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Apple Businesses Technology

Apple Turning Cell Phone Market Upside Down? 320

Posted by Zonk
from the please-keep-right-side-up dept.
joek writes "This MacRumors analysis puts some of the iPhone/Cingular pieces together and suggests that Apple may be turning the the cell phone market upside down. Everyone assumed that Apple's $499/$599 prices for the iPhone was subsidized by Cingular. But, it appears that Apple is not allowing mobile carriers to subsidize the iPhone. Why? Because when Apple comes out with the Touch iPod, they don't want it compared in price to a discounted/subsidized iPhone. Add to that rumors that Cingular may heavily discount service (but according to a Cingular rep, they will not be giving away service, as previously suggested) to attract Verizon customers. Without kicking in $100-$200 against the price of the phone, Cingular can discount the service as an incentive. Other cell phone manufacturers will certainly be interested in the outcome of this new model."
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Apple Turning Cell Phone Market Upside Down?

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  • by LehiNephi (695428) on Friday January 26, 2007 @03:05PM (#17774346) Journal
    Without kicking in $100-$200 against the price of the phone, Cingular can discount the service as an incentive.

    Okay, everyone who thinks this will happen, raise your hand. Nobody? That's what I thought. Cell phone companies do not base the price of their service on how much it costs them to provide it (including the cost of the phone). Rather, they price their plans purely on how much people are willing to pay. As long as people are willing to pay exorbitant amounts to lock themselves into multi-year contracts, the cell phone companies will continue the practice. And if you're willing to pay $500 for the phone, chances are you'll be willing to pay full price on the plan.
    • by neoform (551705)
      Hmm, seems to me this practice applies to a lot more than just cell carriers.. maximizing profits tends to apply to most businesses these days.
    • by SlashdotOgre (739181) on Friday January 26, 2007 @03:21PM (#17774682) Journal
      I think an interesting move may be for Cingular to offer to pay the Early Termination Fee (which happens to be in that $100-200 range) for people who'd consider getting the iPhone but are stuck with another carrier. Obviously they'd need other incentives for customers not in that situation, but I definitely think that would be a big shot against Verizon, etc.
      • by mr_zorg (259994)
        That would be really smart. I'd go for that. Or, if the phone isn't subsidized, let me buy it myself from Apple with no contract required...
        • by iamhassi (659463)
          "That would be really smart. I'd go for that."

          agreed, that'd definitely get me over too if the iPhone is as great as I'm hoping it is, but yeah, if I like the iPhone and they're willing to pay the disconnection and phone number transfer fees I'd go with cingular.
    • by gstoddart (321705)

      As long as people are willing to pay exorbitant amounts to lock themselves into multi-year contracts, the cell phone companies will continue the practice. And if you're willing to pay $500 for the phone, chances are you'll be willing to pay full price on the plan.

      Actually, in a bit of a roundabout way, this could actually make customers less locked in.

      Most companies will give you the phone either free or at a greatly reduced price if you'll sign up for a multi-year contract. By having you locked in, they

      • Re: (Score:3, Insightful)

        by Geraden (15689)
        Nope - if the company can lock you into a contract, they will.

        Ultimately it doesn't MATTER if your phone has been subsidized or not. Even though it should.

        I think this will eventually reveal these companies for the skanky enterprises they really are.
        • by gstoddart (321705)

          Ultimately it doesn't MATTER if your phone has been subsidized or not. Even though it should.

          I think this will eventually reveal these companies for the skanky enterprises they really are.
          *laugh* You, sir, are a cynic!!

          However, I wish I could refute your position. You're probably right.

          Cheers
    • by Jartan (219704)
      Obviously Cingular wouldn't lower their prices if it was left up to just them. The real question is has apple really convinced them to offer cheaper service. If the answer is no then is Apple might actually in a bad spot. The reality might be that apple is up against a wall and can't get the providers to offer cheaper service instead of subsidizing the phone.

      I tend to think Apple has convinced them to lower prices though.
      • by Ungrounded Lightning (62228) on Friday January 26, 2007 @03:49PM (#17775238) Journal
        Since apple's phone isn't subsidized by the cell companies they have no leverage on how its firmware operates. This means:

          - It's not locked into a carrier. You can switch in a heartbeat and/or put more than one plan on it.
          - It's not locked OUT of using other systems than cellphone - like VoIP over WiFi or WiMax.

