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What's Keeping US Phones In the Stone Age?
knapper_tech writes "After seeing the iPhone introduction, I was totally confused by how much excitement it generated in the US. It offered no features I could see beyond my Casio W41CA's capabilities. I had a lot of apprehension towards the idea of a virtual keypad and the bare screen looked like a scratch magnet. Looks aren't enough. Finally, the price is ridiculous. The device is an order of magnitude more expensive than my now year-old Keitai even with a two-year contract. After returning to the US from Japan, I've come to realize the horrible truth behind iPhone's buzz. Over the year I was gone, US phones haven't really done anything. Providers push a minuscule lineup of uninspiring designs and then charge unbelievable prices for even basic things like text messages. I was greeted at every kiosk by more tired clamshells built to last until obsolescence, and money can't buy a replacement for my W41CA." Read on as this reader proposes and dismissed a number of possible explanations for the difference in cell-phone markets between the US and Japan. He concludes with, "It seems to me more like competition is non-existent and US providers are ramming yesteryear's designs down our throats while charging us an arm and a leg! Someone please give me some insight."
I finally broke down and got a $20 Virgin phone to at least get me connected until I get over my initial shock. In short, American phones suck, and iPhone is hopefully a wakeup call to US providers and customers. Why is the American phone situation so depressing?
Before I left for Japan about a year ago, I was using a Nokia 3160. It cost me $40 US and I had to sign a one year contract that Cingular later decided was a two-year contract. I was paying about $40 a month for service and had extra fees for SMS messages.
After I got to Kyoto, I quickly ended up at an AU shop and landed a Casio W41CA. It does email, music, pc web browsing, gps, fm radio, tv, phone-wallet, pictures (2megapixel), videos, calculator etc. I walked out of the store for less than ¥5000 (about $41) including activation fees, and I was only paying slightly over ¥4000 (about $33) per month. That included ¥3000 for a voice plan I rarely used and ¥1000 for effectively unlimited data (emails and internet).
Perhaps someone with more knowledge of the costs facing American mobile providers can explain the huge technology and cost gap between the US and Japan. Why are we paying so much for such basic features?
At first, I thought maybe it was something to do with network infrastructure. The US is a huge land area and Japan is very tiny. However, Japan would have lots of towers because of the terrain. Imagine something like Colorado covered in metropolitan area. Also, even though places like rural New Mexico exist, nobody has an obligation to cover them, and from the look of coverage maps, no providers do. Operating a US network that reaches 40% of the nation's population requires nowhere near reaching 40% of the land area. The coverage explanation alone isn't enough.
Another possibility was the notion that because Americans keep their phones until they break, phone companies don't focus much on selling cutting edge phones and won't dare ship a spin-chassis to Oklahoma. However, with the contract life longer, the cost of the phone could be spread out over a longer period. If Americans like phones that are built to last and then let them last, the phones should be really cheap. From my perspective, they are ridiculously priced, so this argument also fails.
The next explanation I turned to is that people in the US tend to want winners. We like one ring to rule them all and one phone to establish all of what is good in phone fashion for the next three years. However, Motorola's sales are sagging as the population got tired of dime-a-dozen RAZR's and subsequent knockoffs. Apparently, we have more fashion sense or at least desire for individuality than to keep buying hundreds of millions of the same design. Arguing that the US market tends to gravitate to one phone and then champion it is not making Motorola money.
At last I started to wonder if it was because Americans buy less phones as a whole, making the cost of marketing as many different models as the Japanese prohibitive. However, with something like three times the population, the US should be more than enough market for all the glittery treasures of Akiba. What is the problem?
I'm out of leads at this point. It's not like the FCC is charging Cingular and Verizon billions of dollars per year and the costs are getting passed on to the consumer. Japanese don't have genetically superior cellphone taste. I remember that there was talk of how fierce mobile competition was and how it was hurting mobile providers' earnings. However, if Japanese companies can make money at those prices while selling those phones, what's the problem in the US? It seems to me more like competition is non-existent and US providers are ramming yesteryear's designs down our throats while charging us an arm and a leg! Someone please give me some insight.
