iPhone and Cell Phone Market Dynamics

[fustercluck]

In Europe and Asia, it's common for providers to sell unlocked phones with a contract plan at a reduced rate. When you sign the contract, you obviously lock yourself in... but your device remains unlocked. The whole locking technology is utterly infuriating to me.

For the record, I've got an unlocked SonyEricsson phone that I purchased in Australia on a 12 month contract, which I now use in the US with a T-Mobile PrePaid SIM Card. It works great and the phone wasn't expensive up-front because of the 12 month contract which I signed with the provider.

At the end of the day, you pay for the phone, regardless of how the plans are organized. But yes, I do agree that the initial outlay of cash can deter consumers. Hopefully, Apple can create a revolution in the cell phone market: the SIM locking technology is ridiculous (if you buy a household phone, you can use it with any provider... why not with cell phones?). What doesn't seem to be acknowledged in much of the press coverage is the fact that network providers can still subsidize the handset by selling the phone bundled with a service contract.

Totally agree. We NEED unlocked phones, especially those of us who travel internationally. I'm sorry, but I'm not paying an American phone company $1.99 a minute to use my cellphone when I'm in Europe.

We also need to be using one standard internationally. For me, Verizon offers the best call reception, but the fact that their technology isn't compatible with the European/worldwide standard is a serious drawback. (CDMA vs. GMA or whatever the acronymns are.)

(By the way, if anyone does call Europe frequently - especially from a cellphone - I suggest looking into Gorilla Mobile which I use daily. It has saved me thousands of dollars in this past year alone.)

 

[aswitcher]

Right... no one's saying its hard to do... but its simply now how this system works.

For example, if your mom (in Europe) goes to phone provider and says, "I want a cell phone from Apple and buy service here", I'm sure they'll be people who can answer her every question and set that up.

Here, if my mom walked into T-Mobile, I'm not convinced the support people could do the same. That's not to say it can't change... but Apple has to make the process seamless if they go that route.

arn

You could easily buy from an Apple store with a prepaid SIM...they could have on offer all the major telcos so there is no bias.

They could also have package plans of the same arranged with the telcos.

Or they could just sell you the phone and point you in the direction of a telco or two.

 

[LastZion]

How hard is the concept of an unlocked phone? Really says alot of how intelligent they think consumers are. I hope this is the route Apple goes

 

[stcanard]

How hard is the concept of an unlocked phone? Really says alot of how intelligent they think consumers are. I hope this is the route Apple goes

Here's your first problem.

Person buys an unlocked Apple phone, then goes to Verizon (or here Rogers) and says "I want to buy service for this phone".

9 times out of 10 the answer will be "Sorry, but that can't happen. Only phones bought from Verizon will work on our network. You need to buy this LG Chocolate if you want a music phone"

Then you get, depending on the stubbornness of the customer, a 5 - 30 minute argument, the end result of which is that the sales drone will refuse to sell the service, and the customer storms back to the Apple store and demands to know why he was sold a phone that wouldn't work.

Apple will, of course, explain what's going on, the customer can go back to Verizon, and still will not get the service sold to them. Its nothing to do with the intelligence of the consumer, and all to do with the training of the person selling the service.

And that completely ignores the CDMA issues that most consumers are completely unaware of.

The _only_ way an unlocked GSM cellphone would sell to the average consumer (and I've got my fingers crossed, since I hate my RAZR, I would love to get something else) is:

1) Apple positions it as being a full-fledged iPod so people can swallow the price. If they're comparing against a subsidized $50 Sony Walkman phone they need a reason to understand the price difference, and in a country mostly unaware of locking -- remember in Canada we don't even have number portability -- in-depth explanations of that aren't going to fly

2) Apple is positioned to sell some sort of service directly with it, so the "it won't work" argument doesn't happen, and/or Apple positions themselves as the "upgrade" phone, so when you walk into the Apple store they pop out your Verizon sim card and put it in for you.

Mind you that would be very typical of Apple's current trend -- selling something that looks simple to the average consumer, but offers extra possibilities to those technical enough to understand.

 

[JonMan]

As much as I want the iphone to come into existance (especially as an AAPL shareholder), I don't see it hapening. Way too many logistical issues, many of which have been raised in this thread.

Why is everyone so sure an iphone is in development? Apple has not confirmed this in any concrete way! All this is doing is creating a (dangerous) bubble in their stock!

JM

 

[ChrisA]

I find the whole "free minutes" concept much more confusing. When I get a phone, I want to the know the price of the hardware, the monthly subscription cost, and the price per minute for a call.

