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Why are GSM cheaper than CDMA phones?

Discussion in 'Northeastern US Wireless Forum' started by jones, Sep 17, 2003.

  1. jones

    jones Silver Senior Member
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    Why are GSM cheaper than CDMA phones?
    Does anybody knows the answer to this?
     
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  2. Codepyro

    Codepyro Senior Member
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    i think the prices tht yor comparing are based on what the stores offer...if you take the full retail price they are not cheaper...however when you sign up for new service you do not pay full retail for a phone, you pay a subsidzed price....since alot of carriers want consumers to switch to gsm they heavily subsidize the price...for example, full retail for a gsm camera phone would be around 270(roughly the same as a cdma phone) but t-mobile will give you the phone for 70...this means t-mo has to pay the phone manufacturer the difference which is $200 thats one of the reason they make you sign a contract...
     
  3. bobolito

    bobolito Diamond Senior Member
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    The reason is that GSM phones sell more so when manufacturers sell more phones, it becomes cheaper to make them. This is called economies of scale. Many of the models that come to the US are modified versions of GSM phones that were sold in the rest of the world so it is cheaper for them to make them and they pass the savings to the carriers which in turn make them cheaper for the end users.

    In the future, carriers will benefit from the lower cost of running a GSM network, so the price of their plans will remain less expensive than CDMA carriers. This is another benefit of GSM.
     
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  4. jones

    jones Silver Senior Member
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    Does Verizon offer a colored screen phone for $49.99?
     
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  5. Jimi77

    Jimi77 New Member

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    The fact that GSM phones are digital only. Makes them cheaper to make as well.

    To answer your question. I believe the cheapest color phone at Verizon is the T730 for $99.99 after rebate.
     
  6. Rasputin

    Rasputin Bronze Senior Member
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    The cheapest color is the T-730 for $99.99, I prefer the Vx-6000/SCH-A530 or my own VX-4400.
     
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  7. bobolito

    bobolito Diamond Senior Member
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    I doubt it. Even the CDMA digital-only phones that Verizon is pushing now are more expensive. The fact that they have no analog seems to have no impact in price.
     
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  8. GoodmanR

    GoodmanR Silver Senior Member
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    Analog has nothing to do with the price. The chip just needs enough silicon...World GSM phones =3 or 4 bands CDMA/PCSCDMA and AMPS is 3 bands. The AMPS functionality has been around for so long it costs nothing to add it to a phone.
     
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  9. Codepyro

    Codepyro Senior Member
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    bobolito is right about economies of scale...but bobolito ask for retail prices of those phones and compare them to teh retail prices of cdma phone and you will see that they are not much differnt in price...and verizon does/did offer the t720 at one pont for 49.99 also they offer/offered the audiovox 9500 for 49.99 both are color phone..sprint defintely offers cheap color phones...even free in some places...and i garuntee you that verizon will have a cheap color phone again come this december.....they always do that during christmas time...
     
  10. scohen

    scohen Junior Member
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    GSM is where the carriers want to move, so they are going to encourage the trend of switching to GSM by offering the cooler phones in GSM modles and making them cheaper. If the carriers didn't want people to use GSM they wouldn't be offereing good prices on them.

    Also GSM coverage sucks now, so the more people use it the more they can build out infrastructure to support it.
     
  11. jones

    jones Silver Senior Member
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    If GSM phones can be given free by GSM carriers in exchange for 1 year contract then CDMA carriers should also be able to do the same. I don't think its economy of scale because Verizon has 35 million customers.
     
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  12. GoodmanR

    GoodmanR Silver Senior Member
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    i agree. the retail prices do differ slightly however, simply based on demand...also the carriers dont all want to move to gsm. verizon and sprint have no plans to do so..

    however, not to be picky, but i am an economist by training...economies of scale have absolutely nothing to do with producing cheaper goods by producing more goods, but with the returns for imputs/factors of production...they are somewhat connected but are not really relevant here.
     
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  13. DeathRider

    DeathRider Member
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    Tell that to Henry Ford [​IMG]

    I know when I buy electronic parts, the more I buy, the cheaper the price per unit gets.

    So lets say I need to produce x amount of gizmos for a customer. The larger the x is, the more parts i need to buy, the cheaper the cost per unit becomes (as far as parts - I know I would still have to factor other assembly costs, like labor, rent, utilities, tools, ect.

    Now, if I can get several ppl to consolidate parts perchases with me, we can all save on price per unit...to a point.

    This does not say we would have to pass the savings along to the customers, we could keep the price the same and keep the profits...

    Also, the longer I make the gizmo (or the more units I can produce/sell), the cheaper my tooling costs become (better amoritization), ie molds, R&D, ect.

    That's just my guess.
     
  14. jones

    jones Silver Senior Member
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    If American Management is so Great, Why are all these Mobile Phones (both CDMA and GSM) made by Foreign Companies? With one exception is Motorola.
     
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  15. bobolito

    bobolito Diamond Senior Member
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    35 million customers is nothing compared to the world GSM users. Manufacturers make phone for more than just the US.
     
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  16. scohen

    scohen Junior Member
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    I wasn't implying that every carrier wants to switch to gsm, I was implying that ones selling gsm phones for less then other bands want to switch.

    Also I believe the concept of economies of scale was used correctly above.

    Here is a quote from my Econ 103 text:

    "These occur when mass producing a good results in lower average cost. Economies of scale occur within an firm (internal) or within an industry (external)."
     
