Smartphone Adoption Is Hindered by High Subscription, Service Costs

By Wayne Rash  |  Posted 2010-11-21

Smartphone Adoption Is Hindered by High Subscription, Service Costs

The price of smartphones plays a major role in adoption according to study by mobile advertising company Smartphone penetration is greatest where the people who need the devices can afford to buy them, and can also afford the monthly subscription charges, concluded the study, which was compiled by Adzookie's Tiffany Trias. 

I suggested that this might be the case when I discussed the new, low-cost Android smartphones being offered by Verizon Wireless and T-Mobile

Shortly after that column ran, Adzookie published its findings which compared the cost of an Apple iPhone against the average annual income for people in each of several countries. As you might expect, when an iPhone costs over 20 percent of the average person's annual income, you don't find a lot of people with iPhones. This cost differential is a critical factor as Trias points out in her study.  

Of course there are two factors in cost in relation to smartphones. The first is the cost to purchase the device itself, and the second is the cost of the data plan. Again, low cost tends to encourage smartphone use.  

Now, before all of those iPhone partisans come running to tell me how the iPhone is the only solution that should ever be considered by anyone, let me explain why it's important to look beyond the iPhone as a solution to access to knowledge globally-or even in the United States for that matter. The iPhone, after all, is inherently an elitist device.  

Regardless of what claims may be made about its perceived quality, it is beyond the means of the vast majority of people on the planet. Worse, the price that people pay in the United States is lower than most places and is kept artificially lower than that through carrier rebates. 

It's also important to know that the data plans in the United States are not the only pricing models available. In most of the world, pricing is usage-based and data use can be fairly inexpensive, especially when you consider that data prices in the United States are higher than they need to be. I suspect that if the carriers weren't subsidizing all those smartphones, prices would be lower. As it is, some U.S. carriers, notably T-Mobile, have extremely inexpensive usage-based plans for those who only need data access occasionally. 

When you look at the role that smartphones play in people's lives outside the United States, it's also important to know that private Internet access is very rare. In many, perhaps most, societies outside of the United States and Western Europe, the only private Internet access is through a smartphone. This in turn means that for many people, the only private, ad hoc access to knowledge is through a smartphone.  

Factoring Smartphone Use into the Cost of Living


People are willing to pay for this access, as long as it's possible for them to afford it. It's also worth noting that smartphones are useful for more than just access to a data service. In India, for example, there's a nationwide social networking system based entirely on SMS messaging. You don't need a smartphone for SMS, but having a full keyboard makes using the service a lot easier and a lot more productive. 

The near universal need for access to information, combined with the need to communicate, easily argues for broad smartphone adoption, but only if it's affordable. Likewise, smartphone use makes economic sense only if the monthly charge is affordable. Because most places with relatively poor populations have found a way to make wireless service affordable, the biggest piece of the puzzle is getting the best device for the job that's also affordable. 

Regardless of the iPhone's coolness factor, or the many partisans of the iPhone, the fact is that it's not affordable. Neither are the high-end BlackBerry devices or the high-end Android phones. But because the Android OS is open-source, it means that devices using Android can be made to sell for prices that the rest of the world can afford.  

Admittedly, these low-cost Android devices don't bring you the latest, snazziest features, but that's mostly irrelevant. They bring access to the Internet, and that's what really counts. They also bring access to communications, to specialized apps and to information that can prove to be critical for commerce, such as weather information, crop prices, merchant sales information or the means to negotiate the price of fish. You don't necessarily need to worry about a data plan for such things. What you need is the means to gain access. You can get that with a smartphone. 

I should add that before I spent a lot of time with the study that Trias sent over, I asked her about her references and her sources. Turns out she actually went to the places you'd expect for a study of this magnitude. Those sources included the UN, Neilson, ComScore and others.  

Her motivation was also important, which was to figure out where it makes sense to place advertising. The fact that she developed findings this important speaks to both her scholarship and to the fact that most people in the United States who use smartphones don't necessarily think much about smartphone use elsewhere. Fortunately, Tiffany Trias does think about this, and what she's learned is important to learning what people around the world are willing to pay to gain access to knowledge. 


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