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Shock and Awe: Nokia's Handset, Netbook Pricing

Tuesday, September 8, 2009

By David Coursey

If you believe technology is supposed to become less expensive over time, Nokia has news for you: Prices for the company’s newest products, introduced last week, are simply shocking.

Still, there is a bit of illusion at work here. The prices quoted are for unlocked phones and don't reflect subsidies paid by U.S. cellular carriers.

Subsidies lower what Americans pay for cellular hardware at initial purchase and make Nokia's non-subsidized list prices appear outrageous by comparison. If you think no phone offered in the U.S. costs as much as what Nokia wants for its new models, this is the reason.

In the case of my 32GB iPhone 3GS, AT&T appears to have paid at least $300 to lower its initial selling price. (You can get a handle on how much the subsidies are by looking at pricing for replacement phones bought before the end of a service contract).

In some parts of the world, handsets are sold by themselves, without subsidies, without service contacts, making these list prices more important than they are in the U.S. And, of course, the list prices don't reflect discounts that resellers offer to consumers.

Let's consider the new-model pricing that Nokia has released, mostly last week at Nokia World in Germany:

Reduce each of these prices by a $300 carrier subsidy and they still seem high. Take off another $50 as a reseller discount and they seem a bit more reasonable. Still, if an American can purchase an iPhone for at little as $99 or a Palm Pre for $199, all these products seem pricey, least to me.

In England, there are subsidies but cellular service costs less, too. You can, for example, get a free iPhone 3GS with a $70-a-month service contract.

A English friend looked at the prices for me, however, and said that by the time they make it to High Street shops, the new Nokia products will be priced to compete with other vendors' products.

Just for comparison, an unlocked 32GB iPhone 3GS sells for $799 in Asia, so my $300 subsidy guesstimate could be a good bit too low.

Taken in a global context, Nokia may seem be asking top dollar, but maybe not top Euro. Global handset pricing is a complex and confusing business, and I think the cellular carriers are happy about that.

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