I can get a cell phone within a few blocks of basically anywhere I am.
The carriers make money selling calls and data: not phones.
And while I'm talking about this kind of thing... I can go anywhere and get "free" wifi: even at Circle K. Ya. They have free wi-fi at the Circle K. I can sit at a coffee shop, get a 3 dollar coffee, and work all day. Restaurants are the same.
Admittedly, the internet speeds to the USA are not that great. However, internal to Vietnam, they are really good.
You can go into a store, pay 5€ and walk out with a new line in less than 5 minutes though.
It's mainly due to terrorism and security excuses, not real reasons.
In Australia you also need to show ID, but it is very quick. Although expensive.
UK was the best, and for £15 all you can eat data.
The average US cell phone user has no idea that phones and service aren't one-in-the-same.
I live in China, and prepay is great. I still pay full price for my phones, but I come out ahead in the end.
As far as I can see there are no pay as you go data plans in the US. Only subscription plans. If there are I'd like to know of them
I found out that AT&T has annoying restrictions based on the IMEI number - for a IMEI that maps to a computer, they will only offer you the $50/month plan. For a IMEI that maps to a tablet, they will allow you to to buy the $15/month plan. FWIIW, they require you to enter a IMEA number, not the number of the device you are using the SIM in. ;-)
I am currently running my phone on a T-Mobile on a $30/month pre-paid plan with unlimited (for some definition of "unlimited") data and 100 minutes of talk. Unfortunately, they have poor coverage in about half the area I frequent... I end up roaming on AT&T and don't get data coverage there.
Both those options are essentially the same as your Singapore plan.
See footnote 6 on the page you linked to, then click on any of the plans, then click View Details next to any of them.
I'm visiting New Zealand now. The first thing I did when I got off the plane was purchase a 3G prepaid (2GB) USB dongle for $70, and I can top it up if I need to and move the sim card to a phone if I want to. I didn't have to sign or agree to purchase anything extra.
I can do this in Australia, too. What the hell, USA?
Note that the plan you really want is the "Tablets and Gaming Devices". The "Computers, Netbooks, Aircards, Others" plan is a rip-off except for the $50/month 5GB plan, which is the same as the "Tablet" plan. On the "Computers" lower data rate plans, it is $15 per day, $30 per week. Data is data, so they are just ripping you off.
AT&T DataConnect Pass plans
* No Long-Term Contract
* Plans are active for 30 days or until depleted.
* Plans automatically renew every 30 days for domestic data plans, unless you cancel.
* International plans do not automatically renew.
* Plans can be cancelled at any time.
Domestic DataConnect Pass Plans Cost
DataConnect Month Pass 250MB $14.99
DataConnect Month Pass 3GB $30.00
DataConnect Month Pass 5GB $50.00
It's such a good deal that even with carrier penalties for breaking contract it is still much cheaper over the course of a year.
\* I understand there's a soft cap on the data of about 2GB a month, but I haven't run into it yet.
Such a great idea.
Apple then focuses on selling as much of those products as they can irrespective of market share. They don't deep discount just to gain "mindshare" or "marketshare".
Engadget and others could moan that it isn't fair, but to be fair the only company that has been able to build and sell even remotely comparable hardware at comparable margins is Samsung, and frankly that is largely because Samsung supplies the same parts to Apple, so Apple is effectively subsidizing Samsung's overhead.
Other companies could play Apple's game, there certainly is room to do so, but it is a low volume/high margin strategy traditionally. The anomaly is Apple's been able to take low volume/high margin to very high volumes while leaving the high volume/low margin business to everyone else as prices fall downward.
I don't feel bad for Acer, LG, ASUS, Sony, Dell, or HP because they've all become so bad at designing, building, and selling a premium product that they really don't deserve to be competing. Ironically, much of iPhone's design was inspired by Sony's design heritage, and yet, Sony is still yet to truly match it.
To put it another way, you know it's kind of a sad state of affairs when Microsoft can put their own team together and ship a legitimate competitor to the iPad in a very short period of time and Microsoft isn't even a hardware company.
Other than that, it's a nice phone.
On the other hand, maybe the big players have exhausted themselves of their creativity for the time being. After all, how creative is an extra row of icons on the home screen? Or an even wider, bigger version of last year's phone?
Let's look back a decade for a moment. i.e. The iPod.
