Apple 2.0

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How Bell Canada got the iPhone

October 6, 2009: 8:24 AM ET

BellCanada1902A Bell Canada (BCE) press statement Tuesday made official what the Canadian press has been reporting since Monday: that the company, in partnership with Telus Corp. (TU), will start carrying Apple's (AAPL) iPhone in November.

The deal puts an end to the exclusivity that Rogers Communications (RCI) has enjoyed -- to the dismay of many Canadian iPhone owners -- for more than a year.

It's news that is likely to be closely watched in the United States, where AT&T's (T) exclusive contract with Apple is expected to expire next year -- opening the door, in theory, for Verizon (VZ).

But only if Verizon's network can be upgraded in time.

Like Verizon, Bell Canada operates, through its Bell Wireless subsidiary, a CDMA cellular network that is incompatible with the iPhone's GSM chipset. But unlike Verizon, Bell Canada was able to rapidly upgrade its network to an HSPA standard that is iPhone compatible.

Verizon has said it will begin deploying a so-called 4G Long Term Evolution (LTE) network later this year. But it's not expected to be able to offer nationwide coverage for iPhones for another year or more.

So how did Bell Canada do it so quickly?

The fact that Bell Canada is providing telecommunications for the 2010 Winter Olympics Games in Vancouver probably had something to do with getting the company focused on the task.

But a bigger factor, we suspect, is the size of Canada's population and the way it is distributed.

Source: Statistics Canada

Source: Statistics Canada

Canada is actually slightly larger than the United States -- it covers an area of 10 million square kilometers (3.85 million square miles) -- but has a population of less than 34 million, compared with the U.S.'s more than 300 million.

Moreover, the vast majority Canada's population lives along its southern border. So even though Bell Canada's HSPA network will cover only 1.2 million square kilometers (roughly the combined size of California and Texas), it will reach 93% of Canada's population.

That payoff for both Bell Canada and Apple could be significant. Last week, Morgan Stanley's Kathryn Huberty estimated that if Apple were to go to a so-called multi-carrier model in Canada, its share of the local handset market would double to 9.7% from today's 4.8%.

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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