        This means that the cellphone carriers are not just in competition with other cellphone and cellphone/data carriers. They're also in competition with Wireless ISPs (WISPs).

        Even between the cellphone carriers the lack of the lock-in means they're in straight competition on price of service. (They had to do the lockin and early termination fee to pay for the handset tie-in.)

        This will produce significant downward market pressure on cellphone companies.

        Market forces don't produce a heavy drive toward marginal cost until there are at least THREE competing providers of the good or service. (For two the strategy is to track each other's prices and split the market about 50/50. For three or more the incentive is for the little guy to try to undercut the two biggest players and steal market from the pair - and for them to retaliate using their economy of scale.)

        While there are several cellphone players now there are typically only two dominant players in most markets. The original bandwidth licensing regime was set up for "competition of two" (the incumbent phone company and ONE competitor) and the early rollout gave two players incumbent status in most markets. They then had an analog of the government-subsidized copper buildout of the wireline phone companies that gave them an advantage in coverage as the upstarts started up - leading to sickly third players and rounds of consolidation.

        This device lets WISPs with significant coverage play in the cellphone space - and use their bandwidth cost advantage to become major players. If Verizon is smart it will try to head this off by dropping prices to where they're just covering network connectivity rather than subsidizing the non-existent "free" crippled phone.
        • by Ungrounded Lightning (62228) on Friday January 26, 2007 @03:57PM (#17775418) Journal
          If Verizon is smart it will try to head this off by dropping prices to where they're just covering network connectivity rather than subsidizing the non-existent "free" crippled phone.

          Oops! Meant "Cingular".

          And if Cingular/ATT and Verizon are BOTH clueless and leave the plans at regular cellphone rates, watch for users to start migrating to WiFi hotspot operators and WISPs.

          (Watch for that anyhow, once people start hacking. B-) Even if Apple doesn't support it - or doesn't support it well - nobody in their right mind with a VoIP account and a WiFi AP at home is going to chew up cell minutes when at home when they can make the iPhone use their broadband and existing accounts, getting hax from their VoIP providers or third parties to make it work well.)
    • by Tiro (19535)
      Not me. When I realized that a cut rate Cingular plan could save me over a hundred dollars, I seriously began to consider the iPhone.

      This after I initially balked at the lack of 3G and proprietary features.

      The reason is that with a subsidy, I can then afford to buy the updated 3G model later. I don't care whether the subsidy comes as a big rebate up front, or as a long term discount to service, because, you know, I'm rational.

      • I originally wondered about the lack of 3G. In the USA, where the iPhone first comes out 3G is not that available. At the same time more and more places are providing Wi-Fi access, which is much faster than 3G. By the time the phone gets to Europe (2008), you may find that the phone has matured enough to include good 3G support. In the meantime I think cellphone companies could start providing wi-fi access, which they provided at a reduced price (or free) for their customers and at a cost for non-customers.
    • by SuperKendall (25149) on Friday January 26, 2007 @03:32PM (#17774900)
      Okay, everyone who thinks this will happen, raise your hand. Nobody? That's what I thought. Cell phone companies do not base the price of their service on how much it costs them to provide it (including the cost of the phone). Rather, they price their plans purely on how much people are willing to pay. ....

      The math doesn't add up though - if they are selling smart phones with a large subsidy today, that subsidy money comes from somewhere. That somewhere is the guarantee of fixed income for a certain period of time, in other words the service cost is not just what people are willing to pay but also builds in the subsidy of the device you are getting for a discount with that service.

      There's no reason why it does not make as much sense to say, that they would provide service for a reduced cost for a set period of time as well. All sorts of things already work like this - you pay less per year if you pre-subscribe for a longer period of time.

      I think the argument that Cingular might want to use this opportunity to really pull in marketshare away from other carriers to be compelling, and with the iPhone at a fixed price it leaves them no choice but to use service pricing incentives as a tool to obtain that marketshare.

    • And if you're willing to pay $500 for the phone, chances are you'll be willing to pay full price on the plan.