Apple made the iPod good. Then they made the iPod cheap. Nobody could compete. Could companies like Diamond or iRiver have made better devices if they didn't have to compete with cheap iPod's? Almost certainly. Once Apple diversified the iPod line into the extremophile niches other mp3 player manufacturers were clinging to it was game over. Complete and utter dominance. Now almost nobody buys iPod's because everybody's phone can do the same job.
Apple knew that the key to maintaining dominance was to drive down prices faster than the competition without compromising quality. By offering premium devices at prices that are just barely above that of inferior devices Apple made the iPod a no-brainer purchase for consumers. They did this so well that it was only Apple themselves who finally obsoleted the iPod with the iPhone. They've tried to do the same thing with the tablet and have arguably built up some degree of incumbency with the iPad. Low-margin pricing on the Nexus 7 and Kindle's can be seen as attempts by Google and Amazon to fight Apple's tablet incumbency before they're locked out of the market completely.
Let's face it, if Amazon or Google tried to sell their tablets at the same price as Apple's offerings they'd never catch up. Even if they were of exactly equal quality, Apple's is the proven product because it's been around longer. If Google and Amazon made poorer quality tablets and sold them cheap, but with decent profit margins, they'd wind up like Diamond and iRiver. Only their ability to sell at low-margin and profit from ads/media sales gives Google and Amazon the edge they need to compete with Apple and have any hope of catching up.
The end result of this is a three-way battle for tablet superiority where there would have only been one choice: the iPad. Oh, and now Microsoft is throwing their hat into the ring too... Quite frankly, I think the next few years are going to be very kind to tablet-fans, and that's partly in thanks to "predatory" pricing.
Efficient prices versus low prices will play out spectacularly poorly in U.S. v. Apple and publishers, the book price fixing case. Like with tablets, Amazon undercut the true price of books, which harms authors and publishers. Hilariously Apple and publishers did a legal "corrective action" that is precisely described in the DoJ's own guidance on anti-trust. But I digress.
I would agree with Engadget that Amazon and Google selling tablets at or below cost is unequivocally bad for the tablet industry. I'd prefer efficient prices. Otherwise, Amazon undercuts everyone, all the other tablet manufacturers cease to exist, and then they let the product stagnate.
What we want is vibrant competition with many players offering low prices. However, if companies dump their products at or below cost, we may find we're left with fewer players as some companies exit the industry. Apple and Samsung are both doing wonderfully, but others including HTC, LG, and Motorola Mobility aren't in such a sunny position.
Amazon hasn't said this, but some have justified Amazon's high P/E ratio by saying that Amazon is going to be the future of retail and once they've killed off some of their competition, they'll be able to raise their margins. That may or may not be true, but such a situation would be bad for consumers. We want low prices (that's a great thing), but we also don't want to lose options and competition in the future (that's a bad thing). Amazon is running razor thin on its profits to be popular. I'm not suggesting that Amazon is evil. Rather, it seems to just be Jeff Bezos' attitude towards margins: they should be low so that people can buy more stuff. However, that attitude may not always prevail, especially if competition dies out.
It's good to make things cheaper and more accessible (as Linus has said). However, sometimes you can make something too cheap to be really sustainable. Often times large players will sacrifice profits to gain marketshare and that can sometimes be justified. Still, it's important to recognize as the play for market power that it may be and the temporary situation that it may be. A company does not intend to lose money forever. If they're able to eliminate competition in their industry, that gives them power in the future to raise margins.
It can be hard to judge an industry sometimes. Apple and Samsung are clearly going to be sticking around: they're making products people want and raking in money. However, other players just haven't been so profitable. Having to compete with a device like the Kindle Fire being sold at cost is hard to do and may drive them out of the industry. You can say, "well, they weren't able to compete" and that's somewhat true.
However, it hides the fact that Amazon may not be playing "fair" (for some definition of fair that I'll explain). Let's say (hypothetically) that Amazon is actually Evil, Inc. They have a war chest of money and are willing to lose money over the short term to become monopolistic. So, they price the Kindle Fire even below cost - $50 maybe. Some competitors will just fold. Others might try to continue competing for a short time, but their war chests are empty before Evil, Inc.'s. So, we end up with only Evil, Inc. selling us tablets. Nice for Evil, Inc. They can now charge a healthy $300 as well as up the margins on content purchases - charging higher prices to consumers as well as negotiating harder against content providers. "Ah, but if they did that, someone else would come in with a $250 tablet to compete!" Probably not without government intervention. Why? Because they know Evil, Inc. will temporarily drop the price on their Kindle Fires until the new company goes bust.
