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« Bloodbath Results of the Smaller Guys - LG and Nokia report Q3 | Main | My Thoughts On Nokia Handset Unit Sales to Microsoft - In Short: Is Bad WAY to Sell Something and thus gets you bad bargain »

October 29, 2013




>> There is no "global Android" ecosystem. Android is fragmented in many ways

Only if you count every Android App Store as own ecosystem. But I can run various App Stores on Android or simply sideload Apps if they are not available in my region.

>> The Galaxy segment (if you prefer) is the one that's selling the high profit data plans for the telcos.

This is currently true.

But the time will come when $100-Android phones will be able to satisfy the needs for 90% of users, like we see today with cheap Windows Notebooks.

Then the market will change radically.

This is already happening in the tablet space, where $200-tablets are 'enough' for most people. You do not need a $500 iPad or an Asus Transformer TF701 to surf the web and do some E-Mailing on the couch anymore.

Two years ago $200-tablets were junk, as well as $300 smartphones.

My prediction is that in two years it will be tough to sell tablets for more than $100 and phone for more than $200 for most companies.

And companies like Samsung and Apple have to be prepared for this inevitable outcome.


"There is no "global Android" ecosystem. Android is fragmented in many ways"

If you look at the definition I posted above, there is.

There is a global ecosystem of parts and assembly, design know-how, app construction, and so on, and so on. Only when you limit "ecosystem" to mean strict app store B2C, and only that, you could even start to make a point.


Why don't you invest in Hermes shawls. They have the highest margins? Or LVMH? Low volume, high profits. Just like Apple.



>>@Huber - you are correct that over time the cheap phones will get better and better. Will this help carriers sell expensive data plans to the most desirable customers and lock them into long term contracts? No

Yes, this will be tough for the carriers and their €90 top data plans.

But nevertheless they will have to adjust their business model or die.

Prices will continue to shrink, and once a certain point is undercut (e.g. SGS4-like devices for less than €200), selling such expensive contracts will become very difficult.


Huber is correct.

For all the talk about "disruption", most commentators forget that Christensen identified two kinds of disruptions -- not just the "create a completely new market/product-service type".

The "low-cost" disruption, whereas a new entrant proposes an objectively "inferior" product, but that is good enough and is so much cheaper that it enables new users _and_ new usages, is a deadly form of disruption for high-margin, premium incumbents.

"Nokia's top end phones were more than twice the price of the iPhone."

Any figures to substantiate this? We are talking about unlocked, contract-free devices, of course.


"The carriers NEED a device that sells their premium data products."

The situation is muddled, because most, if not all, those service plans include bandwidth throttling and data caps -- which makes them much less attractive to owners of top-of-the-line devices.

"All those currently buying feature phones can now afford a top of the line phone."

Simply untrue. Remember that in many, many countries, a top-of-the-line phone costs the equivalent of one month to one year of income. People there spend literally a few dollars in mobile services per month, and cannot afford more.


Finnish try to gather funds to buy Microsoft out of Nokia acquisition deal. They ask for bloggers to drive it. Why haven't we heard of you?



>>@Huber can you see how you are making the case FOR the iPhone? The carriers NÉED a device that sells their premium data products.

The point here is that as phones get cheaper, people are willing to pay less for their data plans, too.

You won't buy a €200-phone without contract and then pay €90 for their data rate. This simply 'feels' wrong, even when you can easily afford it.

In such an environment, Apple also could not sustain its business model.

I know people with lots of money who don't buy an SGS4 or an iPhone with premium contract because for them the cost is too high from a subjective point of view.

It's like when I buy a bottle of Lagavulin for €50, but then refuse to pay €6 for sparkling water, because the cheaper one tastes the same.

It's not that I couldn't afford the 'premium' sparkling water, I just see no point in paying for it.

And this will also happen to the iPhone if Apple would try to charge €700 for a phone which isn't much superiour to a €200-phone - most people just would feel stupid when buying it.


