Nokia’s price for exclusivity | Hacker News Reader

Nokia’s price for exclusivity

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65 pointscoob50 comments

It always surprised me that Nokia made such a public announcement that they would be killing an existing product line that was selling fairly well (at a solid profit from what I understand).

While switching from Symbian to WP7 may have been a good idea, to publicly announce that you're dumping the platform of your best selling phones seems like a pretty big blunder.

Yahoo's approach seems better to me. I'm sure that Marissa has a game plan for products that they'll EOL and directions that'll change but they're keeping it close the vest to not shake things up publicly too much.

Hernan Cortez didn't burn his ships because it was prudent. He did it to give his crew no choice but to follow him.

Had Cortez and his men died in the jungle, that would not have been regarded as a bold act of leadership.

> While switching from Symbian to WP7 may have been a good idea, to publicly announce that you're dumping the platform of your best selling phones seems like a pretty big blunder.

From what I understand, Nokia did this because of the "warring factions" and duplicated effort across the company. Killing it early was likely seen as a strategy for reducing cultural problems later.

I agree this will be studied like the Osborne Executive gets studied in business schools. I've seen these sorts of transitions managed in different ways, they all have their risks. Commodore-64 to Commodore Amiga (unsuccessful), Apple II to Macintosh (successful), Emulex Storage to Networking (not successful), IBM Mainframes to software consulting (successful). It is a tricky tricky thing to do, to take your company's most profitable product and build a replacement inside its market internally.

    Commodore-64 to Commodore Amiga (unsuccessful)

Actually the Amiga was a lot more successful than you'd think looking at the American market (it was mostly successful in Europe: http://www.amigau.com/aig/sales.html - there is no reliable public data about exact numbers but its somewhere around 4+ million units, most of which in Europe).

With the success of the Amiga 500 commodore had a decent chance at staying alive and even prospering, if not for extreme mismanagement & very questionable business decisions (that started before the time of the Amiga).

Commodore-64 to Commodore Amiga (unsuccessful)

Except every kid I knew when I grew up swapped their Commodore 64 (which they had) for an Amiga 500. The Amiga was widely successful and ahead of everything else at the time, at least within the consumer price-point.

What killed Commodore was that they got complacent, lazy and slept on their laurels.

When the PC finally overtook the Amiga (much like Nokia, RIM being overtaken now, etc) it took too much time until they realized what was happening, and when they did, it was too late. They had no products to offer which could match the competition, and slowly, but surely they went into bankruptcy.

Apple II to Macintosh (successful)

semi-successful at best. The Mac didn't get the same marketshare in the 80'ies as the Apple II had.

They were/are being paid very large sums of money to save Windows Phone, hence announcing that Windows Phone now has manufacturer support is part of what they've been paid to do. And they got far more money from that than they would have from selling those symbian phones.

edit: after reading the article I see that this is the actual point he's making, though he claims that they could have made an extra 3 Billion from selling the symbian phones if they'd focussed on that, and only got 1 Billion from Microsoft. Except he pads the numbers by assuming they'd have hit their 150 Million sales targets and sold another 50 million devices at an average of $200 (unsubsidized) and got 33% or $66 dollars profit from each one (neatly equalling the subsidy of $68 they get from Microsoft from each WinPhone they sell at current sales rates).

Of course, the Microsoft payments continue and were guaranteed, whereas Symbian was a gamble and is, frankly, now dead so the "price" of this choice becomes less with every passing day and depending on which numbers you pick out of the air, they could already be ahead on the deal.

How did you arrive to that conclusion? The article is making exactly the opposite point: the lost profits from the lost sales were much more significant than the support money from MS. And it also shows the (rather reasonable) calculations used for this analysis.

Well... There is something to be said for public statements of intent and focus. There are also the cost savings in not developing Symbian anymore.

But I agree that this seemed pretty reckless especially since WP7 was/is still at such an early phase. It basically multiplied the risk that future nokia phones would be crap by the risk that windows would be crap.

Page seems to be down. Anyone have a mirror?

The best mirror I could find (nyud.net and Google let me down): http://substancedigital.com/2012/10/21/nokias-price-for-excl...

