It was big news when Sprint announced last week that it would offer a $69 package on cellphone service, including unlimited calling to any other cellphone, unlimited texting, some fun bells and whistles like GPS navigation, and most important: unlimited data. Lots of people were celebrating the move, with writers and readers pondering switching providers to Sprint. As a former Sprint customer, I'm not in any hurry to get back to the company with the worst customer support I've ever encountered (in any industry). But then I look at my iPhone plan with AT&T, which squeezes an extra $20 out of me for unlimited text messaging, and I wonder…
To keep people like me from jumping ship, the other big providers will inevitably respond with similar plans. This could be a great development for consumers — a good old price war! Taking it a step further, though, it could be a good thing for mobile/cellphone tech in general: Since data service is so cheap now, primitive phones will fall into the bin of obsolescence. Soon, pretty much every cellphone will be a smartphone.
As smartphones spread, though, Sprint's big move might have an unexpected consequence: Putting itself and its fellow providers in a weaker position. My reasoning after the jump.
The term smartphone is somewhat contested, but the general consensus is a mobile phone that does network communication other than phone calls and texts, namely Internet and e-mail. With their enhanced capabilities, they tend to tax the network of their carrier more than "dumbphones" (phones without those network capabilities), which leads to higher pricing for those plans. Or so it did.
With cheap pricing on plans for smartphones, it takes away the last excuse (other than technophobia) for a customer to skip out on buying one. As the price war wages, it's a certainty that more smartphones will be sold — especially since the hardware is borderline free now (the iPhone and Palm Pixi start at $99, for instance). More smartphones in the hands of more people is great news, for three reasons:
1. Cheap information for everyone. When I was one of the few people in my social group to have an iPhone, I was often the go-to guy at parties or nights out for sports scores or random bits of trivia. But as iPhones, BlackBerries, and others have multiplied, I'm not so alone anymore. Now everyone can get the information they want, when they want it, wherever they are — at a low cost. Welcome to the Collective. Um, the good Collective.
2. Faster networks will come… faster. With so much increased demand for data services, the pressure will be on carriers to expand their higher-speed data networks faster. Over the next year or two, 3G access will spread even faster than it would have before Sprint's move, with 4G close behind.
3. Weaker service providers. Lastly, Spint's price-slashing has a good chance of weakening phone providers' power overall. The move already has a whiff of desperation, undercutting the competition with a sudden grab. With fewer people counting their minutes (thanks to unlimited mobile-to-mobile calling) and more customers entering the smartphone space, a greater number of people will begin to realize the wonders of data plans — and start to ask some uncomfortable questions. Like: Why does my carrier limit my text messages but lets me send unlimited emails?
Smartphones encourage people to regard their service provider as a "dumb pipe" that simpy moves all those 1s and 0s to their handsets. The app model reinforces this perception as developers find ever-more innovative things to do with those bits. That paves the way for apps like Google Voice, which basically lets you do a bunch of things for free that providers typically charge you for, to take the power back from providers and put it back in the hands of customers.
This price drop is really the first move in power shift that will ultimately leave the U.S. cellphone providers in a weaker position than before. And as most will agree, that's long overdue.