Uncompetitive Canadian Pricing Threatens Mobile Internet
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Monday July 23, 2007
My weekly Law Bytes column (Ottawa Citizen version, Toronto Star version, homepage version) focuses on the mobile Internet in Canada, arguing that we are falling behind even developing countries as a consequence of overpriced mobile data services in our cozy, uncompetitive market. Until recently, the conventional wisdom held that there were two barriers - technology and cost - to the emergence of widespread mobile Internet use. From a technological perspective, most cellphones and wireless devices could manage email and text messaging, but were ill-suited for the full Internet experience including browsing and Internet video. That technology barrier has largely been eliminated, fuelled by popularity of devices such as the Apple iPhone.
The cost barrier still looms large, however. Canadian carriers have treated mobile Internet use as a business product, establishing pricing plans that force most consumers to frugally conserve their time online. Indeed, the mobile Internet in Canada is reminiscent of Internet access in the mid-1990s, when dial-up access dominated the market and consumers paid by the minute for their time online.
For example, Rogers - Canada's sole GSM provider and therefore the only telecom company currently equipped to offer the iPhone - offers a starter data plan that provides 1.5 megabytes of data per month for $15 (each additional MB is $21). Since that is not even enough data to download a single high-resolution photograph, most consumers presumably opt for more. The company's biggest data plan provides 500 MB, yet costs $210 per month - far beyond the reach of most consumers.
This pricing, which is comparable to plans found with Bell and Telus, is not close to competitive internationally. The introduction of the Apple iPhone in the U.S. has placed the spotlight on the difference between the Canadian and U.S. market, where AT&T, the sole iPhone provider, offers unlimited data for only US$20 per month (the total monthly price is US$59.99, but AT&T divides the bill as two-thirds for voice and one-third for data).
While it is tempting to believe that the AT&T offer is an anomalous product of pressure from Apple, the reality is that unlimited data plans are becoming commonplace around the world. For example, consumers in Lithuania can purchase an unlimited data plan for less than $3.00 per month, while similar plans can be had in the Netherlands and France for under $15.00 per month. In fact, Canada not only trails the U.S. and Western Europe, but Eastern European countries such as Poland and Romania, Asian countries such as Malaysia, and African countries such as Rwanda all offer unlimited monthly data plans for less than $50. Even in those countries without unlimited data plans, the pricing is often far better than what is found in Canada. Italians can purchase 1 GB - double the largest Rogers plan - for $29 per month, while a 500 MB monthly plan is $45 in South Africa, $79 in Mozambique, and $103 in Tanzania.
The negative consequences of Canada falling behind even the African market should not be underestimated. RIM has expressed frustration with Canadian pricing, predicting that carriers could sell "eight or nine times" more Blackberries if they lowered data prices to levels found elsewhere. Reduced sales are only part of the story. High data prices mean Canadians use the mobile Internet less than people in other countries, which Google has noted leads to lower Canadian usage of web-based email or online mapping services from wireless devices.
Canadian carriers would do well to reshape their approach to mobile data by better servicing consumers, however, the longer-term solution lies in Industry Minister Maxime Bernier cracking open the wireless market by encouraging new entrants through a spectrum set-aside. The prospect of a new national wireless carrier offering unlimited data - and perhaps even the red-hot iPhone - would do wonders for a once-proud market that now lags behind the rest of the world.
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Monday July 23, 2007