      Yeah, and the only flaw in your logic is that most people WON'T be willing to pay $500 for a phone. Thus you either lower the price of the phone (subsidized by cell company), or the cell company keeps the margin on the phone that they'd have normally given up, and discounts the service for a certain time period.
      • Low cost data plan (Score:5, Interesting)

        by Aqua OS X (458522) on Friday January 26, 2007 @11:02PM (#17780412)
        Well, consider the monthly bill for a smart phone. A decent talk plan, a data plan, SMS, and whatever additional fees they tack on, can run you $100 to $150 a month. Although this might not bug certain enterprise users, for consumers who just now considering a smart phone, that monthly bill is going to be a shock.

        If Apple can workout a deal to lower that ridiculous monthly bill, I would consider a nice phone that didn't sodomize my wallet once a month for 2 years. If they can't lower that talk + data plan price, well, you can count me out of the early adopter club.

        All in all, if the gadget is cool enough, you can probably get away with charging more up front and less down the line. Heck, people were willing to pay a premium for the iPod when that first hit the market.
    • by Per Abrahamsen (1397) on Friday January 26, 2007 @03:37PM (#17774994) Homepage
      Unless Apple is totally nuts, they will have negotiated the contract terms in advance with Cingular, and threatened to go to one of the other GSM providers if the terms were not as favorable to the customers as possible. They should in fact be able to negotiate terms that makes the iPhone a loss-leader for Cingular, as the iPhone exclusive will be of great promotional value to the company.

      If Apple is totally nuts they might have let Cingular in a position to decide the fate of the iPhone. Cingular might then very decide that iPhone is the perfect low volume high margin product, as the most determined Apple fans will buy it at any price.
    • Re: (Score:3, Interesting)

      by trcooper (18794) *
      Just like they *could* not tie users into contracts because they aren't subsidizing a device.

      The real new business model is now instead of getting cheaper equipment for agreeing to a contract with a provider, now you must be tied into a contract with a provider for the privilege of owning a particular phone, this one a very expensive one. That's awesome!

      I find the idea that Cingular is suddenly going to become the nicest company in the world, and start offering people great discounts and probably free pupp
      • by ivan256 (17499)
        The real new business model is now instead of getting cheaper equipment for agreeing to a contract with a provider, now you must be tied into a contract with a provider for the privilege of owning a particular phone

        You must think people are really dumb if you think they would be willing to lock themselves in to a contract with no incentive.

        Regardless, even if people *were* that dumb, and Cingular really didn't provide any incentives for signing the contracts, the incentives would just move one step donw the
    • Cell phone companies are willing to provide incentives to acquire customers. The value of these incentives are frequently upwards of $300, given in exchange for a two year contract (some of that incentive will go to your sales rep as commission). What difference does it make to Cingular if they give this incentive as a service discount, or as a phone subsidy?

      And if you're willing to pay $500 for the phone, chances are you'll be willing to pay full price on the plan.

      Big companies don't typically play psychol
    • by CastrTroy (595695)
      This is exactly the way it works. If you buy a phone, you don't have to sign a contract but you still pay the same amount for service. So unless you're planning on switching companies in the next 2 years, then you might as well get them to pitch in some money to get you a new phone. This is why nobody buys the phone. Because you don't get a cheaper rate. You get the option to cancel at anytime, but if you're planning on cancelling your service then why are you signing up in the first place?
    • Re: (Score:3, Informative)

      by Idaho (12907)

      And if you're willing to pay $500 for the phone, chances are you'll be willing to pay full price on the plan.

      Not really. At least in the Netherlands, when you enter a "SIM-only" contract (which means you have to provide the phone yourself), you always pay just 50% of the normal monthly fee associated to the chosen service.