That's an exaggeration, but dumping products like this isn't unheard of. The more people that get Kindles, the better Amazon's market power is over content providers and consumers. Similarly, if the margins become so low that many companies can't create devices, we end up with them exiting the market and competition is reduced. The fewer competitors in the tablet market, the better it is for Amazon long term.
Basically, we want competition today AND competition tomorrow - sustainable competition rather than one or a few companies winning. We want prices at a point where they're low, consumer friendly, and encourage wide adoption while making sure that 5 years from now, we're benefitting from similar low, consumer friendly prices. If we're left with only Apple, Samsung, and Amazon, we'll be worse off.
It can be hard to think about. In some ways, we might see a company like Amazon as winning by providing things cheaper in a way that's good for consumers. However, we don't want Amazon to win - we want others to be able to match Amazon so that Amazon will have to keep innovating and competing in the future. At the same time, we want the lowest price. It's a balance similar to investing in the future (or taking on debt). We don't want to starve ourselves now (we want to enjoy our lives). At the same time, we know that we shouldn't just rack up debt in the present having fun because we want a strong future. We don't want to pay high prices for devices now, but at the same time we don't want one or two companies to come out as the survivors of the "tablet price wars" who can then charge us more money now that the competition has been vanquished.
* I know I picked on Amazon a bit here and that's just because the Kindle Fire is being sold at cost below the competition. I'm not saying that Amazon is evil, but even in the absence of evil, we wouldn't want Amazon to win because competition brings innovation and discourages slacking off. Even if you're a good company trying to do positive things, seeing what others are doing makes you better. As such, even a purely altruistic company is bad as a monopoly.
We have seen over the last 20 years that computers not only get faster but also cheaper. The fact that the top phones have stayed at 600-700 for the past several years suggests that they are padding costs or simply have no compulsion to be efficient in their supply chains. Google says this is definitely the case and they are still making money on the Nexus 4, even though it costs much less than other flagship phones.
Also note just how horrible Motorola built-in UI is, for example. Something's wrong if they can make an inferior project and not expect to get killed. There's a lot of inefficiency at these companies and they don't care and they don't have to care. Google is trying to change that.
The Galaxy Nexus was sold at $399 unlocked (some time after release). The Nexus 4 is $299. Google is trying to bring the cost down further. When top-line phones hit $150-200 unlocked, people will be able to upgrade once or twice a year.
This will actually encourage even higher quality phones. Once all the topline phones fall to $299 or less, it opens up a space for someone else to make a really, really nice phone at the old $600 level. This is not crazy talk. This is exactly what happened with PC laptops over the last 5 years. Now the better Ultrabooks that are now jockeying for the position of "high-end PC laptop."
So there are a lot of benefits and I believe the drop in prices will lead to better phones and tablets across the board.
Not to mention that it would finally break the carrier subsidy/contract model. If you're looking for business practices that harm consumers, that should rank many places above the "problem" of phones and tablets being too affordable.
I think people are looking at this from the wrong side. In the US, they don't sell you a phone with a service contract attached: they sell you a service contract with a bonus phone. Yes, Google or Amazon could give away phones for free to eliminate the value of the bonus phone, but you still need a strong alternative to contracts for service.
Currently you have carriers like T-Mobile that offer semi-decent prepaid service, although it's been hampered by technological issues (the band they use for 3G is incompatible with iPhones, although supposedly they're in the process of changing it). Why are so many people still buying contracts, though? Is it really just because of the subsidized phones? I'm not convinced.
Furthermore, Europe already has a very competitive phone service market, with extremely popular prepaid plans that are far cheaper than anything you can get in the US, and no locked phones; and they achieved all of this without resorting to phone dumping.
For all these reasons, I think selling phones at or below price has nothing to do with disrupting the American carrier model (which hardly makes sense for Google or Amazon anyway - they're not even in that industry!).
In fact, Google has been gunning for this disruption since the very first Nexus One. Remember, they introduced that phone -- their first -- unlocked and unsubsidized, with direct-to-consumer sales. At the time, that was a novel approach (and really exciting for knowledgeable consumers). However, they got their ass beat down by the carriers and had to whimper back home with their tail between their legs. They even stopped selling phones direct for a time.
