Hello! And welcome to our Friday column, Worst of the Week. There’s a lot of nutty stuff that goes on in this industry, so this column is a chance for us at RCRWireless.com to rant and rave about whatever rubs us the wrong way. We hope you enjoy it!
And without further ado:
Good ideas always attract imitation. (Heck, just look at all the different toilet paper brands and types we have to choose from.)
The same plays out in the wireless space, where every good idea will and has been copied. Why do you think all current smartphones look similar to Apple’s original iPhone? Or, why carriers have similar pricing plan models?
The latest “good idea” gaining a crowd is this device financing model where carriers spread out the full price of a mobile device over monthly installments, thus easing the upfront sticker shock of ever-increasingly expensive mobile devices. While this model has been around for some time, T-Mobile USA really kicked it off earlier this year when it went all “un-carrier” and began allowing customers to make monthly payments on their devices.
The model is a great one for carriers in that they no longer need to subsidize the price of a device in exchange for a rate plan contract. Sure, there is some sort of subsidizing up front as the carrier is not getting the full price it paid for the device from the customer, but through the payment plan customers end up paying for the full price of the device.
One of the supposed consumer-friendly aspects of these models is that it de-couples a service plan contract from a device. Thus, once your initial service contract ends you do not need to re-sign a new contract in order to get a new device as part of the financing option.
Fair enough, but instead of now being tied to a service plan you are tied to a device financing plan. Sure, you can eventually pay off the device and then be free from all obligations, but isn’t that sort of what is available today?
I would say that if anything these device financing models are great in that they seem to finally be putting a value price tag onto mobile devices. Something that carriers had initially attempted to do prior to Apple cutting the price of its subsidized iPhones to $200 shortly after launch.
In reality the consumer-friendliness of these offers is directly proportional to each carrier’s current position in the competitive environment, otherwise known as how desperate they are to attract customers. T-Mobile US’ current offer seems to be the most consumer-friendly in that they also cut the price of their rate plans when they rolled out the device financing option. This would theoretically allow customers to end up paying less for service once they pay off their device, but in reality consumers are more likely to want a new device before having paid off their old one thus they are never actually going to see that savings.
In addition, T-Mobile US recently updated its device financing model with its “Jump” offering that for an additional $10 per month allows customers to get a new phone every other week, or at least whenever they need a new device to match their wardrobe. This model looks to be a boon for those with short attention spans, but further ties a customer to constantly be paying a little bit extra for their device.
At the other end of the “desperation” scale is Verizon Wireless, which announced its “Edge” device financing option this week that some critics have likened to a stranger slapping your grandma in that the carrier did not also cut the price of its rate plans to de-couple the price of a device subsidy. That is indeed true, but Verizon Wireless is also not charging an extra fee per month to be able to partake.
The one carrier that has so far not thrown its hat into the ring is Sprint, which word has it has been busy being acquired or acquiring something or other … I don’t know as I rarely follow wireless carriers. Sprint is expected to get in on this party at some point and my guess is that by looking at its current competitive position, its offer will be closer to that of T-Mobile US than that of Verizon Wireless.
Or better yet, maybe Sprint will go device-financing crazy and throw out some offer that includes free backrubs, unicorn rides and non-stop parties at your local Chuck E. Cheese’s. Now that would be an offer I could get behind.
In the end, all these new offerings show is that the mobile space continues to lack originality and that marketing departments should be ashamed of themselves for not keeping their eyes on their own test.
OK, enough of that.
Thanks for checking out this week’s Worst of the Week column. And now for some extras:
–Has Verizon Wireless finally put the sleeper hold on rivals attempting to play in the postpaid space? Well, if the carrier’s recent quarterly results, and for that matter results over the past several years, are any indication, then yes, other carriers are slowly being choked out. Even more punishing is the fact that Verizon Wireless is beginning to get cocky in its domination, noting it expects to post even stronger postpaid growth throughout the rest of the year.
This dominance could be one of the reasons AT&T put in its bid to acquire Leap Wireless. Sure, AT&T wants Leap’s spectrum, but having another iron in the fire in terms of a no-contract space can’t hurt. If AT&T does indeed keep the Leap/Cricket brand like it said it plans to, the carrier will have three offerings in the space along with its GoPhone and Aio Wireless brands.
–Finally, research firm Canalys predicts the worldwide “smart watch” market is set to grow 900% in 2014, from around 42 devices sold in 2013 to five million sold next year. As this market has yet to produce that one device that defines what a “smart watch” really is, I am going to assume it will simply be something that has been around forever, just in a sleeker package.
Most troubling about the prediction was the comment from Canalys’ VP and principal analyst Chris Jones, who stated: “Smart watches will be the most important new product category in consumer electronics since the iPad defined the market for tablets.”
There you go tech-junkies. Time to start shaving that wrist hair in order to make room for your next fix.
I welcome your comments. Please send me an e-mail at dmeyer@rcrwireless.com.
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