All three major Russian carriers dump iPhone
rethink-wireless.com
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This is a country which Apple has never found easy - notably,
Russia bans handset subsidies, making the iPhone an expensive
option for most customers.
Carrier subsidized model should be ended to bring down consumer telecommunication costs. It only benefits the carriers.
I buy a new phone every 2 or 3 years. Go ahead and count on your own if I'm better off with this model.
Russia bans handset subsidies, so customers compare actual handset costs from one handset to the other, and notice that iPhones cost hundreds of dollars more than other smartphones, making them expensive relative to alternative handsets.
Rather than:
iPhones in Russia are expensive relative to iPhones in America.
The problem is that Apple doesn't have (yet) a portfolio strategy, so you still thinking in terms of when this product started to sell. Like cars. Or fashion. Despite if last year's model is better than yesterday's launch.
Once they stop using sequential numbers and migrate to models - e.g., iPhone Pro, iPhone Air, iPhone Lite - you'll clearly understand what is flagship or non-flagship. But that's pure marketing/product positioning, nothing to do with the product itself.
TL;DR: Apple already has a non-flagship product; it's just not clearly positioned as such. This is not a mistake; this is by design [1].
[1] http://www.asymco.com/2013/05/29/tim-cooks-answer-to-my-firs...
The "flagship" iPhone (5) costs between $650-850 + tax. The "non-flagship" is a couple of hundred bucks less, which is reasonable. Apple charges more, simply because they can.
I'm not making a judgement call here. I personally wouldn't pay that much, but I'm not the target. In fact, I don't think any individual person is the target of non-flagship devices for Apple; their strategy has always been to sell locked devices to carriers in bulk, so they can offer "for free" to customers upgrading from a dumb phone -- in exchange of a 2 yr agreement, ETFs, and an outrageously expensive data plan.
That's essentially my reading of Tim Cook's answer in the link above. If they can charge what they charge, why change?
Of course this strategy won't work forever. Eventually they will have to migrate to a portfolio strategy, OR enter the race to the bottom with Samsung, HTC, et al (unlikely).
The only question is when.
If you want to see examples of poor performance then take a look at the Android ecosystem. It consists of effectively one player: Samsung and a bunch of other companies whom are either exiting or perilously close to bankruptcy.
The Russian market, not the market in general.
Complete straw man. This sub-thread is about the price of non-flagship iphones vs alternatives in Russia. I provided two such prices for comparison.
"The "non-flagship" is a couple of hundred bucks less, which is reasonable."
You seem to be under the misconception that I am complaining that the iphone 4 is overpriced. Let me disabuse you of that notion: zonk
"Apple charges more, simply because they can."
Apple charges profit maximizing prices but due to secondary market realities it cannot charge radically different prices in different countries.
One way of looking at the smartphone market is that there are <$100 smartphones, $100-$200 smartphones, $200-$300 smartphones, $300-$400 smartphones, $400-$500 smartphones, $500-$600 smartphones and >$600 smartphones (some overlap yes).
We might observe Android has entries in all of these categories but that Apple has chosen, for profit maximization, focus, brand, whatever reasons not to participate in 4 of those 7 categories as of today. We could use fewer or more categories but the same basic truth will remain: Apple does not compete at the low end of the market.
Another observation is that for many countries, of which Russia may be one, the majority of smartphone consumers don't buy from the top 3 categories that Apple participates in. Regardless of how you structure the categories, some markets cater toward the low or lower-middle end that Apple doesn't participate in.
> "Complete straw man."
Not at all. As I said, Apple does have a non-flagship device. Still, this doesn't mean they are participating in the race to the bottom. The same profit maximizing strategy still in full force, flagship or not. Good luck trying to make the same strategy work for Samsung. Or Nokia. Or SE.
(side note: do not confuse profit maximizing strategy with having models at all price bands. That's what the CE and personal computer industry did for the past 20 years. How's that working for Sony, Dell, HP, Nokia...?)
Yes, $400-800 is a steep price to pay upfront, in any country. That's why it works in heavy subsidized markets (like the US).
On the flip side, this doesn't work well in markets that 1) don't have a large middle/upper class population with high disposable income (to afford the outrageously expensive data plans), AND 2) don't have a strong culture of carrier subsidy.
That's exactly Apple's problem in Russia. Or India. And - just to stay with BRIC markets - the situation is slightly better in Brazil only because the heavy culture of subsidy and the recent growth of middle class, but import tax is what is/was killing them. (solution? Just open a fraking factory there [1]).
