Answer quickly- how much is your smartphone worth?
How many of you said $199? I'm sure if you ask this question of the general public, they'd say the same thing (or less!). And if you try to suggest to consumers anything along the lines of $600, or try to explain carrier subsidies, people are most likely going to look at you like you're nuts.
This is clearly one of the biggest education issues facing our industry. The concept of a subsidized handset made total sense when the US cell phone market was in its infancy: people had access to wireline phones everywhere, the cost of the handsets themselves was prohibitively expensive, and carriers needed to spur adoption to begin recouping their network build-out costs. Enter multi-year contracts and low out-of-pocket cost phones--and it worked like a charm.
Nowadays we've reached a point of market oversaturation, with total cellular penetration rates well over 100%. People are completely hooked on their devices, doing more and more with them every day. We're moving to the era of the "internet of things" where cellular connection ubiquity has gone further than anyone could possibly have predicted.
The perceived price ceiling - established by the launch of the original iPhone at the then-unheard of $199 price tag - hasn't moved since. Phones are incredibly powerful computers, with larger screens, thousands and thousands of apps to choose from, more horsepower than the average PC, better data handling (LTE anyone?) and more - yet the consumer's out-of-pocket cost has remained the same.
This value perception has had some seriously unintended consequences in other parts of our industry. It is very difficult for smartphone manufacturers to compete, and we're beginning to see the consolidation that results from that pressure, significantly shrinking consumer choice. At the same time, PC sales have plummeted, and I have to wonder if some of this may be the result of the $199 smartphone. What most consumers can do on a $1400 laptop is not significantly different than what they can do on a $199 smartphone. And with the advent of the $299 Chromebook, the difference is highlighted and magnified. It's no wonder the Chromebook is the only sector of the PC market that's growing.
The question remains: what is the best way to teach consumers about this gap. Do the benefits of this knowledge outweigh the cost? And if so, who really is the beneficiary? The carriers have all launched a different version on the "pay it off early" plan, but it's yet to be seen if this does anything for revenue. Will it benefit the handset makers if people think they're getting a deal?
I still think consumers need to know. The devices we carry--although we may take them for granted because of their ubiquity-- are amazing, and need to be valued accordingly. Maybe we need a third metric beyond money and power to apply?
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