So they failed at subverting the carrier's (anticompetitive, illogical, anti-consumer) business model the first time they tried, but you can bet they still want to. Apple actually does, too, for similar reason, but Apple didn't underestimate the power of the carriers, and waited until they had the most dominant phone in human history and the leverage that came along with to make the carriers lay down and take it however Apple deigns to give it to them.
Google would love to be in a similar position, but they won't be until either Google can make a phone close to the iPhone in popularity, or the carrier-subsidy model goes away or is at least greatly diminished (neither thing being very likely in the foreseeable future).
Lack of high-speed data? HSPA+ 42Mbps isn't "high speed"?
Yes, LTE may be "the future", but right now, there are few places you are going to get better speeds over LTE than HSPA+. And there's enough headroom in HSPA+ for the next couple of years; it can go up to a theoretical maximum of 168 Mbps. LTE definitely has more headroom, but given that people tend to upgrade phones every 2 years or so, I'd say that HSPA+ has plenty for the lifespan of the Nexus 4.
I think that selling an unlocked, unsubsidized, $300 phone with only HSPA+ is a much better strategic move for Google than a locked, subsidized phone on Verizon that does LTE.
Because in Verizon and AT&T (the major carriers, only option for most people), you don't get a lower price for bringing your own phone. Essentially, you can pay full price for the contract and get the phone subsidized, or you can pay full price for the contract and full price for the phone.
Is it surprising that most people choose the subsidized option?
For example, T-Mobile has a $60 flat price for unlimited text/voice and 2 GB data, which is far cheaper than their contract price. Similarly AT&T Go-phone has cheaper prices.
Next, there are various MVNOs that resell service from the big 4, and they also have much cheaper price on prepaid. However, I have noticed that US consumer are almost universally unaware that such cheap plans exist. Part of it is that prepaid is seen as something used by people with low credit-worthiness, and other reason being that the subsidized contracts make it possible for far more people to have high end phone than normal. I have met quite a few people with iPhone, who would never be able to purchase it if they had to pay $700 upfront in store.
So, given that I did want an iphone, and therefore needed a contract, I tried to get one without providing my SSN. Those were another fun couple of days - it began with about 10 different Verizon employees telling me that would be impossible, and ended up with a $400 deposit and no SSN.
So, I paid for the phone upfront, but I'll get $400 back when the contract ends - as of feb 2012, that was the best deal one could get on the iphone 4s from Verizon.
And while it is easy to get coverage of any kind in NYC or SF, that is not true in general. T-Mobile's high speed coverage is lesser, and many of the MVNOs have a really limited coverage area (and non-trivial roaming charges outside those areas)
Is there really 600-800 dollars worth of technology in a smart phone, or are the margins really high? I honestly don't know one way or the other. I do know however, that the Galaxy Nexus is the best phone I've ever used, and the fact that it was 349.00 when I got it played a large part in my decision.
In tablets, we see really hard price competition. Amazon is selling the Kindle Fires at cost. In short, tablets are cheaper than phones with much smaller displays and smaller batteries. In a certain light, why is the Nexus 4 a full $150 more than a Nexus 7 (assuming the same 16GB storage)? Sure, miniaturization probably has to do with the cost difference,
Also, I think the comparison to laptops might not be so great. Ultrabooks aren't doing so well and we've seen huge consolidation of competition in the PC/laptop market. Heck, we nearly saw HP leave the market. Dell generates less than 5% of its income from the consumer market. Yes, we have some Ultrabooks coming in, but they aren't selling so well and seem more driven by Intel than by the manufacturers (excluding Apple here). In a lot of ways, Laptops are actually showing how this is a problem: I hate that 1366x768 resolution, but everyone uses it because it's cheap and everyone is focused on price. Yes, I can spend over $1000 and get a nice resolution, but there's this gap in the middle. I remember reading an article lamenting how Dell would try every couple years (in a half-hearted sense) to create a MacBook Pro competitor line just to get hit by a complete lack of sales as people only cared about price. And that's ok in a certain way, but it also leaves little room for innovation and risk taking (what Engadget was commenting on). If I want a Windows version of a MacBook Pro 15", what is there? Certainly, there is no Retina MBP competitor. Really, I don't want Apple to take the high end and have every Android vendor compete on price alone like laptops devolved into. Heck, laptop vendors compete so much on price that poor quality keyboards and trackpads are the norm. Any hidden place they can save a cent gets hit. I'm sure the Nexus devices have fine touchscreens, but if price becomes the only object, things like the touchscreen quality could get hit in the future. We want the lowest price for good stuff. It's easy to read processor and RAM specs, but we also want to make sure that the non-listed stuff works well. And we want to make sure that we don't get to a point where we aren't improving because we've programmed ourselves to be so cheap that we won't spend an extra $15 for something much nicer - I feel that way about trackpads.
