Phone Monopoly Redux

Wed

Dec 12
2007

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The economics of hardware subsidization aren't as significant in mobile phone
contracts as you might think. The mobile phone companies could sell you a $20 phone that would work just fine. They do in other countries, and they used to do it in the US. They don't any more, though, because if they offer the option, people take it instead of getting locked into a lengthy contract.

The Nokia phone I bought here in South Africa is about $20, with a plain black-and-white screen, no camera. It's lighter, sturdier, and more reliable than my $200 Motorola RAZR. It's also a nicer phone than the "cheap" $70 Nokia that T-Mobile tried to sell me in Oregon when I wanted to replace my RAZR without an extended contract. (It had a color screen, but the cheap construction of something out of a gumball machine.)

This is the behavior of an effective monopoly. In this case it's a small group of companies, but they're all playing the same game.

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Comments: 8

Michael R. Bernstein [12.12.07 06:14 PM]

The term you're looking for is 'Oligopoly'.

Allison Randal [12.12.07 10:56 PM]

The word on my mind was 'Hegemonopoly'.

Ciaran [12.12.07 11:26 PM]

A $20 Nokia and T-mobile's pay as you go service have served me well for the past couple of years, costing about a quarter of what the cheapest contract would.

Anton [12.13.07 01:11 AM]

Yep, you paid $20 for the phone.
If you bought it through an approved vendor (ie. not on the street somewhere), you would have had to pay another $20 or so for the starter pack (SIM card and $5 or so airtime).
Generally that's the way phone purchases work here. The same SIM card starter pack is sold for less than 50c when bought separately...

They're gonna screw you over one way or another.

Scott [12.13.07 02:05 AM]

I paid $20 for a Kycera phone to use with Virgin Mobile pay-as-you-go service.

(Your captcha/preview system needs some work. Can't post directly from the preview -- have to reenter comment and info, and another round of captcha. Plus the text is too often too hard to decipher -- I'd have given up on this whole thing except I feel motivated to complain.)

Allison Randal [12.13.07 02:14 AM]

The key point being that they can "screw you over", because they have what you want and don't need to work on appealing to the customer. That's one of the defining characteristics of a monopoly/oligopoly. If they had any real competition (from, say, a completely different mobile telecommunications technology), that would change.

Daniel [12.13.07 08:22 AM]

I want to also chime in that I am very happy with my $20 pay-as-you-go phone. No bills. No surprises. The catch is that I am not a big phone user. I don't use that many minutes. While this works for me, if you're a big talker you may quickly notice it when you have to go buy more minutes! In a way this makes you conscious of your phone use habits.

Benjamin Williams [12.13.07 09:30 AM]

Come up with a way to connect a country as big as the United States with the extremes in climate, moisture, elevation, and population density factored in, staff the company in local, state, and regional offices, then train a sales team, customer service (24/7 support), web site team, plus comply with 50 state regulations, 911 regulations, and federal regulations. Then sell a phone with no contract, all of the features, and only cost $20. I'd buy it.