Do Canadians Prefer Subsidized Smartphones to Shelling Out Hundreds for a Device?

by Istvan Fekete on February 6, 2013

Canada is the world leader in the three-year contract, Iain Grant, a Seaboard Group telecom analyst says. The reason? Canadians are more comfortable with spending less on their smartphone (at least as a one-time payment) than spending $500 or more to purchase a device.

As a result, Canadians opt for that three-year term, which provides the biggest subsidy to spread out the cost of an Android, BlackBerry or iPhone. But that’s quite a unique phenomenon, as the majority of carriers across the globe offer only two-year contracts.

The news comes at the height of the recent debate over the three-year contract. You may recall that the CRTC launched its draft wireless code and asked Canadian mobile users to read it and give feedback.

Now, one of the most interesting things is that one week later, the most-commented section is the one related to three-year contracts, which was “somehow” missing from the draft of the wireless code.

“I am disappointed to see that the Draft Wireless Code does not contain any regulation pertaining to contract length. I believe this is one of the largest issues that plague the Canadian mobile telecom industry and was brought up by many in Phase 1. The “3 year standard” is ridiculous and costs Canadians hundreds of dollars in the event a device is damaged. Insurance for accidental damage is sky high with large deductibles. Three years is a long time in the current technology industry and only providing Canadians with this option is unjust. We should follow in the footsteps of many other countries and limit these contracts to two years maximum. I believe this issue should be the most fundamental policy implemented by this code” the most liked comment writes.

However, in reality Canadians aren’t really satisfied with the option to shell out $500 or more for a high-end smartphone. As the Wind Mobile chairman and CEO Anthony Lacavera has pointed out, the company’s strategy was to attract customers by offering them the up-front payment, but they had to change tactics, because people weren’t interested in paying high amounts for a handset. “They want the phone financed”, he said.

Now Wind Mobile customers have a tab allowing them to pay off the costs of their smartphone in monthly installments. If they decide to leave no-contract Wind, they have to pay off the balance.

Rogers, Bell and Telus, on the other hand, report that most of their clients have subsidized phones. “Superphones, smartphones and tablets are increasingly more complex and powerful devices and Canadians overwhelmingly prefer the heavily subsidized price we offer on the hardware with a three-year term,” said Bell spokesman Jason Laszlo.

In reality, if unsubsidized smartphones can save some real money for Canadians, although I have to admit that paying $175 for an iPhone is more comfortable than paying the full price. But if it comes unlocked, it could worth the price. What about you? Would you pay the full price for a device, or clear monthly installments instead of a subsidized smartphone?

Written by: Istvan Fekete. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

{ 3 comments… read them below or add one }

Mike February 7, 2013 at 1:11 pm

I bought a replacement phone mid-contract, thinking it would get me freedom. But when it came time for me to renew the contract, they had no discounted package if you had your own phone. So I took the new phone (exactly the same model) and now I have an insurance phone if the first one breaks. I would rather have had a discount, but my provider doesn’t work that way. Maddening that they always weasel more money out of you with their byzantine pricing programs.

Alex February 7, 2013 at 1:28 pm

What this article conveniently leaves out, is a common sense middle ground. Why must the only options for Canadians be a 36 month contract with a $400+ subsidy, or buy your own phone with no subsidy (and sadly, no corresponding reduction in monthly fees).

I’m sure there are thousands (millions?) of Canadians who would jump at the chance to pay $50-$100 more for their phone up front, if it meant not being chained to their contract for an additional 12 months.

Most of the rest of the world offers subsidised prices on phones only slightly higher (often the same or lower) than we pay, for just a 2 year commitment. This concept of an all or nothing phone subsidy model is one the telecom companies have devised to fool customers into the value of 3 year contracts.

If a carrier can provide a $450 subsidy in return for a 36 month contract, why can it not provide a $300 subsidy in return for a 24 month contract? or $150 for 12? Canadians are finally starting to see the answer to this question.

Geoff May 1, 2013 at 7:48 pm

There is a discount available, just ask, but the point is it is not a discount, it is bonus time. I receive 1650 Min. in my 250 Min. plan. because I did not take the subsidy. I pay $25 per month for 1650 Min. And an additional $30 for 10GB. For a total bill of $55.00 per month. I never use up the allotment of time or data. I tried the “Give me a discount” line, it did not work, then the salesperson ever so gently suggested I ask for “Bonus time and data” and Bingo, the answer was yes. I know it is silly, but that is how they want to roll.

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