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The Problem With Mobile Devices, The Price Tag [Opinion]

Standards in the mobile industry have been few and far between in the past. However, cellphone manufactures have recently done away with their different chargers and have adopted the microUSB. While the addition of the microUSB has been much appreciated, there have been other adopted standards that are just unbelievable.

Somewhere, someone thought of the magical price tag of $199.99 as the fair price for a top of the line smartphone, that is with a two-year agreement of course. If you were to buy one of these incredible mobile devices off contract it would run you an upwards of $500 – which is just ridiculous. A majority of these smartphones cost anywhere from $150-$200 to produce, yet these corporations feel inclined to market them with a 100% price increase. You then receive the two-year contract discount, which in the end has you paying much much more. Think about it, every 14-18 months you are spending $199 on a new phone and continue to lock yourself into your (most likely) expensive contract.

Now with the introduction of 4G, service providers are again increasing the price of their plans and smartphones. I plan on pre-ordering the Galaxy Nexus the moment it is available – even with that $299 price tag. However, this mobile phone will cost me more than an Xbox 360, PS3, or even a new HD television – if I was to buy it off contract it would cost me more than some computers.

Just think about it, how much will a 5G phone cost, or better yet a new quad-core one? These prices are absurd, why do we continue to buy into them?

  • Anonymous

    I knew this would happen a long time ago, it all started when the DROID charge came out. It was the first smart phone for 300$, it was unherd of, but i knew that would be the new normal price for a smart phone

  • Sperho

    $300 for a modern high-end smartphone.  Freakin’ bargainsauce.  These devices are nothing short of amazing.

  • Jimmy McMillan

    The rent is too damn high!

  • Prickee

    We buy because phone companies got US by the short and curlies and WE want the latest and greatest so why should they change??

  • Anonymous

    I don’t think the prices of these devices are ridiculous. Its the price of data. It is absolute BS that we are being charged upwards of 100 dollars a month for 2 GBs of data and unlimited talk and text. If I had to take a guess at the profit margin on mobile data i would guess it is approaching 1000%, maybe more.

    I’m happy to spend $500 to $600 bucks on a smartphone, think about everything they are capable of… Its the providers that are truly ripping us off, not the smartphone manufactures.

  • UGHRHGHG

    i live in New Zealand. All high-end smartphones, whe  they finally arrive, and > $1000NZ. NZD = $0.66 US. Do the math. Everything in New Zealand is a rip off.

  • Tjcard03

    i say if they’re going to charge us that much at least let us upgrade every year instead of 18-20 months.

  • Anonymous

    Spoiled… Phones like the galaxy s (one) cost upwards of 1200 to 1500 like in ‘exico where they make less than minimum wage here. I used to buy Nokia Communicators for over $1000 back in the late 90’s. That’s how much smartphone cost and should cost… Why should it be cheaper than $500? Anything under $800 is still cheap in my books. Entitlement is a funny thing.

    • http://twitter.com/chqueed charles rogers

      There are cell phones in ‘exico? Who the hell knew. I mean cares. My bad.

      • Anonymous

        My exact same feelings. Don’t whine if you can’t afford these phones. Get a job.

  • Anonymous

    I am also disgusted with the price of premium smartphones.

    But like you, I’ll be forking over $300 for a SGN next month and passing my DX onto my wife or kid.

    I did manage to talk Verizon into an early-upgrade discount though, I guess that’s a small victory…

    • http://www.facebook.com/profile.php?id=503955513 Matt Zwirn

      When were you initially due for a upgrade? Im not up until March with my last loyalty discount as well, and was hoping somehow to sweettalk or beg so im able to get the Nexus.

      • Anonymous

        Step 1. Wait for the phone to launch. Step 2. Call to cancel your plan, tell them your phone is crap and you are going to sprint to get a galaxy. Step 3. Let them pusuade you to stay and offer you a similar device (nexus) at new contract price. Be firm, if they try to call your bluff, tell them you will check with Sprint and call back to cancel. Either way, they will add notes. You will eventually run into a retention sales person whom will make you a deal. Has worked for me many times. Aside from the device at new contract prices, they can offer you up to 60$ in accessories. If you are a late bill payer or have had your line cut due to payment, don’t bother trying any of this. This only works for long standing customers with good history.

