For the longest time, the typical way you would get a new cell phone (smartphone or otherwise) in Canada was that you’d sign a three-year contract (now two years) and you’d receive that new cell phone at a discount. People came to expect that they could get the hottest new phone for about $200. That is still partly the same, except the market for BYOD has changed and so have the prices for monthly plans.

Now, if you bring your own phone (or buy one outright), you gain access to more affordable monthly plans than the people who wish to “qualify” for a hardware subsidy from the carrier of their choosing. In effect, which only makes sense, you’re paying back the subsidized value of the phone over the course of your 24 month contract by getting a more expensive plan. The two are tightly intertwined.

Until recently, the same kind of dynamic also applied in the United States, but that has now changed. Now, you’re seeing all sorts of other options including equipment installment plans (EIPs) where customers put up $0 up front and put forth a monthly installment toward the purchase of a new phone. That installment could be over $30 in the case of certain top-tier smartphones. Another option that has emerged is the leasing model where you don’t actually own your phone, but you get to “upgrade” to a new model every year or two by paying a monthly fee.

Will either of these be coming to Canada any time soon? It doesn’t appear to be the case. At a recent conference in Toronto, representatives from Canada’s Big Three all stated emphatically that they are not terribly interested in equipment installment plans and they’d much rather stick with the current subsidy-based model. John Gossling, the chief financial officer at Telus, says that equipment installment plans are “a big working capital hit.” Bell CEO George Cope says that they’ll “change with the market” but EIPs aren’t something in the cards for them right now, while Rogers CFO Tony Staffieri says the company sees “it as cash dilutive for us, and eventually the industry, if everyone does it. So we don’t see a lot of upside for it.”

The assumption is that these positions will also stand for their sub-brands, like Virgin Mobile, Koodo and Fido. Whether the same position stands at other carriers, like Sasktel, Videotron and Wind Mobile, remains to be seen. In the meantime, Canadians can expect to keep going with the subsidy model, backed with the “tab” system that has sprouted up in recent years.


Via Globe and Mail

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