  17. Philgsm

    Philgsm New Member

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    The reason is simple. Firstly anyone who uses the Qualcomm baseband chipset, ( The only one avaliable, Qualcomm developed the current CDMA standard), pay a high royalty to Qualcomm to use it. The second reason is that CDMA is more complex to implement in hardware than GSM, i.e. more components. Thus the higher cost. People want to avoid the high costs that is why Koreas SK telecom dropped their CDMA2000 (Qualcomm again) plans and went to WCDMA. WCDMA is a different standard and is founded by the GSM based group independant of Qualcomm. Most of Europe and Asia will eventually go to WCDMA. Qualcomm's only hope to implement CDMA2000 in these areas will be to drop the crazy royalty fee required by them for each baseband chipset. WCDMA has a higher bandwidth and thus will have higher data rates than CDMA2000. Most GSM carriers in the future ( time unknown) will migrate to WCDMA.
     
  18. bobolito

    bobolito Diamond Senior Member
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    That still remains to be seen.
     
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  19. Codepyro

    Codepyro Senior Member
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    your wrong i dont know which areticle your getting you facts....

    1. Qualcomm gets royalties on both wcdma and cdma2000(one of the reaosn qualcomm promotes wcdma on thier website...)
    2. The cost of upgrading to WCDMA(compared to the cost of upgrading to cdma 2000 ev-do) is higher because it requires an infrastructure overlay and is not backward compatible. One of the main reasoins why european and other gsm carriers are unwilling to switch.
    3. Those higher data rates only occur in theory on average CDMA 2000 ev-do get roughly the same as w-cdma(may get a little more but uses MORE spectrum...5mhz instead of 1.25-i think thats right correct me if i'm wrong)
     
  20. Philgsm

    Philgsm New Member

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    I agree they are unwilling to switch right now, but the future roadmap for GSM shows WCDMA. In fact on GSMworld.com 85 % of GSM operators have plans to use WCDMA in the future.
    As for bandwidth CDMA2000 is 3.75 MHz and WCDMA is 5 MHz.
    I agree Qualcomm charges royalties on their baseband chipset. For CDMAone and CDMA2000 they own the market. They also have WCDMA chipsets. But for WCDMA many companies now are developing WCDMA baseband chipsets and do not have to pay royalties. Therefore the ongoing court battles over the ownership of the patents.
    As for my information I work for a RF chipset design company.
     
  21. jsb

    jsb New Member

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    SK Telecom has absolutely not dropped their CDMA2000 plans. They're implementing WCDMA alongside CDMA2000, but they're still actively upgrading and promoting the CDMA2000 network. KTF (another S. Korean carrier) is doing the same thing.

    Also note that Qualcomm is no longer the only developer of CDMA chipsets. Nokia has developed their own CDMA2000 chipset for use in their phones. It may be EV-DV only (which means we won't actually see the fruits of this development for a while, as EV-DV services aren't available yet), but I'm not positive about that. However, I'm absolutely sure that Nokia has been developing CDMA chipsets. In cooperation with Texas Instruments, I believe, although I may be confusing this with some other Nokia-TI cooperation. I've got no information on the specifics of Nokia's chips, i.e. how they compare to the Qualcomm-developed chips, any compatibility issues, etc. But if they're successful, they may well drive down the costs for CDMA2000 chipsets in the future, which could have an impact on the prices of CDMA phones.

    As Codepyro pointed out, Qualcomm gets royalties from both CDMA2000 and WCDMA chipsets. However, they get a bigger slice of the pie on CDMA2000 chips.
     
  22. GoodmanR

    GoodmanR Silver Senior Member
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    good point. nokia is making a major push into the cdma component market, opening and investing a lot of money in san diego for cdma research and development. TI is also developing their own cdma chipsets, im not sure if they are working with nokia any longer on this...

    as for the price. the difference in price for CDMAone chipsets, and a standard GSM chipset is so unbelievable small (if there is one at all, im not really convinced that there is) that the price difference cannot be accounted for by the chipset.
     
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  23. scohen

    scohen Junior Member
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    I agree, I think what the companies want people to buy will be cheaper. So if cingular is pushing GSM they'll have great deals on those phones and plans even if they loose profits on the actual phone sale.
     
  24. polonius

    polonius Junior Member
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    And the GSM carriers are expected to break the 1 billion customer barrier in October -- GSM is one full order of magnitude bigger than CDMA (1 billion -v- 100 million). The scale economies of GSM are an obvious source of its competitive advantage. Codepyro is correct in pointing out the CDMA carrier bump up the subsidies on their phones to make the end-user price roughly the same, but this means they are using resources for handset subsidisation that the GSM carriers can devote to network expansion and service development.
     
  25. GoodmanR

    GoodmanR Silver Senior Member
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    Ture technically, but not really applicable...

    In the US the GSM carriers are devoting basically all of their resources just to turning on the GSM networks. There really isnt anything to invest money in improving yet. So in fact, in recent years, CDMA carreirs have improved in the US much faster than GSM carriers have. CDMA has focused on network improvment, while GSM on network deployment...
     
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  26. jsb

    jsb New Member

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    Actually, in Europe, they'll probably be dedicating all of those resources to paying off the exorbitant fees they paid for WCDMA licenses. I have to say, it makes little sense to me that the Europeans (and others, including many of the WCDMA manufacturers and future operators) believe that you need a brand-new license to provide 3G services. We've got them here in the US and they exist elsewhere, and many of those carriers were allowed to upgrade/migrate their 2G systems to 3G within their existing spectrum. To me that seems like a much more efficient system.
     
  27. jones

    jones Silver Senior Member
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    I believe those exorbitant fees were reduce by their governments simply because they exorbitant that they were threatening the existence of mobile companies.
     
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