Looks like the whole site is down. Here's a text only copy from my RSS reader's cache: http://pastebin.com/MRNg2GPu

I wonder if this is also why providers can price the Lumia 920 so aggressively at $149 with a 2 year contract (iPhone and the Galaxy III are both $199 at the least). I'm curious what price point they can buy the phones at...

See now this is an example of how US cell phone consumers have been successfully brainwashed. A $50 difference on the subsidized cost of a handset is not "aggressive" discounting; it's inconsequential.

Chances are you'll be paying $60-100/month for 24 months when you take out any smartphone service (or less if you go with T-Mobile or Sprint). Assuming $80 that's:

    $199 + 24 * $80 = $2119

    $149 + 24 * $80 = $2069

which is less than a 3% discount. Now the service obviously costs something and you may not have it for 24 months (which probably means you're paying an ETF anyway) but that should definitely be how the consumer looks at it: would you rather pay $2119 for an iPhone and service or $2069 for a Lumia and service?

Even worse, I see people who will pay $2119 for the iPhone 5 and $2019 for the iPhone 4. It makes no sense.

Here's another way of looking at it: that $199 iPhone 5 costs ~$650 unsubsidized. Your ETF is (IIRC) $350 (-$10/month on the contract). If you terminate immediately you've paid $200 + $350 + probably $80 so basically full price anyway. If you do so after a year you pay $200 + $230 + whatever you've spent on service. $430 from $650 means they've discounted the phone $220 for you but you've also spent $960 on service.

To compare: when I got my iPhone 4 in Australia the 64G model was A$1000 at the time (the exchange rate was at the time a lot worse than it is now). Also, that includes tax (10% GST). Instead I bought the phone on a Telstra Business 24 month contract which was $50/month and $299 for the phone with a $100 store voucher (from JB Hifi), so $199 + $50 * 24 = $1399 - $1000 retail cost means I really only paid $400 for 2 years of service or alternatively the phone was discounted $800. Either way that is "aggressive" discounting.

Seriously, cell phones are an utter ripoff in the US. It still astounds me how expensive it is.

Oh and in the US you pay to receive calls. Not true in Australia and most of Europe that I'm aware of (certainly not the UK, Germany or Switzerland).

You are absolutely correct about everything. Two additional points:

1. While the brainwashing is there, and is very effective, the major carriers (AT&T, Verizon) will make you pay the same monthly charge whether you bought a "subsidized" phone from them or not. So instead of subsidized phone vs. unsubsidized phone (the way you have it in most of the world), what you have in the US is sucker-with-a-lower-price-tag ($200), vs. sucker-with-a-higher-price-tag (e.g. $650 if bought from Apple) - your service cost will be the same (with the exception that if you brought your own phone, you won't pay an ETF if you leave early).

2. Yes, it is exclusively in the US that you pay for incoming - and that's for historical reasons. Unlike essentially everywhere else, there is no special area code for mobile, so you can't tell if you're calling a mobile phone, so -- back in the days when calls to mobile cost more everywhere -- there was no other way to handle this. But the US public has gotten used to it, so no company is thinking of changing that - people here think its normal to pay for a received text message (SMS) as well...

Mobile phone service in the US is a ripoff, but it will not change because the public is not aware that is the case, and congress is bought and paid for.

That's not 100% true. At least Tmobile doesn't make you pay the full monthly cost if you didn't get a subsidized phone from them. So if you're using Verizon or AT&T you're indeed a sucker, but there're options..

T-Mobile is the only major US carrier to do this. I use them and I think they're a great bargain, but it's not a good option for everyone. Their coverage map is much smaller than AT&T or Verizon and they are not a good choice of carrier if you want an iPhone.

Regarding #1, if you don't buy subsidized, you are also able to get a phone that works all over the world (i.e. unlocked), and one that the carrier can't exercise over the software so you can tether/root/get software updates. The latter is at least that's true with Android (Galaxy Nexus specifically).

Another plus is that in the US the wireless coverage providers MANDATE buying data if you use a smartphone on their network, subsidized or not (which is BS, but the FCC is bought and paid for). If you don't want your wireless provider to know you have a smartphone, you have to buy it unsubsidized.

