This article
explores the recent increase in cable and telephone bills for the people of
Canada, and the reaction to the increased costs. Since the recession of
2008-2009 the price for cable services rose 20.4% and the price for telephone
services rose 9.1%. In recent months
Prime Minister Stephen Harper and Finance Minister Jim Flaherty have voiced
concern regarding the pricing and discussed potential government efforts to
bring down the cost for consumers.
As the title
would suggest, this article brings into question whether the grievances of the
people are legitimate. The initial data presented shows that the increase in
cost for cable and phones has increased greater than the consumer price index,
which has grown 7.5% over the same timeframe. The timeframe being analyzed is
July 2009-September 2013. This is significant in that July 2009 is right about
the time that Canada came out of the recession of 2008-2009. Exhibit 1 shows
the household demand shift during the recession. During the most recent
recession demand fell 2% during the recession, and rose above pre-recession
levels after the recovery. All of this data is presented by by
Statistics Canada. Statistics Canada exists to provide statistical information and analysis about
Canada’s economic and social structure and to promote sound statistical standards
and practices (statcan.gc.ca). It is also important to note that food and
shelter rose 7.8% and 6.8% respectively during this timeframe. These account
for much greater proportions of the consumer price index and skew the average
towards their mean.
The timeframe
analyzed led me to question whether the price increase was the result of
price-gouging by cable providers, or simply a market correction that occurred
as a result of economic recovery. I figured that because the variable cost per
customer is fairly low for cable and phone providers that they could have
lowered prices during the recession scare to keep customers, and raised them as
the economy grew beyond pre-recession levels. To shed some light on this the
article presents data from other timeframes as well.
Since April of
2013 the annual inflation rate for cable prices has been <2%, and since
August of 2012 for telephones. This is just slightly above the current
inflation rates in Canada, as seen in exhibit 2. These numbers would suggest that
the prices for cable and telephones are now stable, and further increases have
not recently occurred.
The article
concludes by presenting the increase for energy products and gasoline over the
same period, 25.8% and 33.5% respectively. I believe that this is done to show
that while cable and phone prices have risen they aren’t completely out of
control.
Further research
outside of the article presented a possible ulterior motive for the recent
slowing of price increases. Canada had been mulling regulations on cable
providers, and recently passed legislation forcing cable companies to unbundle
their channels. Hopefully, we will see this option in the U.S. soon.
Recent Inflation Rates for Canada
|
Year
|
jan
|
feb
|
mar
|
apr
|
may
|
jun
|
jul
|
aug
|
sep
|
oct
|
nov
|
dec
|
ann
|
|
2013
|
0.5%
|
1.2%
|
1%
|
0.4%
|
0.7%
|
1.2%
|
1.3%
|
1.1%
|
1.1%
|
||||
|
2012
|
2.5%
|
2.6%
|
1.9%
|
2%
|
1.2%
|
1.5%
|
1.3%
|
1.2%
|
1.2%
|
1.2%
|
0.8%
|
0.8%
|
1.5%
|
|
2011
|
2.3%
|
2.2%
|
3.3%
|
3.3%
|
3.7%
|
3.1%
|
2.7%
|
3.1%
|
3.2%
|
2.9%
|
2.9%
|
2.3%
|
2.9%
|
|
2010
|
1.9%
|
1.6%
|
1.4%
|
1.8%
|
1.4%
|
1%
|
1.8%
|
1.7%
|
1.9%
|
2.4%
|
2%
|
2.4%
|
1.8%
|
|
2009
|
1.1%
|
1.4%
|
1.2%
|
0.4%
|
0.1%
|
-0.3%
|
-0.9%
|
-0.8%
|
-0.9%
|
0.1%
|
1%
|
1.3%
|
0.3%
|
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