Earlier this week, Apple unveiled its latest smartphones, the iPhone 6s and iPhone 6s Plus. The tagline, “The only thing that’s changed is everything” cheekily acknowledges the likeness to its predecessor while immediately brushing off that inevitable criticism.
That its body is largely unchanged, at least at a distance, from its predecessor is unsurprising: every S-branded “tock” cycle has retained the visual identity of the phone that came before it, and the overall spirit of the iPhone line dating back to 2007.
Other than the processor and camera, upgrades over their predecessors that Apple is happy to quantify, the company largely stays away from the specs race. It advertises neither processor clock speed nor memory size, and highlights in its marketing materials only what it believes will help it sell more phones.
And sell phones Apple does. Over the past four quarters, all iPhone models sold a combined 222.5 million units, with the larger iPhone 6 and 6 Plus leading the infusion. Apple’s CEO repeatedly commented that a large percentage of those sales were not iPhone users upgrading to newer, faster models, but Android users dissatisfied with their smartphone experiences.
Apple doesn’t sell cheap smartphones, either: there is a reason the company accounts for nearly all of the smartphone industry’s profit. And that truth has never been more evident to Canadians than this week, when it was revealed that the cheapest iPhone introduced, the 16GB iPhone 6s, would cost $899 CAD, $250 more than the equivalent phone in U.S. dollars.
But in the U.S., despite the phone not increasing in price over its predecessor, customers can now purchase the iPhone 6s and 6s Plus using a new monthly financing plan, inspired by similar programs at carriers like T-Mobile, Sprint and Verizon. For a monthly fee of between $32 and $44 depending on the model and storage size, customers get to upgrade to a new iPhone every year, and receive AppleCare+ insurance as part of the deal. Unfortunately, that same financing option isn’t available in Canada despite a weakening dollar and rising smartphone prices.
It’s no secret the Canadian dollar has slumped in recent months, but few industries refresh as quickly as mobile, so we’ve seen the effects of that downturn laid bare in the price of new gadgets. The cost surge isn’t unique to the iPhone either: Samsung’s latest Galaxy products are approximately 20 to 30 percent more expensive than their previous generations. It’s just that Apple is more transparent about its pricing; it sells the iPhone unlocked from its website, so when it makes changes that subsequently filter down to the carriers, the public is wholly aware.
When currency depreciation raises the prices of consumer goods, companies try to hedge in advance, building in protections in case of a correction or, at worst, a further drop in valuation. Sanjay Khanna, Senior Mobile Phones Analyst at IDC Canada, believes that by pricing the iPhone 6s and iPhone 6s Plus as it has — $150 to $210 higher than the iPhone 6 when it debuted, and $60 more than the refreshed cost from March — Apple has hedged against further weakness in the Canadian dollar.
“The hedge that has been built into the price protects against further downside in the Canadian economy in the run-up to Christmas and into the first half of 2016,” he said. But, he believes, there is still room for the iPhone to grow in Canada despite the price increase.
Part of the issue with the iPhone’s pricing is that the standard subsidy model, where carriers discount up to $500 over two years in exchange for 24 months of consistent revenue, is no longer suited for technology of this price. While Apple offers high-interest financing options for its unlocked devices through a partner, carriers have yet to adopt the increasingly popular interest-free financing model that is finding success at U.S. providers like AT&T, T-Mobile and Verizon, and at smaller Canadian outfits like Wind Mobile, SaskTel and Eastlink.
The Big Three carriers, and to some extent their flanker brands, feel less pressure to move away from the two-year subsidy model, because it reinforces their place in the purchasing cycle.
But Canadian customers desperately need a similar option when buying expensive smartphones like the iPhone 6s. Not only does it make paying for the device more manageable by spreading the damage over two years, but it disentangles the cost of the phone from that of the smartphone plan, allowing carriers to charge less per month. After the phone is paid off, that extra $20 to $30 per month drops off the end of the bill, leaving the plan that was presumably cheaper to begin with, since it didn’t factor in subsidy bloat from the start.
Wind Mobile recently justified its reduction in device subsidies by capitulating to the rise of BYOD. It would rather keep plan prices down, it says, than maintain the often profit-reducing nature of device subsidies.
There is no question that the iPhone 6s and iPhone 6s Plus are expensive phones, but the reality is that their price hasn’t increased in the U.S., nor in countries where currencies are stable against the Greenback. Canada’s economic lot is affected by the rise and fall of oil prices; Apple, like most OEMs, is merely responding to that reality.
So when the new iPhones go on sale in just under two weeks, on September 25th, iPhone loyalists and Android defectors alike looking to upgrade will need to consider whether the current financing options — purchasing a phone outright for around $1000 and saving $20 per month on his or her phone bill; or on-contract for around $500, with a higher monthly cost — is cost effective. With the stipulation that phones purchased with subsidies must be tethered to a share plan, many Canadians just emerging from their iPhone 5 contracts (Double Cohort notwithstanding) will be faced with more costly phone plans alongside drastically higher upfront phone prices.
The good news is that even those looking to stick with the iPhone need only to look at last year’s models for significant discounts; and if Android, BlackBerry or Windows Phone devices are in contention, there are plenty of great options there, too.