Mobile Telecommunication Companies Fail At Math

Let’s start with a very fair premise - within the modern context a cellular telephone network is just a network that pushes data around. That data can be voice data, video data, text data, whatever data. In terms of data, voice data is actually one of the most challenging because in order to have real-time voice communications you have to have a certain level of quality of service. The same could be said about video if it was in the context of video calling. Therefore, you would expect to see some sort of premium on voice and video calling services over other data services. As for other data like text messaging, email, web traffic, etc. this is easy data to push around, especially plain text data like email and text messaging.

So, let’s take a look at how Rogers Communications in Canada charges for their Fido mobile services relative to each other. For those of you not from Canada I should forewarn you that Canada is well known for its lack of mobile competition and ridiculous fees.

Fido charges 3¢/KB for raw data. With the launch of the iPhone they reluctantly offered a special plan giving 6GB of data for $30/mo.

If you used 6GB of data outside of that plan you would receive a charge of a wopping $188,743.68 ! (6GB is 6,291,456KB x .03 = 188,743.68)

WOAH! Does that mean that Rogers is giving away $188 thousand dollars in service for only $30 ?!?  What a deal!!  If that is true their bancrupcy should be immenent.  Or is it that their 3¢/KB charge outside of a plan is grossly over-inflated?

So let’s take a look at their voice communication charges, which by our earlier premise should be more expensive.

Outside of a plan or on overage minutes, Fido charges 35¢/min.  A quick google tells us that 1 minute of voice roughly takes up 367 KB of data.  Based on Fido’s data rates a voice call should cost $10.95/min. (367 x .03 = 10.95)  Therefore, a typical monthly plan that provides 250 minutes of talk time should be costing $2,737.50/mo.  Really?!?  Something is definitely amiss in their pricing structure.

Finally, let’s look at the ubiquitous text messaging.  An SMS outside of a plan or on overage costs 15¢ per message (yes, really, for those reading this from civilized countries like Cambodia.)  An SMS is 140 bytes of data, therefore based on the grossly over-inflated data rate of 3¢/KB, an SMS should cost 0.4¢ (140 bytes is 0.1367188KB x 0.3 = 0.004) Wait a second!  SMS should only cost 0.4¢ per message even at the grossly over-inflated data rates?!?

As you can see, there is no rhyme or reason to the pricing structure of SMS or data.  The way free-market capitalism is suppose to work is that, in the presence of competition, the cost of goods and services should be driven towards their actual costs.  Obviously this is not happening because either Rogers should be going bankrupt for giving away $188,000 of service for $30, or they should be driven out of business for such ridiculous pricing structures by another company that more transparently and fairly charges for the same services.  But no one ever said we have free-market capitalism in Canada.  That is why we have the CRTC, to ensure fair pricing amongst our government sanctioned monopolies of Bell, Telus, and Rogers!  So CRTC, what say you?

Here is a nice breakdown of what each service would cost if charged based on the pricing structure of each of the other services:

Notes:

• 1 minute of voice requires the transfer of 367 KB of data
• 1 SMS message is 140 bytes of data
• 1 MB is 1024 KB

UPDATE: I have been involved with a company called Roam Mobility over the last couple of months and they are addressing some of the egregious roaming charges from the Canadian telcos. You can check out their roaming rates at www.roammobility.com