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Canadians have been without the Apple iPhone for four months and counting, and it's caused consumers and analysts to take a hard look at the state of the Canadian cellular service landscape.
The iPhone's absence is certainly not due to lack of demand. If the device were accessible (and affordable), rest assured every teen in Canada — and a fair number of adults and business people too — would be clamouring for one.
And maybe that's the problem. The mainstream, or at least less businessy consumers lusting after the iPhone, aren't the kind of customers Canadian cellular providers are used to catering to when it comes to devices that are heavy on data usage.
The situation has created a clear "digital divide" in Canada between those smartphone and high-end cellphone users who can afford (or who work for corporations willing to subsidize) expensive data plans that allow them to enjoy features such as video calling, movie and music downloads, streaming radio and television, web browsing, photo sharing and email — and those who can't.
"Canada is probably one of the most expensive markets that you're going to find, certainly within the Western world," says Jeff Wilson, General Manager of Brightroam, a company that works with international cellular providers to offer Canadians discounted roaming rates when they travel abroad. "It's really driven out of the fact that there are a limited number of providers, and with the market being relatively small, those providers have elected to charge premium prices to recoup their investment within the cellular technology."
Overseas, according to Wilson, it's not uncommon to have countries with six or more carriers competing for business, whereas in Canada it's essentially three: Bell, Telus and Rogers (who owns Fido). Australia, for example, currently has four providers operating on the GSM network alone, whereas Canada has one: Rogers.
In the U.S. and Europe, companies offer consumer-oriented data plans as a matter of course. South of the border, the Sidekick device from Danger Inc. is very popular with consumers who want to do fun things like chat via an instant messaging program, share photos, surf the web and download ringtones. T-Mobile offers a specific Sidekick Data plan for $29.99 (U.S.) per month, which includes unlimited data transfer, text messaging, email and web browsing. Voice calls are $.20 per minute. By comparison, a $40 plan email and Internet plan at Rogers or Fido gets 7MB of data transfer, with an overage fee of $6 per megabyte.
In Europe too, according to Wilson, there are companies that specialize in selling pre-paid services to youth, and their data rates are also significantly lower.
With the iPhone and other "hip" smartphones like the HTC Touch clearly starting to target savvy, trend-conscious mainstream consumers and youth, it's clear that Canadian providers need to be quicker to adapt to changing market demands — or risk losing out on a demographic that is tailor-made for the mobile entertainment and Internet services these devices offer.
History has shown that consumer demand drives price, features, and hardware design on mobile devices. Twenty years ago, the only people who carried cell phones were executives and salespeople. Over time, adoption trickled down to the masses, and cellular providers responded by dropping rates and offering special plans for families, couples, and students.
David Neale, Sr. VP of Products and Services at Telus, says that the iPhone situation "hasn't done anybody any harm at all," and that the improved user interface seen on it and other iPhone-like phones has raised consumer awareness about the kind of user experience now available.
"With the device comes the desire to use it, and the good [data] plans follow. It all comes together then," he says.
Mr. Neale says another facet of appealing to mainstream consumers is wording plans in such a way as to emphasize applications over data usage in kilobytes or megabytes.
"Data services are much harder to comprehend from a customer's perspective in terms of how you're getting charged. If I talk for 10 minutes, it's pretty obvious; I know it's 10 minutes. But data isn't measured on the basis of time.
"Nobody does data. Everybody does a specific application. So when we started talking about wireless data, you get a lot of people looking at you going 'Huh? What's wireless data?' But when you actually have a tangible app, who cares? It's not data to me, I'm web browsing."
Telus, Rogers and Bell have all begun to introduce entertainment bundles and subscription plans. For example, all three providers offer music plans where customers can pay a flat monthly fee to download music instead of paying per song. However, at $5 - $10 per application, plus a mobile internet plan ($10 - $75), plus a calling plan ($25 - $40), the bill can still quickly add up to more than $100 a month — still out of range for many everyday consumers.
Which brings us back to the iPhone. Consumers have done their part by exhibiting a demand for the device and the other chic touch-sensitive smartphones that have already started to enter the market in its wake. It's now up to the manufacturers and service providers to furnish pricing and plans that make it accessible.
Wilson maintains that as soon as one provider drops prices significantly, the others will be forced the follow suit.
The question is, who will blink first?