> ...the majority of smartphone consumers don't buy from the top 3 categories that Apple participates in.
And who said that volume is the goal? If your ultimate objective is profit - and why wouldn't it be? That's always your ultimate obligation with shareholders - volume alone is pointless [2].
Unless, of course, your very long-term profit maximizing strategy is to dominate market at the bottom, and then jack up prices so you can finally make some profit to compensate years of eating sand. There are very few industries (like retail, with Walmart and Amazon) where this can be done. Mobile manufacturing is likely not one of them (case in point: Huawei and ZTE eating Samsung's bottom).
The only threat for Apple is a global movement towards ending carrier subsidy, so consumers would have to finally pay full price for their devices.
But that seems unlikely. Consumers still don't know how to do math.
[1] http://online.wsj.com/article/SB1000087239639044416580457800...
[2] http://www.asymco.com/2012/05/03/the-phone-market-in-2012-a-...
You might appreciate this: https://www.youtube.com/watch?v=FL7yD-0pqZg
NSFW ( or as NSFW as foul mouthed teddy bears can be )
that in the eyes of many Russians (like in any status symbol obsessed country) is the main advantage of iPhone :)
It's not that russians are anti-Apple, it's Apple that neglected Russian market for a decade. iPhone got very popular anyway from the first days of American phones jailbreaks (even before apps, before that stuff, a lot of American phones were smuggled), iPod too (it's not so expensive anyway), but that's it. No hi-end gear.
They definitely have a market for full price iPhones, heck, there is a market for multiple companies selling gold-plated jewel-encrusted iPhones.
In the US at least, everyone has to get on LTE before that becomes a reality. Sprint and Verizon 3G and older handsets can't speak the same language, I don't think. AT&T and T-Mobile both use GSM based systems so phone calls are possible using a handset form the other carrier, but their 3G frequencies are different - so you're hosed on mobile data. So, there's a de-facto lock into a carrier with your device even if there isn't one in the contract. (And $600 for a new device just for a different carrier is a hard sell, in a world where subsidies are gone.)
It's happening though. The problem is that companies like HTC charge the same price Apple does for the iPhone for what is a lower quality of product, in my experience. Once again, personal experience, but the number of hardware problems I've had within the walled garden of Apple are few compared to those in my Android days. And those that I've had have been fixed quickly by an Apple store representative, whereas with HTC or Verizon it was a multiple week ordeal.
That's something that makes the product itself even more valuable to me.
All carriers in a single country? Yes, many do. All carriers worldwide? You'd be putting a lot of radios in the thing.
> Could they share a single antenna?
Not a radio expert, but I think each antenna has to be tailored to each wavelength. Maybe you can get away with one per band (one for 800-900, one for 1800-1900, one for 2100-2600)
> Could one be activated by the user selecting which network to get on?
You'd need a SIM card for each carrier you want and swap them out, and for American CDMA carriers you'd have to have your ESN registered with their networks beforehand.
There are phone models that support 2-3 SIM's , very useful when travelling so you don't have to swap anything but can call from different networks seamlessly.
I'm in Europe. The last time I had a phone I couldn't effortlessly take to the US or Asia and use roaming was probably about '99.
2G Network: GSM 850 / 900 / 1800 / 1900
3G Network: HSDPA 850 / 900 / 1700 / 1900 / 2100
4G Network (C6833 model): LTE 800 / 850 / 900 / 1700 / 1800 / 1900 / 2100 / 2600
4G Network (C6806 model): LTE 700 / 850 / 900 / 1700 / 1900 / 2100 / 2600
With one of these babies, pretty much all you're missing out on is extended range areas on Docomo Japan (800 MHz)
Many Chinese phones even sell with from two and up to 4 GSM SIM slots (that can be active simultaneously), so I wouldn't be surprised if you could even use both at the same time.
HTC charges a similar price for a lower quality phone that has a bigger display, more RAM, higher resolution display, more internal storage, external storage capability, etc, etc.
Well, I've got another phone brand this time with a lot better track record.
There is more to phones that just specs.
Many (most?) Verizon/Sprint phones support GSM already in order to gain worldwide roaming capabilities. If they just allowed R-UIM cards or allowed foreign ESNs to be registered on their networks, handset manufactures would quickly follow suit and ship multi-standard phones that aren't software locked to prefer a certain standard.