      Basically this means you should simply add up how much you would pay just for the service during the 2 (or 1) years of the contract (e.g. EUR 600), and beat half this amount worth of phon

  • About time (Score:2, Interesting)

    by sinij (911942)
    I never wanted/needed video camera, mp3 player or camera on my phone but I always wanted cheaper service and shorter term contract. I realize that iPhone has all of these things, but I'm hoping that service-discounted business model will succeed and move to other offerings, so we finally can get affordable no-frills phone and basic service for cheap.
    • Re: (Score:3, Informative)

      by Hes Nikke (237581)

      but I'm hoping that service-discounted business model will succeed and move to other offerings, so we finally can get affordable no-frills phone and basic service for cheap.
      do me a faver and put your money where your mouth is [metropcs.com]. thats what i did. :)
  • by wiredog (43288) on Friday January 26, 2007 @03:06PM (#17774350) Journal
    That Apple (and Apple phones) would not be contractually (for Apple, anyway)tied to Cingular.
  • by LaughingCoder (914424) on Friday January 26, 2007 @03:07PM (#17774394)
    Since the phone is not subsidized, there *should* be no 2 year contract requirement. That would really spur competition among the mobile carriers if people weren't forced to stick around for 2 years under penalty of paying full price for their phone. Of course the fact that some use CDMA and others use GSM complicates this a bit - we need phones that support both for true service portability. In fact, a *smart* carrier would offer either non-subsidized phones at a monthly service price of X, or subsidized phones at a monthly service price of X + Y (where Y basically recaptures the phone discount over the life of the contract).
    • by elrous0 (869638) *

      Since the phone is not subsidized, there *should* be no 2 year contract requirement.

      Yeah, right. I'm sure they'll happily hand it to you unlocked. While you're dreaming, why not dream even BIGGER? Maybe they'll GIVE the phone away.

      -Eric

      • Nope. If you acquire a phone by yourself, and sign up for a plan with an unlocked phone, they'll still lock you into the exact same contract. I'm not really sure sure why, they just do.
        • by MBGMorden (803437)
          I've never seen a carrier that forces you into a contract. I've seen "signup fees" that are waived if you signup for for a 2yr (or reduced if you sign up for a 1yr) contract, but all of them seem to have an option of just going month to month as you wish if you provide the phone.

          And interestingly enough, phones are cheaper than many would think if you know where to look. The phone that I'm using now (a Nokia 6015i) was $40 brand new at Wal-mart. SimpleFreedom uses CDMA phones, many (most?) of which aren'
    • With phone number portability, the 2-year contracts are no longer tied to just phone subsidies, they now exist for their own sake. Even if your phone is "paid off", most carriers now have one monthly fee if you agree to a 2-year contract and another, higher, fee if you want month-to-month.
      • by nasch (598556)

        Even if your phone is "paid off", most carriers now have one monthly fee if you agree to a 2-year contract and another, higher, fee if you want month-to-month.

        What is all the bile about this practice? If you sign the contract, you're giving something of value to the provider - an assurance that you will continue to pay their monthly fee. In exchange, they give you something of value - lower prices. If you do not sign the contract, this exchange does not occur, and instead each party keeps the valuable th

  • by ahg (134088) on Friday January 26, 2007 @03:11PM (#17774472)
    If Cingular cannot subsidize the phone, then why did Apple give them the exclusive and require that all customers sign two year contracts? Usually the two year contract requirement is to pay back the subsidy... without the subsidy, there's usually no incentive to sign a contract. If that's the case, I think Apple botched this one for the customer.
    • There was no subsidy, but there was a considerable amount spent by Cingular updating their software to support things like the visual voicemail and other new and innovative features that you can only get with the iPhone. The 2 yr contracts will help them recoup the development costs for this effort.
    • They may have botched it for the customer, but it's sweet as all get out for them and Cingular.

      And who do you think they care more about? heh

      I just don't get it, if cingular is not subsidizing the phones then why any contract at all? It makes no sense since they would have greater market penetration with a more open phone. Unless of course Cingular is paying them a kick back on each service package sold. This would be a back door way of subsidizing without actually saying they were subsidizing.
    • Re: (Score:3, Insightful)

      by truthsearch (249536)
      Along with the specialized features that someone above points out, Apple gets some very targeted marketing out of it. They realize that today no one goes to Apple looking for phone service. But they do go straight to providers. So when Cingular markets this phone with their service they'll target many many more customers than if Apple did all the marketing independantly. I imagine they also expect some people on their current Cingular plans to upgrade to these iPhones once it's marketing by Cingular. S
  • Ummmm, I'm on Verizon and Cingular would need to dangle a heck of a lot of discounts to make me want to drop 600 bucks on a phone, switch carriers, PLUS pay for a service plan. Not the least of which would be steady coverage EVERYWHERE I go. The main reason I stick with Verizon is that pretty much everywhere I've gone, Verizon's coverage will work where others won't.
    • by aesiamun (862627)
      Never been to Stowe, VT huh? Cingular works pretty well there...verizon? sucks.
    • My wife had cingular and a nice samsung phone, I had Verizon and the cheapest/no-frills kyocera phone. Her phone would constantly get drop-outs...but not hang-ups...heh. Mine just always worked. It was weird...
    • I wish Verizon had worldwide service. For this I go with T-Mobile: $30/month plan and free worldwide phone.
    • Re: (Score:3, Informative)