I finally broke down and got a $20 Virgin phone to at least get me connected until I get over my initial shock. In short, American phones suck, and iPhone is hopefully a wakeup call to US providers and customers. Why is the American phone situation so depressing?
Before I left for Japan about a year ago, I was using a Nokia 3160. It cost me $40 US and I had to sign a one year contract that Cingular later decided was a two-year contract. I was paying about $40 a month for service and had extra fees for SMS messages.
After I got to Kyoto, I quickly ended up at an AU shop and landed a Casio W41CA. It does email, music, pc web browsing, gps, fm radio, tv, phone-wallet, pictures (2megapixel), videos, calculator etc. I walked out of the store for less than ¥5000 (about $41) including activation fees, and I was only paying slightly over ¥4000 (about $33) per month. That included ¥3000 for a voice plan I rarely used and ¥1000 for effectively unlimited data (emails and internet).
Perhaps someone with more knowledge of the costs facing American mobile providers can explain the huge technology and cost gap between the US and Japan. Why are we paying so much for such basic features?
At first, I thought maybe it was something to do with network infrastructure. The US is a huge land area and Japan is very tiny. However, Japan would have lots of towers because of the terrain. Imagine something like Colorado covered in metropolitan area. Also, even though places like rural New Mexico exist, nobody has an obligation to cover them, and from the look of coverage maps, no providers do. Operating a US network that reaches 40% of the nation's population requires nowhere near reaching 40% of the land area. The coverage explanation alone isn't enough.
Another possibility was the notion that because Americans keep their phones until they break, phone companies don't focus much on selling cutting edge phones and won't dare ship a spin-chassis to Oklahoma. However, with the contract life longer, the cost of the phone could be spread out over a longer period. If Americans like phones that are built to last and then let them last, the phones should be really cheap. From my perspective, they are ridiculously priced, so this argument also fails.
The next explanation I turned to is that people in the US tend to want winners. We like one ring to rule them all and one phone to establish all of what is good in phone fashion for the next three years. However, Motorola's sales are sagging as the population got tired of dime-a-dozen RAZR's and subsequent knockoffs. Apparently, we have more fashion sense or at least desire for individuality than to keep buying hundreds of millions of the same design. Arguing that the US market tends to gravitate to one phone and then champion it is not making Motorola money.
At last I started to wonder if it was because Americans buy less phones as a whole, making the cost of marketing as many different models as the Japanese prohibitive. However, with something like three times the population, the US should be more than enough market for all the glittery treasures of Akiba. What is the problem?
I'm out of leads at this point. It's not like the FCC is charging Cingular and Verizon billions of dollars per year and the costs are getting passed on to the consumer. Japanese don't have genetically superior cellphone taste. I remember that there was talk of how fierce mobile competition was and how it was hurting mobile providers' earnings. However, if Japanese companies can make money at those prices while selling those phones, what's the problem in the US? It seems to me more like competition is non-existent and US providers are ramming yesteryear's designs down our throats while charging us an arm and a leg! Someone please give me some insight.
No doubt.
Not in the US, but being a Canuck, we get the same treatment really.
I have a Sony-Ericsson w810i (Which I do really like a ton, but that's beside the point), through Rogers. The phone supports custom ring tones and the like, but Rogers locks this out and tries to force their users to buy every little darned thing through Rogers. I had to wipe Rogers proprietary installation and 'update' the phone with the original installation software to 'unlock' features that the phone inherently supports!!!
The providers are blood sucking leaches, nothing more, and certainly nothing less. And see how well you fare if you decide to try a different approach...the big boys eat your lunch.
What's the solution? I'd love to know...any ideas anyone?
No Comment.
Are you suggesting that if a carrier came out with a lower price, people wouldn't flock to it because people are okay with the prices they pay to Cingular and Sprint? The problem isn't that people are buying what is currently offered, the problem is that there is no disruptive provider coming in to challenge the established market.
