Why Some of 2014’s Most Intriguing Gadgets Will Never Reach American Stores
BARCELONA — Among the hardware on display at the Mobile World Congress show here, I’ve seen the following intriguing items:
• Hewlett-Packard’s giant-screen Slate6 and Slate7 VoiceTab tablets, which come with a generous 250 MB of data a month, for 24 months.
• Lenovo’s S860, an Android phone that can recharge another phone through its own USB port.
• A prototype smartphone running Firefox OS that can be sold for $25.
• The ZTE Projector Hotspot, a WiFi router that can share its LTE connection with nearby phones while also recharging them — and project video up to 10 feet away.
• Acer’s Liquid E3, which features a special button on the back to ease taking selfies;
• Blackphone, a privacy-first, Android-based smartphone that comes preset to make your communications anonymous and encrypted.
These diverse devices share one thing in common: Even though some are made by U.S. companies, or have prices listed in U.S. dollars on press releases, they’re not coming to U.S. stores soon. Some, in fact, may never reach the States in quantity unless MWC attendees smuggle them home in their luggage.
This global gathering — last year’s drew more than 72,000 attendees — provides an excellent opportunity to see what’s new in the smartphone world, or at least that portion of it outside of Apple’s orbit. (That company skips events it doesn’t run itself.) But MWC also can’t help but spotlight how different the U.S. market can be from the rest of the world.
The single biggest distortion is this: Far more than elsewhere, you can’t buy a phone until the carrier first buys it for you.
Like other situations where a middleman steps into a transaction — say, subscription-TV services that decide what box you use to tune into their services, or state-run liquor stores that charge too much for a limited selection of booze — this can short-circuit the usual feedback loop through which companies learn from customers what they like and don’t like.
But it also complicates life for vendors that aren’t already on the shopping lists of U.S. carriers that, in turn, realize the power they hold. “The ones that are the most desirable have exceedingly stringent requirements,” said Geoff Fishman, executive vice president for consumer brands at XPAL Power. His employer sells an emergency-calling model called the SpareOne that can rest idle for years on one AA battery; it’s still working on in-store distribution.
Even a large manufacturer has homework to do before it can work with carriers as big as Verizon Wireless (96.2 million subscribers) and AT&T (72.6 million). “We obviously don’t have those relationships in the U.S.,” said Andrew Barrow, product launch director at Lenovo. “There’s a lot of infrastructure you need to build to support it.”
Smaller firms can sound less forgiving. Victor Hyder, chief operating officer at Blackphone partner Silent Circle, described the carriers as “behemoths” that “feel like they own the world.”
Some companies have separate reasons to sit out the States. Firefox OS isn’t going there, Mozilla vice president Johnathan Nightingale explained, because “we’re holding it back”: That nonprofit would rather focus on developing markets that would benefit more from cheap smartphones running its open-source system. “We think we’ve got a huge opportunity to do a good thing for the world.”
Phone manufacturers looking to break into the U.S. market can try to sell directly to customers — see, for instance, Google and its Nexus line of Android phones. But two other factors can gum up their progress.
One is the CDMA (“code division multiple access”) technology deployed by Verizon and Sprint. In this system, a phone won’t work for anything but calls to 911 unless the carrier activates it. That’s why, for example, you can’t count on using a Sprint-sold phone on a service reselling Sprint devices.
The GSM (“global system for mobile communications”) standard in use at AT&T and T-Mobile gives owners more control. If carriers sell a phone to you, they can lock its subscriber identity module slot to stop you from using it with other carriers — but if you bought an unlocked phone that speaks their wireless frequencies, all you need is the SIM card that any retailer will gladly sell.
But even at GSM carriers, handset subsidies — the invisible chunk of your monthly fee that lowered the price you paid for a phone — can leave unlocked phones climbing a steep hill. Why pay the full price of a phone if you then get a monthly bill inflated to recoup a subsidy you didn’t get?
Almost a year ago, T-Mobile dynamited that business model by pricing phones and service separately. The appeal of this wasn’t immediately clear to many; subsidized pricing has become so settled that the iPhone 5c was widely hailed as the “cheap iPhone” or the “$99 iPhone” when its $549 unsubsidized price was only $100 cheaper than the $649 full-freight bill for the iPhone 5s.
But in December, AT&T tiptoed away from subsidized pricing as well by granting subscribers a $15 break if they brought their own devices. The climate for unlocked, unsubsidized phones — for a customer to say, “Here’s my hardware; let me connect,” as Silent Circle’s Hyder put it — looks a little warmer than it did two years ago.
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