The visible hand in economics

3G iPhone: It’s all relative

Posted on: July 9, 2008

I’ve been watching all the hysteria surrounding the cost of the new iPhone with great amusement. There’s an article on stuff saying the prices are way too high (see the available plans here), a petition to get the iPhone on prepay here and John Campbell was having a good crack at the guy from vodafone about it too.

The thing that has bothered me the most is that the comparison’s being made are with what you would pay for an iPhone and a data plan overseas. This sounds like a reasonable comparison at a first glance but it isn’t. The first question I asked when I saw these plans was “what are these plans like relative to other mobile data plans available in NZ?”. The clued on Gen-Y blogger over at playing to win points out that the cheapest plan (the 250mb plan) actually offers more data then his current plan.

My general impression (although I haven’t researched this in any great detail) is that the plans are at least comparable to current plans. And if you get the cheapest plan you will have to pay $699 for the 16gb phone. Given that the 16gb iPod touch is current going for $599 at dick smith I can’t see why people are complaining about the price, you are getting alot more for that extra $100.

Once we look through all the hysteria the main question isn’t “why is the iPhone plan expensive relative to the rest of the world?” it should really be “why are cell phone plans more expensive in New Zealand?”. Anyone who ahs been to the USA/UK/Asia in recent years will know how ridiculously cheap cell phone plans are relative to New Zealand, it’s not just the iPhone. The iPhone is only more expensive because mobile in New Zealand is more expensive because mobile in New Zealand is more expensive.

So why is this case? I’m not sure but a few possible reasons are

  • we are a small market and thus don’t get the same benefits from Network Externalities that large markets do
  • We are small market so we don’t achieve economies of scale
  • The Vodafone/Telecom duopoly isn’t competitive which means they have been under no pressure to invest/innovate and/or they charge high prices because they have market power
  • Telecom has been operating on a less popular network standard with less popular phones so hasn’t been able to effectively compete

I’m hardly an expert in the Telco area so I’m sure there are other possibilities, but I do think the fact that  telecom is rolling a  new network is indicative that the third and fourth may be less of a problem going forward (except for the exercising market power part).

Any other thoughts on why cell phone plans in general are more expensive here?

Agnitio

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10 Responses to "3G iPhone: It’s all relative"

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[…] nikkixo wrote an interesting post today onHere’s a quick excerptI’m hardly an expert in the Telco area so I’m sure there are other possibilities, but I do think the fact that telecom is rolling a new network is indicative that the third and fourth may be less of a problem going forward (except for … […]

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I belive that the Telcos would say it is the cost of servicing a long skinny city masquearding as a country. The 3G data coverage is geographically very poor and presumably it will cost something to extend it beyond the metropolitan boundaries of the major towns.

On another matter, I am astounded at how much free publicity Vodafone has generated. The Campbell Live segement was essentially enhancing the exclusivity and snob value of using an iPhone – did Vodafone pay to go on the show?

[…] way too high see the available plans here, a petition to get the iPhone on prepay here and John Camphttps://tvhe.wordpress.com/2008/07/09/3g-iphone-its-all-relative/mobile: Caller TunesXtra: Caller Tunes…http://xtra.co.nz/mobile/0,,11989,00.htmlmobile: Internet […]

[…] price of a 3G iPhone – one more point 10 07 2008 Agnitio discussed a number of the important points surrounding the price of the 3G iPhone that is coming to New […]

[…] admin wrote an interesting post today onHere’s a quick excerptGiven that 16gb iPod touch is current going for $599 at dick smith I can’t see why people are complaining about the price, you are getting alot extra for that extra $100. Once we look through all the hysteria the main question isn’t … […]

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