> AT&T and T-Mobile both use GSM based systems so phone calls are possible using a handset form the other carrier, but their 3G frequencies are different - so you're hosed on mobile data
High-end phones nowadays (such as the Xperia Z) support both 3G frequencies. Also, T-mobile are refarming their frequency allocations to open up 3G on their 1900 spectrum, same as AT&T. I could use my Euro-model iPhone 5 on T-Mobile 3G this year at WWDC.
So, despite official sales numbers are low, there is a remarkable iPhone user base here.
You can now order iPhone there over the internet, carriers can't realistically compete with this because they'll lose money selling for less that Apple Store and sell zero phones selling for more.
(I've never owned nor bought anything from Apple)
Strong competition has a similar effect. If the SIM free contracts are good enough, people are not going to get into lengthy, expensive contracts. This doesn't happen in places like the US because there's a very strong cartel/oligopoly there that affords them the right to simply deny you a terminal if it's not under the carrier's conditions.
If Apple is selling for cheaper than the carriers can afford to sell, then they will simply do what they are doing: stop selling it.
What? There are scores of industries that use loss-leaders to get customers to commit to long-term contracts. Razors, satellite/cable TV, etc.
> This doesn't happen in places like the US because there's a very strong cartel/oligopoly there that affords them the right to simply deny you a terminal if it's not under the carrier's conditions.
This isn't true at all, and I don't know why you would think it was. Here's a counterexample: https://ting.com/
For razors: you are allowed to manufacture and market blades that are compatible with competitors; so people are (both legally and practically) allowed to buy a loss-leader razor from company A, and cheaper razorblades from company B.
For satellite/cable TV: in places with decent consumer rights laws there are practical, massively used ways to get out of long-term lock-ins; so such deals work only as long as consumers like the deal. If customer walks away, there may be a contract-breaking fee involved, but as soon as you want to change the contract the slightest bit not to customer's favor (increase price by a dollar or drop a TV channel, which you may need to do) - bam; the customer can walk away with no fees.
This makes it blatantly obvious to the consumer that the unsubsidized phones are cheaper.
If they are "selling you the phone on credit", then it would be obvious to require (a) in bill, separate items for the telecommunications and for the phone payment; (b) in advertising, note the full price of the phone, including the all monthly payments+interest; (c) when the phone is paid in full (24 months?), then stop charging for it... rather than continuing the same bill forever.
I pay 25/mo for my iPhone plus an 8/mo data plan. I don't do much calls but they're 8/c minute IIRC. I can move from a plan to another or cancel the data but the 25/mo will stay there until the phone it's paid.
It was 50€ cheaper to buy it this way than to pay full retail price.
What's the reasoning behind that for the phone vendor? That seems odd.
2) There are economies of scale (order size) and synergies (sell phones at the same office you already have for contract sales) that can mean that $RANDOM_TELECOMPANY has significantly lower costs than $RANDOM_PHONE_RETAILER and can simply outcompete them on price.
Yes. Carriers in the US lose, literally, billions of dollars on the iPhone because they've calculated the cost of acquiring a customer is a few hundred bucks, on average, so if subsidizing a phone buys you customers it's worth it.
Personally, I think they've gone overboard, but then again I'm not in the front office.
http://www.latimes.com/business/money/la-fi-tn-verizon-on-ho...
If there is no legal/monopolistic lock-in like in USA (where the phone is locked to a certain operator), but instead operator B can jailbreak&unlock your phone for you when you switch, then you can't extract huge monthly prices just because you sold a phone 9 months ago.
The "zero point" of regulation would mean that any and all device restrictions can be freely legally broken and removed, which currently isn't the case in USA; in unregulated markets there are thriving legal businesses that do, for example, jailbreaks of phones that people bring in from USA, and which were subsidised there.
The point of a market is to allow sufficient flexibility so that lots of individual actors can by trial and error find an efficient solution to a hard problem without requiring a benevolent genius at the center. How much flexibility is enough? How much is too much? I don't think there's a one-size fits all solution here, and the size discrepancy between the cellular provider and the individual user only makes it harder.
Personally, I think that in most markets, but particular these kind of highly asymmetric ones, we'd see more innovation and progress if the market were more fluid; which suggests to me that the carrier (and handset provider) lock-in is not a good thing.
