This is a country which Apple has never found easy - notably,
Russia bans handset subsidies, making the iPhone an expensive
option for most customers.
The effect is exactly the opposite; those countries where phones are mainly subsidized have also the highest total cost of ownership and ARPU (average revenue per user). The subsidized phones aren't cheap, quite the opposite.
Carrier subsidized model should be ended to bring down consumer telecommunication costs. It only benefits the carriers.
That's very true. I'm in Russia and telecommunications are dirt cheap here. I barely spend $10 in 3 months on my cellphone (that's including occasional internet browsing, although unlimited traffic would cost you more). Broadband internet is also very cheap, my bill is $8/mo for a 30Mbps connection and unlimited traffic.
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.
No man, you don't get it. MOST people in Russia really never buy expensive smartphones with subsidies. They actually pay the full price. My guess is, carriers tried this model, realized it doesn't really work very well and decided to dump it altogether.
No, man, I really do get it. I understand they pay full price. The point is, iPhones are a premium smartphone. They intrinsically cost more than many other smartphones. If you're looking at the (full) price of an iPhone versus the (full) price of a non-flagship Android phone, the (full) price of the non-flagship Android phone is typically hundreds of dollars less than the (full) price of the iPhone.
Exactly. And what's the difference between last year's model and non-flagship? Both have old-ish processor, old form factor. But recent software, and all the basic functionality -- just without the bells and whistles.
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].
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).
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.
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.
I think you're arguing a point no one made. This entire subthread is just about why the iPhone does not do well in the Russian market. And so far, everyone agrees it's because the full cost of the iPhone is more expensive than the alternatives.
He's not trolling. He's just saying that the non-flagship iPhone is still expensive compared to new Android phones. Which explains Apple's poor performance in a market which forces consumers to pay the actual price.
Apple's poor performance ? You do realise that Apple siphons the majority of the profit from the market and on every metric (except market share) is doing extremely well.
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.
Yes, and they don't buy it because they can compare the full price of the iPhone vs other flagships and see that they're getting much less for more money (i.e. being screwed over).
Russians also seem pretty anti-Apple, thinking Macs and iPhones are a staple of the rich.
People buy iPhones. A lot. iPads too. Macs - not so much.
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.
There is a large market in Russia for premium products; large economic inequality means lots of poor people but also a lot very wealthy people in the major cities.
They definitely have a market for full price iPhones, heck, there is a market for multiple companies selling gold-plated jewel-encrusted iPhones.
> Carrier subsidized model should be ended to bring down consumer telecommunication costs. It only benefits the carriers.
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.
> 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.
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.
> In the US at least, everyone has to get on LTE before that becomes a reality
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.
I've always wondered: can a single phone have radios for all the different carriers? Could they share a single antenna? Could one be activated by the user selecting which network to get on?
> can a single phone have radios for all the different carriers?
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.
All carriers worldwide would be tough, but a sufficiently multi-band GSM phone will typically give you pretty much worldwide roaming from a variety of carriers.
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.
Yeah, most modern phones will work most everywhere, but there'll always be one carrier's 3G or 4G network you'll miss out out. Some phones have really impressive radios in them now. Here's the Sony Xperia Z Ultra:
> You'd need a SIM card for each carrier you want and swap them out
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 don't know about CDMA vs GSM, though I think it might work (there definitely are two-GSM-SIM phones, and GSM-and-CDMA doesn't seem philosophically different). Having a phone work on both AT&T and T-Mo, though, is easy, Galaxy Nexus or Nexus 4 can do that, just to name a couple of popular ones.
"All" I don't know about, but got to Aliexpress.com and search for "GSM CDMA" - you'll get a bunch of phones supporting multiple standards.
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.
If the wireless situation doesn't resolve itself in the next few years, I suspect that it will drive software defined radio deployment to the masses. One phone with one antenna and chunk of silicon that can speak on any network, software permitting.
It's about the culture of using prepaid vs contract phones, ie it's not like carriers don't understand ARPU, it's subscribers who stay away from contracts.
Carrier subsidized model should be ended to bring down consumer telecommunication costs. It only benefits the carriers.