The global smartphone tipping point: '$100 or less'

Smartphones may be everywhere here at Mobile World Congress, but they're still a business opportunity in much of the world.

Nielsen's mobile usage Jessica Dolcourt/CNET

BARCELONA, Spain--These days you'll be hard-pressed to find people who remember when personal computers were luxury items that few could afford. Now smartphones are increasingly headed in the same direction, continuing to become cheaper and more ubiquitous for everyone, not just for the global elite.

The mass market in question goes well beyond the budget-conscious living in developed markets, and focuses specifically on getting more smartphones and into hands in emerging markets. This was the topic of a panel discussion at MWC today.

Research numbers support the adoption trends of both developed and developing markets. Demand in the U.S. is already driving down smartphone prices. And 48 percent of American consumers are carrying smartphones, according to Jonathan Carson, CEO of Nielsen Digital; among 25- to 34-year-olds, four out of five of these mobile phone buyers choose smartphones.

It doesn't stop there. U.S. consumers are increasingly buying a portfolio of devices, Nielsen found, including tablets and e-readers. Almost all of tablet and e-reader owners own smartphones, according to their research, and about a third of tablet owners also own e-readers.

Yet while more Americans are using smartphones for quick lookups and tablets for watching movies, e-reading, and interacting with professional apps, on a global scale much of the world is still transitioning from basic phones to high-end feature phones, leaving smartphones in the province of the privileged and the business elite.

In Brazil, for example, 20 percent of phone owners have high-end feature phones, Carson said; and that's far more than smartphones. As users start demanding more features, there will be growth opportunities for the manufacturers and carriers to grow their business.

Nokia Lumia 610
The cheaper, but no less flashy, Nokia Lumia 610. Jessica Dolcourt/CNET

Pricing is the largest barrier of all, and one that has to bend if smartphones are to become truly ubiquitous. "If we're really going to move the tipping point, we have to drive down prices," said Rob Conway, chief international affairs officer for Vimpelcom. "The tipping point is about $100, sub-$100" for smartphones. That's the total cost of the phone, even without a contract.

Microsoft happens to agree that price is a major factor behind the adoption of Windows Phone versus Android or iPhone. This week, the company announced that it lowered minimum requirements to make less-expensive, lower-powered Windows phones like the Nokia Lumia 610 more attractive on a global scale that may not support higher charges.

Consumers in emerging markets traditionally aren't as concerned with specs as they are in the U.S. and elsewhere, suggested Gavin Kim, Microsoft's general manager of product management for Windows Phone. Instead, the connected phone becomes a primary communications and Internet device. "Technology isn't an end," Kim said. "It's a means to an end."

Not just handset price
The price of handsets is a key factor, but it isn't the only barrier to more-widespread smartphone adoption. Data prices are also key, since downloading and uploading information like Facebook updates and mobile games require an extra cost--whether you pay for it as part of a plan or buy it a megabyte at a time.

Carriers need to do their part to lessen the financial pain point in emerging markets, Conway said. One idea that's been floating around is a speed button, a physical or onscreen control that works like a car's overdrive mode to temporarily rev up a higher-priced data rental plan during short bursts when you need a surge of speed, like when downloading a music track or playing a resource-hungry game.

The device manufacturers, operators, and service providers dance a tricky dance, tying to balance the total cost of smartphone ownership that they're trying to encourage, with the reality of the hardware, the software, data, and maintenance costs for the people who actually buy the phones.

Editors' note: This post was updated on March 1, 2012, to correct a Nielsen report that 48 percent of American have smartphones.
 

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