      by cyngus (753668)
      My experience is that Cingular and Verizon have roughly equivilant coverage. There are places, however, where ones works and the other doesn't and I think these just about wash out. If you happen to be one of those people that live or work in one of their dead zones, of course you're going to think it sucks. So, pick the service that works best for you in your tiny subset of the coverage area, but don't extend this to make general conclusions about coverage. Besides, EVERY company in the US sucks incredibly
  • by dpbsmith (263124) on Friday January 26, 2007 @03:22PM (#17774696) Homepage
    The current system essentially amounts to anticompetitive bundling. It frosts me that I cannot take "my" phone with me if I change carriers.

    It also makes the overall package so complicated that it's fairly hard to make a cost comparison between competitive carriers.

    It also creates an incentive for bloated, overly complex phones since it is in the carrier's interest to be certain that you are capable of using any cost-added services they provide.

    Just as Consumer Reports advises that you should always negotiate car price, car financing terms, and tradein as separate deals, what I want to do, and what I think is best for the consumer, is simply buy my phone as a separate transaction from buying service... and be able to change carriers whenever I feel like it, while continuing to use the same instrument.

    If the iPhone moves us toward that model, good.
  • Cingular will sell the iPhone for "full" price, and give you some sort of rebate for contract of service, would be my first guess on how they handle it.
  • by MarkusQ (450076) on Friday January 26, 2007 @03:23PM (#17774716) Journal

    If this is true, and the pricing will be based on the actual cost to produce them and the number sold will be determined by how many people are willing to buy them at that price (supply and demand, anyone?) without all sorts of shell game market manipulation, the headline should read:

    Apple Turning Cell Phone Market Right Side Up

    It's sad that we've gotten to the point that a rational straight forward pricing model, without games, is considered "upside down."

    --MarkusQ

  • by jratcliffe (208809) on Friday January 26, 2007 @03:26PM (#17774780)
    The barrier to getting people to sign up for wireless service (or a lot of other subscription services) has always been equipment cost. Even though a customer is likely to pay $1k or more in service fees over the course of a 24-month contract, consumers focus on the $300 upfront for the phone, not the monthly fee. Cut the phone price, and more people sign up.

    BTW, for you folks who don't want to sign up for a contract, you don't have to. Get your own phone (paying retail price), and Cingular or Verizon or Sprint will put you on a month-to-month contract, no problem. There's no way the economics work, though, to have free RAZRs and no contract.
  • So the $499 / $599 isn't subsidized, so why the hell are people going to be stuck in 2 year contracts? So they get a phone for a primium price AND locked into a 2 year contract. Doesn't make any sense, one or the other.
  • I have no doubt the integration between Macs & iPhone is going to be ABSOLUTELY UNBEATABLE. I know Apple will keep the interface simple, even though I know they will upgrade it over time, I know from experience, I can rely on Apple to DELIVER easy to use functionality. I don't have countless hours to study new equipment and software for dozens of hours a month.

    I have had so many phones that had crap that didn't work, every new phone had a different keypad buttons and menus & icons, and menu struct
  • by Hektor_Troy (262592) on Friday January 26, 2007 @03:46PM (#17775174)
    You live in a non-regulated market with regards to cell phones (as I understand it at least).
    I live in a fairly heavily regulated market (Denmark).

    Here, with the most expensive plan being prepaid phones, I pay about 4.3 cents/SMS including a 25% sales tax. About 14 cents/minute to make phone calls I think (I don't make that many - others call me)
    Sure, we may not get as "awesome" a phoneplan as you guys do, and thus we probably don't get the phones as cheaply as you do.
    But we don't pay for incomming calls or SMS' at all, which is rather nice - especially on a prepaid phone.