Industries won't change until they are challenged by a disruptive competitor. That has been true with automobiles, computers, agriculture -- all across the board. The same is true of mobile voice and data services. Nothing will change until disruptive technologies are allowed to enter the market.
Seriously, take a trip to Japan sometime, and use a cellphone there (ketai means CELLPHONE). US phones can't even begin to compete with Japan's offerings. I'm in the country right now with a POS rental, but I'd seriously love to use it back in the states over my Nokia N95 (too bad it doesn't support GSM, or US 3G signals). I highly doubt you can hold your cellphone up to dedicated pad to pay for things in the US. Hell most phones in Japan now have awesome built in OCR capabilties (getting Kanji readings seriously is AWESOME for someone learning the language). Theres a whole laundry list the OP doesn't go into that I'd kill for in the US market. Would go on about it, but it's almost 1:30am, and I needs sleep (Hokaido to Saporo in a few hours, 15 hours FTL!!!).
The sad thing is that none of this has to do with competition. Japan actually has next to zero competition between companies (they are all owned by the same people for the most part). Now if you wanna see competition between cellular companies goto Hong Kong. $13 a month for what I pay in the US at $70 a month without the ability to call international most places you wanna call without extra crazy fees. No contracts required to boot (5 cellular companies).
While I understand that people love black and white/good and evil stories, this isn't that simple.
CDMA is often deployed in the United States because the technology has been developed for larger cell sizes than the GSM/GPRS/EDGE systems deployed in Europe. This is highly beneficial in areas where population density is low (think suburbs). Deploying GSM across the United States would be significantly more expensive than deploying CDMA.
GSM systems using SIM cards were highly advantageous in allowing users to keep a single (expensive) phone and to purchase multiple SIM cards in different countries if they were moving around Europe. The political boundaries and separate companies operating the networks almost demanded the GSM design. The lack of a contiguous network (back when GSM was developed - universal Europe roaming is now relatively common) drove the separation of the phone from the connection identifier (part of the SIM card). This situation doesn't exist in the United States, because the FCC auctions off frequencies in extremely large geographic blocks, and the wireless providers were very quick to provide nationwide coverage (even if it did have large roaming fees 5+ years ago)
There are also other subtleties. CDMA is a US-developed technology, while GSM/GPRS/EDGE was developed in Europe. If you don't think that makes a difference to other countries deploying the systems, then you're wrong. These volume differences at the manufacturing level then impact price of the basestation systems... and the advantages of GSM drove countries with large population densities (think most of Asia) to deploy it. It is areas with larger rural populations (Brazil and parts of India, where CDMA is successful)
The net effect of using CDMA makes it much more difficult to separate the phone from the network. The system wasn't designed for it. Yes, there are identifiers in the phone that would allow it, but having separate SIM devices (the GSM model) is much more flexible and much of the basis for the difference in corporate behavior on the network (it's easy to not activate a phone due to a certain policy, but very hard not to allow use of a device where the only authentication is from a SIM card, so the service provider doesn't know what the hardware is)
The author's story and stories like it are only half true.
We always hear about how much better the devices in Asia are, and generally it's true.
However what's certainly not true is that service plans in Japan are anywhere as good a value as in the USA or Canada.
Having lived several years in Japan, I can tell you that although the author has a 3000 yen "voice" plan, it probably includes something like 20 to 40 minutes. Japanese rate plans are not measured by minutes however, rather time is priced according to a draconian function of time of day, location, day of the week, and destination network, and deducted from your voice pool. Once the author exhausts his base 3000 yen (about 30 minutes say), another formula kicks in charging upwards of 70 cents per minute if used on a weekday during the daytime to a cell on another network. 30 minutes use for a $40 plan? Would that work in the USA or Canada?
By the author's own admission, he never uses voice so he may not have noticed. However, attempting to use a phone for professional purposes, where the majority of work is done via voice, you can see how the Japanese carriers' ARPU is astronomical compared to the USA, where competition may not improve devices but it certainly drives down price.
Surely it's this increased ARPU that allows Japanese carriers to monstrously subsidize flashy, impressive handsets for both business and personal users.