@huber "Note that Apple would have gone bancrupt in 1995 without MS bailing them out. Main reason: Fosusing on profits alone while neglecting market share."

Bankrupt was very near, yes. The reason you state is mostly wrong.

The problem Apple had in the 90s was that 1. They had worse OS and developer story than competition 2. They made boring beige boxes like everyone else 3. they had a huge overlapping product line that confused customers 4. They licensed MacOS to other manufacturers.

Points 1 and 2 are about quality and desirability, points 3 and 4 were made to *gain* marketshare but actually ate profits and were not successful.

Some of the first actions Jobs took was to make the product lineup very spartan and kill the Mac clones. That made the unit market share (of both MacOS and Apple's computers) drop, but during the same period Apple became profitable because Jobs (and slightly later Cook) trimmed the hell out of the logistics and manufacturing.

A few hit products, like the iMac did not hurt.


"Phone to phone networking and other very interesting ideas may someday disrupt teclos and their premium services."

Exactly. People do not seem to remember how much WLAN scared telecom operators -- they believed interconnected WLAN would cut into their wide area access network business.

Strike that. WLAN continues to scare operators. All the fudging about tethering, tablets (tablets are essentially WLAN devices -- and even when mobile networking is available, few people actually use it) prove it.

There still is the possibility that some form of WLAN will happen to displace (partially) WAN.

And this is exactly where disruption comes up again. iOS, Android and WP are perfectly optimized to "do the job", as you state: selling premium data plans. The primary relation of Apple & co is with operators -- not with end-users (it is operators that commit to buy specific amounts of devices from Apple, it is operators that get exclusivity from Apple or Nokia for new models, it is operators that subsidize expensive high-end iPhones and Galaxies with their devious service plans, etc) -- and those manufacturers are organized for that, are finely attuned to the needs of operators, devoting their minds and capabilities to their relation with operators. This will be their undoing.

One day, some new devices will come that bypasses or piggybacks traditional mobile infrastructure, does not work as smoothly as those classical smartphones, but will provide such cheap, ubiquitous, direct multi-peer data access that it will swamp the market. From this perspective, the platform where experimentation is easier will lead. At present, Android is the only one (and very imperfect at that); hopefully the "open-source" smartphones will be a suitable launchpad for such evolutions.

My guess is that this will happen earlier than we think. After all, those premium data plans are totally unsuitable for the billions of people who can devote just a few dollars per month to mobile services. "Premium" does not apply there. Tomi used to report very interesting developments from Africa and India; I hope he will pick this thread up again.


"Those low cost phones, though, do nothing to enable the purchasing of the high end services."

This is the fundamental problem with your analysis: assuming that the whole of mobile networking is teleologically geared towards the distribution and sales of premium content and services, and that outside of expensive smartphones and "high-end" services, nothing relevant exists. In your view, if something does not support the sales of music, apps, tv shows, ebooks, movies, then it does not really matter.

I have repeatedly mentioned an example of a mobile service running on low-end devices, with a massive adoption, and extremely profitable: mobile e-money. It is remarkable that nothing of that sort exists in those supposedly advanced mobile high-end-services-for-top-of-the-line-smartphones markets, and also significant that this item has been strenuously ignored in the discussion so far. It is tunnel vision. I am afraid that the obsession of Tomi on Elop and the demise of Nokia have led him astray of his once interesting reporting of innovative mobile developments taking place all over the world. Alas, this is of course conducive to those looping discussions about the tireless triad of Apple-iOS/Google-Android/Microsoft-WP and myopic arguments about "ecosystems" -- from which I feel there is less and less to learn.



"One day, some new devices will come that bypasses or piggybacks traditional mobile infrastructure"

Precisely that will happen. Some towns in tourist regions are already installing no-cost WLAN/WiFi hotspots and once this becomes more commonplace, high volume data plans will get less desirable.