> you are also able to get a phone that works all over the world (i.e. unlocked)

FYI: Any Verizon subsidized phones are unlocked-for-carriers-outside-the-US, if you just ask, 60 days after you bought them. As far as I know, AT&T is not as nice. I did this with my VZW 4S, which works beautifully in Europe when I travel there. So if you're a verizon customer and you don't get the "subsidized" phone, you are being an even bigger sucker than the average US mobile phone user.

Rumors are that the iPhone5 on verizon is always unlocked - don't know if that's true.

Oh, and specifically for the iphone, AT&T will unlock it for you after the contract is over, or you paid the ETF. But as far as I know, they won't do it for any other phone.

I also heard that Verizon's iPhone 5 is GSM unlocked, but I was unaware that any phone other than the iPhone had SIM trays. And yes, ATT does unlock your iPhone now after contract (just began allowing it this summer, it's ridiculous how long that took).

As anyone reading will probably notice, I've been quite jaded with my interactions with the mobile carriers. Actually, until this year, I would renew my contract, then sell the locked iPhone on eBay and make a few hundred dollars. I haven't done it this year, but I think the widespread availability of unlocked iPhones noawadays probably lessens the value of a locked iPhone quite a bit.

Further to point 2, it always costs more to call a cell phone. In the US the recipient essentially pays the extra over a landline and gets a bulk discount for doing so. In most other countries the caller pays more for making the call to a cell phone. The price difference can be staggering.

Look at this (random) calling card rates page where it gives the price per minute to call from the US to various countries: http://callingcards.com/shopping/qj-phone-card-usa.asp

Note how much more it usually costs to call cell phones versus land lines, sometimes ten times as much. Don't forget the rate includes the transit of the call from the US to the country as well so the actual difference can be even greater.

It does seem somewhat fairer that the person making the call is hit with the extra charges, but at the same time it is far harder for them to get a bulk discount since the charges come from the recipient's network.

All that said the SMS situation is because the US carriers could get away with it.

As an aside, it doesn't cost more to call a cell phone for any reason other than "Because people will pay more".

If anything, mobile networks are less troublesome to maintain than fixed line networks, the equipment needs a lot less human interaction, and generally cost much less to run.

If you were building a voice only telephone network today, it would not involve wires into people's houses.

> If you were building a voice only telephone network today, it would not involve wires into people's houses.

That's something that is easy to agree about, however,

> As an aside, it doesn't cost more to call a cell phone for any reason other than "Because people will pay more".

That's something that is hard to argue unless you have an insider's breakdown of the costs, and assumptions about the cost of capital. (specifically, with all the wires already in place, it is NOW, for the landline company cheaper to use that infrastructure - the costs have already paid by an entity which has gone bankrupt or otherwise wrote it down)

Well clear numbers are pretty hard to get yes, but BT Openreach is a good source of data, as a government forced wholesaler of land line services.

Ofcom has set the current price of wholesale line rental (i.e. a land line only service, no broadband), at £98.81 for 2012-2013. [1]

This price gives Openreach a small operating profit, but not much at all. Remember that Openreach employs 19,000 field engineers to maintain the UK phone network, it's a massively expensive task. [2]

A mobile network has much less fixed infrastructure, and with it comes much lower costs, even disregarding the actual cost of laying wires (as you say, that's largely been paid for now, even the BT FTTC roll out is "only" costing £2.5 billion, or about £100 per home in the UK)

1 - http://media.ofcom.org.uk/2012/02/06/ofcom-proposes-new-whol...

2 - http://www.btplc.com/mobile/Careercentre/Meetourpeople/Peopl...

Not sure why this comment in particular got downvoted, bizarre..

Not sure why this was downvoted (I upvoted, for giving hard data, even if I think the reasoning is flawed).

I don't think these numbers are at all helpful - without taking into account e.g. how much openreach paid for the infrastructure it is using (did it inherit? did it create all?). Also, the efficiency of openreach is an unknown that makes every other number moot. They employ 19,000 employees, but that does not mean that a similar level of service cannot be reached with 5,000.

I suspect that your basic claim as I understand it: That if we started TODAY, wireless would be cheaper. But I can't tell if it's true when you ignore all sunk costs everywhere - which, practically, you do.

Openreach inherited the original infrastructure yes, it was built when it was owned by the UK government, then passed to BT, then Openreach (a BT subsidiary).