      • Jer85008

        Not until July 2012! We have had a family plan with four lines (three smartphones with data) for several years, so I guess I have some leverage. I simply asked what the ETF was for my line, because I wanted to upgrade and figured it would be cheaper to pay it and either move to another carrier or sign a new deal with Verizon. I asked if there was a way for me to just pay the ETF and get a discount upgrade instead of going to all the trouble, and they offered me an early upgrade on Nov 12 for a $20 fee.

  • Nathan Hosford

    If we paid normal retail for phones it would ruin the whole phone echo system we would not need to upgrade ever and these company’s would make no money and could not afford to build great networks like verizon lte.There would also be higher monthly contract cost.
      

  • Djstar2k2

    really its insane but i guess the argument is you will need service for a cell phone.  but like you said b4 if it only cost 150-200 to make why is 500 full retail right or even fair?  esp with android oem have the software free and the chip makers so all they have to do is design.  oh and skin.  my contract up in 3 weeks and and what the show for it ?  nuttin just another chance to sign up for 2 yrs.  u cant tell me a carrier pays the full retail price or the price a customer pay for those phones.  an arbys roast beef to cost 3.19 to make more like 3 cent for the bun, .75 cent for the beef and.30 cent for the wrap.  but in the end ill pay it for the galaxy nexus and shut up even tho it has no kb but im gonna wait for that xmas bogo

  • Smooshy-Bunny

    While I agree with you about this line
    “A majority of these smartphones cost anywhere from $150-$200 to produce”
    You are only including the physical parts in the price assumption. What about the marketing, R&D, testing, engineering etc. that goes into these phones? These firms have to make profit after all. So they can continue to make great phones for us.

  • Darrell198023

    I agree totally! There are a few things I refuse to do. 1) pay full price or subsidized price for a smartphone. I buy my phones slightly used. 2) I will never again sign a contract that is loner than 1 year. This year marks the 8th yea that I have been a customer of Verizon. Of those 8 years I have only been under contact 3 years.

    • Anonymous

      Hey, I agree with your concept of not signing a contract…but then you indicate you’ve been with Verizon for 8 years, so what real harm would there have been for you in signing a contract, since you obviously aren’t going anywhere else.  I’d argue that you’ve cost yourself money by not taking advantage of subsidized pricing on phones–I was on Verizon 1 year contracts for three years, and it was great, only paying $50.00 premium over 2 year contracts for subsidized phones, a lot cheaper than buying slightly used. 

  • http://twitter.com/Justinwrites Justin True Anderson

    Hell I’d smack a kitten on top of that 300 if they’d have the Nexus ready for PDQ

  • http://www.twitter.com/nblufire12 Nathan Patel

    Absolutely agreed. These cell phone carriers are absolute scam artists.

  • Anonymous

    My phone and my computer are the most useful things to me so I am willing to pay a little more for a good one. But $300 on a 2 year contract is pretty much the maximum I would pay.

  • http://www.toysdiva.com Toys Samurai

    As a consumer, I 100% agree with you. However, if I put on the manufacturer hat, I can’t say I don’t understand their reasoning. First of all, the production cost is just the manufacturing cost. There are other expenses, such as R&D, marketing … man, even hiring someone to clean your office costs money (the bigger, the more you will have to spend.) Secondly, business is not science, there’s no guarantee your products would sell as good as you expect. Sure, I can only charge a 10% premium, but with a margin so low, a single mistake could put the whole business in risk.

    But, $299 for the Galaxy Nexus is just too high. I have to buy FOUR to replace all 4 of the Droid in the family!

  • Dan

    Because we’re techno-junkies.

  • http://www.facebook.com/JSTong Josh Tong

    Hey Dan, if you could make something for $200 would you sell it for the same price? Or would you sell it for more to make a profit? Just a thought…

    • http://www.facebook.com/JSTong Josh Tong

      I work for Verizon as a Sales Rep. The $199 is the price the wireless company charges you, not the manufacturer. The full retail price is what the manufacturer charges the wireless provider. For the wireless company to recoop their cost for the device, is where you’re 2-year contract price comes in. You pay $199 for the phone with the promise to pay a data package of $30 a month for two years. For Verizon to put a customer on 4G it cost them under $5 a subscriber. It’s how companies make money and stay in business. If there was no profit there would be no money for R&D, employees, and factories. Soda cost just pennies to make but you sure shell $3 for one when you’re thirsty! lol

    • http://www.facebook.com/vespadaddy Dan Peters

      I think you misunderstood my point.  Either way, the contract purchase price seems a bit arbitrary, given the $$ a 2 year contract costs.

      Mostly though, I am just impressed with the technology, so I’ll pay.

