Reflective Blog #2

While the price of a acquiring a cell phone and associated service is going down, the cost of using a cell phone and associated service is going up. What do you think is meant by this statement?

I got my first cell phone in 2000 when I was 17 years old. It was a Motorola Startac flip phone with 3 lines of green text. No graphics, no colors, no games. If I remember correctly the phone was free and the service was $35/month for unlimited local service and a 1 year contract. Most people I know got pennies for a penny or around $50. The fees for roaming and long distance were absurd - but the monthly contracts were totally reasonable.

Now, however, we pay hundreds of dollars for our phones (depending on how inclined you are to have the newest/hottest tech), we are locked into 2-year contract, and our service is more expensive than ever. Between our monthly minutes, texting, and internet, it isn't unheard of to pay $100 for a single line of service. That may or may not include unlimited internet, but generally it does not. It also would not include the ability to tether your phone to other devices, to leave the country with your phone (without paying insane costs), and "unlimited" generally comes with a few limiting factors (eg they will throttle your bandwidth if you dare to actually make good use of the service you pay for).

But why? Why are we still paying huge amount of money for a service that is now used by, literally, billions of people worldwide. The best answer I can come up with is that the cell providers A. don't want to eat their infrastructure costs for upgrades such as 4g and new towers so they pass on these costs directly to the consumers in the form of inflated prices for things such as texts (really, 25 cents per text message in 2013?), overpriced internet, and no reduction over time once their costs have been recouped. B. they see the demand for service and lack of many other options so they are able to keep the prices high and C. their is little perceived demand for competition or innovation so the companies can do as they wish.

Infrastructure costs may be high, but I wonder how much longer cell companies are going to have the current hold they have on the market. Between smaller companies offering extremely competitive prices and VOIP services such as Skype, Gchat, and now Facebook, there are many options for those who don't wish to pay for these services.