Openreach have since been responsible for the upkeep, and are rolling out fibre to the cabinet using largely BT's own money, rather than government funded.

As to their efficiency, well I'm not sure who else has as similar setup of firewalls between their retail business (BT selling to normal people and businesses), wholesale business (sells to ISPs and telcos), and network infrastructure (sells to BT wholesale and larger telcos), so it is a hard one to judge, but if they could do it with 5,000 people, I'm not sure why they wouldn't.

Over the years BT have got rid of an awful lot of staff, they're definitely more efficient now than they have been previously.

I'm pretty sure that the 'no special code for mobile' and 'recipient pays' concepts were part of the same plan - companies worried that nobody would call a mobile if they knew it was different or more expensive, so they made it look exactly the same to call one, and make the assumed 'high powered exec' cover the cost difference in order to receive calls. I'm not sure why this only happened in the US - was it the first country to have consumer mobile phones?

I have no first hand knowledge, but I'd assume there's no malice involved. In the US, every state has a different area code, and calling within your area code (and possibly a few others) is "local", and other area codes are "long distance".

At the time, the infrastructure wasn't there for a US national mobile area code - the installations were state local, and as a result, mobile numbers were state local. And it all follows from there.

The US phone infrastructure (both landline and mobile) was there first, and as a result, suffered from a lot of legacy that the European system was able to avoid by virtue of having more time to think about it, observe how it was done wrong, and do it right.

I could never work out why people in the US were so resistant to buying their phones from a 3rd party.

Are you saying that carriers don't offer any 'SIM-only' packages? i.e. You can't ask for a contract without a free phone?

If so - is there a workaround? If I went for a package with the cheapest possible dumb-phone, how much would I save?

For comparison I'm on a $28/month package with Virgin that I can cancel at any time (1 months notice) and has unlimited data and SMS. No phone included. This is a particularly good deal but even before this there were similar deals but with a data cap.

You can get prepaid, and there are second-hand networks that will sell you a SIM-only plan (reselling from leased space on a major carrier). Virgin sells prepaid here in the US as well. Most smartphones require a data plan on the carriers here though, which costs a lot more. Most prepaid plans come with a phone included ($100 for the phone and x number of minutes, then you add more minutes by paying more).

> Are you saying that carriers don't offer any 'SIM-only' packages? i.e. You can't ask for a contract without a free phone?

You can; but at AT&T and Verizon, it's not cheaper than if you do get a phone, so everyone gets a phone. And for quite a few people, T-Mobile and Sprint are unacceptable (coverage, technology).

$80/month? AT&T has $40/month with 1gb/month for the iPhone. So with $199 for the phone, that ends up around $1160.

Concerning Australia: Last time I walked in to (I think Telstra, and the same at Optus and Vodafone), I asked about the cost of cancelling a 2/yr contract. They said I'd have to pay out the entire contract ($50+/month for 750mb/month). So $1200+ in any case. With who were you able to cancel and not have to pay out the full?

In any case, my initial question was basically: Why $149 and not the $199 like the other top-end phones?

Where is this $40 plan? If you're referring to the new "mobile share" plan, you also have to pay a $45 per month device fee, making it $85.

You're right - if you cancel before the end of your contract you're up for the entire remainder of your contract. The poster didn't actually mention canceling the contract (he was doing the sums over the life of the contract).

The best value in Australia is actually to buy the phone from a grey importer (though this works best with Android phones as iPhones aren't discounted much - a GS3 an be had for ~$530, iPhone 5 for ~$770), and going with a VMNO such as LiveConnected (http://www.liveconnected.com.au/mobile-plans) - a plan with ~600 minutes and 2GB of data only sets you back $17 a month, and you're not on a contract.

Interesting. Have you used LiveConnected? Know why they can be so inexpensive? Also, where you can you find a grey importer?

(by the way the author does mention terminating the contract.)

I personally don't use it (I'm with Vodafone on a month to month contract as I used to work for them and have quite a good deal, and I know how they value long-tenure customers) but I know some friends who do. They've had no problems, but I've heard that if you do there is next-to no customer support on their end - if porting a number goes wrong, for instance. A middle-ground would be TPG Mobile who have some customer support if you need it.