But you are not the average consumer. If you ask the people they are truly brainwashed into thinking ALL their minutes are free and their phone is free too. If you try to explain that they are paying $50 per month for 2 years so they can have that free stuff it is just to complicated. Remind them that $50 x 24 = $1,200 and they at first don't believe it. The phone company marketers are darn smart. They know that most people would never be able to spend $300 on a phone they just want to know "how much per month" it's the same with buying cars. "How much per month?" is the only question many people ask.

Maybe it's just California but here this person was begging for change at the gas station. I told her I used plastic money so she went away and made a call on her cell phone while she waited for the next customer The current system allows people who could never get $300 all at once to by phones and the phone companies have greatly expanded their market by this method. IT clearly works.

Appple will simply "cherry pick" the phone market but heck I'd go for 1% of the cell phone market. 1% is a lot, even for Apple.

 

[wongulous]

The confusion will be even greater when it comes to GSM/CDMA/TDMA/iDEN, etc. Then once you pin down the technology, you have to make sure it supports the correct band. Say the phone is GSM, there are I believe 4 different frequencies that GSM uses and you have to make sure it's compatible with your carrier.

Despite the confusion, I want Apple to go the unlocked route. I think carriers subsiding it would be bad, the last thing I want is an Apple phone with my carrier's logo plastered all over it.

You and several others in this thread are REALLY trying to overcomplicate this.

No provider users TDMA anymore, and iDEN (Nextel's former technology) is all but dead since Sprint has stopped building it out and began integrating both PCS (CDMA) and iDEN technology in the new Sprint|Nextel phones. There are four bands of GSM, but only three used here, and three in the rest of the world (two overlap). Most providers only use 1-2, though this will all change somewhat with the newest purchases of spectrum from the FCC this year.

All GSM phones are compatible with all GSM carriers, assuming the phones are unlocked. That's the point of a SIM card and the PRL OTA (Preferred Roaming List Over The Air download), you don't have to "reprogram" your phone, and you don't have to bring it in to your service provider to give them an opportunity to say "no" or sell their wares. iDEN uses SIM cards similarly, but there is sometimes still some programming that must be done. CDMA, however, never did implement their SIM-like initiative, so those who use CDMA providers (Sprint, Verizon, Alltel, US Cellular, Cricket, MetroPCS, CellularOne, etc) do have to have their new handsets programmed with identifying network information, and their ESN/IMEI information stored in the provider's network. In the case of some providers, notably Sprint, they have for many years steadfastly refused in 100% of scenarios, from retail to corporate level, to activate ANY phone that did not come from Sprint, unlocked or otherwise. Verizon is almost as bad, though at any retail front the idiots working there (speaking as a 4-year wireless sales consultant) will flat-out refuse to spend their time activating your unlocked or third-party phone, even if it is unlocked. So Apple is going to have to make some agreements to be a supplier to at least several CDMA networks unless they want to stay GSM-only.

I sincerely hope they don't go GSM, because T-Mobile and Cingular not only have the worst coverage (though they are awesome in like the top 40 cities of the US), but also some of the most unfriendly and in some cases expensive plans. In the midwest, CDMA providers rule the population, and eventually how many people you know on your same provider becomes somewhat important with mobile-to-mobile savings allowing you visible fiscal savings with more conservative plans.

Apple as a MVNO even complicates the problems of target market further than a GSM-only iPhone, because that's a whole 'nother switch for consumers to make, and there has to be markup somewhere.

Here's hoping they make both locked-carrier-delivery GSM models, unlocked GSM models (all quad-band for worldwide deployment), as well as locked-carrier-delivery CDMA models.

 

[bigandy]

In Europe and Asia, it's common for providers to sell unlocked phones with a contract plan at a reduced rate. When you sign the contract, you obviously lock yourself in... but your device remains unlocked. The whole locking technology is utterly infuriating to me.

that certainly doesn't happen in the UK or Poland. you get a phone subsidised on a contract term of 12 - 18 months, and you get a phone, but it's SIM-locked to the network. until recently companies didn't create the same annoying software customisations that their US counterparts did, but they are doing this on an increasing basis now.. And branding phones themselves, unique to their network (O2 X1, XDA; Orange SPV etc).

But nobody sells unlocked phones on a contract.

 

[bigandy]

All GSM phones are compatible with all GSM carriers, assuming the phones are unlocked.

I sincerely hope they don't go GSM.

