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Why no Canadian iPhone? Data Volume is the answer

Examining the circular logic of the wireless providers, and why data prices need to drop for volume to rise

A popular question amongst Canadian mobile phone users seems to be, when will prices decline? This question is often associated with another one, when will the iPhone come to Canada? And the two answers are linked together.

In all likelihood the Apple (NASDAQ: AAPL) iPhone won’t come to Canada unless data rates decline. Unless volumes increase data rates won’t decline. Data rates won’t decline unless volumes increase. A certain level of circular logic exists in this scenario.

With a competitive climate which largely includes three major wireless incumbents, Bell (TSX: BCEITBusiness.ca), Rogers (TSX: RCI.B) and Telus (TSX: T); many have pondered the notion that with increased competition perhaps customers – both corporate and consumer – would enjoy lower prices.

Surprisingly to some, once wireless number portability was allowed in Canada the three major carriers didn’t really make a play for customers to switch carriers. It almost seemed that if one vied for another’s customers, the floodgates would then open, and customers would switch from one carrier to another.

Over the past couple of weeks two of the major carriers released their quarterly earnings. Telus was upset with the churn of their customers, meaning some left for another provider. Rogers indicated they see growth in the data field, and they didn’t support lowering prices for data services in previous quarters.

However, in order to boost the usage of data on mobile devices in Canada the rates must fall.

Smaller, regional telecommunications companies such as MTS-Allstream (TSX: MBT) have made grumblings regarding the prices and service offerings in Canada. And with the upcoming spectrum auction looming in the near future, another carrier could join the market. (The spectrum announcement refers to the frequencies available for wireless carriers. Essentially, more will be available soon.) As new frequencies become available, more carriers can compete. A new carrier should help ensure better data prices for consumers and corporations alike.

With the increased competition, ideally, more mobile services should become available, as will price reductions and an increase in the amount of data volume generated by those subscribers.

While “price reductions” is not a phrase business people like to hear, in this case it will open up the market and enable more opportunities. With the increased competition, also not a welcome term, more services and lower prices mean that more people will consider using mobile devices for multiple purposes (i.e. voice and data.)

Organizations will show less hesitation before installing mobile solutions. Solution providers can be right there to design, implement and service the package. These new opportunities will, most likely, exist in the Canadian mobile space by the end of 2008.

Michelle Warren is a senior analyst with London, Ont.-based InfoTech Research Group.