Chief Executive Philipp Humm said in an interview that many of his smartphones will eventually be made up of Google-powered phones costing less than $100, half as much as the smartphones typically available at U.S. carriers. In October, to lower the cost of monthly bills, Mr. Humm introduced a limited data plan that costs $10.
T-Mobile seems to be attempting to differentiate on price. In a regular market reaching saturation that might be a viable strategy. However the market is neither regular not saturated. T-Mobile’s chances of gaining large share are limited.
Churn, or the chance that a user will switch networks is still very low. If anything, AT&T and Verizon are more sticky and lose fewer customers than T-Mobile and Sprint.
Mobile computing saturation (25% to 30% penetration) is also not nearly at a point where competition on price leads adoption.
Lastly, the $100 price point is being put against the standard $200 price point which itself is an illusion for the user. The drop in smartphone entry price is not as powerful going from $200 to $100 as it is from $300 to $200. Psychologically, $200 is an inflection point. Apple’s $100 3GS pricing (now $49) is defensive and probably effective.
In short, the market for telecom services is not very “liquid” and users are quite trapped in their carrier contracts, pricing is not yet a basis for competition and pricing illusions persist.
Mr. Humm, in an interview at the Consumer Electronics Show in Las Vegas, acknowledged that the likelihood Verizon Wireless getting the iPhone as well could affect his subscriber numbers.