Canadian Phone Prices Jump the Most in 30 Years

Prices for Canadian phone service rose at the fastest rate in more than 30 years amid a debate over whether the wireless industry needs more competition.

The cost of mobile and landline communications climbed 7.6 percent in August from a year earlier, more than three times general inflation, as the biggest phone companies pulled back on promotions and moved to shorter contract lengths.

According to Statistics Canada, the jump was the biggest since March 1983, the same year Motorola Inc. debuted the first commercially available mobile phone. Last month’s increase helped boost the core inflation rate to 2.1 percent, the highest since April 2012, the statistics agency reported last week.

Canada’s government has been pushing for more than six years to encourage a fourth mobile-phone carrier to compete nationally in the wireless market with Rogers Communications Inc., Telus Corp. and BCE Inc. The Big Three, which control 90 percent of subscribers, argue more competition would endanger their multibillion-dollar investments in new cellular towers and fiber-optic cables.

Wireless prices have generally declined in the last few years for all but entry-level plans, according to a March 2014 report from Wall Communications Inc. The average price of a plan with 1,200 calling minutes and 1 gigabyte of data fell to C$80 ($73) in the beginning of 2014 from C$110 in 2010, the report said.

Slower Pace

“We will continue to support policies that promote more choice and better services in the wireless sector,” said Jake Enwright, a spokesman for Canadian Industry Minister James Moore.

Phone prices, including landline subscriptions, have risen in all but eight of the past 56 months dating back to January 2010, albeit at a slower pace than in August, according to Statistics Canada. Before last month, they had averaged an 0.6 percent increase this year.

Canadians are using more data and paying more for devices as they upgrade to higher-end smartphones, meaning more of their monthly spending goes toward phone services, Kevin Chu, a Toronto-based analyst at Accountability Research, said by phone.

On top of that, carriers are raising prices to recoup money spent on subsidizing phones for two-year contracts, Chu said.

In December, new government rules forced carriers to stop offering three-year contracts, which let them spread the costs of expensive smartphones over a longer time.

“The companies have to make their money back,” Chu said.