We'll see over the coming years how it all plays out, but LG already exited the tablet market. Motorola's last tablet was a year ago? There certainly are vendors struggling and some giving up. That's not to say that there isn't some bloat in there and not efficiencies to be had. Google is a great company - great companies push the bounds. At the same time, I'd like to be sure that the level of competition will stay high - that there will be many companies able to remain competing. It's hard for us on the outside to be commenting because we don't have complete information. Google is saying things to the effect of, "well, prices are sorta coming down and we think we can make up the money in other ways like making sure that people continue to think of Google for search". According to the link, even Google's Motorola division seems to think Google's vision for pricing isn't quite fully realizable.
You might be totally right and in 5 years we'll have awesome competition at better price points than we have now and I'll have been the silly spoil-sport raining on the parade. I was mostly trying to point out that these prices may not be sustainable (at the same time, they may well be). Even if companies aren't purposefully trying to corner the market or anything, this could happen. Amazon might think that they'll make $x off of content for each Kindle Fire only to find out that people just don't buy on them, but were buying them on price alone. Then, a few years later when many companies leave the market due to price, we're left with less competition. Low prices are certainly good. We want to make sure that the prices and innovation keep going into the future.
I think the idea you're getting at is an efficient price. Not too low to devastate competition, not too high to be unaffordable.
The idea of efficient prices ties up a lot of concepts, especially anti-trust concepts. You're really spot on. Consider though that there's a whole body of language that specifically outs Amazon and Google's behavior as plain anti-trust violations. E.g., Amazon bundling its book marketplace with a tablet sold below cost; Google bundling its search and advertising business on an operating system sold at inefficient cost (by sharing ad revenues on partnered devices, Google is essentially paying manufacturers and carriers to use Android).
How does Apple compete against tablet undercutting? How does Microsoft compete against operating system undercutting? Maybe the parameters have changed, and we should embrace the "better way of doing it without extracting that much payment from end users." But beware the world where Microsoft can't sell operating systems and Apple can't sell hardware. We would prefer to have that competition and innovation than none at all.
We will not have less competition because of price or dumping. We will have less competition because the natural dynamics of platforms is to tend towards monopoly, because of lock-in effects of consumer investment in stuff that works with the platform combined with the economies of scale of making things work really well with any one platform.
It upsets me that your misguided wall of a rant is taking up so much space on this otherwise interesting discussion!
"ZTE U950 smartphone packs a 1.3GHz Tegra 3 chip, 1GB of RAM, 4GB of internal storage and a 2,000mAh battery beneath the 4.3-inch display."
Pricing behind the curve means you base the price of your product on the average component cost over the life time instead of your actual current cost. Microsoft does that with the Xbox. In effect you subsidise the early models and make up for that in the long run. It's a valid strategy to gain market share quickly and does not hurt consumers.
Dumping means you subsidise your own product to push competitors out of business. It does hurt competition in the long run if done effectively. Dumping is illegal and you can get into a lot of trouble if you are found doing it.
Since the competing companies are not accusing anyone of dumping, I think it is safe to say no dumping is currently going on.
For comparison http://www.amazon.com/Coby-Kyros-7-Inch-Android-Multi-Touchs... low end 7" tablet List Price: $179.99, sale price 100$.
PS: Also, Amazon has little control over there P/E, it's investors that are convinced there going to profitably rule retail in a few years.
Amazon has confirmed that they're selling the Kindles at cost hoping to make it up on content. Third parties have done calculations on the Kindles and found the parts and assembly to be higher than the selling price (without taking into consideration things like shipping, warehouses, credit card fees, etc.). Amazon is being above board in saying that they're hoping to make their money back via content.
In terms of the P/E thing, I only brought it up because of how some investors justify Amazon's price. Some investors believe that Amazon will be able to get large market power in certain industries (maybe retail, maybe e-content) and then charge higher prices to get fat margins at the expense of consumers. I don't think that's in Jeff Bezos' ethos (to his credit). However, cornering a market is a strategy that companies have done.
To call it predatory pricing is stupid.
If you leave prices high and keep Apple in business, you have to be concerned about their slow rate of innovation. Most of their innovation is figuring out how to extract more money from you. They are like Microsoft IE innovation. MS was really slow until the FREE Chrome and Firefox browsers started to take significant market share.
