Comments on: Building a better carrier

By: WirelessNorth

WirelessNorth — Thu, 10 Dec 2009 23:02:57 +0000

Thanks for your comment. Yep we've heard that, although the contracts are 3yrs the actual device replacement rate averages closer to 18 months and is even getting shorter. And those are for subsidized devices. So from a carrier perspective 3yrs is only the best-case scenario, in reality they have to budget for earning payback on handset subsidy costs within 18 months.

It's managing the customer expectation for getting a free ice cream cone every time they drop it in the toilet that's killing the carriers.

By: WirelessNorth

WirelessNorth — Thu, 10 Dec 2009 22:55:58 +0000

Thanks for your comments J L. What's important is that $600+ is what the handset makers are charging, whether to the carriers or if you buy direct/unlocked. RIM makes a 40-50% gross margin, apple probably more. The recent trend is that smartphones have been going up in effective price not down. A lot of that is iphone-driven.

So what we need is more competition and compelling platform choices amongst the top end hardware makers. And it's coming, just you wait. The combined forces of moore's law and open OSes (that aren't just windows mobile) will have an effect on commoditizing smartphones.

By: WirelessNorth

WirelessNorth — Thu, 10 Dec 2009 15:02:57 +0000

It's managing the customer expectation for getting a free ice cream cone every time they drop it in the toilet that's killing the carriers.

By: WirelessNorth

WirelessNorth — Thu, 10 Dec 2009 14:55:58 +0000

By: thumper212

thumper212 — Mon, 07 Dec 2009 13:18:24 +0000

Telus does offer better deals for there heavy users. Most heavy users can get a new phone for free every year (except Iphone) They do have to sign a new 3 yr contract so in reality they are only extending thier contract by a year. I assume Bell and Rogers probably offer something simular. I have been in this business since day 1 and there never used to be any hardware subsidy and if this was the case today I am sure most people would not have multiple cell phones in their family's Without the hardware subsidy it sure would make it easier to get customers replacement phones when they have non warranty damage. Most customers get extremly irate when they get their first phone for free and drop it in the toilet a few weeks later and then you tell them it is going to be $200 to $600 to replace. If they paid that initially they would probably be more careful and they would know the actual price of the phone. Not to may people would be buying $500 blackberries for their 10 year olds. The bad thing for the carriers is that they would have less subscribers

By: J L

J L — Fri, 04 Dec 2009 19:13:51 +0000

Thanks for the insightful responses despite my somewhat snarky reply. (and forgive my exasperation)

Re WN's quote, I think Japan is a good example for this because when they eliminated carrier subsidies, the handset sales dropped as expected. There was a slight recovery since then, but overall, people seem to be holding onto their phones longer than before. They're no longer paying the same exorbitant subscriber fees, either. Then again, in Japan the ARPU was still CAD$65 in 2008, so the carriers aren't doing so badly either. Not to mention the environmental benefit...

The other thing is, a smart phone doesn't cost $600, no matter how much Apple would like you to believe that. Ever been to a pirate phone market in China? That will tell you how much it really costs to make one of those. The rest is just fat.

By: WirelessNorth

WirelessNorth — Fri, 04 Dec 2009 16:45:49 +0000

Interestingly, heard an exec at major carrier speaking about this the other day. His words “ya, we screwed up as an industry. People think smartphones really cost $200 not the $600 they actually cost (or more for the iPhone) and they don't realize or appreciate what they are getting, our subsidies should have been much more transparent”

By: Chris

Chris — Fri, 04 Dec 2009 15:50:35 +0000

Some may imply that it's explicit and not tacit, but that could be taken as slander, so we'll leave it at tacit. ;)

By: WirelessNorth

WirelessNorth — Fri, 04 Dec 2009 15:44:39 +0000

Small correction: “tacit collusion”.

By: BartV

BartV — Wed, 02 Dec 2009 02:11:56 +0000

Hi JL,

you are totally right and the next big step for the Canadian market will be to offer the “SIM-only” plans. These have been commonplace in Europe for quite some time – but not in Japan where the carriers still think that they need to push the latest technology handsets into the market with as many high-tech features they can come up with.
Many of the SIM-only plans are actually not as transparent as you would like: they do have a contract and after the contract term the rates often go up. So subscribers who are not asleep will terminate their contract after the first term and shop around for a better deal. I have never understood why European carriers structure their plans like this.