Unlocking the unlocked cell phone market

From CNET News.com: Nokia and Sony Ericsson are targeting the U.S. with a new set of unlocked phones. But without hefty carrier subsidies, will they ever be able to crack the U.S. market?

There is no question that when it comes to features, Nokia and Sony Ericsson's new U.S.-ready phones can easily compete against the hottest new phones on the market.

Nokia's N97, a touch screen phone that supports both 3G and Wi-Fi, has a 5-megapixel camera and 32GB of memory. It's a clear competitor to the new Apple iPhone 3G S and the Palm Pre.

The Sony Ericsson W995a, also a 3G and Wi-Fi enabled phone, comes with an 8.1-megapixel camera, a brilliant display screen, a good media player and features such as stereo Bluetooth, and GPS. In terms of features and functionality, this phone could easily compete with other high-end feature phones like the LG enV3, which is sold by Verizon Wireless or the Samsung Memoir T929, sold for T-Mobile USA's network.

But even though these phones may have the features to compete, they are not sold through a wireless operator, which means that they are not subsidized, making them too expensive for most mainstream customers. The N97's suggested retail price is $700, and Sony plans to start selling the W995a for $600.

Meanwhile AT&T charges $99 for the 8GB iPhone 3G, $199 for the 16GB iPhone 3G S, and $299 for the 32GB iPhone 3G S. In exchange for the subsidy, AT&T requires customers sign a two-year service contract. The price of the service, which includes voice and data services, is a minimum of $70 per month. But regardless of whether a device is subsidized or not, users will have to purchase some kind of voice and/or data plan, depending on the type device they buy.

"In the U.S. market, price is a huge factor in determining which phones people buy," said Will Stofego, an analyst with the market research firm IDC. "Why pay $500 or more for a phone when you can get an iPhone for $100? Of course you have to agree to the two-year service plan, but I think that's a trade-off most consumers are OK with."

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