Here's hoping they make both locked-carrier-delivery GSM models, unlocked GSM models (all quad-band for worldwide deployment), as well as locked-carrier-delivery CDMA models.

Three sentences, three problems.

GSM phones work on four different wavelengths and are only compatible with all GSM carriers if they are Quad band. Even here in the UK there are two different bands used - early GSM phones couldn't hop on to another network if you changed sim cards after unlocking.

Second & third sentence - you hope they don't go GSM but they do? Which is it? I sincerely hope they do, otherwise they're shutting out the vast majority of worldwide users.

I really don't care about the arguments regarding the 'better technology' according to one know-it-all or another - all i care about is them making (if it's even happening ) a phone that can be used and sold around the world..

GSM it is then

 

[sam10685]

Finally, another option is one that was hinted at by Kevin Rose. The concept of an "unlocked" phone is more popular in Europe and Asia, but customers can buy a phone independent of service and buy service in the form of SIM cards from Cingular or T-Mobile. This concept, however, is less familiar in the U.S. and could introduce some confusion to the consumers.

i haven't been following Apple/iPhone a lot recently. is this thing comming soon?

 

[digitalbiker]

So how do you get service for an unlocked phone in the US?

You and several others in this thread are REALLY trying to overcomplicate this.

No provider users TDMA anymore, and iDEN (Nextel's former technology) is all but dead since Sprint has stopped building it out and began integrating both PCS (CDMA) and iDEN technology in the new Sprint|Nextel phones. There are four bands of GSM, but only three used here, and three in the rest of the world (two overlap). Most providers only use 1-2, though this will all change somewhat with the newest purchases of spectrum from the FCC this year.

All GSM phones are compatible with all GSM carriers, assuming the phones are unlocked. That's the point of a SIM card and the PRL OTA (Preferred Roaming List Over The Air download), you don't have to "reprogram" your phone, and you don't have to bring it in to your service provider to give them an opportunity to say "no" or sell their wares. iDEN uses SIM cards similarly, but there is sometimes still some programming that must be done. CDMA, however, never did implement their SIM-like initiative, so those who use CDMA providers (Sprint, Verizon, Alltel, US Cellular, Cricket, MetroPCS, CellularOne, etc) do have to have their new handsets programmed with identifying network information, and their ESN/IMEI information stored in the provider's network. In the case of some providers, notably Sprint, they have for many years steadfastly refused in 100% of scenarios, from retail to corporate level, to activate ANY phone that did not come from Sprint, unlocked or otherwise. Verizon is almost as bad, though at any retail front the idiots working there (speaking as a 4-year wireless sales consultant) will flat-out refuse to spend their time activating your unlocked or third-party phone, even if it is unlocked. So Apple is going to have to make some agreements to be a supplier to at least several CDMA networks unless they want to stay GSM-only.

I sincerely hope they don't go GSM, because T-Mobile and Cingular not only have the worst coverage (though they are awesome in like the top 40 cities of the US), but also some of the most unfriendly and in some cases expensive plans. In the midwest, CDMA providers rule the population, and eventually how many people you know on your same provider becomes somewhat important with mobile-to-mobile savings allowing you visible fiscal savings with more conservative plans.

Apple as a MVNO even complicates the problems of target market further than a GSM-only iPhone, because that's a whole 'nother switch for consumers to make, and there has to be markup somewhere.

Here's hoping they make both locked-carrier-delivery GSM models, unlocked GSM models (all quad-band for worldwide deployment), as well as locked-carrier-delivery CDMA models.

So after all this, how do you get service for an unlocked phone?

How do you buy a sim card with prepaid minutes for a cell phone and what rate would it use for local vs long-distance, walkie-talkie mode, nights and weekends, text-messaging, etc.etc.

Say I walk into a CIngular store in the US, with a new Apple phone, will they even sell me a prepaid sim card for this phone, or will they force me into a normal 2 year rate plan?

The problem with contracts is that they include paying for a phone. If I already have a phone, I still don't save any money. I have to pay the same rate as the contract which pays for a new phone. I lose around $200 - $300 depending on the contract.

 

[digitalbiker]

i haven't been following Apple/iPhone a lot recently. is this thing comming soon?

Not only does no one know when the Apple phone is coming, they don't even know IF it is coming at all!

In addition, we don't know how much it will cost, what features it might have, or if it will be any better than a piece of cr@p. Apple does occasionally create duds!

So all said, we are debating a mythical product, with a mythical release date, at a mythical price, providing mythical service, with mythical features.

Kind of seems like a waste of time, huh?

