Benjamin Kowarsch wrote:
> In markets which are approaching saturation, operators are more and more
> moving away from subsidising handsets, at the very least the level of
> subsidies are being reduced.
It is true that we are approaching saturation in Europe, but this is only true
for voice. The mobile data usage is still quite low compared to Japan,
especially if we exclude SMS.
>
> Such subsidies are another indicator of an immature market and they create
> bubbles. This is like a big Ponzi scheme, and eventually someone will have
> to pay for that nonsense. It is not sustainable.
Subsidies can actually be an indicator of a really sophisticated market, since
they lower barriers to adoption, in particular among consumers.
Who could have predicted in the beginning of the 90s that even teenagers would
be using mobile phones? Handset subsidies have been a very important factor
behind the rapid adoption of mobile telephony. There is a strong need for
mobile communications, and this is clearly not a bubble.
> I rather pay the full price for my phone, get cheaper services in return
> and use the phone longer.
>
> Anything else is nonsense, from an economy point of view.
Handset subsidies make perfectly economic sense when it comes to stimulating a
new industry around innovative mobile data services, as we have seen in Japan.
Subsidies create a critical mass and solve the chicken and egg problem that
often arises when introducing a new technology: Companies are hesitant to
develop content and services for a new technology since there is no installed
base of handsets, and consumers are hesitant to buy the new technology, since
there is a lack of content...
By subsidizing i-mode handsets, Docomo quickly created a large installed base
of data-enabled phones, which made it attractive for companies to develop
innovative i-mode specific content. The same thing with Java: In just 6 months,
the number of Java-enabled phones has grown by 4 million, which is a large
enough installed base for companies to start developing rich Java-based content
and services. This wouldn't have been possible without subsidies...
/Fredrik
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Received on Fri Jul 27 22:08:43 2001