So, I so not need data volume when I'm at home, I don't need data volume when at friends' homes, I do not need data volume when at hotels, I do not need data volumes when at the office. In other words: 90% of the time is already being covered by free data access. And as a matter of fact, the remaining 10% can be had for far, far less money than those insanely overprices data plans the carriers offer. Once this realization sets in for more people there will be a major disruption because the product (subsidized phone plus expensive data plan) no longer matches customers' needs.

But then they can't cover up the high price of the iPhone anymore. What then?
I have seen statistics that tie Apple success to an exceedingly low phone price to service price ratio. (like 20% price difference over 2 years between owning a high end device vs. owning a low end device - in Germany it's 400%!) The US are a prime example for such a market. In other words: Apple's success depends on the continued existence of overpriced data plans. This is not a guaranteed scenario, though.

The German market with far better low cost options shows that price does indeed matter and that people having the choice between an expensive high end solution and a far cheaper but 'almost as good' low cost option are far more likely to choose the low cost option.
Of course with a measly 20% like it is right now in the US this cannot happen.


@Rotten Apple
In most parts of the world there is ubiquitous free WiFi. From busses and trains to bars and restaurants.

I just read an interview with a backpacking tourist in Asia who still works one day a week on line. Using WiFi on some terras as her office.

The whole "premium" stuff is sooo 20th century in all of the world, except backwaters like the USA.


You have described in much better terms what I was trying to point out with the "low-cost, objectively inferior, but nevertheless more suitable" form of disruption. Precisely: WLAN is technically inferior (short range, no roaming, no handover, etc), but it can disrupt WAN at low cost. Hence, all players depending on operators for their business, just like Apple, will massively suffer. Exactly as described by Christensen. You give the relevant details.


I will not go into the question of backwater or not backwater. More likely, it is tunnel vision, myopia, inside-the-box thinking. The premium model is wildly successful in a very, very peculiar market (USA/Canada), in other very high-income markets (Japan, Switzerland, Netherlands, etc), and amongst classes with high purchasing power (e.g. the affluent people in China). It is understandable that many believe this is the ultimate state of mobile, since it has been growing so fast, and since they do not know anything else. But a lot is happening with e.g. WLAN or mobile e-money that does not fit this model. We cannot ignore or disparage those developments, since there is a high chance that the new mobile wave will originate there.


@Winter: Yeah, agreed. The free WiFi/WLAN thing will certainly grow. In a larger town nearby they are already discussing the implementation of free WLAN in a few central spots. And if that continues it's not good for today's business models.

In any case, I'm already doing all heavy data dependent tasks with my phone in places where I do not have to pay for that volume.


Where I live they have free WLAN in the whole downtown shopping area. And they have had it for years. I have uploaded stuf over WiFi in anything from Canadian trains to bars to public parks in Hong Kong.

If I look at my own ise. I have WiFi at home and at work, and free WiFi on train stations and commuter trains and when I go downtown.


... and if that becomes commonplace in the developed world - which I consider likely - then all that idiotic talk about high value customers for the carriers becomes utterly meaningless.

And it's quite obvious that those with American-centric tunnel vision are oblivious of things to come.

Sander van der Wal

There are two kinds of telescopes, utter crap ones you can buy for peanuts in a superstore, not even able to show you the moon.

And reasonable to excellent ones, which are bought by people who know what they are looking for in a telescope.

No manufacturer of good telescopes is worrying about his percentage of the entiere telescope market. They only care about their share of the good telescope market.

In other words, people only care about the segment of the market that matter to them.

The smartphone market has to segments, Landfill Android, the crap devices that allow you to make a phone call and send an SMS, and the mobile computer segment, with Apple and Samsung being the big players.

Is Apple peaking in that segment?


"Is Apple peaking in that segment?"

We need detailed statistics!


I don't care about the numbers, all I know is that i'm one of those happy owners..

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