"Subsidies drive innovation"
They said the same about the dot coms,
and innovation there was a lot,
but sustainability and profitability there was little,
which is why boom was followed by bust.
>> In markets which are approaching saturation, operators are more and more
>> moving away from subsidising handsets, at the very least the level of
>> subsidies are being reduced.
>
>It is true that we are approaching saturation in Europe, but this is only true
>for voice. The mobile data usage is still quite low compared to Japan,
>especially if we exclude SMS.
Oh, how convenient that is.
How about a statement like "Internet usage in the US is still quite low
especially if we exclude WWW and email".
:-o
>> Such subsidies are another indicator of an immature market and they create
>> bubbles. This is like a big Ponzi scheme, and eventually someone will have
>> to pay for that nonsense. It is not sustainable.
>
>Subsidies can actually be an indicator of a really sophisticated market, since
>they lower barriers to adoption, in particular among consumers.
>Who could have predicted in the beginning of the 90s that even teenagers would
>be using mobile phones? Handset subsidies have been a very important factor
>behind the rapid adoption of mobile telephony.
Which confirms what I said.
The term immature does not refer to the technology, but to the status of
the market within the context of the business cycle. Initially as you
develop a market you go for market share and you are less concerned with
profitability, then eventually you will have to transition from a market
share driven to a sustainable and profitable model, which in most cases
isn't the same.
There is a strong need for
>mobile communications, and this is clearly not a bubble.
Not so long ago they said the same about the dot coms, the so called new
economy.
In the new economy, they said, traditional economics don't apply, so they
said ...
Haven't heard the term "new economy" lately, have we ?! They have gone quiet.
>> I rather pay the full price for my phone, get cheaper services in return
>> and use the phone longer.
>>
>> Anything else is nonsense, from an economy point of view.
>
>Handset subsidies make perfectly economic sense when it comes to stimulating a
>new industry around innovative mobile data services, as we have seen in Japan.
It depends on the context. Iridium was very innovative but still it didn't
make sense as a business. If they had given away those satellite phones for
free, it would only have contributed to a higher burden of unrecoverable
debt. It was a very innovative service that nobody really needed.
>Subsidies create a critical mass and solve the chicken and egg problem that
>often arises when introducing a new technology
At some point though every business has two ways to go
- profitable and sustainable
or
- bust
TANSTAAFL again.
regards
benjamin
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Received on Fri Jul 27 22:57:52 2001