  • Anonymous

    What sucks is the prices drop tremendously after awhile. Xperia play was $199 and its free now. It really just came out not too long ago. 

    • http://twitter.com/Justinwrites Justin True Anderson

      I”m sure the Bionic will be BOGO shortly.

    • Epdow

      That price drop is what Bill Maher called “A repeal of the Geek Tax “.

  • Anonymous

    The price is that high simply because that is the price that we will pay.

  • Braston Bland

    Maybe I’m part of the problem. I’m going to buy the G-Nex day one no matter what (currently using a BB Bold 9650 :D  ), now I kind of feel like that makes me part of the problem and not the solution. I am so enamored with this piece of tech and cannot wait to have it one of two things is going to happen. A) I’m going to drop $300 bones and use my available upgrade. B) I’m going to buy the phone full retail with no contract extension. I’ve got $700 bucks saved waiting on this. Am I safe to assume if I did buy it full retail that it will hold it’s value better than say a RAZr?

  • Nathan Hosford

    Tablets prove this point even more.

  • Anonymous

    Never buy contract phones. The spawn of the devil.

  • Skittleoid

    Thanks. Someone finally addresses  this problematic topic. I can’t stand how much they are charging for a phone just because it’s a phone. Like what makes the (I*od touch $200) like $500 cheaper than the I*phone.(Sorry used crapple example because didn’t want to look up price of galaxy touch.)

  • Anonymous

    You know, he has point.

  • http://twitter.com/hpizzy Hiral Patel

    Price we pay to be ahead of the curve – Double edge sword if your a techie really. The price has been set by “us” we want them so bad and shown our greed for technology thus providing the fuel. At the rate devices are launched the price is only exponential. We are paying a premium to have the latest and greatest why cuz everyone else has the latest and greatest. 

  • Nsplay

    i agree, i think its disgusting that they charge so much for a non contract phone. i think if a new smartphone cost $400 the most without a contract that it would be more fair. $650 for a 16gb iphone 4S…. and i think most Droid phones are in the nieghborhood of 500-600 themselves is just way unjustifiably tooooooo much !!! WHAT GIVES THEM THE RIGHT TO CHARGE SO MUCH ???

  • Anonymous

    LTE device prices are stupid. There is no way the Thunderbolt and DROID Charge are worth close to what they are charging.

    I don’t have a huge problem with phone pricing except for off contract. There is obvious collusion and price gouging when a single core 512MB RAM device costs as much as a top of the line dual core phone. Contract price I’m not too worried about, if $200-$300 is a problem then paying close to $100/month for service is also too much.

  • http://pulse.yahoo.com/_OOO7GVPXWATBC75FGMUTLHJJME SjB

    i can’t believe i used to buy a new phone every few months before smartphones came out. those were almost $400 a pop at the time. so stupid.

  • Anonymous

    Don’t forget that the $150-$200 quoted in the article covers the hardware only.  It doesn’t cover labor and development costs, which can be quite significant.

    To put things into perspective regarding the high cost of development, for example, I have a piece of hardware (not phone related), sitting on my desk.  It’s small, about the size of two coffee mugs stacked, made of titanium, and has a VERY simplified geometry to reduce the fabrication costs.  It was made just to run a simple test so it didn’t need to be an exact replica of the complex final design.  The total cost to fabricate it was ~$10,000.  The total cost to run the short 2 day test was ~$20,000.  Both prices include labor and material.

    This is for one particular component out of hundreds that would form a final product when assembled.  And of course, don’t forget the final assembled product undergoes its own various tests.

    Granted, this is definitely not an apples-to-apples comparison since my line of work is assuredly more expensive.  However, I imagine Moto’s products go through similar development procedures.  Thus, their MSRP needs to cover all those costs + extra to actual obtain profit.  The metrics they use to determine those numbers I couldn’t say exactly, but it probably includes the number of phones they expect to sell, which is certainly undervalued to save their butts in case of a total failure.

  • Anonymous

    Pricing is based on utility.
    Phones should cost no more than $149, preferably $99
    Tablets should cost $149 – $299
    Laptops are $399 plus

    • Anonymous

      This is so wrong….price is based upon demand.  If people are willing to pay $600 for a phone then, that’s what it is priced at, as soon as people stop willingly paying that much for the device, the price will drop, or the manufacturer will go out of business. That’s the way of the world.  Where I have a problem is when Government interferes to create quasi monopolies, like we currently have in the mobile service world. 

      You may say I’m only willing to pay XX for such utility, but that doesn’t mean that’s what the price is or should be.

