The Nexus One phone from Google Inc. is shown at a demo in Mountain View, Calif., Tuesday, Jan. 5, 2010.Jeff Chiu
Wind Mobile is hoping to bring Google Inc.'s new smart phone to Canada - and in the process help consumers find an alternative to the industry's preferred sales method: the cellphone contract.
Google's HTC Corp.-designed Nexus One handset, launched Tuesday, is not currently being shipped to Canada. But since the SIM card-using phone operates on the GSM network, it could be bought elsewhere and used here.
Eventually, Wind Mobile hopes to strike a deal with the Internet giant to bring the Nexus One to Canada, and market it as Wind does with other devices - no contracts attached. Wind would provide network access, but Google would sell the phone.
"We're trying," Wind's chief customer officer Chris Robbins said in an interview. No such deal is imminent, however, and it's not clear when Wind might be able to begin offering service for the device. "Canada's a small market to these guys. We're not getting a lot of face time," Mr. Robbins said.
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On its own, Wind's attempts to woo Google and HTC don't spell an end to the cellphone contract. But as Canada's wireless industry grows ever more competitive, more consumers are likely to seek carrier services without locking into long-term contracts.
Google's move into wireless "may signal that kind of trend" eventually, Eros Spadotto, executive vice-president of technology strategy for Telus Corp., said in an interview. "But I don't think this is the device to do that."
Google's phone "will be a very competitive device in the market. It will raise the profile of Google - and Android - in the mind of consumers," said Kevin Restivo, an analyst with IDC Canada. Still, "this isn't the next iPhone," he said.
Google's entry into the smart phone market is partly aimed at ensuring the firm's advertising revenues remain undiminished as more people browse from mobile devices. Google is selling the phone in the U.S. with two options: at a discounted price through carriers with contracts, and directly to consumers at full cost.
When choosing wireless service, many consumers in Canada choose the contract option, which keeps upfront costs low. For carriers, contracts provide certainty of revenue and profit over the term of the contract.
But Canadian telecom shares have been hurt as investors anticipate a gradual erosion of strong wireless profit margins enjoyed by the three incumbent carriers Telus,Rogers Communications Inc. and BCE Inc.'s Bell Canada. Like wireless carriers elsewhere, Canada's telecom sector is already challenged by the loss of revenue inherent in a gradual consumer switch from using phones for voice to using them for text and data, which generate less revenue.
Aside from Wind, Canada's Big Three face a fresh surge of competition from new entrants such as Public Mobile and Dave Wireless, which also plan to sell phones at cost with no fixed-term plans, in order to lure mobile users off expensive contracts.
"Over time, we would expect to see some degree of unbundling between hardware and rate plans, it's an open question of whether we go all the way there ... and how long all this takes," said one analyst who asked not to be named. The move away from contracts, well established in Europe and Japan, is also expected to take root in the U.S., some analysts said.
Bay Street is watching closely. When government approval for Wind was granted on Dec. 11 after a two-month delay, it erased more than $2-billion overnight from the incumbents' stock, mainly at Rogers.
Mr. Robbins, who used to work for Vodafone CZ and Oskar Mobile in Europe, said Wind's internal market research showed customers were willing to pay upward of $400 for a phone to avoid a three-year contract. "If you look at Europe, if you look at Asia, the typical approach is that all carriers have the same range of handsets," he said.
"Customers will go out and look for a handset and then they can go get any carrier they want and choose the service. I think that's the model that's coming."
Still, Canadians face a learning curve before many will snap up the Nexus One abroad and activate it here.
"Outside of North America, buying a handset and then popping a chip in is ordinary course of business," said Kaan Yigit, president of the Solutions Research Group consultancy. "It's new here and the Google phone will help socialize consumers to expect more open access."