Sunday, October 10, 2010

Personal Finance Part 19 – The Smart Phone Phenomenon

This post probably qualifies as something of a rant; then again it may also be perceived as a small lone voice crying out (somewhat vociferously) against the rampant materialism and consumerism which seems to be rapidly pervading our lives and society. I guess those of you who saw the title probably could guess the gist of my post, but I would like to emphasize that I do NOT have anything personally against smart phones or people who own smart phones. This is more of an illustration on how one can continue to live (more) simply and cut down on aspects of their lives which do not necessarily need to be made more complicated (by technology, no doubt). Call it “The Simple Dollar” of Singapore, as USA has seen many blogs and websites springing up which espouses simple living and cutting down on material items and technology.

I guess I should first begin with a brief introduction – what is a smart phone, and how it is superior compared to a plain vanilla mobile phone? Granted, I am NOT in the IT line and I cannot give a strict technical definition of a smart phone; so I am just going to go with the layman’s definition – a smart phone is one which has a multitude of functions including, but not limited to, surfing the internet, checking emails, taking high-resolution photographs, playing mp3 and radio and online games. “Normal” mobile phones can just do the basic phone functions (i.e. making phone calls and sending SMS) with some pretty basic functions like a simple diary, calendar and maybe alarm clock. It would seem that the smart phone “revolution” took place with the introduction of Apple’s iPhone 3 back in January 2007; and then later the iPhone 3GS took the entire world by storm. Once this revolutionary device was released, competitors starting swooping into the market with their own versions of smart phones; and now we have models ranging from Google’s Android phones, HTC models, Nokia smart phones, Blackberries, Samsung (also on Android I believe) and many others. The survey I had released about 2 weeks ago sought to find out exactly how many people owned smart phones and what brand of smart phones they owned. The results are summarized in the table below:-


As can be seen from the above, a rather surprising 25.6% of responses indicated they do not own a smart phone. This was contrary to my belief that smart phone penetration in Singapore was one of the highest in the world and would stand at probably 90-95%. As it is, about 75% of people do own a smart phone; and it seems the most popular smart phone to own is the iPhone, taking up also 25.6% of the responses. This is in line with my observations at my work place, and in buses and MRT carriages. If we take the proportion of smart phone owners who own an iPhone, this % is about 33.3% which means about 1 out of 3 people who owns a smart phone is an iPhone user. Blackberry users, I am told, are mostly made up of business people who use one to remain contactable 24/7, while iPhone users are usually for leisure use. However, it has been reported that some companies are considering switching to the iPhone for corporate use instead of the Blackberry. Research in Motion should be pretty disappointed to hear this news, as right now they dominate the smart phone market with the highest market share.

Features – Necessity or “Good-to-have”?

With the introduction of smart phones and comments on the general industry out of the way, it’s time to drill down into the features aspect of these smart phones. Are they necessary or merely nice to have? My argument (since I do NOT own a smart phone) would be that these features have been shamelessly touted by phone companies as being “necessary” to remain updated, hip and trendy. Why carry a camera when your phone has one? Why bother to buy a PSP when you have a phone which can play games? And who even thinks of portable mp3 players at all now that smart phones are around to “bundle” these features all in one?

However, let’s step back and think back to the days when mobile phones were not even present. Back then during the “dinosaur” days (it must seem like the Dark Ages but it was actually just slightly more than 10 years ago), it was common for everyone to just carry a pager around and use public phones. Land lines were very common and everyone had an amazing sense of punctuality because it meant that when you made an appointment, you jolly well stuck to it as there was no way you could contact the person to change or postpone. I remember those days clearly when no one felt that mobile phones were necessary; then again I do admit these devices have indeed made life more convenient, and have allowed people to bridge distances to communicate with one another (e.g. overseas mobile calls).

Now, let’s take a step forward and ask ourselves if the basic functions of what a telephone should be have been “extrapolated” and “expanded” to include a myriad of so many other functions that perhaps the smart phone should cease to be called a “phone”. It should be renamed as a “mobile convenient hand-held multi-functional device” instead. The features present in such phones are an extraneous extension of the phone and do not add overall value to the device as a phone, instead it can be likened to a mini-computing device as it stores files, takes pictures and plays music.