  • Jim

    So, I’ve use the Best Buy buy back plan for the last two phones I’ve owned.  I shell out a bit more for the phone (trade in for 40% of retail up to a year) BUT, I don’t have to sign a new contract!  If you get the Black Tie insurance plan it drops the cost of the plan from $60 to $30.  I’ve been able to cancel the insurance program after a month but Buy Back is still in effect.  Other option is to sell your phone on CL or use one of the online sites.

    • http://pulse.yahoo.com/_OOO7GVPXWATBC75FGMUTLHJJME SjB

      this is what i plan on doing from now on as well. i don’t think i can go 2 yrs with the same phone with tech moving as fast as it is right now.

  • OGdroid1

    A VCR used to cost $2,400.  My 32″LCD was $1,000.  DVD players can now be had for $30 and my LCD equivalent is now just $329.  It is the technology tax, early adopters pay more.  LTE is brand new and a couple of years these things will start to be replaced, just like LED replacing Plasma etc….

  • Anonymous

    Who is more the fool? You pay 299 for a device with the thought that you are subsidizing the device in your contact and plan. However, no contract and you pay 600 for the device yet your plan is not discounted. You are still paying for everyone else’s devices now.

    • Jake

      Who is more the fool? I pay $299 for a device with a two year plan. You pay $600 for the same phone and two years later we’re both still with the same carrier (and in that time you’ve probably switched phones twice, paying $600 for each of those, too).

      • Anonymous

        Totally agree. There is no advantage to getting a contract free device. I have zero ambition or desire to change carriers so I have no problem signing a two year deal.
        Sent from my ASUS Eee Pad

  • http://twitter.com/binglut9 Brian

    Theres no other alternative, what a I going to do write a letter?

  • Anonymous

    2 years ago I paid $299 for my original Droid. 

    So no, I don’t think they’ve gotten out of control with prices, I’m surprised they’re still at $299.

    • Anonymous

      With all the different varieties of phones, I can’t believe every single one of them costs one of three prices. It is an amazing coincidence when you consider the odds.

      • Anonymous

        Prices have absolutely nothing to do with what the materials cost.  They simply charge what they believe people will pay. 

        Case in point, Apple charging $200 more for the 64GB memory card 4S.  The cost is probably within pennies of each other realistically but they know people will spend the money because they need the extra memory.

  • Anonymous

    What I don’t understand is why the full retail price of a phone is double that of a tablet with better specs, larger screen, etc. You can’t tell me that a 3G/4G radio justifies double the price.

    I don’t think they are worth $600… I just think the price them at that so people WILL NOT buy them.

    • Anonymous

      Making things smaller is more complicated and thus costs more to develop.

      Also, from what I understand back in the day, the phone manufacturer sells the phone to the carrier.  The carrier then resells the phone to the consumer.  In all likelihood, Verizon is most likely losing money on all LTE devices, which is gained back by contracted plans.

      Considering the design of the new Razr, it is probably the most expensive handset they will carry (probably even more than the Gnex).  As a result, they probably stand to lose very much money per Razr handset sold.  So really the push isn’t to sell the Razr, it’s to secure people into a contract.

      Based on how little I use my phone, I’m sure Verizon would make their money back from me in 2 billing cycles.  Yeah, that sucks and it’s annoying, but that’s how this type of for-profit service company operates.

  • Talies1020

    I respect most things written here, but this is garbage. 

    The ONLY reason these prices are SO outrageous is because we keep paying them. They wont slow down, let alone come down, until we stop paying them. 

    $600 for a piece of cutting edge silicone is fine by me. My real gripe is that I have little incentive to buy the device off contract. why pass up a $300 discount that “doesn’t cost me anything”, or more precisely, the cost is already built into my monthly fees, whether I want it there or not.

    • http://www.facebook.com/profile.php?id=75200646 Stephen Cox

      Exactly, I never understood this. Now that the ETFs are prorated, it makes no sense not to be in a contract. Its not like your monthly service charge will go down when you are out of contract. Might as well get the phone on contract, and even if its 6 months later, the pro-rated ETF + Contract Price will still be less than full retail… so you saved money.

      • Anonymous

        AND T-Mobile offered lower rates for people that chose to bring their own phones, for a while, but stopped offering.  Most likely because they couldn’t find enough people willing to pay full price for a phone.  For some stupid reason people in the US are conditioned to look at the “out the door” price, instead of considering the total price of usage over the expected life of the phone.

