(keitai-l) Re: Phone Handset Price

I believe you are going in the right direction when you assert pricing models for usage effect initial terminal costs.  However, I also believe there are a few other big determing factors around the actually cost of manufacture:
1.  functionality of phone = cost
2.  market size = volumes

One dynamic defining the relationship of these two is the adoption of standards.  If you have to make a proprietary technology phone for a relatively small market (ala J-Phone), your costs are highest.  If you shipped a standard technology phone in the same market, your costs would be lower because they would spread across a global, not local, scale market.

A second dynamic is the functionality shipped at what time.  TFT color costs more than STN.  The applications they are suited for are different.  Or even more dramatically, why have any color when you don't have content that exploits that functionality.  The key is to have just the functionality that suits your customers' needs, both end user and carrier.  The end user may want coolness (polyphonic ringtones), but if the required investment by the carrier to utilize this coolness and get returns is too great or increases the cost of terminals too much, a business decision to not require the functionality in phones may be made.  This keeps down the cost of the terminals.  That is, decisions to deploy new functionality into the phone and network are driven by cost vs. utility on end user sides, but the carrier and phone manufacturer try to understand that PLUS cost/revenue/margin concerns.  Where they believe these intersect (acceptable price and functionality PLUS good busine!
 ss) is when they decide to introduce new functionality.  Every market is different where this happens.  Why?  Well, in Japan phones are heavily subsidized and in Europe they are generally not.  Therefore, the cost concern is generally removed for Japanese consumers so they are free to demand more and more functionality, no matter what the cost.  In Europe they are more exposed to the REAL cost of a new function, so they are more cautious in demanding/adopting the latest/greatest functionality terminals.  In the US, the consumer price sensitivity seems to be high (are they too used to getting stuff for free?  the all-you-can-eat culture?) and expectations about mobile communication low (the network is horrific) so there is an emphasis on low end, low functionality phones.

A third big factor is the willingness of carriers to subsidize.  In Europe some countries prohibit subsidies.  Corporate governance and emphasis on profitability have lead to the phasing out of it by many companies.  Here in Japan, it remains course du jour.

Just one more possible reading as to why terminal costs maybe higher/lower in certain markets.



-----Original Message-----
From: ext Paul Bryan Lester [mailto:pbl1@livedoor.com]
Sent: Wednesday, February 06, 2002 8:57 AM
To: keitai-l@appelsiini.net
Subject: (keitai-l) Re: Phone Handset Price



    Here's my experience with the price differential.
In the US you get a phone with less features that costs more initially
but usage is lower because the big discounts are on your
monthly bill where you get a lot of free time.

    In Japan, the cheap phones are always put out by the competitors
which have less market share.  They get your money anyway through
2 methods.

1:  the quality of the connection is not as good is as many places
with the 1 yen phone's network.  (They save money by not providing
the best service possible)

2:  The monthly bill has less free time (often none) and thus usually runs
higher
than the US equivalent unless you use your phone a whole lot.

    So after a few months the company has gotten the money to pay
for your 1 yen phone through higher monthly rates disguised in varied
discount programs.

    They used to require you to own the phone for at least 6 months
all the time.  That is the way they used to recap the costs.  No longer.

    Now instead they give you a monthly discount proportional to
the time that you say you will own the phone (which is better for us
developers
who need phones without connections).  In this way the cheaper the monthly
bill you have the more money they make off you because you have
to own it longer or pay a high severance fee.

    In conclusion you don't need to worry about your soul.  Just
be careful which pricing plan you choose and make sure it
fits your desires.

    I have heard rumors of the leader (DoCoMo's) phones on sale
for cheap of 1 yen but haven't seen it with my eyes yet.

Mike Derouin wrote:

> Walking around Akihabara and seeing all the phones at 1 Yen - how much
> of my soul am I losing to get these prices?

--
-Paul Lester
pbl1@cornell.edu
http://members.tripod.com/~pbl1/

"Don't Forget to Try in Mind"
      "May the Force be with you"
              "Ketchup is Good"
-"Ketchup, natto and kimchee, that`s what Wogis are made of"



This mail was sent to address drew.freyman@nokia.com
Need archives? How to unsubscribe? http://www.appelsiini.net/keitai-l/