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How cellphone negotiations go in Canada

14 Jan
The iPhone in Canada: longest contracts around.

The iPhone in Canada: longest contracts around.

My recent post on three-year wireless contract talking points stirred some good discussion among readers. A few commenters furthered the industry points by stressing that three-year contracts are a matter of consumer choice; that they wouldn’t exist if people really didn’t want them, or if they did their research and weren’t so lazy in agreeing to them.

Some other industry talking points naturally came up during the discussion. Perhaps the best way to summarize and counter all of them is with a fictional conversation between a wireless carrier and a consumer. Here’s how it might go:

Customer: Hello. I’d like an iPhone 5, please.

Agent: Okay. That’ll be $179 up front, and you have to sign a three-year deal.

Customer: Whoa, three years? That’s long. What are my other options?

Agent: You can buy it outright for $700.

Customer: I don’t have that kind of money.

Agent: Well then it’s a three-year deal. Take it or leave it.

Customer: Why is the contract so long? It’s only two years in every other country. Down south, you can get the iPhone 5 from AT&T for $199 on a two-year deal.

Agent: That’s because our monthly plans are lower than in those countries.

Customer: But that’s not true – I’ve done my homework. Your average revenue per user is higher than almost anyone else’s.

Agent: Did I say lower? I meant they have more value. It’s because Canadians love their phones and voluntarily use voice, text, data and all the other features.

Customer: You’re saying there’s something special about Canadians, that for some reason we’re more addicted to talking and surfing than Americans, Germans or Singaporeans? That’s weird.

Agent: Well, it’s also because in a lot of countries, people have two cellphones. So add their multiple bills together and they’re higher than your one bill.

Customer: So why do you also have the highest profitability in the developed world?

Agent: Err… how much storage did you want in your iPhone again?

Customer: No seriously, why do you make so much more money than other wireless carriers?

Agent: I can’t answer that, but you say that like it’s bad. First of all, making piles of profit is very American… I mean Canadian. Secondly, we reinvest those profits into our networks and other areas of our business. Have you seen our LTE coverage? Those networks are expensive to build.

Customer: Plenty of other countries have built LTE networks too.

Agent: But do they have the vast land mass of Canada to cover?

Customer: But more than 80 per cent of the population is clustered in a few big cities.

Agent: But they expect coverage in the boonies.

Customer: So you have cell towers in Winisk River Provincial Park?

Agent: Where the hell is that?

Customer: Exactly.

Agent: Well, like I said, we’re also investing in other parts of our business.

Customer: You mean like your internet services? Is that why our internet speeds – especially uploads – and usage caps are woeful compared to the rest of the world? Weren’t you just complaining about how your networks are congested? It doesn’t sound like you’re investing much in them.

Agent: I wish you’d stop comparing us to the rest of the world. We’re different, okay?

Customer: I know. You guys sure do pay out a lot of dividends to shareholders.

Agent: What are you, some sort of anti-capitalist communist?

Customers: And how about buying up all those broadcasters and sports teams. That doesn’t come cheap, does it?

Agent: Well like I said, that’s investing in our business, to give customers better options and services.

Customer: It doesn’t have anything to do with withholding that broadcasting and sports content from your competitors, or making it really expensive for them to get it?

Agent: Look, do you want the iPhone or not?

Customer: Oh, right, the iPhone. If I bought it up front without a contract, would you give me a cheaper monthly plan?

Agent: No.

Customer: Hmm. You drive a hard bargain. I don’t have $700, so sign me up!

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8 Comments

Posted by on January 14, 2013 in mobile

 

8 responses to “How cellphone negotiations go in Canada

  1. Tom

    January 14, 2013 at 1:34 am

    ” If I bought it up front without a contract, would you give me a cheaper monthly plan?”

    Thanks for including that last bit. The incumbents have made it so that buying the phone outright, just like the one and two year options, is only a theoretical option. In practice, the 3 year option is the only viable one.

