The cellphone industry sold 300 million handsets in the last three months of 2007, which includes Christmas sales, an increase of 11.6 per cent over the previous year. But now Internet researchers at IDC say  they expect the market for cellphones to fall to single digits. Things were looking rosy for the industry in all of last year, when 1.144 billion cellphones were sold globally, an increase of 12.4 per cent over 2006.

But a major slowdown of cellphone sales shouldn’t be too surprising. In fact, what’s surprising is that this fall-off didn’t come sooner.

IDC gave no reason for its prediction, except to say that growth in the industry during the holiday months fluctuated from 18 per cent to 30 per cent, so the 11.6 per cent growth of this past Christmas season represented a dramatic fall.  So any expectation of further growth, IDC says, is “unrealistic,” and sales would likely remain in single digits for some years to come.

Most commentators would say that the market has “reached a plateau,” or has been saturated.

This is just investor talk, designed to give some indication of what kind of return you should expect to get from investments in that sector. But that kind of broad talk might be hiding a reality behind the predicted falloff in sales.

More than any other industry, handset makers listen very closely to the telcos about what features they should pack into their cellphones. That’s because so many people get their cellphones from a telco, a kind of circular bit of marketing strategy.

This is an odd situation, because it determines demand by listening to the marketing priorities of the telcos, and therefore only tangentially to the desires of the public. Telcos highly recommend to handset manufacturers certain features that will give them the highest profit margin, the handset makers create the phones, and the telcos then sell them. If a telco thinks a cellphone with an MP3 player will make more profit than a unit with a built-in GPS service, that’s what they will want the manufacturers to make.

The iPhone situation in Canada has illustrated the problem with that sales model.

There is really only one telco large enough to sell the iPhone —Rogers Wireless, the only large Canadian provider that uses the GSM technology built into the iPhone. And despite manifest demand for the iPhone in Canada, Rogers has yet to offer it.

The reason, as I’ve mentioned earlier, is that Canadians seem to be willing to pay the world’s highest prices for data subscriptions, in addition to their talk plans. And Rogers knows we would not be very enthusiastic for the iPhone unless Rogers drops its high data rates, which it is loath to do.

I don’t know what the numbers are, but I’m assuming that Rogers hasn’t yet signed on for the iPhone for another reason — there’s no competitor in Canada that can offer the iPhone, so there’s no effective competition.

Complicating the issue is Apple’s demand for exclusivity in the market: In the United States, for instance, AT&T won such an exclusive contract, and Apple backed it by trying to make the iPhone (almost) impervious to hackers who might want it to work with other service providers. European telcos — in Britain, France and Germany — have had to go along with this exclusivity too.

How far from the line of legality this exclusivity sits is beyond my abilities to say. But it certainly does seem to interfere with most people’s understanding of a free market, which usually suggests that telcos release their products in any given market, and the one that sells the most cellphones wins.

But between the mess of high data-rate plans and exclusivity, I can’t see a very free market for cellphones.

Perhaps what had happened is that we’ve not reached a plateau defined by features or by our needs, but one defined by the way the phones are being made and sold.