Canada Changed How It Measures Phone Bills, Now Inflation Is “Plunging”

Canadian inflation is slowing, but most households are unlikely to be feeling that relief. Statistics Canada’s (StatCan) Consumer Price Index (CPI) decelerated in January, fueling speculation that rate cuts may be on the horizon. A closer look reveals the entire deceleration can be accounted for by just mobile phone plans. Not because households are forking over less cash per month, but because of a very abrupt change in the way they’re measured.

Canadian Headline Inflation Decelerates In January

Let’s start with the data that made policymakers happy. Annual CPI growth slipped to 2.3% in January, trimming 0.1 points from December. The Bank of Canada’s (BoC) preferred core measures also tumbled—CPI-Common (+2.7%) and CPI-median (+2.5%) each shed 0.1 points, while CPI-trim plunged to 2.4% after dropping 0.3 points. A nearly perfect report if one doesn’t consider the details or recall that abrupt deceleration is traditionally a sign of a cooling economy. 

StatCan flagged that some categories show outsized year-over-year growth due to the GST Holiday base effect. Isn’t it funny how price increases are always viewed as transitory, but slowing growth is always seen as a deflationary spiral?

Carbon Tax Still Hiding Sticky Inflation, Inflation 3% Excluding Gas

Annual CPI change vs CPI excluding gas.

Source: Statistics Canada; Better Dwelling.

Anyone living outside a statistical model in Ottawa knows the “price relief” narrative doesn’t quite match reality. CPI excluding gas came in at 3.0%, right at the BoC’s upper tolerance band. Gas prices were 16.7% lower than last year, almost entirely due to the carbon tax elimination, a widely-discussed distortion that ends this year.

Less discussed: cell phone bills have also been distorting headline CPI in recent years. Price growth for cell phones slowed to 5.0% in January, but decelerated from 13% annual growth in December—a 43-year high. BMO chief economist Douglas Porter is one of the few who noted the distortion this morning, writing that the swing “chopped a full tick from the headline inflation rate.”

Let’s put that in context. Headline CPI fell 0.1 points total. Cell phones alone accounted for ~0.11% of that decline. January is a mobile phone story, but funny enough—few people recall the phone bill this past Christmas being 14% higher than the year before. That’s the magic of CPI modeling: how they count the change in price matters more than what Canadians are actually paying.

Mobile Phone Price Tracking Shift Accounts For Full Deceleration

CPI cellular services have been on a rollercoaster—and policymakers have been selectively holding on. They were quick to take credit when cell bills dragged CPI lower in 2024, conspicuously quiet when the same category hit a 43-year high last year, and will almost certainly be back to claim credit for this year’s drop. Meanwhile, you probably haven’t noticed your Robellus bill budging much either way. There’s a reason for that.

It starts with a noisy methodological overhaul. Prior to August 2024, StatCan primarily measured mobile plan prices using web-scraped advertised rates—the sticker price few pay. Most Canadians negotiate loyalty discounts on their renewal. Carriers also routinely undercut their advertised prices through bulk plans, in-store sales, and discount channels like Perkopolis or CAA. StatCan might have even figured it out on their discounted federal EPP mobile internet.

After August 2024, they adopted a “hybrid” model incorporating actual transactional data from carriers. Swapping inflated sticker prices for real billed amounts suddenly produced a big drop on paper, even though RoBellUs was likely taking the same out of customer accounts.  

And there are hedonic adjustments.

Canadian Cell Phone Bills Climbed 13%, But CPI Shows 46% Drop Due Largely To 5G

Annual change in mobile phone prices: CPI cellular services vs average revenue per phone. Last available data point from CRTC is Q2 2025. 

Source: Statistics Canada; CRTC; Better Dwelling.

In nerd terms, StatCan uses a hedonic imputation model with a MARS algorithm to adjust for quality in cellular services. Yes, those were all real words. In plain English: if your carrier adds data, speed, or coverage and your price stays the same, that counts as deflation—even if you never use it or notice a difference. CPI measures the theoretical capacity of the service, not what consumers actually get out of it.

5G is the big one here. Canada’s rollout was slow until the Huawei ban in 2022 accelerated it. National coverage went from 50% of the population to 93.3% in 2023, with rural communities seeing a jump from 3G to 5G. More data, faster speeds, same price? Deflation, according to modeling.

The gap between the model and reality is stark. CRTC data shows average carrier revenue was $64.84 per phone in Q2 2025—down about 40 cents from a year before and 3.59% from 2023. Over five years, average revenue per handset is actually up 13.49%, while CPI for cellular services fell 46% over the same period. That’s a significant disconnect, resulting in a data skew so large it moves the whole headline CPI index. This in turn fuels the narrative that inflation is cooling, and rate cuts are needed to spur more inflation—even though consumers aren’t getting that relief. 

Ultimately, these measurements aren’t just poorly designed. They create volatility, which sounds nice when rates come down, but no one’s a fan when they go the other way. This amplifies household pain, both from the inflation created from the cuts and the interest penalizations on the hikes. Monetary policy that requires such frequent adjustments is a policy failure. Central banks should demonstrate stability, not act like they’re run by raccoons on meth. 

StatCan explicitly warns that major methodology changes render annual comparison unreliable for at least 12 months. That same unreliable data is still baked into the CPI basket, producing the headline swings that policymakers are celebrating this month. It’s not StatCan’s problem; they argue they have nothing to do with the BoC, it’s up to the central bank to recognize these skews. Meanwhile, the BOC points to the same numbers as independent confirmation their policies are working, and transitory errors when they’re not.

This gap in accountability is so large it should be considered the 8th Wonder of the World.