Manufacturers Are Changing How Smartphones Are Sold
Google acquired Android ten years ago and released it in late 2008. Since then, the operating system has evolved and gone from strength to strength, becoming the most popular mobile operating system on the planet. However, Android has changed the market more than the relatively simple introduction of an open source mobile operating system: Android is starting to change how people buy their cell ‘phones in the American market. We are seeing more and more manufacturers position themselves as selling their devices direct to the customers, relegating the carriers to the dumb pipes that Steve Jobs likened them to with the launch of the original Apple iPhone. We are now seeing Apple offer device upgrades direct to customers, something that the business will have worked on for years. However, Apple is following in the footsteps of Motorola, Huawei and OnePlus to name just a few. Chinese manufacturer Xiaomi is preparing to launch their devices into the American market and are likely to forego dealing with carriers and instead offer devices straight to the public.
There are a number of consequences to this change but first and foremost is how the carriers will effectively lose control over the devices that connect to their network. Currently, when most manufacturers release a software update, the carrier-branded devices must have the update tested, approved and sometimes modified by the respective carrier. It’s at this stage where the carriers will add their own applications to the chagrin of many customers in addition to adding carrier branding. Carriers will lose control of these devices. A side effect is that if the carrier does not supply the device, they will be unwilling to offer the same level of support to customers and with this in mind, we stumble upon the first barrier for many customers: customer service. Carriers will have to negotiate this minefield of continuing to help customers needing support without fobbing them off to their device manufacturer. If customers pay less for a barebones service from their carrier – just voice minutes, text messages and data – this could be an acceptable compromise, but many carriers have worked hard to provide an all-encompassing service so as to encourage customers to stick with them. We may see significant changes in how some carriers operate.
If a carrier decides to stop selling and supporting devices, this should be beneficial for the whole Android industry: quicker software updates should keep our devices more secure against critical vulnerabilities and this is in all of our best interests. This is how the Nexus devices work. Over the year to date the Android industry has seen many security scares, such as the Stagefright vulnerability, whereby a malicious multimedia message can takeover a device without the user knowing. These critical security updates are taking their time to arrive at the customer because of carrier involvement.
From a customer perspective, what does this change mean? Firstly, customers will need to understand that they are still paying broadly the same, but things will be far more transparent. Rather than having the cost of the device bundled up with the airtime, things will be set aside. You’ll know how much your smartphone will cost you as you will have paid out for it, rather than accepting a given monthly contract cost. On the cost of devices, this change probably won’t directly result in cheaper prices for a given device. Our carriers are able to order devices in their thousands or millions and obtain a volume discount, whereas we are buying at most a handful of devices. Indirectly, it may force manufacturers to start to sell their devices at a lower price. Given a choice between a $400 Motorola Moto X or a $750 Samsung Galaxy S6 Edge, customers might prefer the S6 Edge but not at almost twice the price.
Where it may be cheaper is if you decide to upgrade your device after a few months, depending on your contract. You won’t have to cancel the existing arrangement and pay an early termination fee. It will also be cheaper if you decide to switch provider, perhaps because your usage, coverage changes or you can find a better deal elsewhere. It could also work out cheaper for those customers willing to hold on to their devices for over the typical two year smartphone contract.