Now blogging at diego's weblog. See you over there!

on mobile phones and pricing schemes


Talk about barriers to entry...

Mobile phone pricing is downright baffling. For all the flexibility that is built into how you pay (contract, pay as you go, subsidized handsets or not, data prices, and so on), it is incredibly complicated to try to make an informed decision on what to buy and from which carrier. Yesterday I made some comments regarding pricing here in Ireland, and Murph corrected me, saying:

Oh dear, you've been done by the misleading (downright bad) way phones are priced - the provider subsidises them and you pay them back for so long as you stick on the same contract.

This is bad because people think phones are cheaper than they are (real UK prices and because the monthly service charge includes a clawback of the subsidy.

So I don't quite get how giving you a discount (subsidy) of ~300 euros against a simm free price for a 7650 is "ignoring the customer"?

We'd all be better off if they charged the rrp for the phones (with nice consumer credit arrangements to spread the cost) and we purchased the service separately - which is more or less what I do (-:

Obviously I was wrong about the UK prices, but I want to point out that the prices I was mentioning for the phones are not SIM-free. They require a contract, 12-month minimum. SIM-free prices are twice that at least. The 7650 can be purchased SIM-free for Euro 469 at Vodafone, and about the same price at O2. The UK still wins on that, I think.

Now, my question is, why does this confusion happen at all? Certainly one could see the "logic" in keeping prices obscure, difficult to understand: the carriers get less mobility of users since it's not clear at all whether you win or lose by switching (while the problems of switching are clear). But in the end, this kind of behavior from the part of the companies simply means angry customers that will switch to something else the second it becomes available.

On top of that, carriers play certain games with their offerings that are difficult to understand as well. I went into a store today to inquire about the SonyEricsson P800 and the Nokia 3650. While the 7650 is available here in Ireland, those two phones aren't? The reason? According to sales people from Vodafone and O2, the carrier hasn't "certified" the product to be sold.

Excuse me? Certified?

To me, plain and simple, they prefer to keep milking their existing product lines with high prices, since they know that once higher-end offerings are available the basic phones must be sold for less. This is ridiculous in more than one sense, since the added services (for which they have invested billions in infrastructure) should bring more money, it's in their interest to move users to the new platform.

And, while we're at it, how can this happen at all? The EU was supposed to bring these barriers down, wasn't it? This might (emphasize, might) be understandable in the more-fragmented US market, but when you've got basically two major players (Vodafone and O2) in Europe, there are no market reasons for this to happen. The P800 has been available for some time in other european countries. And this is not new. I remember almost two years ago when the first GPRS phones appeared (e.g., the Nokia 6310) it took for them about nine months to show up here in Ireland. They have no problem in hyping the technology and spending millions in advertisements, but somehow they won't, or can't, deliver it.

The carriers should wake up: giving customers more choice is good. Clearly showing the costs of something is good. Fight on features and service, instead of artificially maintaining their market position. Once that arrives, the market will expand, I'm sure, and the lives of developers and users would be easier as well.

Categories: technology
Posted by diego on April 17, 2003 at 1:04 PM

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