McNutt Against the Music

If you’ve got even the slightest ounce of nerd in you, you’ve no doubt heard of the grassroots outrage that’s emerged over Rogers’ announced pricing for their iPhone plans. Even the iPhone’s biggest Canadian champion – iphoneincanada.ca – has turned against Rogers. And while the plan prices are pretty abhorrent, it’s not a decision being made in a bubble. So I want to spend a bit of time putting it in its proper context.

First off, let’s see what all the fuss is about. The new 3G iPhone (harder better faster stronger than the first model) is coming out this July in the USA, Canada and several other countries around the world. Here’s what Americans are going to pay for the most basic package available on AT&T’s network:

$69.99 / month
450 anytime minutes
5,000 night and weekend minutes
Unlimited data plan
Two-year contract

Pay particular note to the italics. With AT&T, unlimited data plans are the default – you take your voiceplan, add $30 a month and you have full-blown Internet access on your iPhone. Quite a different story north of the border with Rogers (and with its cooler subsidy, Fido):

$60 / month
150 daytime minutes
Unlimited evening and weekend minutes
400 MB data
Three-year contract

Now some people are up in arms about the extra year on the contract, but really, did you expect anything else? Canadian cell phone companies are addicted to three-year contracts and there’s really no sign that they’re going to change anytime soon. No, what’s truly raising people’s ire is that not only does the base package not include an unlimited data plan like AT&T – NONE of the four iPhone promotion packages available at launch include unlimited data.

Oh sure, you can add one of the revamped traditional Rogers data packages onto your phone package instead, but the prices aren’t for the faint of heart: $30 for 300MB, $60 for a GB, $80 for 3GB and $100 for 6GB. That’s better than the old pricing – $100 for a GB – but still pales in comparison to the options available to our American neighbours. And when Internet access is arguably the iPhone’s biggest feature, that’s a problem.

Really, though, we shouldn’t be too shocked about this. A few optimistic souls held out hope that the iPhone would be the device that would revolutionize cellular rates in Canada, forcing all companies to finally start competing with one another for the best cellular Internet pricing. But it takes more than the “Jesus Phone” to shake up one of the most uncompetitive markets in Canada, a race-to-the-bottom where services regress instead of improve and where the consumer’s wishes are not to be met but mitigated.

This gap between the cell phone companies and their consumers couldn’t be more apparent than in Rogers pitiful explanations around data usage, which show a complete ignorance (or denial) of the realities of the modern web experience. Rogers claims that the 400 MB in their basic iPhone data package would allow you to visit 3,100 web pages – that presupposes an average of 132 KB of data for every page you visit. This may have been true once upon a time, but it’s a load of horseshit today. Check out these stats compiled from two different research studies: the average web page has more than tripled in size in the past five years to over 312 KB. So forget 3,100 web pages – we’re down to about 1,300 or so.

*Edit: iPhoneinCanada.ca has posted a list of several popular websites and how much data their front page takes to load. It seems the worst offenders are news sites: 409KB for CBC.ca, 666KB for CNN (the number of the beast, no less) and the biggest data hog is the Globe and Mail at 859KB. And this is just for the front page – every page from there on in is going to rack up MORE data. Looks like news junkies may be among the most data-needy of iPhone users.

But that’s just generic websites. What about the cool, engaging stuff that people want to do on today’s Internet: GoogleMaps, Facebook, YouTube? Let’s use the latter as an example. What do you think that the average size of a YouTube video is? According to what I’ve been able to find online, it’s about 10 MB. So that 1,300 web pages falls to just around 40 YouTube videos before you start paying extra. And additional data is pricey: 50 cents per MB for the first 60 MB, and then 3 cents per MB afterwards. Is watching a YouTube video worth $5 for you? You’d be better off downloading from the iTunes store…of course, that’s likely to wreck your data plan too, isn’t it?

So given this reality, not having an unlimited data package seems pretty dumb. And because Rogers is the only GSM cell phone company in Canada (for now…) one could argue that they’re merely using their monopoly and the appeal of the iPhone to milk as much money out of their customers as possible. That might be true, but there’s a bigger picture at play here:

Rogers is trying to wean customers off of unlimited Internet access.

Confused? I don’t blame you – unlimited access has been the foundation of high speed Internet since its creation, and the days of “counting your minutes” on dial-up seem miles away. But with the costs of network maintenance rising dramatically as consumer demand for data skyrockets, telecom companies are looking for ways to raise prices while limiting consumer outrage. And their preferred solution is to stop offering unlimited Internet access and replace it with a system that charges by data usage, as explained in the Globe and Mail in June of last year:

The Internet is one of the fastest growing businesses for telecommunications companies, but they say they need to raise prices to offset the hefty investments required by the network, which is increasingly used for much more than sending e-mails and surfing the Web.

If phone companies proceed with such changes, consumers could start paying for the exact amount and kinds of content they use on the Internet, a big shift away from the traditional, all-you-can-eat plans. Those who just send a few e-mails may end up paying less. Consumers who download and send a lot of videos, however, may face far bigger bills. Canadians now pay for different levels of Internet speeds.

“What folks have to realize is the Internet is unbelievably expensive to maintain,” John Watson, president of consumer solutions at Telus, said at the 2007 Canadian Telecom Summit yesterday in Toronto…He wants to switch to a model that’s more like wireless pricing, where people pay by the amount and kinds of applications they use.

And so now, a year later, this is where we’re at. Check out Bell’s home Internet packages today: no longer selling an unlimited option, they offer packages with a 2 GB, 20 GB, 60 GB and 100 GB limit. Telus is the same way – one of their plans has a 10 GB limit, the other two have 60 GB. This trend hasn’t reached Aliant or Eastlink here in Atlantic Canada, far as I’m aware, but believe me: it’s coming.

(And none of this is even getting into Bell’s throttling of its network, which is a related issue but no less interesting).

Now, no one dismisses that establishing and maintaining both cellular and high speed Internet networks in Canada is an expensive endeavor. And the justification that the telecom companies give for eliminating unlimited Internet use is pretty convincing at first glance – that it’s unfair that all Internet users should pay for the minority who excessively download and consume online media.

But who are this supposed minority? They’re the future of the Internet – young people and cyber-engaged twenty and thirty-somethings for whom the World Wide Web is like a second home. There’s no benevolence going on here: the telecommunications companies see the writing on the wall, that this minority will soon become the majority as their email-junkie parents and cyber-cautious grandparents either move on or move into the Web 2.0 age. So the companies are panicking, worried that their last window to easily push through data-based pricing is closing and closing fast. If they do it now, there’s enough casual Internet users still out there that they can get away with it. If they wait, the outrage may be too much for them to handle.

So this is the context that informed and quite likely determined Rogers’ refusal to offer any unlimited data plans for the iPhone, let alone an affordable one. To do so would only raise Canadians’ expectations for what they can expect from their Internet service more broadly. And that’s just not how our sad, sorry excuse of a telecommunications industry operates: here, the only thing that’s allowed to be raised are the prices.