Isn't Apple having a major MWSF 2007 in about 3 weeks time? Why the "BLEEP" aren't we hearing any rumors about "COMPUTERS". Doesn't Apple make these anymore.

 

[manu chao]

that certainly doesn't happen in the UK or Poland. you get a phone subsidised on a contract term of 12 - 18 months, and you get a phone, but it's SIM-locked to the network.
But nobody sells unlocked phones on a contract.

I cannot say exactly what percentage of phones sold in Germany and Switzerland are locked but I would guess it is a very small one. I know enough people who went even so far to buy a subsidized phone on a one year contract, then went to another provider, got a (cheaper) contract there and just payed the monthly fee for that unused contract until the one year was over.

A lot of people also only use prepaid SIM cards. They get a phone from one source and then just buy prepaid cards for a fixed amount.

Moreover, in most European countries you have between four and six different operators, all of them GSM offcourse. They might operate on either 900 or 1800 MHz but almost all phones now support both of them.

 

[manu chao]

Say I walk into a CIngular store in the US, with a new Apple phone, will they even sell me a prepaid sim card for this phone

Why the heck is this even a question? You walk into a store and ask for a prepaid card. If they ask what phone it is for, you'll tell that that is none of their business. Do Chevron gas stations only sell gas to GM cars?

 

[manu chao]

Person buys an unlocked Apple phone, then goes to Verizon (or here Rogers) and says "I want to buy service for this phone".

9 times out of 10 the answer will be "Sorry, but that can't happen. Only phones bought from Verizon will work on our network. You need to buy this LG Chocolate if you want a music phone"

If the US providers are really such a******s, just get the cheapest phone and plan they offer, take the SIM card out, put it in your Apple phone and sell the other phone on E-bay. The provider would be doing itself a disservice because it has to give away a phone to sell a contract, if in fact it could have sold you the contract without it.
If they block this via technical means, sue them for anti-trust violations.

 

[manu chao]

But you are not the average consumer. If you ask the people they are truly brainwashed into thinking ALL their minutes are free and their phone is free too. If you try to explain that they are paying $50 per month for 2 years so they can have that free stuff it is just to complicated. Remind them that $50 x 24 = $1,200 and they at first don't believe it. The phone company marketers are darn smart. They know that most people would never be able to spend $300 on a phone they just want to know "how much per month" it's the same with buying cars. "How much per month?" is the only question many people ask.

If the average person does not get the $50 x 24 = $1,200 thing, I would start to worry about that whole notion of capitalism that the market participants in general are 'well informed'.
In a sense, this is just another kind of consumer credit. And the whole consumer credit business has really taken on insane proportions in the US (and increasingly also elsewhere).
There only three things in life, I would ever use a credit for:
1) Housing, 2) Higher education, 3) Tax avoidance

 

[Americanloti]

Why the heck is this even a question? You walk into a store and ask for a prepaid card. If they ask what phone it is for, you'll tell that that is none of their business. Do Chevron gas stations only sell gas to GM cars?

Well said. I have an unlocked L7 bought on ebay and I'm using it with a prepaid T-Mobile SIM card. The T-Mobile sales rep didn't even ask, why would he?
I'm from Italy and over there prepaid rules over standard contracts. All phones are unlocked even if they are branded by the carrier. So if you are pissed off with you service you can easily buy a new sim card and keep you current phone. Obviously, phone are a bit more expensive than here in the US (you don't get them for free for example), but at least you don't have this long commitments with the phone company. It's funny because when I moved here I found so confusing the monthly plan idea, but from what I've read so far most of the people find confusing the prepaid/unlocked phone option.

 

[tk421]

CNN Money offers a good breakdown of the current dynamics between cell phone carriers and cell phone manufacturers. It also discusses the options Apple may have in introducing a cell phone to the U.S. market, and how it may upset the current balance of power.

I hate the contract system that phone companies use. Two years is a long time to be stuck with a service provider, and the fees for getting out early are huge.

Come on, Apple! Upset the current balance of power!!

 

[stcanard]

If the US providers are really such a******s, just get the cheapest phone and plan they offer, take the SIM card out, put it in your Apple phone and sell the other phone on E-bay. The provider would be doing itself a disservice because it has to give away a phone to sell a contract, if in fact it could have sold you the contract without it.
If they block this via technical means, sue them for anti-trust violations.

But that's the whole problem --- that works for us, but not for your average-person-on-the-street who doesn't even know that is possible.

Its that average-person-on-the-street that they need to be a success.