Or even too cheap to be worth owning. That's happened to me before with furniture, and it's happened to everyone who wants a 1080p laptop but can only find 1366x768.
It's still not ideal, because the 16:9 aspect ratio sucks, and it's ridiculous that nobody but Apple has laptop displays matching the iPad 3 or Nexus 10 at any price. But it's an improvement over the years of 1366x768 regression.
First of all it's not clear Amazon is losing money on the Kindle hardware. But even if they are they seem to have adopted the console model - I give you subsidized hardware and then you pay through the nose for content. They are not going to lose money in the end even if they do lose money on the hardware.
Ask anybody who has one of the old Kindles how much they spend on ebooks compared to what they used to spend on dead trees. The impulse buy will get you every time.
And that's a perfectly reasonable and sustainable business strategy, provided not too many people root their kindle and use it for something else.
Amazon lost money last quarter because they made some questionable acquisitions and because they're in the process of expanding into new markets (like film production), not because they're dumping hardware below cost.
Sustainability is a messy concept. What is the product that needs to be sustainable? How do you define that? Why is the handset alone necessarily the product that you want to be sustainable on it's own? Is a web browser a product that needs to be sustainable on its own? There are many businesses where the real product is not the gadget we hold in our hands. And every time those who try to make a profit from some individual component complain about unfair competition from others who sell a larger package and subsidise that individual component.
Let me ask a few questions about your Amazon example. You say no one will enter the market once Amazon crushed everyone else for fear of Amazon coming back with low prices.
But why wouldn't someone else cross subsidise from a different kind of business and successfully compete with Amazon? Google definitely does exactly that. Others may come up with more ways to do that. Oracle reviving its Java handset business, carriers + Mozilla, someone buying Sony and it's media business. Apple might well be able to do it through media subscription services or just keep selling into the high end luxury/fashion market.
Will Amazon shareholders put up with razor thin margins (even losses recently) forever or will they eventually ask for a payout?
What keeps another big retailer that doesn't carry the cost of giving away handsets from undercutting Amazon in the retail market? Or if it's such a good idea to give away handsets, why wouldn't WalMart buy Netflix and join forces with Samsung or HTC to do the same?
At the end of the day, I'm not concerned about any of this being just temporary. Smartphone prices will never go up. There are just too many angles from which a wannabe monopolist could be attacked.
Predatory pricing seems "intuitive", it'd be interesting to read about the conditions that make it not work.
Basically what falls apart is that once the predation period is over, the predator can't block other firms from entering.
Dumping to protect market share, then jacking prices back up once the competition has been seen off.
But with new entrants trying to compete with an incumbent with an enormous lead, I don't see anything wrong with making the investment to sell at cost or a loss. The consumer wins because they get hardware cheaper and more competition which should drive prices down across the board. The only people losing out are the people previously in a monopoly-like situation.
Imagine a scenario where a company is able to cut costs, never over take the market leader and eventually dump the product, support and all (because they can't afford it due to the low cost). Does the consumer, who is still tied to this device, still considered a winner? The argument can be made that the company can then raise the price to try and offset the low cost previously. Sure, they can do that...and if they get caught, they could be called out for predatory pricing.
There are so many ways to compete with an incumbant, and price could be one of them. The only pitfall is the scenario (which has happened time and time again) of hemorrhaging losses because you are solely competing on price.
Competing solely on cost relies on heavy volume being sold in order for it to even provide razor thin margins. The companies will continually lose here because they aren't able to really recoup their investment put into the device.
In my opinion, the consumer only wins when the company wins because of the intangible benefits a company can afford to provide such as support and customer service. Without these, I don't see the consumer winning with companies competing solely based on price. And I think Apple is the perfect example for this (only because I cant think of others). They charge higher than normal for their devices, but they have great support and are willing to bend over backwards to make sure you as a customer are happy.
Just my .02
The players who are failing/exiting had no hope of ever presenting a meaningful challenge to the iPad. It's still to be seen if even Fire/Nexus/Surface devices can sell in the same order of magnitude as the iPad.
I'm also curious how this would be evaluated if Amazon/Google price their hardware devices in a different fashion than more hardware based companies like Apple/Samsung - on the services they lock you into. I'm skeptical that Amazon is really losing money on each tablet sold, as those tablets really are just vending machines which they then make money off of product sales. (Similarly with Google and its services/ads.) Do we regulate hardware pricing even if the profit calculated isn't directly on the hardware sale itself?
