With everyone down with a bad case of iPhone fever (long line-ups on July 11 and proclamations it’s going to the “New Personal Computer”), one important consideration many people seem to be overlooking is the wireless carriers own the playground that everyone (hardware makers, consumers) want to play in.
It’s the carriers who have been investing aggressively on 3G so they can offer a faster, service/application-friendly network to consumers. With those investments pretty much done, it’s now time for some serious ROI (aka return on investment). This means while the carriers are going to offer iPhone, Blackberrys and cool devices, using them will not be a cheap proposition for consumers.
To pay for the investments made (and being made), carriers will pass on the costs to consumers. This will be a relatively easy exercise given consumers are so excited about the wireless Web, GPS, e-mail, mobile commerce, etc. This will make it easy for carriers to sell high-margin data packages so consumers can get the most out of their smartphones.
So, you’ll pay for your voice service, e-mail, text messaging, ringtones and mobile Web access. The carriers will come up with other fees and services to purchase so at the end of the day, the average bill could easily be $100/month. In Canada, Rogers recognizes this is the new reality, which is why their iPhones plans were/are so expensive.
You see, 3G is the golden goose for wireless carriers. It’s technology that turns their networks from boring voice systems to multi-functional data systems. They’re going from being a diner offering three specials/day to a restaurant with a huge buffet. This buffet is enticing and offers something for pretty much everyone but you’ll have to pay for it.
This is important to remember as we rumble down the smartphone/3G path. There’s a lot of excitement and great new devices being launched but don’t forget one crucial thing: the carriers control the house, and if consumers want to play, they’ll definitely need to pay.
Update: Apple said it sold one million 3G iPhones over the weekend. I wonder how many of those were sold by Rogers in Canada? I think the numbers are, at best, modest despite Rogers claim demand was strong. Demand may have been strong but supply appears to have been limited. For a different perspective on the iPhone, check out this Newsweek article, The iPhone Haters.
5 Comments
The real golden goose is roaming – if you spend a bit of time out of the country with your Blackberry it is not hard to hit $1000 or more on your bill with 90% of that in roaming charges.
Good warning Mark, this is especially true in Canada where the much lower population density makes it very expensive for the carriers to roll this out when compared to Europe, Asia or the US.
One of the issues here is our usual oligopoly structure in Canada. With so few carriers and only just one GSM provider, it is too easy for them to go past the point of cost recovery and unfairly gauge the customer. The fact that it is an emerging technology makes it even harder to understand what fair rates are.
A friend went to a Rogers store in Whitby on Friday at 11am for an iPhone. She was #11 in line and there were at most 20 people lined up. She wasn’t able to get her phone until 7pm, as Roger’s systems were so bogged down they couldn’t process the orders. Very little demand and a lot of frustration, but what else would you expect from Rogers.
It’s surprising that Rogers’ systems weren’t working that well given it had so much time to prepare and modest traffic.
Mark, great post. Long term costs and wireless carrier fees are something consumers should definitely think about before purchasing an iPhone/cell phone.
I was intrigued by the 3G iPhone, at first, then after seeing it in real life I was instantly seduced by its shiny-sleek quality – a momentary lapse of consciousness where only the few can return from.
However, I wonder if service fees and cell phone plans will be cheaper in the future? I hope so, but the outlook doesn’t look so good.
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