Despite my critical ascertainment with Apple’s persuasive legal course as a hindrance to innovation in the Smartphone arena, there’s no denying the fact that the latest avatar of the iPhone has been a runaway success. With Apple alongside its various carriers receiving close to 2 million pre-orders within the opening 24 hours and analysts expecting the sales to reach the 10 million mark within the week, the hype and curiosity surrounding the iPhone 5 is greater than ever.

And the way Smartphone markets work in US is what makes for an interesting reading for an average Indian mobile user. All the major mobile carriers namely AT&T, Verizon and Sprint have collaborated with Apple to sell their newest offering on no-commitment as well as 2-year contract plans. A no-commitment plan is similar to purchasing a new iPhone without any network services for 649$ (34,663 INR) while a 2-year contract means that the customer ends up paying just close to 200$ (10,682 INR) with a monthly data and call usage plans of between 85$-100$ (4540-5340 INR). Yes, the first part of a contract agreement is enticing enough to get your budget restraints wagging but it’s the premium monthly charge which translates to the analyzed fact that every iPhone 5 user will be able to actually take full benefit of his device after a good 9 months after purchase without burning a hole in his pocket.

From a consumer’s perspective, it is a good enough deal as they are getting the latest gadget for a knockdown price and willing to part with a substantial monthly amount for it. And you can’t blame them considering the phenomena an iPhone is considered in US. Some experts have even quoted iPhone 5 as the “new cash milking cow for the mobile carriers”. The contract system is a camouflaged and nifty business practice which allows mobile carriers to give products like the iPhone at subsidized prices and recover the costs and make handsome profits via the contracts. And with most of the phones in these contracts not being unlocked, change of carriers becomes increasingly hassle some once the contract period expires. But hey, Apple might just launch a new iPhone till then to keep the cycle running!

What I have always wondered is why mobile carriers have not been able to tap in on and successfully replicate this business model in India. And the latest advancements in the local Smartphone arena showed me exactly why. One, we are spoilt for choices both expensive and cheap when it comes to selecting a handset so this ideally leaves the companies at risk when it comes to subsidizing the handset costs due to numerous handset launches and upgrades. Secondly, Indians are not the splurging kind and are very particular about their cell phone plans; be it Prepaid or Postpaid. “Call per second” is a good example of that. And most importantly, the shelf life of a Smartphone being used by an average mobile user is 12 months at maximum which leaves the contracts proposition less profitable. Reliance and Tata Indicom have already tried this with low-end CDMA offerings which ultimately failed to excite. And even though Nokia is providing a few handsets with such contracts, it is not preferable for majority of the mobile users.

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