Decreasing wireless data prices: iPhone or competition

Unlimited mobile Internet browsing and email has made its debut in Canada. With little fanfare, Bell Mobility buried the announcement in a news release announcing the introduction of HTC Corp.'s Touch PDA last week. With a service contract, customers can also get unlimited mobile browsing and email for $7 per month. According to the SeaBoard Group, Telus Corp. is also moving aggressively to cut wireless data prices. A recently released report from the consulting firm has been highly critical of wireless pricing in Canada. It notes that Bell and Telus have both dropped prices dramatically for one GB of data over the past five months, while Rogers Communications Inc. hasn't. So why are the rates for mobile Internet browsing from Bell and Telus are falling now? In short, to compete with the pending launch of the iPhone by Rogers Communications Inc., expected next year. Could this singular event be the reason that two of Canada's national wireless operators are throwing their previously well-documented strategy of rational pricing and profitable growth out the window? The success of the iPhone in the US combined with the popularity of Apple products here could be the basis for such dramatic pricing actions from Bell and Telus. The simple theory goes something like this. If they drop their rates now during the fourth quarter and holiday rush, they will capture those subscribers that were perhaps waiting to upgrade to the iPhone, but couldn't turn down an inexpensive rival device with the same types of features and with low pricing plans. Both Bell and Telus offer the HTC Touch - a Windows Mobile-based device strikingly similar to the iPhone in both features and functionality. It has a large touch screen through which users navigate as well as multimedia capabilities. On a three-year contract, the Touch is available from Telus for $99. Bell offers it for $149 on a similar three-year deal. But the iPhone isn't the only thing driving down Bell and Telus' data rates.The federal government could release rules as early as this week for the upcoming spectrum auction, scheduled to take place early next year. It's safe to assume that when Industry minister Jim Prentice met with the incumbent carriers and the new entrant advocates this fall, the pricing issue was raised. For months, new entrant wannabes and incumbent wireless operators have waged a high profile lobbying war over the state of wireless prices in Canada. New entrants say wireless prices are too high and as a result, the department must reserve spectrum so they can offer Canadians low-priced services. Incumbent cellcos have argued that prices in Canada are already among the lowest in the world, resulting from intense competition. This could be another reason why wireless data pricing are dropping, However, it could also come down to the simple fact that Bell has performed poorly against its rivals in recent quarters and its new owners, the Ontario Teachers Pension Fund and others, are eager for a return on their investment. Rational pricing and profitable growth doesn't seem to have worked so far for the one-time leader in Canadian wireless, so why not try something different. Bell could also be blazing a trail in terms of new wireless data pricing trends because it lost out on the big federal government wireless contract earlier this year - something it can't afford to have happen in the future. Does the iPhone change the wireless data pricing landscape in Canada? Of course it does. But it isn't the sole reason.

Decreasing wireless data prices: iPhone or competition

News | November 20, 2007

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