Friday, November 22, 2013

Any self respecting tech enthusiast is likely to be aware that Motorola launched a sub $199 720p quadcore phone last week. Almost everyone has lauded the device to be a game changer for it is able to bring unprecedented experience at the price range. However, many tech pundits think that the Moto G is made just for poor people. Putting the condescension aside, is this really the case?

by Bobby Situkangpoles

In the infographic below, we can see that $200 is the average of what most Americans are prepared to pay upfront for a high end smartphone.

The thing is, in most parts of the globe, phone prices are not subsidized like they do in the US.

That means, to get the kind of experience that the average American consumer expects to get with a $200 initial investment, people in many parts of the globe, the “ emerging markets” for lack of a better term, often have to spend way north of $600.

Here in Indonesia, to get the cheapest iPhone 5S one needs to spend at least US$1000, whereas Samsung’s Note 3 demands about $820 of initial investment.

At this point, one might say that this comparison is flawed because those Americans consumers paying $200 for their current model high end phones will have to pay monthly installments for the following 24 months.

This is correct, however we cannot forget that those monthly installments also come with voice, sms and data.

Lets take a look at what the average person in an emerging market, Indonesia, has to spend in the months following the purchase of their non subsidized phone.

To have a fair comparison, we need the quintessential “average user”. For this purpose, I propose we use my 63 year old mother as an example. Who can be more average than a health department retiree who now spends most of her days giving lectures at a local college?

On average, my mother uses between 1 to 1.5 GB worth of data per week. Terrestrial internet connection is not as widely available here as they do in more developed countries. Therefore, most Indonesians have to rely on cellular networks for most of their internet usage. In my mother’s case, that weekly 1 GB is spent mostly for reading news on Flipboard, browsing through her friend’s social updates on Twitter and Facebook, communicating through IM apps like WhatsApp, as well as watching at least an episode of her favorite Korean show.

My mother uses between 4 to 6 GB of data a month. The price of a 2 GB data plan
from the nation’s biggest telco is around US$ 10. So in one month, she spends between 20 to 30 USD on data.

Unlike in the US, our data plans don’t come with voice and sms services so my mother has to spend more, on top of her 20-30 bucks data plan, for her voice and sms usage. In my mother’s case, she it works out to around $ 7 per week for voice calls and sms usage. Anyone who has used the Indonesian cellular system will tell you that spending $ 7 a week for voice is pretty frugal.

Thus, every month, my 63 year old mother spends about  $ 25 for data and another $ 28 for voice calls. That works out to more than US$ 50 a month for all the things she does with her phone.

Let’s do a little recap. Her original Galaxy Note cost $750 initially. If for each month of ownership she spends, on average, $50 for data and voice use, that means in 24 months, the device will have cost her $2,022 on total.

That is not far from what most American consumers pay for high end phones under 24 months' contract as shown here by

Even though consumers in the emerging markets have to pay the full price for their phones, which for high end models amounts to way north of $600, they also have to spend close to the amount that their western counterparts pay (for their on-contract devices) each month throughout their ownership.

Let’s take a look at what the market has to offer for Indonesian consumers looking to pay similar amount of initial investment for their phones as the average American consumers do, which is around $200. To give manufacturers some leeway and account for price variations, I listed devices available for less than $225.

Samsung’s strongest offerings are the $189 Galaxy Ace 3 that comes with a 4 inch WVGA screen, dual core 1.2 GHz CPU , 1 GB of RAM, and Android 4.2 although internal storage is only 4 GB. Those who want more internal storage to store apps and games need to shell out $223 for the Galaxy Core which comes with 8 GB of storage, a 4.3 inch WVGA screen, 1.2 GHz dual core Cortex A5 chip from Qualcomm mated with 1 GB of RAM.

Samsung’s Korean rival, LG only has two options in this price range. There is the $180 LG L5 II with a 4 inch screen WVGA screen, 1 GHz dual core Mediatek chip, and 512 MB of RAM. There is also the $215 LG L7 II with a slightly larger screen at 4.3 inches, and slightly more RAM capacity at 768 MB. Both have only 4 gigs of internal storage and run on Android 4.1.2. However, the LGs has the advantage of having nice looking IPS screens and the L7 II tops it off with an 8 MP camera, which is interesting for the price range if one can look pass the measly RAM.

