George Ou :
@L
L, you just answered your own question. If T-Mobile is giving people a choice (not to mention lower rates), then people should be jumping at the chance to have lower total cost of ownership by paying for the phone up front. But it doesn’t seem like people are doing that, so that pretty much confirms what I’ve been saying.

I posed no question.

It might not seem like people are buying their own phone to save money. But what seems to be and what is aren’t necessarily the same. Unless T-Mobile chooses to break out information showing how many people go with with what plan, you and I have no way of saying that people are or are not choosing to just buy a phone outright.

The plan differences are new, so many people either don’t know about them, are locked into an existing contract. Also, T-Mobile is third or fourth for size in the US, and as far as I know, Verizon and AT&T don’t offer different prices if you bring your own phone.

Saying that most people buy subsidized phones is more of an observation of how phones are sold than how people want to buy them. Other than the iPhone, people generally select a service provider and select a phone sold by the provider to use that service. The iPhone is different in that people wanted the phone and were willing to switch service providers.

From personal experience, I can say that 100% of the people in my family that use T-Mobile have purchased their phone outright in order to save money.

In a non biased classical liberal economy, the higher the added value, the lower the competition, the higher the profit.

This means companies dwelling in standardized generalizing non innovative grounds will see their profit evaporate, while companies with innovative, uncommon, fast evolving markets will have high margins and increasing market values.

It happens that the pipes are common, standardized highly competitive but slowly evolving grounds. pipes owner will see their profit diminish, and they don’t like the idea at all. What they will try ( and what they already try ) to do is capture part of the profit of the new evolving market by taking a fee on either the consumer or other companies for allowing these services on their pipes. They will always serve you with network management Technics arguments, but the fact that paying is allowed non paying prohibited, independently of the impact of an application on the network is prove enough that this is only a matter of profit and not of Technics…

But in the end money will flow to added value. either the telcos find way to provide innovative services, or they will become mere pipe helders with the profit it deserves, no more, no less…

You’re assuming that most people want a subsidized phone because that’s what most people buy. It completely ignores the reality that until very recently, all carriers offered one price for service whether or not you got a subsidized phone or brought your own. There was no incentive to buy a phone that was not subsidized because no money would be saved. It also ignores the fact that most phones were locked to one carrier.

If you look at T-Mobile, you’ll find two pricing tiers for their unlimited plans. One has a 2-year contract for subsidizing a smart phone and one with no contract for bringing your own phone that has a lower per month price. If you do the rather simple math, you can see that buying a phone outright will save money over time. The time frame for that point is somewhat less than two years for most smart phones.

Having said all that, it does bring up the point of whether or not people can afford to buy the phone up front. For those that cannot, subsidizing a phone may make sense. After the contract is up, they can go to a lower priced plan even if it costs them more in the long run.

At the end of the day, I think it is good that someone is introducing this kind of model to the market. I’m glad that neither model is being forced by government regulations! While I am not as “free market minded” as George is, I do beleive that this is one scenario where having two competing business models is a great idea. Let the folks who prefer the low up-front cost of a subsidized phone in exchange for the various drawbacks take that route, let the people who don’t mind the higher up-front cost and possible support headaches buy a phone and plan seperate.

J.Ja

As to Google Voice and such, if a company attempts to be a “phone service” provider, then they should be constrained by the laws surrounding that service. From what I understand, Google Voice was “blocking” access to some rural areas due to costs; it would have cost them to complete the call versus “free” for others numbers. Unfortunately I don’t have the specific’s at hand, but I did read about this a few months back.

This is not really covered in the scenario of the post; the phone is the “portal” to the service. Google Voice is a service, but they were not constrained by the same access rules as the “traditional” providers. How does that get addressed in this situation?

So what ends up happening is there are (in fact) 3 distinct factions: the pipe, the device, and the content/service (VoIP is simply real time QoS data). At the moment all of this is provided by the wireless mobility companies. You can’t really break just one of them away, either all 3 have to be completely integrated, or completely separated. Then the existing rules need to be separated to each provide (as based on the part they provide) and new rules regarding integration of these separate providers as well (maybe some “standard” relating to customer data that all 3 can use).

Now you have 3 different customer service issues instead of 1 or 2.

Yeah, that’s not a scenario that is particularly great, and I agree that equipment is all too often the issue with poor cell phone service. I’ve had some phones slowly lose the ability to make clear calls, I’ve had phones that never made good calls, I’ve had phones that made good calls but their Bluetooth radios were dying, which gave the impression of poor call quality when using a BT headset, and so on.

On the one hand, divorcing the phone from the carrier would hurt even more, since you wouldn’t be able to bully the carrier into giving you a new phone at “new contract price” every 9 months like some folks do, because the calls stink. On the other hand, customer service would become much, much more important. It seems like Verizon is the only wireless carrier who cares about providing that right now.

J.Ja

When you have a problem with your mobile phone service where do you go? To the service provider. The vast majority of the problems customers encountered with the service is related to the phone, with the service provider being the first (and second) layer of support for another companies product. (note: obviously not all problems are the phone, but the problems that cause a customer to call into a service department).

Beyond the typical “cool factor” for a phone being in the providers offerings, there is the “quality” issue. Any phone that shows up on the shelf to be sold has gone through the carriers own testing, both in lab conditions, and in the field by a testing group using the phone. A lot of phones never make it to the shelf. You might think that it’s an easy thing to just “slap a phone” together, and I would hope that it is, but when it comes down to it, apparently its harder than it seems.

Now, what happens when you have a phone untested/unsupported with a carrier? You split the support provisioning into two. Even worse you probably increase the support problems the customer experiences. What happens when you have 2 different vendors that have to work together providing a service? They generally blame each other’s equipment, software, etc.

Now who do you blame when a problem exists? Customers always blame the service, even when it’s not the service that is the problem. Add to that the idea of law suits when a service provider tells a customer that “phone X” is a poor product because of all the problems with it?

This is the world you are advocating by your blanket support of “net neutrality” in the wireless/mobility network.

George Ou :@Justin James “I think that a core group of people, notably Brin and Page really, truly try to adhere to these principles, and it’s the Schmidt gang that couldn’t care less about it,”
Are you sure about that? http://online.wsj.com/public/article/SB115222788536400097-i72SXBBTMX_EPvtfDIn9uNjtiss_20070707.html?mod=blogs Sure doesn’t sound like Bring and Page are running on “principles” when it comes to the environment.
You’re right that Google’s position on Net Neutrality is both self serving and harmful to Google’s potential rising competitors. http://www.digitalsociety.org/2009/11/fcc-nprm-ban-on-paid-peering-harms-new-innovators/

You didn’t follow my post 100%. When I was referring to “these principles” it meant the ones from the paragraph before (the stuff like Net Neutrality), not the ones from the first paragraph, which I clearly labelled as “disposable” and called out the environment and the plane specifically.

J.Ja

Are you sure about that? http://online.wsj.com/public/article/SB115222788536400097-i72SXBBTMX_EPvtfDIn9uNjtiss_20070707.html?mod=blogs Sure doesn’t sound like Bring and Page are running on “principles” when it comes to the environment.

You’re right that Google’s position on Net Neutrality is both self serving and harmful to Google’s potential rising competitors. http://www.digitalsociety.org/2009/11/fcc-nprm-ban-on-paid-peering-harms-new-innovators/