    Also, when we go shopping for a phone, the sellers are required by law to tell us exactly the minimum price of purchace including the minimum price of any required plans (which can't go beyond 6 months btw).

    Example:
    Sony Ericsson W810i
    Cheapest I can find is US$ 247 (minimum price during the 6 months)
    This is 104$ for the phone, 17$ for the start-up fee, 125$ for a 6 month plan (and a bit of rounding).

    Those 125$ (20.84$ a month) are simply the minimum cost - if you call, SMS/MMS etc for less than that per month, they'll just charge you the full monthly price.

    Long live the free and unburdened market.
    • Re: (Score:3, Informative)

      by squiggleslash (241428)

      I agree with some of your points but:

      But we don't pay for incomming call

      is not true. You pay for incoming calls, it's just you pay for them when you initiate the call, not when you receive it. (If that's confusing, understand what the words "incoming calls" are in this context - they're all calls received by a cellphone. If you initiate a call that will be received by a cellphone, then you're paying for that type of call... in Europe.) You are just as like to make a call to a cellphone as receive one, the

    • by bmajik (96670)
      What we have is worse - companies must be licensed by the FCC to operate cell phone service. This means that licenseholders ahve an effective monopoly- the government has created a barrier to entry of effective competitors.

      The US wireless scheme is assinine. 2 year contracts with "early termination fees" are the norm here, and the phones are locked to one carrier, the multitude of technologies doesn't help this, etc.

      I'll never have a cell phone contract again, nor will i ever buy an locked phone. I plan
  • by frovingslosh (582462) on Friday January 26, 2007 @03:47PM (#17775210)
    Without kicking in $100-$200 against the price of the phone, Cingular can discount the service

    But wouldn't this lead others to want discounted service if they supply their own non-Apple phones? If an Apple Iphone user gets a discount for supplying his own phone, shouldn't a user who just wants to use a less expensive phone be able to supply it and buy the service at a fair price too? That would ruin the business model of the cel companies. The current business model of all of them, even though they are prohibited by anti-trust laws from all agreeing on how to screw the consumer. Isn't going to happen. Sure, there might be some claims of this, but new ways to screw the consumer will be created at the same time to make up for it.

    Come on, the industry knows that the iPhone people are exactly the people who have too much money, they are not going to be giving them a break, at least not a real one.

  • Righto, if I buy my own iphone at $400-$500, I get a service discount of $100 to $200, I presume for the first year, or first two years.

    Ok, what if I screw the iphone and just buy my own. Can I get the $100-$200 kick back, as in premium service for $23 to $30 a month? If not, why not?

    Not that I mind getting a new phone every YEAR, batteries do cost tens of dollars. But if they offer this deal for the iphone, the way I see it, they should offer the same deal if you bring your own phone.
  • by f1f2f3 (66764) on Friday January 26, 2007 @03:50PM (#17775252)
    The people at MacRumor need to work on their reading comprehension. From TFA:

    aren't allowed to subsidize the cost of the phone relative to your contract (i.e. you won't save more by signing a longer contract
    Emphasis in the original. This doesn't say Rogers/Cingular can't subsidize, it says Rogers/Cingular can't change the subsidy based on contract length, meaning they can't charge one price for a one-year contract and another for a two-year contract. That still lets them subsidize the phone overall, and sell it cheaper than it's "street" price

  • 1. Announce incredibly capable device with a rich API and excellent display which would attract even those who despise convergence due to planned obsolescence
    2. The day after announcing product and upon garnering huge press coverage and generating buzz on sites such as slashdot and seeing that PocketPC and smartphone users will consider switching to your product and possibly developing for it, announce that third party applications WILL NOT RUN nor will such support be allowed
    3. Two weeks later, announce th
  • by jpellino (202698) on Friday January 26, 2007 @04:16PM (#17775786)
    The cell phone service is going to be the 4th commmunications industry to pass thru this ridiculous hoop.

    First was the US Mail - who realized the carriers had to walk the route each day and walk past each house each route. They oculd support fixed message cost, and it made them wildly successful. Sears didn't mind it either.

    Next was the data networks, which charged per message, and when we all figured out they weren't epoxying together a brand new tube for each message, went to fixed cost per period.