From Sony, we’ve got the similarly priced Xperia M and Xperia L ($214 v $215). Both comes with dual core 1 GHz chips and Android 4.1. However, for 1 extra buck, the L gives you a bigger and higher resolution display (4.3 inch qHD v 4 inch FWVGA on the M), twice the internal storage with 8 GB, and an 8 MP camera.

From HTC, currently they only have the $214 Desire XC with its 4 inch WVGA screen and 768 MB of RAM. However, they have announced that they are bringing the Desire 500 and 601 before the end of the year. these come with 4.3 and 4.5 inch screens, respectively, with the 601 offering better resolution with its qHD display. Pricing is still yet to be announced for these two HTCs though, so we can not be sure whether they would fit the bill or not.

This is the current level of specs and refinement that people in non subsidized markets can currently expect if they are planning to shell out the equivalent amount of initial investment as their average Americans counterparts do for their phones.

If one wants to experience HD IPS displays with quad core computing power, one needs to stretch one’s budget to around $250 and go with either Lenovo’s S820, P790 or S920. The three phones have 4.7, 5.0 and 5.3 inch screens, respectively, and relaively recent Android version (4.2), although none has more than 4 GB of internal storage.

During the launch of the Moto G in Sao Paulo, Dennis Woodside said,

“500 million people will buy $200 smartphones next year, yet currently their choice are limited to either buying 3 year old “premium phones”, or new phones with old technology….. We don’t think that’s fair.”
Dennis Woodside, Motorola.

This illustrates the significance of the Moto G. For less than $200, the Moto G brings with it a 4.5 inch HD IPS display that beats even the iPhone 5S in terms of pixel density. As previously mentioned, the cheapest 5S costs about US$1000 here in Indonesia.

The Moto G also comes with a 16 GB option that, as shown above, is currently unheard of even for phones that cost up to $250 in the Indonesian market.

During the launch event Motorola also demonstrated how the Moto G is able to outperform the even the Samsung Galaxy S4 on certain tasks that most people do on a daily basis such as, calling up the homescreen, opening the browser, and a number of other common tasks.

Punit Soni, Motorola’s head of software development, said that they have focused their effort to ensure that the phone can perform with zero lag and provide all day battery life. Subsequent reviews have so far supported at least his former claim.

Motorola also mentioned that the Moto G is guaranteed to get an update to the latest Android version, Kit Kat, by January 2014 to ensure that the phone does not become obsolete the moment the consumer opens the box.

These are things that are unprecedented for phones in the Moto G’s price range and in many cases, even for phones that are twice or three times the price.

Earlier, we have shown how consumers in the non subsidized emerging markets face similar monthly costs as consumers who bought their devices on contract, even though the emerging market consumer had to pay the full price of their phones upfront.

Whether their device costs $200 or $700, the average consumer in Indonesia can expect to spend around $50 for data and voice services.

This means the Moto G offers value not only to the people whose budget are limited to $200, but also for people who are used to spend three to four times that amount for their phones.

I have a friend, let’s just call him BW for privacy reasons, who is looking to replace both his aging phone and tablet. His budget is $1000. The tablet that he really wants is the HSPA+ Galaxy Note 10.1 (2014) which is reported to enter the Indonesian market in December for around $750. However, he cannot buy that tablet because he knows that he would also need to spend at least $400 to get a phone that won’t drive him crazy as he uses it on a daily basis.

The Moto G will change this. By offering a premium experience for just around $200, logically, there is little reason for people like BW to spend 400 to 700 bucks for a phone to complement their high end tablets.

Thus the Moto G has the potential to not only disrupt the sub $250 smartphone market but also the market for phones like the Galaxy S4 Mini or the HTC One Mini (both are currently offered for around $500 in Indonesia). If Motorola can pull it off, it can totally obliterate the market for such phones.

The only question left is, will they be able to do it?

Since Google bought Motorola in 2012, the company has significantly reduced their international presence. My home town, Bandung, a city of 3.2 million people, used to have at least three large Motorola centers. There isn’t any to be found now. How will Motorola distribute the Moto G and provide after sales service then?

One option is to do what Lenovo did. Lenovo went from zero to controlling more than 13% of the Indonesian market in mere 18 months by selling their phones through electronic chain stores. That’s a lot of phones considering that Indonesia is fourth most populous country in the world.

The details of Lenovo’s rapid rise in Indonesia is a subject for another article, but they have at least shown that a company can succesfully distribute devices in the country without having their own shops.

Will Moto follow the Lenovo way? We’ll have to wait and see. One thing’s for sure though, the Moto G is not (just) for poor people.