Nokia cellphone market share in U.S. collapses
Nokia's lost half its American market share in 2 years. Why? Because the phone companies here won't sell its smartphones, which are designed for consumers, not carriers.
From Fortune:
Nokia also refused to cater to American phone companies' whims. In Europe and Asia, consumers usually buy phones and telephone service separately, so Nokia needs to please only the end user. In the U.S., where phones and service are sold together, carriers want control over the way the phones look and perform.
It's a sad illustration of why cellphones are mostly dull. The carriers know that consumers are happy with long contracts that more than cover the cost of handset discounts. As a result, these subsidies determine which phones consumers are prepared to buy.
For manufacturers, you do what the carrier tells you to do, or you become $800 geek chic.
Nokia's North America problem [Fortune]
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Clearly, this has nothing to do with the iPhone...
Nokia's N95 and 70 series could be iPhone contenders but they are not sold in the States. I used to call T-Mobile on a weekly basis telling them that they needed to get better Nokia phones in. Instead they sell Samsung products that break 7 months into a two year contract.
I settled for the Nokia 5610 which is an awesome phone that will more than likely last past 2012 (I had my last 2 Nokias for over 3 years and I still use them when I go backpacking) but is pretty far from a smart phone.
Back in the 1990s, the captured FCC insisted on "competition" for mobile phone standards in the USA, so each carrier used an incompatible format (TDMA, CDMA, or GSM) rather than all carriers actually competing on the common international standard (GSM).
This in turn created a culture of, frankly, stupidity in the mobile phone market in the USA. Most everyone expects a "free" (i.e. subsidized) phone, but can't do the math on why a monthly bill of $70-100 might not be fiscally responsible long-term.
(Imagine if Verizon or Comcast gave you a "free" computer, but you paid $300/month for Internet access.)
Maybe I'm just bitter because I've spent the better part of the past week explaining to some "mundanes" (i.e. not happy mutants) why getting a local SIM card when traveling abroad will be less expensive and less of a hassle than an international roaming plan from their current carrier. Half of that involved explaining what a SIM card is and what it does, over and over.
Take control of technology before it takes control of you, dammit!
The iPhone succeeds partly as geek chic, partly as "I carry an expensive iPod anyway, and this is one with a phone".
As far as the subsidy goes: Not new with phones. "Give away the razor, sell blades" is a very traditional marketing strategy, and often more effective than the reverse.
I dunno. I'm really interested in the new Palm smartphone -- but I want to pay for a new Palm and a Phone, plus perhaps a small surcharge for the convenience of having both in one box, not the exaggerated price for the retail version nor required to buy into a different plan than the one I now have. Palm may lose simply because they insist on pricing as a high-end product rather than trying to become a ubiquitous product.
"In Europe and Asia, consumers usually buy phones and telephone service separately, so Nokia needs to please only the end user."
I cannot speak for Asia, but this is definitely not true for Europe. Most consumers here buy subsidized handsets.
I'd have to agree with gfocus here although I'm not sure about mainland Europe but in the UK most people get subsidized handsets traditional on 12 month contracts although 18 months is now being strongly pushed by the carriers... Grrr!
I am still completely baffled that you can't just get a SIM card and stick it in your phone in the US. My first cell phones were in Europe, so I'm very much used to that status quo. The American system makes no sense to me at all.
@ gfocus, robabob: It's possible to get a subsidized phone here (in Germany), but it's neither required by the carrier, nor do you have to leave your SIM card inside that phone. Last time I renewed my contract, I got a RAZR, sold it on ebay, and stuck my SIM card right back into my beloved water- and impact-resistant Nokia!
@RaisedByWolves nails the difference.
In Asia and Europe, although you do have subsidies, you also have a thriving market for handsets.
In Canada and the U.S. - and particularly on the CDMA-based carriers - you can't bring your own phone. The carriers make this extraordinarily difficult, with arguments like "might be stolen". Of course, as long as there is no capability, then there is no market for devices, so goes the circle. GSM carriers here often lock their SIMs *and* phones to their networks.
Now that devices themselves offer significant services (Java, MP3, video, cameras, WiFi, ...) that have nothing to do with the cellular services, I can even see that we might be close to an anti-trust case. As long as all your phone did was use the licensed spectrum, their business model was fine. But when you use a government-provided lock on spectrum to leverage your way into a dominant position in the consumer handset market, I think it should raise eyebrows.
You will also see carriers point out that the subsidy lets you get a nice phone for next to nothing, paid off over a couple of years. Two problems with that: first, it's only the nice phones that they have preselected, perhaps not the one I want; second, I can already do this. I can use a credit card or a line of credit to buy any device now and pay it off over two years. Why should cellphones be unique compared to, say, laptop computers?