In terms of the Amazon tablets, they are selling them at cost (they've explicitly said this) and it will take time to see whether they make back the money they spend on shipping, warehousing, R&D, etc. via content. It may be a model that others adopt to provide competitor tablets. It could also lead to a duopoly of Apple and Amazon on tablets. That would be bad. It could lead to Amazon getting further leverage over publishers and consumer prices. Also bad.
The thing is that bad behavior isn't without precedent. Standard Oil sold at below cost in a market to make the competition exit. When the competition was gone, they would raise prices significantly. So, in the short term you could get cheaper gas, but in the long run, you removed the competition. And sometimes we do regulate bad behavior. We did it with Windows and in the absence of Android, we might be considering it against Apple.
I'm not saying that I'm a fan of intervention or that companies can't attempt a console-style business model for tablets. I'm just suggesting caution in a developing industry that many see as a future of computing: one where we'll want competition and innovation, not for most players to exit before it even takes off. Low prices are a good thing, but let's not get ahead of ourselves and happily applaud low prices into an oligopoly. We want cheap prices that can be sustained and innovated on. Maybe these tablets are going to hit that. But there are some signs that might not be the case given LG's exit, the fact that Moto and HTC don't have recent offerings, the general mediocre financials of Amazon, Moto, HTC, LG, and Asus, etc. Then again, maybe that will turn a corner in the near future and I'm worrying for nothing and we'll have an awesome, cheap, competition-filled future.
Cell-phone carriers have formed an oligopoly due to the extremely high cost of building nationwide service and the limited amount of mobile spectrum. This will naturally lead to a situation where the industry can stagnate and overcharge with there being very little pressure from new entrants to the market that try to exploit the market failure. Carrier-lockin makes this problem even worse because they make it even more expensive to use their services unless you lock yourself in longterm in exchange for a phone subsidy that amounts to a discount.
Sure, there are lots of concerns about Google having lots of information about you. But at least you have choices, and at least you don't have to pay Google $100/month and pay them more if you want to leave.
It's just naiive to think you can be successful without Google.
No. Only Google services are rendered practically unusable. Actually, they are rendered completely unusable.
The OS on the other hand, remains perfectly and completely usable.
That sounds like Google is not just selling it at cost but subsidizing it as well.
If you bring your own phone, you want to be looking at the prepaid arrangements. AT&T has considerably cheaper prepaid plans than their postpaid plans (I think it was like $40 cheaper when I looked?). T-Mobile's prepaid plans are even cheaper; I pay $30/month for 100 voice minutes ($0.10/minute overage, which I've hit a couple times), unlimited data (speed-throttled at 5GB), and unlimited texts.
I paid $350 for my Galaxy Nexus and ditched my $90/month AT&T postpaid plan for the $30/month T-Mobile prepaid plan, and the delta in plan costs paid off the cost of the phone (over a carrier subsidy) in about four months.
I'd blow through 200MB in three or four days though. =)
Lower prices aren't hurting consumers. Good quality Nexus devices around $200-400 ranges aren't hurting consumers. In fact, it encourages a fair competition. As a result, Apple/Samsung have to work hard to make their $600 & up devices feature-rich to justify higher price. Consumer wins!
In case you missed the HN comments on the original article: http://news.ycombinator.com/item?id=4737154
But as a consumer, I don't see why I should be unhappy about it.
Unfortunately, these types of large markets play continuous/repeating games, not one-shots. Ideally, consumers wouldn't want to waste the time it takes for a monopoly to become complacent and be disrupted by a fresh competitor. We can be fairly confident that if the market's inefficient (as it hopefully is in a monopoly), someone would certainly jump in and try to eat that inefficiency as profit for themselves and compete. But that takes time.
Rather, we'd prefer the competition play out continuously. There's overhead in time and wasted opportunity waiting for these games to restart, when we could have been incrementally improving the whole time (say, a lost product cycle or two: 18-36 months maybe?). In this hypothetical ideal, the immediate cost to maintain this competition is higher to the consumer, but cumulatively lower in the long term since we gain though the innovation and efficiency forced by active competition.
