Cheap and Smart Phones

In case you haven’t noticed, the smartphone has begun trickling down and replacing, for lack of a better word, dumb phones.

Case in point, the Huawei Ascend, which runs Android 2.1 and can be bought without a contract, i.e. unsubsidized, from Cricket for $150. The service costs $55 a month, including, well everything. Not too shabby, even Apple’s uber fanboi agrees.

Nokia has been pushing their devices into smartness too. Walmart now sells the C3 with prepaid GoPhone service for $80.

Maybe these aren’t the best devices, but for the price (and without the contract), these are some pretty serious options, especially the Ascend because it rocks Android.

The big question is will Apple counter or even care about losing the low end of the market.

History says no. Macs are content to exist on the high end of the PC market, creating an excellent, high margin business for Apple. Apple prides itself on building great products, which we’re led to believe costs more money, an arguable point, but sure.

For reference, the iPhone 4 is estimated to cost about $188, up a bit from $179 for the 3G S. Above and beyond the cost of the phone, Apple receives subsidies from AT&T for each unit, rumored to be at least equal to the phone’s cost.

So, it’s conceivable that Apple could go lower to compete, depending on the carrier subsidies. I suspect they could compete with the Ascend’s pricepoint, assuming a carrier would be interested.

But again, would they?

The iPhone undoubtably benefits from the perception that it is a high end, expensive device, but that perception has declined as iPhones have become more popular and less expensive. For instance, I paid $499 for the original iPhone, and today, a new iPhone 4 will set you back only $199, a new 3G S only $99.

So, yeah, Apple could do it and still make a profit.

I’ll bet carriers like T-Mobile would be interested in a low-end, prepaid, pay-as-you-go version.

The next logical question is does Apple need to expand down in the market to stop the market share bleeding, assuming that even matters to them.

I don’t think it does matter to them, frankly, given the hubris they show. From a business perspective, they can probably sail by for a few more years, printing money, possibly living off the bump a Verizon iPhone would generate (this time we mean it). Then what?

Another magical, transformative, elegant device?

Find the comments.




  1. Here in the mountains (technically, though I know some who would scoff and call these hills) of Vermont I’d like a phone smart enough to make a damned call. Its sad that shoeless people in 3rd world countries can download the latest bad music from American Idol cast-offs and I can’t even have a conversation without redialling ten times. AT&T claims to provide a great thrillride of wireless joy for 97% of America. I guess they just shake their heads and chuckle at us backward folks in that other 3%. I’m about ready to wrap aluminum foil around the tallest pine and hardwire my Blackberry to it…

  2. There’s big question of how much is the iPhone a channel for selling stuff through iTunes etc, or do they really want to make a profit on the hardware. As a company they have focused on premium/quality. As long as they sell all they can make, then they should just focus on high value customers, especially ones willing to pay for apps, music and videos.

    Windows 7 mobile has a minimum spec set which will preclude cheap handsets for a while. I think Bill wants to try to get into that ‘quality’ area, at least to begin with.

    Handset manufacturers in the Android space don’t have that ‘channel’ income. Inevitably some Android handset makers will go for the cheapest level. I guess the carriers would prefer someone spending $150 for a handset gets one that will tempt them into downloading videos and all that expensive data. So my feel is that the carriers will subsidize the Android handsets down a bit more.

  3. When you think about $55 uncapped for an Android phone in terms of the data you can consume, it’s an even better deal, since the carriers are all moving toward tiered plans for pipe.

    The iPhone is definitely a channel for apps, but then again so is every so-called smartphone now. I’m not sure how Google works with the carriers IRT apps, but I wouldn’t be surprised if more carriers go the Verizon route and open their own stores to establish that channel.

    My point about iPhone is that they could sell it cheap (and do with older models), essentially subsidized by the newer models and tap the low-end market, still pulling in apps and driving carrier value.

  4. All carriers = at&t and us cellular. Verizon has a presence but as soon as friends with that carrier arrive their service goes to moosedroppings. Tmobile kinda works, they don’t cover but it picks up the same weak signal we have. Yea, it really is unacceptable, except thats what there is. I just started doing more work remotely, too, which means working from Starbucks a few towns over 🙁 Nobody forced me to move here, of course, and its wicked fun snowshoeing and hiking. But, yea, options for the needing-to-be-connected group are slim. I’m not completely joking about the aluminum foil solution. It may not be a pine tree and Reynolds wrap, but we are considering what we can do with a bunch of old parts to pick up more consistent data signal, if nothing else.

  5. If I went Android, I’d probably look for a marketplace for the handset vendor rather than the carrier. If someone puts an app on, say the HTC marketplace, I’d be more confident that it would work with an HTC handset.

    But then I’m still happy with a regular dumbphone and a netbook.

  6. Interesting. I don’t doubt that there will be several markets competing with the official Android Market. Still, I think people running Android phones associate the phone with the carrier, not the hardware manufacturer bc they buy from the carrier.

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