This might be counter-intuitive to many people who never lived in Russia, but: mobile phone service contracts in Russia almost do not exist, entire market model for carriers is quite different.
Carriers don't sell SIM-locked phones for over decade now in Russia. Most common contract features are implemented as pay-as-you-go with extra packs (quite similar to what giffgaff does in the UK). This is probably due to the fact that CRA and other similar financial institutions in Russia are currently in their earliest stages of development.
Mobile phones are usually purchased absolutely independently from the mobile service contract, and almost never purchased from carriers: electronics stores usually offer better prices, and all Russian carriers are happy to sell SIM-only prepaid contracts (also see PAYG model notice above).
So overall you should read this news as: "major russian mobile companies decided that long-term contract model required to sell 'cheap' iPhones in russia is still too risky and not feasible", no conspiracies.
The whole population is 143M (2011) including infants and very old people. How is it possible? Multiple phones per person?
People that have more than one line usually buy one line from each provider so they can talk "for free" between the same providers. It is not uncommon for people to ask you what is your provider so they will mark it and call from a phone that uses that provider when trying to reach you.
We also have a high number of people with phones that allow multiple providers with one device.
Business and personal cellphones are not uncommon either.
[1] http://www.ibge.gov.br/home/estatistica/populacao/censo2010/... [2] http://extra.globo.com/noticias/celular-e-tecnologia/quinto-...
My close family is 4 people (my dad, mom, me, sister).
We have 6 lines from one carrier (we got it in a special package, we use 1 line per person + 2 backup lines for whatever we need, since those lines can call very cheap each other, one use for backup line for example is borrow it to extended family)
Also my dad has one workplace line with another carrier, and a Nextel Android.
And I had for a while a extra line to communicate cheaply with people of the same carrier, thus in total we have 9 mobile phone lines for 4 people.
Sometimes you see particularly important business people (like a CEO) here walking with 4 or 5 phones on his belt (one of each carrier + 1 for strictly personal stuff)
First, there is the issue that here in Brazil previously we had a government monopoly on telephony, and the breakup was made along geographic lines, those are not strictly enforced anymore, but carriers sometimes still don't work at all in certain states, while other carriers work in those states (And don't work in other states), thus people that travel a lot have no choice but to own multiple lines.
Also, carriers here tend to have wildly different packages, that are advantageous in different situations.
And yes, sometimes people DO put several phones on their cards, usually whoever deals directly with sales (ie: salesmen, marketing, or CEO of small companies)
I seriously doubt that the telecom regulatory bodies in these parts of Europe pay much attention to the coverage/subscription rates claimed by the mobile operators' marketing departments.
Of course some of the people have more than one SIM card, but with at least 3 major operators this simply doesn't add up.
EDIT: added the sentence about the lack of regulation
It's not that odd: even I, who barely makes calls, have two SIM cards (on a dual-SIM phone), for personal and work related calls. My teenage brother has three (one for each carrier).
Almost everyone uses prepaid, so there's really no cost associated with getting another SIM card - you just pay for what you use.
many countries fall above the y=x line in this plot for example
http://www.wolframalpha.com/input/?i=mobile+phone+users%2Fpo...
So maybe windows phone will actually become a competitor to android in russia?
Is there better competition on service quality and cost or does it end up being just the same?
Dealing with phones and SIM cards there was much nicer than in the US, but that isn't saying very much! The US phone market is a complete mess.
That said, I have no idea how much the law about phone subsidies helps this.
Nah, don't be fooled. Most of the time, The Big Three (MTS, Beeline, Megafon) have almost identical pricing. They have been under regulatory scrutiny for price fixing more than once. Besides, there are several ridiculous features here (like inter-regional roaming, when you pay significantly more in different cities). However, it's really easy to buy a sim card, and that's what many people do, they have a Moscow SIM card and a Saint Petersburg SIM card.
Quality of data connection is usually about average, could be better, could be worse. FWIW, I live in a small city (<300k pop).
Unfortunately, since the iPhone, carriers in many countries have started adopting a very similar subsidy program to the one in US, and the value/buck has done downhill since then. But the pre-paid market is still alive and well at least, and you can get a ton of minutes and data for small prices.
You can buy a SIM card for $5 and have it working in a matter of minutes on any phone.
(Carrier can lock phone; carrier would have to unlock it after the contract ends; but nobody does that on any scale)
It's just the marked shaped itself that everyone first buys phone then decides on carrier; everyone is on prepaid; thus no long-term contracts.
