Several months ago, just a short while after the HTC Thunderbolt launched on Verizon for $249 with 2 year contract or $749 outright, the retail price was silently dropped down to $569, and a number of other devices saw their non-contract price magically drop as well. I was paying close attention to pricing because I recognized that a consumer could upgrade and cancel for less than the original cost of the phone outright ($249 upgrade price + $350 ETF = $599 total < $749 off-contract). However, the corresponding drop of other retail prices created the opposite effect, which is exactly what I was hoping to see happen.
Now that the prices on many of the 3G smartphones are below $500 (see HTC Incredible 2 @ $469, HTC Trophy @ $429, Sony Ericsson Xperia Play @ $449 & Motorola Droid X2 @ $449, etc) we are closer than I can remember to an environment where it can be in the consumer’s best interest to ignore the subsidies offered by carriers and purchase hardware direct from the manufacturer without getting locked into a contract. This is a small but crucial step toward a more ideal wireless market.
In the perfect wireless world, all hardware would be compatible with any carrier, changing carriers would be as simple as switching a SIM card, and the hardware would need to be cheap enough off-contract to be competitive with the subsidized price offered by the carriers. The path between where we are now and that hypothetical situation is both treacherous and long, and the roadblocks are many, but I believe this drop in retail price is a step down that path. If we were able to attain even a partial version of that scenario, the consumer would have much more power than it currently does.
There are some aspects of the ideal scenario which I think are currently out of reach, mostly the first. The LTE build-out of the US is already taking place, and the big players have already decided to use different spectrum once again. However, it is not impossible that the device manufacturers could take measures to sidestep the carriers attempts at creating exclusivity. Technologies that expand upon the ideas presented in the Qualcomm Gobi chipset and penta-band cellular radios that are currently available could create exactly the conditions we are seeking. The problem is that the current institution of carrier exclusivity obstructs the need for such a technology to be developed. The device manufacturers need an incentive to step away from said institution and invest in the technology that would enable their devices to be carrier agnostic. One incentive could be brand loyalty: if the manufacturer is convinced that a consumer would continue to choose their product over their competitor’s, they may be more likely to allow you to use it on your carrier of choice.
Many people doubt that this Utopian-style wireless market is attainable in the US, and I share some of that disbelief, but I don’t find it to be inconceivable. If manufacturers could find a way to move through some of these obstacles and get even a small portion of the market to choose contract-free devices at an approaching-competitive price (sub $200 difference), then we would at least be progressing and not the opposite. Lower retail prices are just a piece of the pie, but that is some delicious and appealing pie. Let’s hope the US gets a taste someday.
Photo Credit: Emily Carroll, Picture Book Report - "Community, Identity, Stability"