In terms of a grey importer, the best option is to keep your eye on OzBargain (www.ozbargain.com.au). Otherwise Staticice.com.au is a good aggregator if you're looking for a less popular model, or need one immediately.

And perhaps I'm struggling with reading comprehension (it is Monday, after all!), but I still can't see him mention terminating the Australian contract early - only the US one.

I do use Liveconnected, there're a reseller of optus, they're inexpensive because they don't pay for sales, and they don't target premium customers like Optus does. You'll find there's tother companies like amaysim, lebra mobile, pennytel all in the same price range.

Grey importers for phones include: kogan.com Shoppingsquare.com Check ozbargain and whirlpool.net.au for reviews and recommendations.

> I asked about the cost of cancelling a 2/yr contract. They said I'd have to pay out the entire contract ($50+/month for 750mb/month). So $1200+ in any case. With who were you able to cancel and not have to pay out the full?

I'm not the parent, but I recently cancelled my iPhone 4S contract with Telstra so I could upgrade to a 5. The cancellation fee was Mobile Repayment Option (MRO) * months remaining; it worked out to about $340 with 12 months remaining for me.

This was the motivating factor for upgrading early; I sold my 4S for more than it cost to break contract.

The difference between your US and AU example are:

1) The initial retail cost of the phone is higher in Australia. $1399 - $650 would be less of a discount.

2) The cost of the service is cheaper in Australia.

It would be interesting to compare and contrast what your $50/month plan gave you when compared against a $80/month US plan.

Good thing the AUD is almost at parity with the USD.

AT&T http://www.att.com/shop/wireless/plans/mobileshare.html#plan...

Telstra https://onlineshop.telstra.com.au/?ti=TR:TR:newshop:mobilepl...

How do you factor in things like coverage and actual speeds? Telstra is generally seen as expensive in AU, but I've been on the other carriers. Telstra's coverage and network speeds were worth the extra cost for me.

It's not brainwashing. $50 up front makes a significant difference for most Americans. I bought my last two phones (Galaxy Nexus and Nexus S) at sticker price and got a cheaper T-Mobile plan. That's not an option for everyone.

Even accounting for inflation, having money today is more valuable than having it in two years. Any calculation that doesn't account for that is invalid.

$50 up front makes a significant difference for most Americans

If that's the case, then most Americans should devote much more effort toward lowering their monthly bills relative to getting cheaper phones.

I bought my last two phones (Galaxy Nexus and Nexus S) at sticker price and got a cheaper T-Mobile plan. That's not an option for everyone.

It is for the large majority. Even if you have to put the phone on a credit card at 20% interest, you probably still come out ahead.

Many americans, the ones being discussed here do not think that way. No matter how many times you try to explain how to "save in the long run", up front cost is by far the biggest decision factor. A better way to describe it is not that it's not an option for everyone, but it's that not everyone will see it as the better option.

The most common cellphone plan here in eastern europe is $10 per month with unlimited voice/sms and 0.5gb of data. If you want an included iPhone and more data, then it's like $40 since the phone is expensive, but how can you get up to $80 is quite a mystery that only monopolist lobbying could explain.

Sorry to say,but $149 for a phone is not aggressive pricing. That's typical of carriers in the US. Lumia 920 is offered for free on pretty much every 2-year contract in UK/Germany/France. You can get S3 for free on a 2-year, $50/month contract, and that already includes unlimited internet(with tethering allowed and no fair-use policy) and unlimited text, and 2000 minutes.

Only because they know their phones don't offer as much "value" (nothing to do with component costs) as their competitors, so they have to cut into their profits to compete.

This is funny, because I remember the old Nokia executives saying they would have to do this if they would use Android, because it would "commoditize" them. And yet they are being commoditized much faster by WP8, since all phones look alike (software wise) and their ecosystem of apps is much smaller, so they have to account for that in the price.

The Galaxy S3 has been selling for $99, too, but only for short periods of time. But as others have said, those prices are pretty irrelevant on a contract.

The Asymco.com site seems to have had a hiccup. Text, but no charts, at the Google cache: http://webcache.googleusercontent.com/search?q=cache:m1lNim-...

Er... this is now giving a 404?

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