Hence, I conclude that these features are “nice-to-have” but not necessary. Surfing the internet around the clock is hardly necessary, any more than it is to always “tweet” whatever you are doing, to making Facebook status updates even on the bus or train. So unless the smart phone allows you to grow revenues or do your job better to generate additional income, the associated additional incremental costs of such “features” appear to be a waste of money and do not represent value to the consumer, except to take up his time the user’s time and make him forget about the rest of the world around him. Many a time, I almost bump into people on the streets staring intently into their smart phones as they walk, or observe people who almost walk into walls, trees or other obstacles because of their intense focus on their phones. I used to think that this behavior was already prevalent during the days of the plain vanilla mobile phones when people were busy sending SMS, but it seems these smart phones have taken it one step further in their quest for distractions.

Costs Involved - A Comparison

This is the part where I break down the costs involved in maintaining a smart phone versus a plain vanilla mobile phone. I have used the most ubiquitous device, the iPhone, as a comparison as the proportion of people who had voted for it was the highest amongst all smart phone users. Note that my phone is a very old Nokia model (so old I can’t even remember the model), and I have been using it for about close to 6 years. It can do basic stuff like calling and SMS-ing, but cannot play mp3, radio or take photographs. Please see the table below:-


Interestingly, one can see that the cost of owning an iPhone 3GS 8 GB (not even the new iPhone 4) can exceed the cost of an old plain vanilla Nokia model by nearly 3 times, if you include the data plan maximum usage of S$30 per month and also depreciate the upfront cost over 24 months (i.e. 2 years). This would imply that the average phone bill for the iPhone user would hit about S$50 to S$60+ a month, while my own Nokia phone bill usually averages around S$30 to S$40 a month (all numbers are quoted before GST charges). If we exclude the upfront costs of an iPhone, one still has to pay about 25% to 50% more per month for an iPhone as compared to a plain vanilla mobile phone.

Let’s then take an example where the iPhone 3GS 8 MB had no upfront costs. For this case, the monthly subscription itself would be S$95 per month, more than 250% of the monthly costs of a plain vanilla phone. In other words, there is no way to “escape” the costs of owning a smart phone – you either pay a much higher monthly charge for 2 years or else pay a higher upfront fee to own such a device.

To conclude, owning a smart phone is an expensive affair, and can increase your costs rather significantly as compared to a plain vanilla mobile phone. Most of the features are also “nice-to-have” but not absolutely necessary. For photo-taking, a digital camera will suffice; for mp3, a cheap model mp3 player will do; and for internet access, perhaps one can just have the patience to wait till one gets home to surf the Internet and update their Facebook pages. After all, patience is a virtue!

10 comments:

la papillion said...

Hi mw,

I own a smartphone, htc variety. Had signed myself up for a 12Gb data plan after 1 year of 'normal' plans. I pay around 40+ per month, inclusive of caller id, which is around 4-5 bucks more than my normal charges. My handset is free, upon signing up with a 2 yr plan with starhub.

I'll say that it dramatically improved my life. I used my smart phone primarily for sms and call. It's good to have a mini computer in my pocket too to do simple calculation and excel spreadsheet computation on the go, but these are ok, good to have but not necessary.

After signing up for the data plan, I'm been using the phone everyday for the bus arrival data. It gives me up to date estimation of any buses at any bus stops, which gives me a lot of flexibility to adjust my journey time. There are more than 1 way to go from A to B, so by knowing which are the buses that comes first, I can plan ahead to save me time. Each day I reckoned that I saved around 30-45 mins from waiting at bus stops instead of choosing a more efficient path. I can't say this is useful for everyone but it's the best thing I did for myself this year by signing up for the data plan. It might not be a lot of time, but my quality of life improves by a few fold.

It's good to have my waiting time reading news on the go too. Recently, I've been reading e books on my phone too. Short ones..Aesop fables. When I bored at work, I browsed through the nearly 100 mails that comes my way from my broker, sieving thru, archiving those for further reading when I reached home.

I guess if you know why you need a smart hp (or not need one), you can jolly well heck care what others think of you.

Musicwhiz said...

Hi LP,

I think yours is a shining example of how a smart phone can add value to your life, and in this case it can also help you to save time, cut (and track) costs and probably earn more revenues too!

Due to the nature of your work (i.e. tuition), it really helps to know when the buses arrive, as opposed to a salaried employee (like me) who only takes the bus twice a day to and from work.

And since you are on the road for long periods of time, then the e-reader is also very useful for you to browse news articles and keep updated on things.

