please do let me know because the Wall report is not only being used in advertising campaigns, but it will also have a big impact on the future of wireless services in Canada.

UPDATE August 10, 2013: Pricing options were introduced by all 3 incumbents (Bell, Rogers and Telus) for what are being called “2-year share plans”,  so one of our concerned readers, Guy V, kindly provided the following prices based on new comparable 2-year plans with data-sharing:

All plans include:
  • Unlimited Nation-wide calling
  • Unlimited messaging
  • Caller ID
  • Voicemail
  • Ability to pool minutes/data with additional smartphones/tablets
  • 1GB of data (unless otherwise specified)

 

Error #2 – Telling only part of the story, potentially misleading people into thinking something is true when it may not be.

I understand the power of using research findings to help create a message for an advertising campaign, but it is important not to be misleading by excluding information found in that same research that may be contrary to your message. In this case I believe it is misleading to state 3 similar statements about the lower prices of Canadian wireless services compared to those of U.S. services as it may lead readers to believe that Canadian prices for wireless services are simply low on average. This is not the case.

In the Wall report it clearly states:

  • In the case of the Level 1 mobile wireless service basket, the Canadian average  monthly price of $31 is slightly lower than the U.S. price. Otherwise, the Canadian Level 1 price is higher than rates found in all of the remaining surveyed foreign jurisdictions, especially so in the cases of the U.K., France and Australia.
  • In the case of the Level 2 service basket, the Canadian average monthly price of $45 falls roughly in the middle of the group of surveyed countries. It is very similar to but slightly higher than the Level 2 rates in France and Japan. Otherwise it is well below the U.S. rate, but considerably higher than the Level 2 prices in the U.K. and Australia.
  • In the case of the Level 3 wireless service basket, the average Canadian monthly rate of roughly $94 falls on the high-side of the average for the group of surveyed foreign jurisdictions as a whole. In this case, the Canadian Level 3 rate is well below the rates found in the U.S. and Japan, but also well above those in the U.K., France and Australia.

Canadian prices are higher on average …

While I already pointed out the potential “error” in calculating the U.S. prices for comparisons to be used in public messages (and clearly you are getting more bang-for-your-buck for the Level 3 service bucket in other countries compared to Canada), let’s assume for the time being that the prices and comparisons made for all countries are correct and fair for general public consumption. While it may have been determined by Wall that prices are lower in Canada than in the U.S. on average, this is not a fact as much as a thorough and systemic, and yet theoretically subjective, interpretation of data. This data in fact shows that Canadian prices are higher on average for Level 1 and Level 3 service buckets when compared across countries.  For these two reasons I believe that the implicit message of lower overall prices in Canada should not be advertised as a fact as was done by the CWTA.

 — Please let me know what your thoughts are as I would like to discuss other people’s perceptions on this matter. —

Sean Copeland is a certified marketing research professional (CMRP) known for his broad knowledge of the research workflow, his disruptive approach to problem solving and for building strong client relationships. In over 5 years Sean has developed, sold, executed, and managed hundreds of consumer research studies using a variety of new and traditional research methodologies.

Contact Sean Copeland:

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E: sean@abacusdata.ca

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