Europe, Europe english, Political campaining

How to get a smart-phone 25 times cheaper thanks to the EU common market

sony-ericsson-xperia-t-mobileHow much would you pay for the iPhone 3G 8Gb? Or the Sony Ericsson Xperia X1? Or the Nokia N96?

Thanks to the common market you can chose from a range of 25 to 700 euros. Wait a second, 25 times difference in the price of the same product in the same market? It can’t be…

Unfortunately for many, and fortunately for some, it can be.

In the Netherlands the deals with the phone companies can get you a iPhone for 26 eur, the Sony Ericsson Xperia for 29 eur and the Nokia N96 for 33 euros, but you can also get them for free if you have a contract with T-mobile. In Spain the deals with big companies like Movistar can get you the same mobiles for free. But in countries like Belgium where telecommunication companies can not offer such deals if you want to buy an iPhone you can pay 575 euros with mobistar or pay even more if you want it liberated. If you want to buy the Sony Ericsson Xperia or the Nokia N96 you can’t find them with the company but you shouldn’t be able to buy them for less than 500euros…

I don’t want to go into considerations -otherwise perfectly legitimate- on whether big companies offering expensive mobiles for free opens the door to unfair competition with emerging telecom companies or the theoretical considerations on to which extend a market can be distorted -and hence stop working as a free market- when prices stop working as information-providers for the consumer, I just would like to highlight the flagrant breach of common market rules by allowing this rip off on the prices of mobile phone:

We are in a common market, yet telecommunication companies can not offer services beyond the national borders -for that we have the roaming services-. Now, if I want to buy a mobile phone in Spain or the Netherlands to use in Belgium I should buy liberated because this way they can charge me a more homogeneus European price since I will only be allowed to use a belgian telecom provider. Or that’s what they think… What happens in reality is that some people are making a highly lucrative legal business reselling the phones bought for free or for 30 eur to companies like Movistar or T-Mobile and getting back 25 times what they paid by selling them in legal shops.

I tested this twice during last 4 weeks in two different countries: in Barcelona I entered a shop attracted by the price of a brand new iPhone 3G, 250 euros! a bargain? When checking the mobile it was clearly written on the box and on the mobile that it was a movistar phone. Good deal for the shop, they get a margin of 250eur and good deal for me, I get a phone for half the “official” price.

I repeated the experience in Brussels, I enter a shop attracted for the price of Sony Ericsson Xperia, 50 eur cheaper than the 500 official price. When checking the phone the seller tells me that because I’m nice I can get it for 400 eur and he includes the 8Gb memory card… same trick: on the box and on the mobile it is clearly written T-Mobile and all the instructions and software of the mobile are in dutch, I check a bit further and in the dialled and received calls appear calls with the code +31 of the Netherlands. They probably got the phone for free in Amsterdam and they will make a profit of 400 eur in Brussels. Not a bad business!

Is this ilegal? In both cases I ask for the guarantee and to get an official invoice and they said guarantee of 2 years and getting an invoice poses no problem at all.

This is clearly a case of common market failure where the European consumers are the ones being clearly ripped off and where only action at European level can bring a solution.

The European Commission has already taken succesful action in the communications market when legislating on roaming costs against abusive prices charged by the big companies. Now it is time for the European Commission to show its commitement in protecting European consumers by stopping this abuse of the common market.

Once this is done we will be closer to answer the 1 million euro question: what is the real price of a mobile phone?

2 Comments

  1. There is some Belgian-specific legislation that prevents bundling – i.e. a contract plus a ‘free’ phone, and this means networks do not compete on which handsets they offer (as they do in NL, UK etc.)

    Apparently the rule is coming to an end – see this, but will the mobile firms reduce prices? That would be so if it were a market in Belgium, but even on that I doubt it…

    (oh, and I’m owner of a UK iPhone now!)

  2. Good to know! although this measure will only bring Belgium to the level of other European countries = nobody knows how much a phone costs.
    According to free-market rules the mobile phone prices should be set by supply and demand and with this bundling we move away from a perfect market (perfect information and perfect competition) towards a market that is regulated by companies and not the government…

    (Enjoy the iPhone and I hope you paid a “fair” price for it 🙂 )

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