Welcome to Rye Country Day's Economic Blog. Here you will find perspectives by students taking Economics at Rye Country Day School. It is meant to be a forum where students can openly express their ideas and take positions on relevant economic issues. I urge everyone to participate in presenting their own ideas in an open manner so that we can all learn from each other. Regardless of whether you are currently taking Economics, everyone is invited and encouraged to comment on articles and get involved. Feel free to e-mail me, Alex Osborne at alexander_osborne@rcds.rye.ny.us , with comments or suggestions.

Wednesday, January 17, 2007

Featured Entry - Google CEO: Free Cell phones for all if…


I recently read a document about Google CE0 Eric Schmidt and how he predicts that in the near future cell phone prices will be reduced significantly, possibly to the point of being free. Schmidt believes this because of the increase in big business advertising which has taken place over the last few years. This document sites a statistic which says that the average person spends at least 10 hours a week on the phone. Because of this cell phones have become the newest target for the spread of advertising. However, despite all this it will be hard for a phone to become free because the companies that sell them don’t want to lose that profit. I feel that advertising will most likely drop the prices, but not as significantly as people would think. Still any drop in price is a win for the consumer.

-Josh Anderson

5 comments:

Omar said...

What I thought about when I read this was how this form of advertising would convince companies who make cell phones to offer them free of charge. The whole reason for the use of this form of advertising is that cell phones are so widely used, but wouldn't this high demand cause manufacturers and service providers to continue selling them? What would cause these companies to provide phones for free?

Kunal said...

Free phones would just let more people have cell phones and thus become exposed to advertisements distributed through cell phones. It's kind of analogous to Google's business plan - Google itself is free, but Google makes money because advertisers pay to have their ads show up next to particular search terms. Every time someone clicks on an ad, Google makes money. The same situation could probably happen with cell phones in terms of a customer replying to a text message advertisement.

-Kunal

Alex Buckingham said...

If prices get too low, perhaps the government will have will have to put a floor on the price. If there was a floor then advertising would become even more important, since the prices would be so low. Does the governmeant need a reason to put a floor on a price or can they do it if any buisness is suffering?

Alex Osborne said...

there was a recent article in the WSJ about how ads on cell-phone internet webpages are becoming huge. i think it said only about 15% of people use the internet on their phone due to many factors but mainly due to the price. however, with the new iphone coming out that is touch screen i think this is something will be very profitable in the near future and ultimately reduce the price of phones as well as the price of surfing the internet on your phone

Matt Reese said...

It's probably safe to say that no company will lower costs in one area without raising costs in another. If a phone's price falls, then the cost of service will probably rise to balance it out. Either that or advertising will suddenly become a very big aspect of cell phones. The main point is to keep the process of buying phones going; if a cell phone provider flops, then everybody loses.