Rogers Communications Inc. recently tweaked some of its high-end wireless plans, a move that could herald a shift toward more U.S.-style pricing.MARK BLINCH/Reuters
Rogers Communications Inc. recently tweaked some of its high-end wireless plans, a move that could herald a shift toward more U.S.-style pricing that separates the cost of customers' smartphones from their monthly service charges.
Toronto-based Rogers changed the prices for plans that include 10 gigabytes of mobile data – a large amount in Canada, where unlimited plans are rare – to charge $130 a month across the board, regardless of whether customers bring their own device or receive a big up-front subsidy on their smartphone. Previously, the company charged so-called "BYOD" customers about $15 less a month than subscribers who opted to put less money down on their device and pay off the rest over a two-year term.
The change doesn't extend to smaller data packages, but Citigroup analyst Adam Ilkowitz says it could be a "first step to explicit unbundling of the equipment price" from the cost of monthly wireless service, with Rogers testing the waters with its higher-spending clients.
For subscribers: Rogers shuffles executive ranks as Natale focuses on customer service
Related: Canadian cellphone startup has success stateside, but shut out at home
In the fiercely competitive United States wireless market, carriers often foot the entire bill for the up-front cost of pricey smartphones, allowing customers to finance the cost over two years and setting a separate price for the service itself. Canada's Big Three carriers, Rogers, BCE Inc. and Telus Corp., do offer subsidies on devices but have so far resisted offering the most popular and newest smartphones for $0 down, saying in the past they had no incentive to adopt the more capital-intensive practice.
"I think this is something that bears watching on how the market reacts, competitors react and how it develops over time," Mr. Ilkowitz said in an interview of Rogers' move to even out service pricing on the 10 GB plans. It effectively gives customers who take up-front subsidies and agree to two-year terms the same lower price as those who bring their own device and are free to switch to another carrier at any time.
He noted that as of Tuesday, BCE and Telus hadn't matched the Rogers pricing. (So far, the change only applies to Ontario, Alberta and British Columbia – in provinces such as Quebec and Saskatchewan, where there are strong regional players competing with the Big Three, wireless prices are significantly lower.)
Asked about the potential of moving to $0-down smartphones, Rogers says the change is actually about keeping high-value customers happy.
"We think the subsidy model allows us to offer customers the most choice and best value," Rogers spokesperson Sarah Schmidt said in a statement on Wednesday.
"With the new rate card, we've simplified our pricing structure to provide customers on larger data buckets with more value. These data buckets are often shared between multiple lines or highly connected individuals and we want to provide them with premium devices at no extra monthly charge."
Mr. Ilkowitz suggested it could also be an early sign of change implemented by new Rogers chief executive officer Joe Natale, who once held the top job at Telus and is often credited with playing a key role in that company's successful "customers first" initiative and its low rate of subscriber turnover.
"His reputation and his goal is to improve customer service and improve customer retention. And I think the simplification of offers is something that Telus has been known for and could be something he's looking to bring to Rogers over time."
Setting one price for service – regardless of whether customers buy their device outright or take a subsidy from Rogers – could make it easier for employees to explain data packages, Mr. Ilkowitz said, potentially leading to lower customer-service costs.
South of the border, it was the scrappy T-Mobile U.S. Inc. that spurred the trend of $0-down phones in a bid to win customers away from industry leaders AT&T Inc. and Verizon Communications Inc. It has now become so common that carriers have built up massive accounts-receivable balances thanks to those customer loans on popular and pricey phones, such as Apple iPhones and Samsung Galaxy devices.
A report from Moody's Investors Service in May, 2016, estimated that 45 per cent, or 94 million, of U.S. contract subscribers' phones were financed and would soon represent a receivable of $55-billion (U.S.) across the four major carriers (including Sprint Corp.). The cost has become so significant that some carriers have started offering securities tied to phone leases – Bloomberg reported last year that Verizon issued bonds worth more than $1-billion backed by the income stream from two-year smartphone instalment plans.
But the Big Three Canadian carriers seem content to continue offering subsidies but not covering the entire cost of devices up front.