As for North Americans accepting this state of affairs, remember we've been raised on CDMA where the whole idea of an unlocked phone is a moot point anyway, since there is no sim card to deal with.

 

[failsafe1]

I prefer to buy unlocked phones on eBay and keep the cheap freebie phone as a back up. That way I just switch out my sim card into whatever GSM phone I can afford. I can also buy sim cards for other countries when I travel and simply buy phone cards for the local area. No roaming or long distance charges! Brind it on but lower the price.

 

[manu chao]

But that's the whole problem --- that works for us, but not for your average-person-on-the-street who doesn't even know that is possible.

Funnily enough, the average-person-on-the-street seems to be buy windows PCs and not Macs and Apple has managed to deal with it (and seems finally even to be gaining market share).

 

[digitalbiker]

Why the heck is this even a question? You walk into a store and ask for a prepaid card. If they ask what phone it is for, you'll tell that that is none of their business. Do Chevron gas stations only sell gas to GM cars?

First off, your analogy does nothing for me! I don't get a free car with a two year contract for gas from Chevron. So cars and gas have about as much to do with cell phones as tea in China.

2nd, it was an honest question because I have never seen a sim card sold this way from service providers in my area.

In my area, you can either buy a cell service plan on a 2 year contract with a subsidised locked phone or you can buy a locked phone with prepaid minutes. Once the minutes are up, you return to the service provider and they re-program your phone.

I have never seen a pre-paid minutes sim card for cell service offered for sale. I am not saying that it doesn't exist elsewhere but I haven't experienced this in my area.

I was wondering if you had actually had first hand experience at buying a pre-paid cell minutes sim card with Cingular because we do now have Cingular service here.

 

[DeepIn2U]

unlocked phones would cause confusion? How? It's a pretty simple concept to me. Buying chunks of airtime seems to be the big hurdle. Who would provide support for problems other than with hardware?

I read the article and thought HOW would this present any confusion amungst users. Any SMartphone user on a GSM-based network (includes GPRS, EDGE, 3G/UMTS/HSDPA/HSUPA in the future) should be fully aware of this concept. Until I read the first post above.

Manufacture provides hardware support.
Service Provider providers network/services support (incl Airtime, Data Connectivity over the wireless provider network, wireless provisioning, and billing) should any issues arise. NOW if Apple becomes an MVNO then they'll do level 1 support of network issues. If they cannot resolve then they will liason to Cingular (for example) to provide more support. Not their regular paid rep. But more of their management team for large clients (corporations/government/mvno). Case in point is Virgin Mobile (you get a bill from them, any billing descreptancy's or changes you want to make) your dealing with Virgin Mobile directly & only. If you have data provisioning for say EV-DO service then your still speaking with Virgin Mobile but they'll have to get back to you in a few hours because their speaking with THEIR OWN support.

The average person on the street may not know about unlocked/unbranded SIM card based phones; however they learn from those that do and have incredible phones that they see the techies with and want. How else would Symbian (S60/UIQ3) or Windows Mobile Smartphones could thrive?! Also these analysts need to pull out of their Arse's and think of Apple coming into the market just like Palm did back with the Treo 180/270 came along. Those where unlocked first and were sold on their website. months later THEN Cingular, Tmobile and other providers picked it up because they wanted the piece of the pie

 

[stcanard]

Funnily enough, the average-person-on-the-street seems to be buy windows PCs and not Macs and Apple has managed to deal with it (and seems finally even to be gaining market share).

Actually an awful lot of the APOTS (tm) buy Macs now, too. That's what the original flavoured iMac did, and that coincides with the start of Apple's resurgence.

It's also the APOTS (tm) that made the iPod a success and the Newton a failure.

So, yes, history says that the APOTS (tm) is required for a success, especially in what is already a pretty saturated market.

 

[manu chao]

2nd, it was an honest question because I have never seen a sim card sold this way from service providers in my area.

In my area, you can either buy a cell service plan on a 2 year contract with a subsidised locked phone or you can buy a locked phone with prepaid minutes. Once the minutes are up, you return to the service provider and they re-program your phone.

I cannot vouch for all European countries but in a lot of them, you can buy prepaid SIM cards even at kiosks (similar to buying a long-distance calling card from e.g. AT&T). From what I know, this is also the case for a lot of developing countries, in India for once I have seen this myself. You can recharge your prepaid card via phone, over the internet or even at the supermarket counter.

These are the benefits of the SIM card aspect of GSM phones and a regulatory policy which created a competetive market (at least within single countries).