Telecom prices in eastern Canada are on the rise again, and experts say planned increases by BCE Inc. and Rogers Communications Inc. highlight the key role internet service plays in their revenue growth as surfing and streaming outpace interest in traditional TV packages.
Both companies recently notified subscribers about imminent price hikes; BCE's Bell Canada is set to charge internet customers in Ontario $5 more a month and increase the price for Quebec subscribers by $3, while Rogers is hiking its prices by $8 a month for customers on higher-speed plans and by $4 for those with slower download speeds (Rogers serves Ontario and Atlantic Canada).
Price increases are a regular occurrence in the telecom industry, although the exact timing and rollout can vary from year to year. Bell held off on announcing increases this year until its main competitors – Rogers in Ontario and Quebecor Inc.-owned Vidéotron in Quebec – revealed their own price hikes.
But this year's changes across the companies also emphasized higher prices for internet versus television service, Desjardins Securities analyst Maher Yaghi said in a report shortly after the telecoms announced their price hikes.
"This was likely due to the internet being increasingly seen as a necessity for a large portion of the population," he said. "We also believe this is a symptom of TV's diminished attractiveness to consumers."
Kaan Yigit, president of Solutions Research Group Consultants Inc., agrees.
"The consumer will grumble, but will continue to subscribe of course, as they value internet greatly," he said on Friday.
But there's still a risk for the telecom providers, he says, as consumers look for savings and consider cutting television service altogether or reducing the size of the channel package they get.
"Now, because many people are in bundle situations and looking at their overall spend, ironically, these increases overall will make the consumer even more aggressive in their shaving/cutting behaviour as it increases total bill, and TV is the natural place to cut along with home phone, if they haven't already."
Representatives of both Rogers and Bell attribute the price increases to investments in improved service as customer demand for data continues to increase.
For the first full year ever, Rogers earned more revenue in 2017 from internet service than from cable television. And while its broadband revenue is steadily rising – increasing by 7.4 per cent to $1.6-billion last year – TV revenue has declined for more than five years. Last year, the company gained 85,000 internet customers and shed 80,000 television subscribers.
Bell does not separate its television and internet revenues in its financial reports, but it too attributes much of its momentum to broadband. In its fourth-quarter 2017 report, the company said it added 27,000 new internet subscribers – up 47 per cent from the same period a year earlier – while the number of new IPTV (internet protocol television) customers it adds is slowing and it is steadily shedding satellite subscribers.
The companies' price increases come against the backdrop of heightened competition for residential customers in Toronto. Bell is spending $1.1-billion to bring fibre-optic service directly to all homes and businesses in the city to compete better against Rogers, which offers faster broadband speeds with its cable infrastructure.
Bell is now more than 60 per cent through the Toronto build and plans a widespread advertising campaign in the spring, but has already begun targeting small pockets of customers. It is offering select condo buildings cut-rate deals – in some cases even lower than those of internet resellers such as TekSavvy and Distributel – while raising the prices for existing subscribers.
Since Rogers dominates the home internet market in downtown Toronto, it stands to lose more revenue if it responds to BCE's promos, Barclays Capital's Phillip Huang said.
Rogers is also working on service improvements as it plans a new internet-based television platform for this year. In the meantime, Mr. Huang suggests its internet customer turnover could be higher than usual in the first quarter because it has not matched BCE's condo promos and because of the $8 price increase.
Price hikes tend to anger consumers. The most recent report from the federal Commissioner for Complaints for Telecom-television Services revealed a steady climb in internet-related complaints, with many stemming from Bell's price increases in early 2017.