Vodafone NZ locking handsets

# 128432 4-May-2008 17:33

Johnr...

The Worldmode devices are significantly different to a standard GSM handset in the sense that first and foremost, they're sold as CDMA devices to connect to a CDMA network. They only connect to a GSM network when there is no CDMA network available. Yes they can be unlocked, but they're intended for use by travelers and people who want their phones "to just work". Could I argue that this is protecting the customer experience, too? Also, are you sure they're sold unsubsidised?

I doubt that we'll ever see the Telecom Worldmode devices unlocked, either - mainly because they won't work on the new network currently being built out. By the time the CDMA network closes, I would think that most - if not all - customers would have upgraded anyway.

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# 128434 4-May-2008 17:44

munchkin: Johnr...

The Worldmode devices are significantly different to a standard GSM handset in the sense that first and foremost, they're sold as CDMA devices to connect to a CDMA network. They only connect to a GSM network when there is no CDMA network available. Yes they can be unlocked, but they're intended for use by?travelers?and people who want their phones "to just work". Could I argue that this is protecting the customer experience, too? Also, are you sure they're sold unsubsidised?

I doubt that we'll ever see the Telecom Worldmode devices unlocked, either - mainly because they won't work on the new network currently being built out. By the time the CDMA network closes, I would think that most - if not all - customers would have upgraded anyway.

if they were not sim locked they would work fine on most gsm networks around the world with no issues.

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# 128438 4-May-2008 18:10

johnr: if they were not sim locked they would work fine on most gsm networks around the world with no issues.

Yes in theory you are correct, but if you did this, effectively you have paid $299/$399 for a phone that does in GSM mode what a $99 GSM phones does. There is no point and they are as munchkin says subsidised, even on prepaid.

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# 128466 4-May-2008 20:37

johnr:
What do you mean if Telecom were to lock there handsets! Where have you been for the last 2 years??

So its OK for one mobile Telco in NZ to lock its GSM based handsets for the last 2 years even when purchased out right! and the handsets can not be unlocked for any fee!!

But not OK for the other telco even though they will unlock them for a small fee!

CSI!!

Are you disagreeing with my statement that it is a barrier to entry to the market? Not being a customer of Telecom, I couldn't say whether or not they are carrier locked. Also, I am not aware that Telecom has made any statements about what they will or will not do with their GSM phones. I would complain just as loudly if their GSM phones are locked to a carrier.

So, could you please point out where my submission was incorrect about carrier locking being a barrier to entry?

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# 128475 4-May-2008 21:18

TinyTim:
nic.wise:
jpollock: Why is locking reasonable when the phone is under contract?

If there is a termination clause on the contract, why lock it down?

I guess, in a attempt to stop you getting a nice phone from provider A, which may have bad call costs, and a sim from provider B (who may not have the phone, or may charge loads for it, but their pricing is better for calls)

It also stops you from seeing out your contract with an old phone, and on-selling your subsidised phone (for a profit) to someone on a different network, in which case the operator gets no benefit out of the subsidised phone.

Both those reasons are poorly thought out. I think some math is in order!

As I posted, the subsidy on phones is small. In fact, the price of the contract outweighs the price of the phone! This is true in all markets, regardless of the subsidy, including ones with free phones. So, the subsidy value of the phone is included in the price of the contract. This is obviously demonstrated by the fact that they don't offer contracts without the subsidy (you can replace it with minutes).

Let's try some quick math. Let's say Vodafone gives you an NZ$200 subsidy on a 24month contract. That's less than NZ$10/month. So, they quietly put the price up on the contracts by NZ$10, throw in a phone. Profit! I guarantee that no one is getting a "free" phone. You're paying for it every month. In fact, Vodafone will currently give you an NZ$40 subsidy on a NZ$20 plan. You have the option of swapping it out for an extra 2 minutes per month. That tells you that the value (to Vodafone) or the NZ$40 price cut is actually less than NZ$1/month.

Add to that early termination clauses, and there is no reason to lock the phone. The person doing so will have no reason to take the phone somewhere else until their contract expires. In fact, Vodafone already has termination fees equal to 100-160% of the phone subsidy if terminated within 3 months. Yep, that's right, if you terminate your contract early, you can end up paying MORE than the subsidy on the phone.

Prepaid phones are different. As we can see from American experiences, selling subsidised prepaid phones results in them being purchased at retail and then exported. That's why NZ doesn't sell subsidized prepaid phones, and it would be stupid to do so, with or without locking.

Vodafone is locking ALL phones, not just ones under contract. However, I think I've shown that locked phones provide no increased security over the terms of the contract. The price of the subsidy is already factored in to the contract.

