With contracts falling out of favor, a new model for
smartphone sales may take hold.
Motorola's next flagship smartphone, the Moto X Pure
Edition, will debut on September 3. Those who wish to
purchase one must do so through Amazon , Best Buy , or
Motorola's own website -- Motorola will not sell the
Moto X Pure Edition through any carrier.
This stands in sharp contrast to its Android rival
Samsung (NASDAQ Other:SSNLF) . In the U.S., the Korean
tech giant does not sell unlocked Galaxy handsets -- all
of its phones are designed for particular carriers.. Every
Samsung phone sold in the U.S. -- even those sold
through third-party retailers -- is branded by a single
wireless carrier.
Motorola has been much less successful than Samsung
to date, but its strategy hints at a changing U.S.
wireless landscape.
Unlocked and ready work to with any carrier
It's often a difficult and confusing process to bring a
handset from one carrier to another. Differences in
technologies and frequency banding can make it an
impossibility. In the U.S., Samsung sells four versions of
its Galaxy S6 -- one designed to work with each of the
four major networks. Some of these versions are
compatible with other networks (the T-Mobile variant,
for example, can work on AT&T ) but a difference in radio
banding can lead to sub-par performance. Others are
simply incompatible -- the AT&T variant lacks the CDMA
technology used by Verizon 's (NYSE:VZ) network.
Motorola's Moto X Pure edition, however, is able to work
with all four major carriers. The phone's lone model
supports both GSM and CDMA, HSPA+ and 14 different
LTE bands. By simply changing the SIM card, Moto X
Pure edition owners will be able to change their carrier
whenever they please.
The death of subsidies
At the moment, there is no version of Samsung's Galaxy
S6 that offers this capability. This wasn't much of an
issue in recent years, as most smartphones were sold on
standard, two-year contracts. When a contract expired,
consumers would just sign a new contract and get a
new phone.
But the way consumers are purchasing smartphones is
changing. Earlier this month, Verizon announced that it
would be doing away with contracts altogether for new
customers. Now, new Verizon customers must purchase
their phones outright, pay for them in installments, or
bring over compatible devices they've purchased
elsewhere (like the new Moto X). They can cancel their
service at any time, and if their handset supports it, use
their device on a different network.
Under this system, an unlocked phone with support for a
wide variety of networks is much more attractive, as a
handset lacking support for other carriers limits its
owner's choices.
Whether this will lead customers to choose the new
Moto X over a competing Samsung device remains to be
seen. Certainly, Motorola's brand isn't as strong as
Samsung's -- even as Samsung's mobile profit has
plunged, its share of the U.S. Android smartphone
market has strengthened. According to Kantar
Worldpanel, in the second quarter, Samsung and LG
combined for 78% of all U.S. Android sales.
Apple seems to be aware of this shift. The Cupertino
tech giant began selling a fully unlocked version of the
iPhone 6 earlier this year. Like the new Moto X, this
version of the iPhone is compatible with all the major
U.S. carriers, but as the company notes on its website,
"purchasing an unlocked iPhone means you will not
qualify for the lower... price associated with... a carrier
installment plan." Buying an unlocked iPhone 6 means
spending $649 or more up front -- a tall order for many.
A niche offering, or the future of the wireless industry?
The Moto X Pure edition, in contrast, starts at a far more
palatable $399 -- but it may still be too expensive. In
the past, T-Mobile's marketing for the Galaxy S6 has
consistently emphasized "$0 down" for its installment
plans -- clearly, customers are not eager to part with
several hundred dollars upfront. At the same time, the
move away from contracts is still somewhat in its
infancy. In fact, Verizon customers could still sign
contracts through Wednesday.
The new Moto X Pure is a different phone for a different
era: a radical shift for a company that has been selling
its Android flagships through carriers since 2009. But if
it succeeds, it could help fuel a new trend -- one that
could change the U.S. wireless industry forever.
The next billion-dollar iSecret
The world's biggest tech company forgot to show you
something at its recent event, but a few Wall Street
analysts and the Fool didn't miss a beat: There's a small
company that's powering their brand-new gadgets and
the coming revolution in technology. And we think its
stock price has nearly unlimited room to run for early in-
the-know investors!
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