  • Pennywise

    Yea yea yea… but how can we hijack this into a massive e-peen praise party for the Galaxy Nexus?!

  • Anonymous

    Anyone have any guesses on how much I’ll have to pay for the Galaxy Nexus if the last time I upgraded was in January 2010? Also, in going from 3G to 4G, do I get to keep unlimited data?

    • Anonymous

      1) You probably have an upgrade right now–or if not now, then soon. Check on VZW’s website. Assuming you do, it’s gonna set you back a cool 300 dollars.

      2) You do get to keep unlimited data when you trade up to 4G from 3G.

    • http://twitter.com/binglut9 Brian

      It will be 200 because you still get new every 2 year

  • babadush

    It’s because they are small. Smaller = more expensive. It’s always been like that.

  • horizon

    What is sad about the industry is at this point, I really have no “choice” anymore who is my carrier. Because of grandfathered plans on Big Red, I get 500 minutes, unlimited texting, insurance, and unlimited data for $85/per month, taxes included. Now that’s a great deal…but say the company decides to take all this away at some point….who can I turn to? Sprint is the last carrier to offer unlimited data to new customers and that looks to be coming to an end.

  • http://www.facebook.com/people/Chris-Robson/1317522018 Chris Robson

    I’m planning on buying this phone but got to do the talk on the phone with verizon to get the cheaper price since my upgrade is next year. Anybody want to buy a kidney I’ll sell one for this phone!   We finally get a nexus yeeeeeeeaaaaaaaaaaaaaaahhhhhhhhhhhhhhhhhhhhhhhh!

  • Riggj46

    Is it confirmed that the gnex on Verizon wont have a locked bloader?

    • Anonymous

      It WILL have a locked bootloader, per Verizon’s request (read: demand).

  • Koos

    And to support this opinion, the new portable gaming system from sony, the PS Vita, is only $250. The vita has all of the specifications of a cell phone and then some, touchscreen, huge 5 inch OLED screen, a rear touchpad, six axis, GPS, WiFi, bluetooth, front and rear cameras, and 3g data(Plus $50). Whats with that!?

    • Anonymous

      Sony sells the system as a loss leader, and makes a profit off of every game sold, they want to get as many of these in the hands of consumers as possible so they have a larger potential market to entice more game developers. 

      I may be dating myself, but there was a time not that long ago when you could get almost any phone from any of the carriers for FREE with a 1 year contract, that was when they actually had to compete for your business. When smartphone’s came along, things started to change, but from the carrier’s standpoint, why not charge more for devices with more features, especially if they cost the carrier more, and your choice is to buy a similar device for the same price from the supposed competition. 

  • http://www.DavidPat.com David Pat

    Yeah phones cost way too much if you think about how much tablets cost. Just put a cell radio in a tablet and its a smartphone… Why are phones $600 retail!?

  • Anonymous

    The full retail price of a “smartphone” is simply absurb. It prices higher than a game console, a mid range hdtv, or a mid range computer. To get a so called discount, you are locked in for two years.
    And also think about this: the phone that you bought isn’t really yours (even if you buy it without contract). You don’t have the freedom to do whatever you want with it. You are locked in with bootloader and/or carrier. Wanna change carrier? Sucker, go buy another phone.

    • Anonymous

      I agree about the locked bootloader, but the carrier thing is a technology problem, not a carrier restriction.  You can take a phone from VZW and flash it to Cricket Wireless because they use the same CDMA standard, but you can’t suddenly turn a VZW CDMA phone into an AT&T GSM phone. Sucks.

      • Anonymous

        Aren’t there phones that do both gsm and cdma?
        Now, I am not sure about this. But isn’t both sprint and vzw both cdma? I don’t think sprint will let me switch my droid x to their network… Correct me if I’m wrong.

        • Anonymous

          Yep, Verizon does have some “global” phones that you can plug a GSM card into and use. The thing about Sprint and Verizon, from what I understand (and I don’t know much about the situation–I’m just a normal guy, no Sprint rep or anything) you theoretically could run a Verizon phone on Sprint, if you update the firmware AND get Sprint to put the phone on a registered list.  So in this case, yes, it is the carrier.  That being said, I have heard stories of people being successful at getting their VZW phone added to Sprint’s authorized serial number list…

  • ChrisI

    “These prices are absurd, why do we continue to buy into them?”

    The American consumer = the most reliable sheep known to man.

  • Tnparamedic

    I will be purchasing the new Galaxy Nexus…with my 2 year contract discount!!!