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iPhone to drive down cellphone rates?
    National Post  

By Peter Nowak

    July 17, 2007  

Will be hard for carriers to resist, but also tough to take

Despite all the hype about it being a "game changer," Apple Inc.'s iPhone may actually live up to its promise when it arrives in Canada by driving wireless prices down, analysts say.

Apple unveiled the iPhone, which combines cellphone and iPod music player functions with Web-browsing features, last month in the United States through an exclusive deal with the country's largest wireless provider, AT&T Inc. Cupertino, Calif.-based Apple has not announced availability outside the United States, but industry expectations peg a Canadian and European release in the fourth quarter.

In Canada, the only compatible wireless network is owned by Rogers Communications Inc., making it the potential carrier for the device. Neither Apple nor Rogers will comment on a release here.

Most handset manufacturers sell their phones to a wireless carrier, which in turn controls the customer relationship. Apple, however, has reportedly made unusually strong demands of carriers, including dictating monthly service plans and demanding a cut of usage revenue.

Carriers are thus in the difficult position of having to give in to the demands or face outrage from customers who are clamouring for it, and some -- including the world's largest, U.K.-based Vodafone Group PLC -- have given it a pass as a result.

"There is little negotiating with Apple. It's either take it or leave it," said RBC Capital Markets analyst Jonathan Allen. "Never before has a handset vendor wielded this much control over the carriers. If Rogers doesn't just take whatever Apple offers them and the launch gets delayed, then customers will be howling mad."

RBC estimates Apple has sold nearly one million iPhones in the two weeks since its launch.

It will ship a total of 13.5 million by the end of next year.

Existing wireless prices in Canada, however, would make the iPhone an expensive proposition for customers here. AT&T's basic service offering, which includes 5,450 voice minutes and unlimited data downloading, is US$59.99 a month. A comparable plan from Rogers, with significantly fewer minutes and less data allowance, would run in excess of $140.

Apple will not tolerate any service plans that curb how much the customer can use the iPhone and will demand customers be offered terms similar to AT&T's, analysts said. In Canada, that will spur prices -- particularly on data usage -- downward.

"It will definitely have a downward impact on prices," Mr. Allen said.

Rogers could opt to hold out for better terms from Apple, but the company would run the risk of being beaten to the punch. New wireless carriers such as MTS Allstream and Videotron Ltd. are on the horizon and momentum is building toward Rogers' competitors, Bell Canada Inc. and Telus Corp., upgrading their networks to be compatible with devices such as the iPhone.

"A new carrier could base their launch on the iPhone," said Iain Grant, president of The Seaboard Group telecommunications consultancy. "And wouldn't it be fun if [Telus chief executive Darren] Entwistle stole the iPhone from Rogers?"


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