So, if a locked phone isn't what is going to keep someone with the carrier while their contract is valid, why do it?

Let's enumerate some reasons:
To keep them with the carrier at the end of their contract. (instead of an MNP surcharge)
To increase that termination fee from NZ$40 for a NZ$20/month contract to NZ$90.
To force people to continue to carry 2 phones.
To put a barrier in front of new GSM entrants who don't have a significant customer base.
To put a barrier in front of new GSM entrants who don't have a significant retail presence.
To lock in high roaming fees.
To add friction to the market, slowing down churn in response to price changes.

None of them are for the benefit of the customer.

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# 128482 4-May-2008 21:52

jpollock:None of them are for the benefit of the customer.

This may sound pessimisstic but i dont think they would care too much about this point.

I agree with you completely. However everyone should realise that since vodafone is a company they are trying to protect their duopoly status, and it fits in with basic economics which is exactly what you have shown.

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# 128483 4-May-2008 21:55

eXDee:
jpollock:None of them are for the benefit of the customer.

This may sound pessimisstic but i dont think they would care too much about this point.

I agree with you completely.

I think the customer wouldn't have a clue about any of this until around 3 months into the future, when it starts to get annoying and becomes a talking point.

Except people like us, or people who are related to the industry.

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# 128522 5-May-2008 09:26

I think the customer wouldn't have a clue about any of this until around 3 months into the future, when it starts to get annoying and becomes a talking point.

Or they won't give it a second thought and accept that they have to either shell $50 or just get a new handset, much like they do now and have done for as long as Vodafone / Bell South has been here.

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# 128561 5-May-2008 11:41

As a number of people have already mentioned, this scenario was "writing on the wall" so to speak. Since Vodafone are the only fully fledged GSM/UMTS provider in New Zealand at this time & with competition looming from NZC *cough, cough, LMFAO* & Telecom just around the corner, I personally see no problem with what they have done.

Telecom do the exact the same thing with their Worldmode GSM/CDMA phones & have done so for the last 2 years.

As for the subsidy issue, I was at Sylvia Park in Mount Wellington yesterday & they were offering the Nokia 6121, which of course works very well on Vodafones new UMTS 900Mhz Network for $299 On Account with a 24 Month - You Choose Talker or Txter Plan, this phone usually retails for $499 or so.

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# 128562 5-May-2008 11:50

Well I see that handset for $390 at ETown, so against the actual cost of the phone, rather than the inflated cost of the phone that subsidy looks less than impressive. $90 off and they get a 24 month contract out of you?

Probably wouldn't be hard to find it at an even cheaper price, since ETown are not usually the cheapest PI.

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# 128564 5-May-2008 12:00

Well we are not talking about Telecom anyway and the whole argument of "if one is doing then it is ok" is just not valid in my books.

And NZ Communications is actually doing some work and even showing up here on Geekzone.

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# 128567 5-May-2008 12:21

Indeed, that argument is very weak; I don't buy it either.

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# 128571 5-May-2008 12:40

I don't think people who haven't lived in the UK, understand what it means to buy a subsidised phone. Knocking $200 off the price for a 24 month contract is not subsidised - it's a tiny discount compared to other countries in the world. The most common argument in this thread that justifies the phone locking is that 'other countries do it'. Well those other countries also offer heavily subsidised phones, or free phones. You can even get a Nokia N95 8GB for free if you sign up to the right plan. But have a look at this page on the Vodafone UK site and you'll understand what it means to offer subsidised phones: http://shop.vodafone.co.uk/mobile-phones/pay-monthly/home/

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# 128572 5-May-2008 12:44

And here is a Nokia N95 + 8GB memory card (not the new N95 model) for free with a 18 month contract for GBP30 per month. The same phone here is currently $739 (on special) with a 2 year contract for $40 per month.

http://www.t-mobile.co.uk/shop/mobile-phones/phones/pay-monthly/nokia/n95/overview/

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# 128612 5-May-2008 17:48

Does anyone here know how much it costs to get them here "officially supplied"? and the difference in cost prices between VF Live handsets vs PI?

I assume it would be a lot more expensive having to go through official channels to have a phone parallel imported as often these factories tend to discount heavily on large quantities ordered so countries for e.g. UK cost price is cheaper.
Whereas with NZ we are probably not going to get the new Imate Ultimate series and I assume due to the inability to order the numbers they require for a shipment.
Really meaning you can't fairly compare costs of phone between VF and PI.
But still agree subsidies should be higher to warrant locking handsets and prepay phones should not be locked.

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