Part of the answer likely relates to obscuring the underlying price of the airtime. Carriers are deathly afraid of becoming purveyors of a commodity. They do not want you to be able to compare minutes and rates between them. One way to avoid this is to always bundle the airtime with a device, so that they never have to compete on airtime costs alone, and you always have to compare airtime/rates/handset bundles, a much more complex task, often with no clear result.
Fixing this problem is going to be tough. Right now, the only recommendation I have is to go pay-as-you-go, which lets you apply more leverage in terms of staying or leaving. It *will* mean that you pay more for your handset - but I think that consumers actually paying more (*) for their handset devices to get more from their handset devices will ultimately be the sign of a healthy market. It should also mean that you can then pay *less* to get less; given the complaints I hear about overly complex phones, I think there is a significant market for that, too.
(*: Oddly enough, though, I switched from a monthly plan to pay-as-you-go last July. I studied my bills to find my usage patterns (this is critical), and did detailed comparisons between carriers of pay-as-you-go. Pay-as-you-go often includes voicemail and callerID, pricey extras on monthly plans - I've heard "convert to monthly, save money" horror stories. Even though I spent nearly $150 on the phone (+), a Bluetooth headset, and holster up-front, now, only 7 months later, I am on target to break even (against the monthly bill alone) in June. If I include maintenance costs on the other three-year old phone which really needed a new shell and battery, then I will break even in March. So - in this case, pay-as-you-go turns out to actually be cost-effective, too.)
(+: QVGA screen, Java, autonomous GPS.)
@#8, Chris S...
I haven't tried this in the last year or two, but I have definitely succeeded in the past at bringing my own phone over to Bell (CDMA, I believe) with very little difficulty. I called them up, gave them the (insert name for the code on the phone that I can't remember right now), and voila, done. And with Rogers, you can certainly insert your sim into any unlocked GSM phone and use it. I have an old unlocked RAZR (which I bought, un-subsidized, in Ireland, but it was STILL locked to the Vodafone network and I had to unlock it myself) which I threw a Rogers pre-paid SIM into, it was super easy.
Having said that - Canada has a piss-poor selection of available phones. It really sucks.
In the past, my employers have supplied me with cell phones, in order to interrupt me at various inconvenient times. I carried one at all times for many years, though I have never owned one.
No vendor of cell phones and associated services seems to have any interest in selling me a phone that would increase my enjoyment of life, either directly or indirectly, so there is no reason for me to buy one. Annoying encumberances are widely available for free.
Of the cell phones I have seen, the jitterbug seems closest to optimal. It would only need a few less functions and a smaller form factor to achieve elegance.
Zuzu, if there isn't a discounted plan available to consumers for the non-subsidized phone, then it's actually a *bad* financial choice to choose an unsubsidized phone. If you're going to pay the same monthly fee regardless, then why not get a couple hundred bucks off your phone?
So it's not the consumer's fault, but the FCC and provider's faults for forming the market the way it is.
Sadly, ISPs have gone the opposite direction; in recent years Verizon has been requiring 1-2 year contracts for its FiOS service. I'm glad I got on before that nonsense started. (Not like there's any real competition anyway for FTTC, unless Obama's new FCC chair includes subsidizing municipal dark fibre loops to the curb as part of the larger domestic infrastructure subsidy / "stimulus" plan.)
This is also a management problem for private enterprise, and IT culture generally. Purchasing decisions for mobile phones and laptops should be left to the individual employees themselves. Just give them a $5000/year bonus and let them figure it out. (Presuming that said business is not hiring ignorant people to begin with.)(^_^)
@RaisedByWolves what are you talking about? I use a prepaid sim with an unlocked phone in both Canada and the US, and had no problems getting signed up for either. I've done this personally on T-Mobile in the US, and Fido and several MVNO's in Canada, and know personally of people who have done the same on Rogers and AT&T.
@Chris S.: Please give me an example of a GSM carrier in North America who "locks their sims" - I'm not sure this is even technically possible.
Funny, I would describe Nokia's phones as "mostly dull". The last one that I seriously considered getting was the 6600, and that was because, at the time, various rebates and price cuts would have made it free.
@Hypatia; Re: locking of SIMs
My understanding (from reading, not from use) was that Rogers had blocked the use of the SIMs for the iPhone from working with any other device. This made considerable sense, since Rogers iPhone data pricing was better than even the data pricing on the rest of Rogers' phones.
In hindsight, I realize that they don't need to "lock SIMs" in order to get the same effect. They can simply only allow IMEIs for iPhones on the network using that SIM.
Of course, the net effect is the same. I should have described the effect, not the assumed mechanism ... that carriers lock their offerings to particular devices, such that services and pricing you get on one device with a carrier might not be available on a different device from the same carrier.
@Ryan; when you brought your own CDMA device to Bell, did they give you a break on the airtime price since they didn't need to subsidize your phone?