Next Smart Phone not a Smart Phone

Note: this article is the writers personal opinion. It is based upon almost 40 years of experience in small computers and communications, but it is still an opinion. It is presented AS IS. All use is at your own risk.


According to an article in Network World over half (65%) of persons choosing a new phone will not choose a smart phone, but a less featured ordinary “dumb” phone. Images showing November 2010 survey results can be seen here and here. Apparently, owners of any Android variety are more likely to upgrade to a full smartphone than other types, with most people choosing to buy a phone that lacks even basic Internet or texting.

The survey found that 49% of current Android owners traded up from a not-smartphone while 13% switched from a BlackBerry device. 11% of Android owners are on their second Android device, compared to repeat buyers of iPhone at 26% and BlackBerry at 32%. It is rather astounding that 11% of a random sample would even be on a second Android… Android is essentially only two-years old.

The most common business reason given for refusing to buy a smart phone were that the high cost of ownership and requisite service contracts was not justifiable: very few felt the devices were too complicated for them to utilize. A Dutch friend of mine once told me that in Holland phones are $5 each and include all capabilities: no roaming charges, not extra fees: they buy several and keep them in a basket for out of town guests to use. By comparison the cost to Americans of nearly $100 per month with a multitude of restrictions, abusive early cancellation penalties, and piles of extra add-on fees, is rather repugnant.

For business this should be awake up call: clearly consumers are tired of expensive and deceptive contracts that add more charges after the fact. Of course telephone companies have pulled this for years, but with the mobile market it has been far more abusive than before. The net result of American mobile plan pricing is apparently to discard 65% of the market by charging drastically more than the market will bear. Watch for a severe adjustment as enabling factors are already in place: China and other foreign powers are rapidly buying up foreign markets.

All that would be required to completely own the American mobile market is for a Nokia, a Wal-Mart or another large Chinese corporation to decide to offer a no hassles plan everywhere in the US with a flat $20 fee. The existing top heavy mobile corporations that are charging substantially above market price are not likely to adjust fast enough to survive: their thinking seems to be that they can control the market, which is a fantasy that can exist only until competition recognizes this low hanging fruit waiting to be eaten and simply takes over.

There is no such thing as a free lunch: there is only temporarily above market pricing followed by a market adjustment. Such a take over could be achieved in one or two months, suddenly resource starving the existing American players with an extreme interruption in their cash flow that would force them to either accept their rival as their Hegemon by stock exchange or merging, or at least forcing them to sell off their towers and fiber and drastically resize human assets sufficiently to meet payroll in the third month. With something like a $32b trade imbalance right now China does have the cash required. At that point market terms could be set by the survivor, most likely a 50% correction (prior $60/month average – minimum $20/month)/2 resulting in a flat market price near $39.95/month.

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