You just dump money into a terminal once or twice per month and use that credit for calls/data/options.
I lived in Russia and now live in Canada, and I would take Russian mobile market over Canadian any day. Dirt cheap, fierce competition between operators, over-abundant coverage, hidden fees are much less prevalent, there are contracts but pretty much everyone is on prepaid, buying new SIM card is a breeze.
I do not know if subsidized phones are forbidden, but much more likely the tradition of buying own phones is historical. Back in 90s owning a phone was a status symbol, there were no credit bureaus, no credit histories, inflation was rampant and ruble FX rate was very volatile. Everyone trusted only cold hard cash (preferably USD).
Later the country was swamped with lots and lots of cheap phones. So-called "grey" phones (euphemism for "smuggled") were brought in circumvention already lax or non-existent import regulations.
So I guess it is just not in the Russian tradition to sell subsidized phones.
The situation is similar in Ukraine with one exception: in Russia, you'll have to let the store scan your passport to buy a SIM card. In Ukraine, you can buy SIM "starter packs" in bulk if you please, completely anonymously.
Not always. You can purchase anonymous SIM too. I did it two years ago on a train station. Price for calls is a little higher this way though.
If any operator is ignoring poor service in some countryside region, competition will put up a few towers, make a local advertising campaign, and people can switch immediately.
Midsize companies (a few hundred employees) have enough negotiating power to ask for perfect coverage in a freshly built office building in the middle of nowhere, as they can trivially switch all their business phones overnight to a different operator otherwise.
And the cost, well, in my place are teenager plans for ~$5/mth that cover unlimited minutes/sms. I'm paying ~$10/mth to get data as well (speedcapped after 2gb, unlimited is a bit more).
For a customer, it's great. You use whatever phone you want, you buy it where ever you want, change operators easily, and pay way way less than in US.
My plan, with unlimited data & 3/4G speed, with 2-simcards (so I can use the plan in two devices), costs 15 euros a month. Compared that to ATT & T-mobile, $60+ a month and get an abysmal coverage which doesn't even work inside a house most of the time.
I mean if you knew the KGB could possibly listen in on your phones, how likely would US carriers keep it?
I've been thinking an overseas consumer and business/government backlash against US technology products is inevitable now that the NSA being in bed with every major US technology company is public knowledge.
Plus, the CyanogenMod team is now working on encrypted end-to-end messaging that is built-in:
End-to-end encrypted messaging is a good sign, but it doesn't matter how "community made" your endpoints are - the NSA has the network.
I agree about the voice calling, though, which is why I'd like them to use RedPhone as the default dial app, too, so at least you can have encrypted voice conversations when connected to the Internet.
And carriers go where the money is. This sounds like a purely economics driven decision.
I think its very likely the contractual disagreement, but I'd be very interested to know if sales for US-based technology products have fallen since recent revelations came to light.
In that environment, you aren't surprised by backdoors, you treat them as a natural part of life.
ALL things have backdoors, no matter who made them, so for individuals (not army/gov't purchases) that isn't a factor, you just choose whichever device you like. If they're not spying on you, then backdoors don't matter; and if they're spying on you, then they'll get the backdoor in anyways.
If it didn't have backdoors at manufacturing time then it may have backdoors by the time it's sold to you. If the device didn't have backdoors when arriving at your house, well, it might have been installed yesterday.
Americans could/should be surprised, but not Russians.
They're not carrier-locked, when purchased direct from Apple for $920, are they?
And if they're selling for $3500 on the black market, exactly how "expensive" can they be, at $920, let alone how could they be "expensive" due the import taxes that result in an official product that's less than one-third the price of the illegal product that skirts those taxes?
The game for selling $920 iPhones is "find a price point were demand times price minus cost is maximized".
The game in the black market is "find the highest price point at which the inventory sells out quickly enough".
If the price of a black market iPhone is higher than that of the legal-market iPhone, with any regularity, it suggests that $920 isn't a problem, let alone the import tax portion of that: supply must be the problem.
And if the price only hit $3500 in a couple rare situations (errors, morons), I'm not sure why they even brought it up as if it were common, as that fact completely undercuts the argument about the iPhone being too expensive.
Unless there's something special about them, maybe jail-broken with a few grand worth of apps on it? (Not really buying that, just noodling).
On the black market, iPhone 5s have even been reported reaching over $3.500