Cellphone service prices could make Apple’s new toy unaffordable in Canada, experts say
Fiona Anderson
Sun
Ridiculous rates for data transmission, charged by Bell, Rogers and Telus means Apple won’t release the iPhone for sale in Canada for at least two years, says SFU professor Richard Smith. Photograph by : Glenn Baglo / Vancouver Sun
While the hype for iPhones has Canadians anxious to give them a go, they may have a long wait, as the price of cellphone service in Canada makes iPhones unaffordable, according to academics.
Apple sells experiences, not products, says Richard Smith, a professor with the school of communication at Simon Fraser University. And the experience of an iPhone is to get access to unlimited data without worrying how much each download costs, he said.
In the United States, AT&T has won the exclusive right to service iPhones with phone service that includes unlimited data starting at $59.99 US a month. The plans get more expensive as voice minutes increase, but the data (e-mail and web access) in all plans remains unlimited. Smith tags the data portion at $20 US a month because that’s what current AT&T customers have to pay to upgrade their service to an iPhone.
Canadian cellphone companies don’t have any plans that come even close to that, Smith said. For $20 Cdn a cellphone user in Canada may get about five megabytes of downloading capability.
“That’s not even a song,” he said.
And one video download from YouTube would max out many plans, he said.
BCE Inc. spokesman Jeff Meerman called the AT&T rate “extremely aggressive.” But AT&T can do that in part because it doesn’t have to subsidize the phone purchase, Meerman said. When it does, like with its BlackBerry plan, then the costs between the two companies are more aligned, with AT&T charging $70 US for its plan, similar to Bell’s $70 Cdn plan.
That plan only includes four MB of data, which Meerman said would be enough for the average user.
Telus spokesman Jim Johannsson pointed to Telus’s Spark 25 package as its best offering for unlimited Web access. For $25 a month users can browse to over 200 selected sites.
But the key to the AT&T plan is the unlimited data, Smith says, and four MB or access to 200 websites doesn’t do that. And while Canadians may not use much data, that’s because data is so expensive they are constantly worried about going over their limit.
Apple is trying to change that by making consumers no longer worry about limits, and yet not pay a fortune, Smith said. And that type of plan just isn’t available to Canadian cellphone users. Plans with anything close to unlimited data access would cost about $100 a month, Smith said.
So until Canadian companies can offer cheaper plans so that everyone will want one, iPhone won’t be coming to Canada, Smith said.
“Apple would never agree to deliver a phone that people couldn’t use,” Smith said.
Meanwhile, companies in Europe will have no problem offering a plan along the lines of AT&T’s, so iPhone will likely launch there first, he said.
Michael Geist, Canada research chair of Internet and e-commerce law at the University of Ottawa, has calculated that a Rogers plan equivalent to the cheapest AT&T plan would cost about $300 a month. He picked Rogers because right now only Rogers, which uses a GSM (global system for mobile communication) network, could service the iPhone. Both Bell and Telus operate on CDMA (code division multiplex access).
For $295, Rogers provides 500 MB of data download, not quite unlimited, but more than enough for most people. Cheaper plans with less downloading are available, but they may also have fewer voice minutes.
Both Smith and Geist call the high cost of Canadian data plans Canada’s “dirty little secret.” And both blamed a lack of competition in the industry for the high prices.
Most data users in Canada — those who surf the Web or download e-mails — are high-end users who have their costs paid by their employer or company, like BlackBerry owners, Smith said. And they don’t care about the costs.
And while Apple is trying to make that kind of use accessible to everyone, Canadian companies will be reluctant to offer the kind of pricing AT&T is offering, he said.
“Why would you lower prices for something that hardly anybody buys and the only people that do buy it are your best customers that will pay anything for it?” Smith asked.
Geist called it a chicken-and-egg problem — prices are so high that most people don’t use their cellphones for data, and so companies say there isn’t the demand.
But demand is changing.
“And, unfortunately, the Canadian market at the moment is ill-suited to adapt,” Geist said.
Last week, Research in Motion — the creator of the BlackBerry — said companies could sell eight to nine times as many BlackBerrys each week if the price for data service in Canada matched what consumers paid in Europe.
But Telus’s Johannsson said it is premature to speculate on what Canadian companies would charge to provide service for an iPhone or to say it would be prohibitively expensive.
“[Smith] is right. Right now there is no plan in Canada that compares to AT&T’s plan for the iPhone,” Johannsson said. “But that’s because the iPhone isn’t a reality in Canada yet. And when those discussions [happen], then we can start talking about what the pricing may look like.”
And while Telus isn’t currently capable of providing iPhone service, the company could adopt GSM technology that would enable it to do so. Or iPhone could come out with a CDMA-capable phone.
Johannsson refused to say whether Telus was considering adding GSM to its network. But if it were capable of servicing iPhone, it would look at creating a rate that was market sensitive, like it has with other products, Johannsson said. For example, Telus introduced live-streaming television on its cellphones at a fixed cost for unlimited use because if the company charged by the megabyte it “would kill the market,” Johannsson said.
So if Telus can get into the iPhone market it will look “at creating a rate that would be attractive to the market and that would meet the needs of consumers,” he added.
“Because the last thing you want to do is introduce something to the market that is unaffordable,” he said.
© The Vancouver Sun 2007