A Cell Phone for Under Five Bucks

The problem with cell phones is that, despite their ubiquity, they are still too expensive for the majority of the world's population. According to the World Bank, three-quarters of all humans live within range of a cell phone signal, yet only one quarter use cell phones.

Philips Semiconductors executive Thierry Laurent has a solution to bring cell phones to the masses: a cell phone that would retail for less than $5.

Speaking at a conference in June, Laurent unveiled his strategy. From its manufacturing base in China, Philips would develop ultra-low-cost phones that can make phone calls, send SMS messages, and play polyphonic ringtones. Not too shabby for less than five bucks.

The fulfillment of Laurent's vision is likely a ways off, as the infrastructure to build these phones remains under development. However, he predicts that they could drive the cost of phones down to $15 by 2008. Currently, the average handset retails for $40.

At less than $5, cell phones would (in the West, at least) become effectively disposable... causing problems for carriers looking to lock customers into long-term commitments. To attract and keep customers, carriers may lure them with ever more sophisticated smart phones, or offer steeply discounted airtime to customers who agree to long-term contracts. Or, they may partner with other marketers who would use cell phones as "loss leaders" (free phone with every purchase!) Meanwhile, more cell phone customers in the developing world could yield some interesting social and political consequences.

Source: i-mode strategy