    They do this, of course, with their two tier pricing system – everyone knows that the published prices are just a starting point and that most customers end up paying much less then those published prices. Any option that they don’t really want to allow customers to have (like tiered data plans, or bringing your own phone) precludes customers from getting the less ridiculous rates.

    I bring this up because this is one of the ways that the CRTC/carriers might arrange to make the new wireless code meaningless: create a set of options relative to the published prices, but which disappear during negotiations.

     
  2. Choice is for the 1%

    January 14, 2013 at 9:04 am

    I’m still under contract with Rogers for another 6 months so I haven’t investigated options yet other than a Bell rep telling me they give a 10% discount if you bring your own phone, but there are probably other handcuffs on that contract. And if you have a $50 bill each month, that’s only a $180 savings in three years, which is far less than the subsidy. And if you have to pay $50 to unlock the phone, much of that savings evaporates. In reality, choice is only for the rich.

    As for the small operators, they usually have very poor coverage and beyond the inner city everything is roaming where costs go up and features go down.

    Yes, I’m sure looking forward to checking out the “options” in a few months. No doubt, Rogers will have renewed my contract without my permission and I’ll then be facing a multi-hundred dollar buyout.

    But I’m sure the CRTC will come to my rescue. They’ve been so helpful in the past. 😛

     
    • Tom

      January 14, 2013 at 11:50 am

      “other than a Bell rep telling me they give a 10% discount if you bring your own phone,”

      As you pointed out – the amount of discount they are offering is very small compared to the amount of the subsidy. But I question whether they would even give you that reduced discount.

      Try this. Have a normal negotiation with a bell rep and get yourself a normal discount. Now ask that they also give you the 10% discount for bringing your own phone. In my experience they won’t even give me that.

      They are willing to offer 10% of for BYOD because most users will get at least that 10% off anyway. In reality, you get no additional discount for bringing your own device.

       
  3. Michael Richardson

    January 14, 2013 at 11:12 am

    Unless you live in a small village, go for the small carrier… Yes, they have poor coverage outside of the big cities, and yes, you will be roaming. But, how much will it really cost you? Do you really need data coverage while skiing?

    If you do live in a small village, and spend all of the day there, then I agree: you are locked into the Duopoly.. Something you should talk to your local council about.

    If you live in the country and drive to work, odds are the duopoly doesn’t give you coverage anyway, and you have some kind of rural wireless broadband connection (e.g. storm.ca, xittel.ca, etc.) and at home, you’ll be on wifi anyway.

     
  4. Marc Venot

    January 14, 2013 at 2:47 pm

    In the news the iPhone5 is not selling as well as expected. We can guess that the sumo Apple will put pression on its partners to ease this grip on the customers.

     
    • Chris C.

      January 14, 2013 at 11:41 pm

      “The iPhone 5 is not selling as well as expected”. Indeed. Perhaps Apple should have spent more energy developing a product and less energy trying to control what its product owners can do with their property and waste less energy paralysing the courts with its frivolous patent lawsuits.

      I’ll tell you why the iPhone 5 is not selling: because everyone I know is getting the Samsung Galaxy Note 2 instead. Not only is it technically superior, but you don’t have to sell your soul to your product manufacturer in order to simply use one of their products.

      Hint to Apple management: it’s called FREEDOM. And maybe Mr Tyranny himself, Steve Ballmer, should ponder about it when looking at why sales figures of ‘user friendly’ Windows 8 are so poor…

       
  5. ponder

    January 14, 2013 at 6:26 pm

    I don’t have an issue with the Big3 bleeding Canadians dry for an iphone. Like you said it’s a $700 phone off-contract. Somebody has to pay for that phone. Often this is subsidized through the price of the service plans, which is inflated to cover the cost of expensive smartphones. What I have a problem with is that those that purchase $500 or $400 also have to pay the same price for the plans. Those that want an iphone should pay more and those that want a less costly device should pay less. Otherwise non-iphone users are essentially subsidizing iphone users. This would be the case with 3 year contracts, 2 year contracts, etc.

     
    • ponder

      January 14, 2013 at 6:28 pm

      *sorry “those that purchase $500 or $400 phones, which are subsidized”

       
 
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