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Canadians use phones less, prepaid services more

Canadians are often referred to as more polite, humble and reserved versions of their southern counterparts with whom they share a relatively open border stretching for thousands of miles. That demure demeanor, which seems to lapse during certain hockey events, has translated to the wireless industry, where a recent report from the Yankee Group noted Canadians spend nearly half as much time per month talking on their cell phones than U.S. wireless customers.

The report looked beyond the social and ice-skating differences between the two countries in citing a number of contributors to the calling minutes-of-use discrepancy including prepaid preferences, voicemail restrictions, in-home calling and overall variations in calling-plan options offered by carriers.

According to a 2003 Yankee Group consumer survey report, 31 percent of Canadian customers said they were prepaid subscribers compared with only 7 percent in the United States. The Yankee Group noted that “consumers are likely to be more conscious of their per-minute usage when paying by the minute.”

Canadian wireless customers are also less likely to have voicemail on their cell-phone service, cutting into overall usage as customers are not using minutes to leave and retrieve voicemail messages. The Yankee Group survey found that only 37 percent of Canadian wireless subscribers had voicemail on the phone compared with 67 percent of U.S. subscribers.

The report noted the discrepancy was due to Canadian carriers typically charging extra for voicemail, while U.S.-based carriers include at least a basic voicemail offering, though some U.S. carriers have begun to reverse that trend with Cingular Wireless L.L.C. and Nextel Communications Inc. charging between $1 and $2 per month for basic voicemail.

Further separating U.S. and Canadian wireless customers is a slower landline replacement rate in Canada. Canadians on average have replaced 9 percent of their landline usage with wireless, compared with 31 percent replacement in the States. The Yankee Group noted part of the difference was due to Canadian carriers not including long-distance as part of many of their rate plans, as opposed to most U.S.-based carriers including long distance on nearly all of their local and national rate plans.

In addition to not including long distance on standard rate plan packages, Canadian carriers have resisted the urge to partake in aggressive pricing wars that in the U.S. have seen per-minute charges dip below 10 cents per minute for anytime calling and recently pushed most carriers to offer unlimited in-network calling to go along with already offered unlimited night and weekend minutes. Instead, many of the plans offered by Canada’s four nationwide carriers are based on evening and weekend calling with a relatively small number of weekday minutes and a stronger emphasis on text messaging.

Despite the lower MOUs, the Yankee Group found that Canadian customers generate a higher weighted net present value than U.S. customers because of lower overall customer churn. The top 16 U.S. carriers reported an average churn rate of 2.4 percent during the fourth quarter of 2003 compared with 2.1 percent for the four nationwide Canadian carriers.

The Yankee Group report concluded that Canadian carriers should not try to emulate the high-usage ways of their southern counterparts at the expense of profitability.

“The days of growth for the sake of growth in the wireless industry are over,” the report noted. “By merely increasing the size of the buckets of minutes, carriers risk overloading their networks with traffic without enjoying profitable revenue growth.”

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