Carriers

Why are single-core phones more expensive on Verizon?

April 22, 2011 | by Michael Heller

Verizon

Verizon rule the air

If you’re a Verizon customer, you may have noticed that the cost of Android devices seems to be on the rise on the big red carrier’s network. For a while now, $199 on-contract has been the standard pricing for a new, high-end smartphone. Phones never really got more expensive than that, and newer tech would simply slip into that price slot as older handsets received discounts. Recently, there have been a few handsets to break that tradition. All of these phones are on Verizon, and all feature single-core CPUs rather than the increasingly popular dual-core offerings from NVIDIA (Tegra 2), Samsung (Exynos), and Qualcomm (Snapdragon). So, why are they more expensive?

Prices increasing

It started when HTC put out the Thunderbolt for $250 on-contract or $600 off-contract. Now, we’re getting reports that the Samsung Charge will be $300 on-contract, and the LG Revolution will also be $250 on-contract. Both the Thunderbolt and Revolution feature single-core Qualcomm Snapdragon MSM8655 CPUs running at 1 GHz, and the Charge is reported to have a 1GHz single-core Hummingbird CPU.  So, what’s causing the price increases for these other handsets? As I’ve covered before, the price of the Xoom can mostly be attributed to Motorola’s exclusivity on Honeycomb, and Verizon’s general greed, and surely that second issue plays a part in the pricing of the Charge and Thunderbolt, but I’m not sure it’s the whole story.

I’m sure manufacturers and Verizon would try pointing to the increasing power of smartphones as the reasoning for the price increase, but that doesn’t explain why these phones are priced above their more powerful Tegra 2 bearing cousins in the Motorola Droid Bionic and Motorola Droid X 2. Before its delay, early reports had the dual-core Droid Bionic launching at a mere $150 on-contract, and the Droid X 2 is the standard smartphone $199 on-contract. If we extend out to other carriers, the Motorola Atrix kept with tradition and launched at $199, as did the LG G2X, both of which feature Tegra 2 processors. It almost seemed as though Verizon was setting the prices to keep their Droid line cheaper, but that doesn’t explain the Droid Charge listing for $300 especially since the Charge is very similar to the Nexus S 4G, which is $199 on Sprint.

Possible reasons

Except for the Xoom, which I explained before, Motorola is one common thread for cheaper handsets. HTC, Samsung, and LG are all carrying premium pricing, although none warrant the increase. However, all of the Motorola handsets on Verizon are undercutting the competition. The better specs of the Motorola Droid Bionic should point to a higher price tag, but the early leaks had it as half the price of the Samsung Droid Charge.

Motorola has had a long history with Verizon. The two companies joined forces to become the dominant source of Android devices in the United States. They have worked closely together to build up the Droid brand name to the point where many people use the term “Droid” as a colloquial stand-in for the entire Android OS in the same way that Kleenex can stand in for all tissues. Of course, this close relationship may not mean much. 

I asked Samsung and was told that the carriers have the ultimate say in handset pricing, so while it is possible that Motorola is getting preferential treatment, it’s ultimately up to Verizon what the subsidized price will be for phones.

 

Another possible reason for the increased price is that the Thunderbolt, Charge and Revolution are all the first-run LTE devices from Verizon. The Droid Bionic was planned to be part of that group though, so the leaked pricing for there puts a small hole in the theory. It’s hard to say for sure, though, because the Bionic has seemingly been delayed. Regardless of the Bionic, would an LTE radio really bump up the price $50-100 for the handset? That would somewhat explain the relative expense of the Motorola Xoom, but from a purely hardware standpoint, it is highly unlikely. We have to remember that Verizon is keeping the same pricing for LTE data plans as 3G, instead of adding the $10 monthly premium that T-Mobile and Sprint have added for their “4G” services. Given that choice by Verizon, they may be using this as an opportunity to pull in a little extra on 4G handsets. Although, there are rumors that Verizon will start charging an LTE premium in the future, which would negate any need for higher device costs. Time will tell if LTE is the reason for the price.

Conclusion

Ultimately, it’s hard to say what’s behind the price increases. And, given that it’s only 3 phones, we can’t even say for sure whether it is a trend that is likely to continue. In the end, customers vote with their wallets, and reports say that the Thunderbolt has been selling very well, regardless of the higher cost. If customers are willing to pay, carriers will be more willing to keep increasing prices. And, the numbers are proving that customers are willing to pay. Over half of the new LTE users for Verizon in Q1 are using the Thunderbolt. Maybe the Xoom would have seen better sales if LTE was built in from the start?