By Michael Fisher | November 12, 2012 2:01 PM
Several months back, I wrote a piece explaining why it’s the rate plans, not device prices, that customers should focus on when buying subsidized smartphones in the U.S. That’s because, while shelling out a mountain of dollars for a smartphone at a retail store feels a lot more costly than paying $80 a month for a wireless bill, the reality is that the monthly bill will cost you much more over the course of a two-year contract.
I’m not sure people, as a whole, have gotten the point yet. That’s probably because reality’s hard to accept, companies obscure the true cost of their services, and you guys haven’t shared the above-linked story enough (HINT). So in wireless, for better or worse, the focus remains on at-the-counter device pricing.
Today -in America, at least- this relates to Windows Phone more than any other platform. Sure, Google might be making waves in North America with its bargain-basement prices on the Nexus 4, but that phone is being sold either unlocked or through T-Mobile USA, neither of which guarantee much visibility. The real boat-rocking on smartphone price tags is happening over at AT&T, which has been pricing Windows Phones to sell since the Nokia Lumia 900 launched for the then-absurdly low price of $99.99 with contract. That trend has continued with Windows Phone 8, with the successor Lumia 920 priced the same. Even the device’s full retail price of $449.99 is fairly low compared to what we’ve come to expect from smartphones. It’s quite a steal.
Earlier this year, the Lumia 900′s pricing garnered a lot of attention and presumably helped move a few units, which of course was the whole idea. But it wasn’t enough to push Nokia’s offerings into true blockbuster territory, with Lumia sales totaling 4 million in 2Q2012, then falling to 2.9 million in the third quarter. That drop was due to a variety of factors, but it surely prompted some brainstorming at the headquarters of both Microsoft and Nokia. Or at least it should have.
Maybe the companies were too busy focusing on preparations for the new version’s arrival. Now that Windows Phone 8, the newest and most promising candidate to pull the platform out of the doldrums, is here, we’re seeing much of the same sales tactics as before employed here in America. As mentioned above, AT&T has once again put the high-end Lumia 920 into bargain territory at $99.99, the 32GB model undercutting the 16GB HTC Windows Phone 8X by $100. Also, we’re seeing a resurgence of aggressive advertising from Microsoft, with Windows 8 ads joining forces with Windows Phone 8 spots to push the brand further into the public consciousness.
“EXCEPT IN NEBRASKA!”
But if the past is any indication, that won’t be enough. Yes, many things are different this time around, and I talked about some of the more important ones recently — but most of that’s coming from Microsoft and its OEM partners. Carriers are absolutely essential to a smartphone’s success in America, and based on my experience on launch day, AT&T is repeating the approach it took with the Lumia 900, letting the low price speak for itself, in concert with some featured placement on the website and a prominent position in retail stores. That’s certainly better than nothing, and to its credit, the carrier has been aggressive about fixing problems that cropped up on launch day. But the whole thing has felt a bit more like a “soft launch” than a real blockbuster unveiling. It’s hard to imagine AT&T stores not being prepared with demo units for, say, an iPhone launch.
What if, instead of re-employing the same tactics that led to the Lumia 900′s mediocre adoption, carriers like AT&T (or Verizon, which will be getting some Windows Phones of its own) worked together with Microsoft and its manufacturer partners to make special price plans available for Windows Phone? What if OEMs and carriers changed the conversation from “get a Windows Phone and save money at point-of-sale” to “get a Windows Phone and save money over two years”?
It’s been done before, albeit in reverse form. Back in the days when I was slinging smartphones for Sprint, and BlackBerry devices were king of the smartphone heap, carriers charged very high rates for their accompanying data packages, ranging from an additional $30 to $60 per month. These add-ons were especially for BlackBerry devices, distinct from other smartphones, and were absolutely required for the devices to function.
If you haven’t already bolted to the comments to protest that this is a terrible example, allow me to explain. I know BlackBerry devices required special data plans because of the BES and BIS servers that powered them, for which Research In Motion charged an access fee. In that way, Windows Phones are nothing like BlackBerrys; the back-end elements are mostly free, and it’s really nothing like RIM’s model. But my point is that carriers have, in the past, been willing to modify their rate plans and make special exceptions for a specific manufacturer. In RIM’s case, the carriers did it to ensure they could still sell BlackBerrys; in exchange for modifying their pricing schemes, the wireless operators got more customers on their respective networks.
Why couldn’t the same hold true for Windows Phone, in a same-but-different approach? Creativity isn’t dead among all carriers: prepaid operators like Boost Mobile have experimented with “shrinking” rate plans, where customers pay less for each month they stay with the company. What’s stopping AT&T or Verizon from working out a deal with Microsoft wherein some of the hardware subsidy is forfeit in exchange for a rate plan discount?
Think about the messaging: “Buy A Windows Phone and Save Every Month.” It would be a fresh, new approach to the subsidy model, one that would turn heads. It would garner attention for Microsoft’s platform and the carrier which adopted it. And it would go a small way toward fixing consumer perceptions about where their money is really going when they buy a smartphone.
Of course, carriers would probably see that last “plus” as something of a “minus,” so that’s one likely barrier to adoption. Also, carriers have plenty of other hot hardware to focus their efforts on, and they’ll naturally only go so far out of their way for a fledgling platform. Finally, Sprint has recently been one of only two large American carriers willing to think outside the box with regard to rate plans, and it has shown almost zero interest in Windows Phone since the platform launched two years ago. The other creative-thinker is the similarly small T-Mobile.
So it’s unlikely we’ll see the bold move I’m proposing here in America — and if we do see something like it, it’ll likely be pioneered only by the smallest of our national wireless operators. But maybe, as Windows Phone slowly claws its way toward increased relevance and gains more “street cred,” carriers will start squabbling not just to differentiate based on who has the cheapest Galaxy S III or iPhone, but who’s got the best price on Windows Phones. And maybe then we’ll see the kind of creative thinking Microsoft -and its customers- would benefit from.