    Then we knocked on the telco's door and told them we figured out that they didn't have to run a new wire everytime we called someone, not even for the first time. They 99% went to fixed cost per period, with some sucker plans for people who still didn't get it and thought they could beat the telco out of the 99% plan. Vonage et. al. pretty much dope slapped anyone who still didn't get it.

    Now come the cells. They still make us think that they have to send a squadron of pixies, who subsist on gold and caviar, flying out of the hayloft every time we want to place a call or send a message. Apparently the text pixies have never seen a salad, and the 411 pixies are down-right clones of Roseanne.

    In the days of tower buiilding, when no one knew we'd all have these glued to our ears constantly, charging by the message unit was the only way anyone was ever going to let you take a risk like that.

    That's all changed. The network is in place. The towers, T1s and infrastructure are all on, all the time - their operating cost is known and predictably rising with the cost of energy, inflation etc. The system scales now. Your unit revenue per user should find a point where it supports the scaling. Energy costs marginally less at night than at daytime, but it's always daytime somewhere in the net.

    It's all a matter of who blinks first. Nights and weekends is slowly creeping wider, the others will have to follow. They are slowly, inexorably creeping towards flat monthly, but they're still betting some of us will put up with the sucker's bet.

    I hope it works that way - in the telco case we had help from non-traditional suppliers who had nothing to lose and could bust the Bell model. In the cell case, there's the big six(?) who may slowly compete to some equilibrium, it won't be the rest that bust it - as MVNOs they just follow what the biggies do.

    Here's hoping, anyway. Nice to see that Apple can make them think about dancing, though.

  • by guruevi (827432) <evi AT smokingcube DOT be> on Friday January 26, 2007 @04:17PM (#17775790) Homepage
    In Europe this is 'standard' since most countries (I know for sure in Belgium and I think it's a European directive) banned giving away free phones with a x-year signup contract on cell phones. So you usually pay full price for your phone (maybe $10-50 rebate) but you can't get the phone for free. You can step in-and-out of a contract at any time though (no early-termination fee, just pay whatever you started that month) although if you stay longer, you'll save up rebates and freebies. The phones (GSM) aren't locked so you can keep your phone in whatever provider you go (provided that the frequencies are all supported, but the newer phones don't have that issue).

    I think that's also why Apple went with Cingular/GSM technology. 1) there is only one phone they have to develop for both Europe and US since CDMA is nearly unexistant in Europe, and 2) you can just switch your SIM cards to get another provider, no lock-in possible.
    • Re: (Score:3, Informative)

      by MemoryDragon (544441)
      No it is not all over Europe, here in Austria we have both options, most people though prefer the 1 year cheaper/free phone option compared to the phone full price but no contract binding option.
  • Everyone assumed that Apple's $499/$599 prices for the iPhone was subsidized by Cingular.

    Who thought that? At that price, it had better be profitable.

    Cell phone internals are becoming very cheap. Check out the Texas Instruments "LoCosto" [ti.com] two-chip cell phone. Manufacturing costs are approaching $20. This isn't being reflected in the prices seen at US carrier's retail outlets, though. The handset price is inflated there, then "discounted" to compel users to sign up for "plans".

  • by Doc Ruby (173196) on Friday January 26, 2007 @05:40PM (#17777184) Homepage Journal
    If the iPhone can break mobile "phones" away from the US carrier lockin to their original network, then it's worth every penny. We need to be able to switch networks dynamically on service price/quality, not this insane AOL monopoly business model. Every step towards opening the "last mile" to multiple access is worth taking.

    Apple has been the main driver forcing record labels towards discarding their archaic "scarcity" bizmodel, however limited its own movement along that road. Let's see if Jobs can force the networks open the way Apple forced computing to be "for the rest of us".
  • by notyou2 (202944) on Friday January 26, 2007 @08:25PM (#17779278) Homepage
    So a "missing" $200 subsidy translates to $8.33/month on a 2-year contract. Perhaps instead of directly subsidizing the phone itself, Cingular is subsidizing the cost of the data plan for the phone? Seems like this would make good marketing sense, and provide the potential buyer with a perceived savings (since that same data plan at retail might actually cost them $10-20/month).

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