Of course, we can certainly think of Solitaire as a one-person competion, but most companies don't have the wherewithal to actively compete against themselves (there are a few really awesome counter-examples, but they're at least partially awesome in light of how much everyone else fails to live up to that ideal). It's much easier to cheat: take the short-term pay-off since no-one is available next round to punish. Lacking alternatives, the consumer can't even properly punish the monopoly for cheating, and will instead have to either pay higher costs or accept passive innovation as the company coasts (or abstain, becoming a noncomsumer and shrinking the market - a worst-case scenario!). Or worse, they drive their efficiencies enough that none may even afford to enter to compete, and since there won't be competition next round, the consumer faces all the same negatives and a much lower hope of competition-driven innovation/cost reduction for the round after that. Now the best hope is a hidden competitor with the funds to jump in suddenly and without warning with a fully formed alternative (say, an iPhone perhaps); this happens rarely, and will likely take years to prepare.
TL;DR: When you're the only player, no one is there to stop you from cheating. And the consumers are paying for the game. That's why monopolies are lousy: consumers can't compete, but are still invested players - albeit disenfranchised.
The only case for anyone complaining about price in this whole situation is if Apple were aggressive about their pricing, driving out competitors. But they're not. There is no case to answer for the market entrant pricing aggressively, up to and including paying people to use the product (i.e. negative prices).
About the only advantage paying for your phone gives you is the opportunity to leave your carrier, but since the buyout is usually less than the subsidy on a smartphone it's usually better to use the buyout.
Ironically, Torvald's post and the Engadget article both have an assumption that whatever provides better quality(innovation) and product choice at lower prices to consumers is an unequivocal good. While seems likely to me that this is true, I don't quite get the conflation in popular culture between "consumers" and the public good.
I recently picked up a Nexus 7 and I was a bit stunned at the level of technology I could get for $200. If the margin is getting squeezed, that means entities on the other side of the transaction are too, including labor.
At what cost to humans (and the environment) is this rock bottom technology being created? Is there a connection between ultra competition and increasing income inequality in the US, if not the world. It seems at least intuitively plausible.
These phones should be dropping to $150 already... but there isn't enough competition for that yet.
In other words: It's not a preference for one design over another, it's a preference for freedom. You may disagree with the freedom argument, but this is certainly what it's about. This is why Linus is coming out to bat for Android -- not because he likes Google or Google's style, it's a pragmatic decision because he thinks Google is his friend as far in trying to reintroduce competition into the market.
So, there can be a 'race to the bottom' of high quality products.
In another year that FX-6100 will cost considerably less, thus giving the same horsepower for a lower cost.
Race to the bottom does imply making things cheaper but it not necessarily true that it's also worse. The XBOX 360 is now half the price it was when it was first released and yet more reliable and uses less power.
Projecting much? At best he said he likes Android's UI. He didn't even mention iOS.
Getting "carrier lock-in" is more symptomatic of American carriers' way of doing business rather than a universal once, since, as pointed out by many others, Apple sells unlocked iOS devices in many parts of the world.
I don't know that at all.
Editorial: is Engadget really that stupid? Or just corrupt? Or trolling us all?
Here is another "race to the bottom is bad" article, this time in the form of an "editorial" from Engadget. It's even more idiotic than usual.
The whole "race to the bottom" concept is odd to me: people complaining about how technology gets less outrageously expensive, and more available to everybody, and more commoditized. Like that would be a bad thing? So the whole argument is fundamentally flawed to begin with - any time I see some pundit or CEO complaining about how the competition is making things cheaper, I go "Uhhuh, crybaby".
But when it comes to cellphones, it's not just a flawed argument, it's doubly stupid. Because in that market, particularly in the US, the alternative is the whole broken carrier subsidy model, with all that entails. None of which is good, and all of which is much worse than any (hypothetical) "race to the bottom" arguments.
And at no point did that deeply flawed editorial even mention carrier lock-in issues. What crock.
I have many reasons to like the google nexus phones: I just think that the plain android experience is generally cleaner than most of the skinned ones, and even when there is superior hardware (Samsung Galaxy SIII) I tend to prefer the Nexus model (honesty in advertizing: I've gotten free phones from both google and Samsung, but I actually bought my own Nexus One and Galaxy Nexus on google play store. And I installed CyanogenMod on the SIII Samsung gave me, because I wanted the JellyBean experience).
So I like the Nexus phones just because I think they have a nicer interface.
But I like the Nexus phones even more because they are clearly pushing the whole "no carrier lock-in" model. And price is absolutely part of it.
Link to http://www.engadget.com/2012/11/03/editorial-amazon-and-goog...
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Thats why I think he's awesome.