Canadian Regulator Orders Telecoms To Tell Us What It Costs To Run Their Service

bshell writes "Canada's CRTC (like the FCC) has finally asked telecoms to provide information about how much their services actually cost. Quoting a Montreal Gazette story: 'In a report I wrote last year, I estimated the markup for Internet services was 6,452 per cent for Bell's Essential Plus plan, which provides a two-megabits-per-second speed for $28.95 (prices may have changed since last year).' The markup is likely similar in the U.S. It's about time that we consumers found out what it really costs to provide Internet service, and for that matter telephone and wireless services, so we can get a fair shake."

Re:not really that simple.

[similar_name]

Large companies are complicated. AT&T for example recently posted $3.64 billion profit on $31.46 billion in revenue [chicagotribune.com]. Compared with the quarter before where profit was $3.62 billion (slightly lower) on $31.48 billion (slightly higher) in revenue. Two things to note. First is that cost in each quarter was different by about $40 million. Second is profit went up when revenue went down. New customers cost more so slow customer growth meant decreasing revenue but increasing profits. To make matters more complicated this is all while carrying $64.5 billion in debt [att.com].

Re:not really that simple.

[ShanghaiBill]

The markup is large but I suspect it is no where near that by the time you add in advertising (print, TV, cold/warm calls), collections activities, billing legal etc.

Companies wouldn't pay for any of those things (other than legal) if they didn't provide a positive return on investment.

Just because something has a positive ROI doesn't mean it doesn't drive up costs. My wife made an iPad app. Initially she sold it for 99 cents. But we were able to double sales by running some Google ads. But the Google ads cost 20 cents per click and only a quarter of those clicks resulted in a sale. So that means the advertising cost was 80 cents for a 99 cent sale, which is a 10 cent loss after Apple takes their 30% cut. So we raised the price to $2.99. Now one click in seven leads to a sale, but the price is high enough to pay for the advertising and still leave a profit. So the advertising has positive ROI, but only if we raise the price.

Re:not really that simple.

[kenh]

'In a report I wrote last year, I estimated the markup for Internet services was 6,452 per cent for Bell's Essential Plus plan, which provides a two-megabits-per-second speed for $28.95 (prices may have changed since last year).'

That makes no sense.

$28.95/64.52 = $0.45

So the author of the original piece "estimated" that it only costs 45 cents to provide 30 days of wired internet access? That is nonsensical. The ISP can provide 30 days of ISP service for 45 cents? How much of that estimate accounts for the cost of electricity to rn the headend equipment to support the service? How much of that 45 cents goes towards mailing the bill to the client each month, etc?