Wednesday, 16 October 2013

Fun Topic: Cellphone Economics Part 3 (No Free phones...)

Sorry for lull in posting. It's been a busy few weeks...

(iPhone 5C from here)

Well I guess I was wrong about the iPhone 5c. Turns out the "c" didn't stand for cheap. At $450 it isn't really that much cheaper that it would be a zero dollar phone on 2 year a contract. (Update: confirmed. See here that it's $99 phone on 2 year from Verizon) I don't see that many new people who weren't already planning on buying a iPhone to go ahead and buy the iPhone 5c.

(Turns out the out-of-pocket difference is only $100 on 2 year contract between iPhone 5c and 5s. For my $ I would have likely upgraded to 5s.)

No "Free" Amazon Phone.

Also it seems that Amazon rumours of a FREE Android phone have been over exaggerated. From the looks of it, it will be "likely" an "at cost" phone, just the Kindle Fire, if it ever launches. If the Kindle Fire HD is around $215, how much would you pay for an Amazon phone? More or less than the 7" tablet? If you cut costs from smaller display and battery, will that offset the cellular modem costs?

My thoughts were the Kindle sold right against the Kobo and Sony reader. 7" is basically the size of a trade paperback and just smaller than a hardcover. Would you attempt to read a whole novel on your phone?
Part of me thinks that people already read *a lot* of email on your phone. Add on top of that, today on my commute I forgot my book, you *always* have your phone on you. This means your more likely to read more, even if it's in shorter bursts.

As a side note, great article on why the Kindle Paperwhite outsold the Sony Librie:

The other part of me feels that the main motivation of a cell phone is being a phone. If the Amazon phone isn't a better phone (or at least a very very good one), why would you sacrifice that to get books which you can already get via Kindle app? Building a WiFi 'tablet' I think is easier than true telephony features. Most phones today have a lot of software and hardware to make calls sound good.

Watch out for Xiaomi?

Yes, it's *that* company that lured a Google Exec away with a $58 million compensation package.
(New Xiaomi Mi3 from here)

From the reports (Xiaomi does *not* sell here in North America yet so I have never played with one) Xiaom Mi is the new 'king of cheap'. In Asian, this phone outsells the iPhone by a huge margin. I think the market in North America is huge for zero dollar phone on contract and maybe this is it.

You believe it? Here is an article showing just how fast these phones are selling:

From my Asian friends, they said they have heard nothing by positive things about it in the news & social media sits overseas.

Asus (Cheap) phones also coming soon?

With the success of Nexus 7 by ASUS, it seems they are ready to enter the phone market in North America. This is possibly via FonePad. Or maybe a totally new device. So far they have been locked out of the market, but with their engineering skills and co-innovation with Google, I see a very good chance of them being successful. If they can get out a Market-Leading 7" tablet for $250, how hard would it be for them to release a 4-5" good phone for under $300?

The bottom line is that I strongly feel like we need better cheap phones to continue driving cellular data and next wave of apps. The feature or dummy phones available today are getting long in the tooth. While they won't make a killing on margin per device, I see whoever can do this win on total sales and revenue. I think too many people are overdue for an update on a lower cost phone and the window of opportunity for major mobile device penetration in North America is now. (Implying the market for $700 and $800 upgrades of bleeding edge devices is drying up for now.)

Overseas where devices aren't usually subsidized as heavily, only the big spenders it seems can purchase devices outright at the high end of prices. Buying a new iPhone every year can add up quickly. Damage, loss or theft of a expensive new can be painful.

Lastly, not every wants or needs a Porsche. Companies like Hyundai are making a very good living selling reasonably priced cars.

So with that, are you, or someone you know looking for a new phone? Thoughts on what you might get?
Hope that helps...

Wayne Pau

p.s. While the talk now is about BYOD, there are stilll companies that give employees company standard issues phone. While a price difference one time of $50 to $100 might not seem like a lot, what if you multiply that out by 500x or more employees every few years? (FYI - that's $25K or $50K a year. Or $250K to $500K for 5000x person company.) I don't imagine that the more expensive product increases productivity that much (or if any at all).

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