So I guess the smart phone is tailored to help you in your oqn unique way(s)! That's great! So for your case, I can safely conclude that the incremental charges for the smart phone and data plan (minimal, IMHO) are more than justified as it saves you time (and hence money).

Cheers!
Musicwhiz

Hubert wee said...

Hi, I have some comments to add-

1) You stated that the % smartphone penetration was 90-95% Is there any research to substantiate this?

-I don't think u should be surprised by your blog's poll results as they may not be sufficiently representative of the general population ( not to mention the small sample size). Why ? The majority of smartphones are owned by the younger generation, and I believe that the median/average age of your blog readers is probably in the 30-35 age range.

A fairer comparison would be to collect the types of phones used for each age group and compare with the national average, but then again the sample size is too small to be meaningful.

- I do share some of your views on some of the features of smart phones, in that they are mostly nice to have but not absolutely necessary. However, they are widely embraced by many youngsters today.

btw, Lp, I use sms for Iris, so there isn't really any data plan needed for this.

Drizzt said...

hi musicwhiz, my take is that for most people, it doesn't add value really as they still call sms but they add another facid to their phone use which is check on facebook which is utterly unproductive.

but other than blogging investments (investmentmoats.com) i do blog about mobile productivity @ productiveorganizer.com.

take a look at how one can use a smartphone to value add > http://www.productiveorganizer.com/iphone-organizer/

sadly, my take is the cost out weigh the benefits for most peple

la papillion said...

To mw,

Haha, I think for me it's a very good deal too. Perhaps next time when I start to conduct classes at my own place, then I won't have a use for a smart phone. We'll see :)


To Hubert,

Oh, I didn't know there's a sms service for IRIS. Anyway, I don't use their services to check the arrival time. It's very lousy platform. I used another software that had a lot more features than IRIS. They allow me to save bus-stops number as a bookmark so that I don't have to key in all the time, allows searches for bus-stops around my vicinity using GPS, allows me to check the bus arrival times for ALL the buses at a particular stop. This last feature is especially impt to me, as I need to plan ahead to save time.

You'll be surprised that with a little planning, I can save up to 45 mins a day. 45 mins can let me have a longer meal time or a little snack in between or just go home earlier. Very priceless.

Musicwhiz said...

Hi Hubert,

I think you misread my statement. I said it was my BELIEF that smart phone penetration in Singapore would be 90-95%, but I was proven otherwise by the results of the poll. It was just an opinion and not a factual statement being made.

And yes I do agree the sample size is painfully small, but then again it's just a small little poll I did for interest; and I bet the telcos could give more definitive numbers on this. Last I read in Aug 2010 was that 40% of customers of all 3 Telcos owned smart phones, and this number was set to increase to 50% by end-2010. Of course, this % is very skewed as mostly younger folk own smart phones; and probably many foreign workers own plain vanilla mobile phones (I've seen them on the bus so I know this for a fact).

It would be hard to compare by phone brand/model and age group because as you said, too small a sample size. I could ask AC Nielsen to help though LOL!

Thanks for the comments!

Musicwhiz

Musicwhiz said...

Hi Drizzt,

Wow I didn't know you're so into IT! That's a nice site you have, but sorry I don't really understand most of what's written there! hehe...

Seems you also agree with me that the costs outweigh the benefits. But it seems more important for the youngsters to be "hip" and "cool" these days.

Regards,
Musicwhiz

Musicwhiz said...

Hi LP!

Haha, I just read yesterday's Sunday Times which mentioned iPhones being used as lullabys to calm kids! The author Marc Lim did express his reservations about exposing kids and toddlers to electronic devices at such a young age, as he is afraid they will grow up to be full-blown geeks! This could also spell the end of playgrounds as we know it. LOL!

I just want to make sure my daughter gets a "normal" childhood where she gets to play with "real" toys and not just get hooked to electronic gadgets like iPhones or iPads.

Sorry, rambling again, paiseh....

Musicwhiz

Drizzt said...

Hi Musicwhiz, I am an engineer by training so its no surprise there. But my hobbi is really to study this mobile web business competition.

it is so interesting to see the tactics used by google,apple, facebook and microsoft and the competitive business network they built.

here is one example article that is great >> http://techcrunch.com/2010/10/02/facebook-bigger-google/

make no mistake the future computing is on the mobile device.

Drizzt
Investment Moats.com

Musicwhiz said...

Hi Drizzt,

Thanks for the link!

Cheers,
Musicwhiz