The GSM Association (GSMA) has announced the second phase of its Ultra-Low Cost (ULC) cell phone initiative aimed at making wireless more affordable for the estimated 3.3bn people on the planet that currently don’t have mobiles and might use them. In this phase an invitation to form a strategic partnership has been issued to handset manufacturers worldwide. The result of the selection process will be announced at the 3GSM World Congress Asia in Singapore at the end of September, with new handsets expected to be available from Q1 2006. The objective is to achieve a sub-US$30 handset price-point, with a similar volume target as the initiative's first phase of 6mn handsets within six months. In the first phase Motorola was selected by the GSMA to start delivering products during the Q2 2005 at a price point below US$40 (ex-factory). According to the GSMA, Motorola is already on target to meet the programme's anticipated initial volume of 6mn units.

"Effective communication is one of the key catalysts for economic growth. The GSMA is bringing together operators and vendors to address the affordability issues of mobility in emerging markets", says GSMA chairman Craig Ehrlich. "The next phase of our initiative aims to drive even greater affordability, through sustainable products, at even lower cost than the first phase of the programme. At the right entry level we believe there is the potential for over a hundred million new connections per year".

In practice the price of particular cell phones (in given quantities) is already impressively low. At the end of last month Hop-on Inc, the company that claims to have commercialised the world’s first throwaway cell phone some years since, and Hop-on Mobile India Private Limited, a company incorporated under the laws of India , announced that Hop-on was offering a dual band (900/1800MHz) GSM cell phone targeted for the India market. This will be available for as low as INR1,500 (approximately US$34.50) in quantities of at least 100,000 units. Hop-on's Model 1813 is a candy-bar style phone that utilises a Texas Instruments chipset and includes such features as SMS messaging, 50 phone book entries, 15 ring tones, 4 games, and a rechargeable lithium ion battery. Customers can also customise the phone by downloading their own ring tones or pictures.

" India is the second most populated country in the world with over 1bn people. Our market research indicates that less than 10% of India 's population currently uses cell phones so this represents a tremendous growth opportunity for the wireless industry”, comments Hop-on ceo Dan Gannon. “However, as an emerging market, one of the keys to being successful is the ability to provide low cost handsets. We believe this is the least expensive GSM phone in the market and we look forward to working with our business channel partners in India to capitalise on this market opportunity".

Ring low sweet chariot
How much lower can you go? Quite some say the experts. Within two years, and possibly within 12 months, the wireless handset industry is on track to design and manufacture low-end cellular handsets that cost US$25 or less to make, according to results of a recent survey conducted by the Portelligent technology intelligence company among its customers in the wireless and electronics industries.

Among respondents to the survey, 80% reported a belief that a low-end GSM handset with a total bill-of-materials cost of US$25 can be achieved within two years or less, while 51% believe this level can be reached within one year or less. In addition to electronic and mechanical components, the cost of the handset as presented in the survey was defined to include battery, testing, final assembly, software and IP licensing, and product packaging.

"We have believed for some time, based on the trends in product design and component cost which we see in our product tear-down analyses, that very low-cost cellular handsets will emerge in the next several years", comments David Carey, president of Portelligent. "We think this survey is significant in that it shows that a substantial majority of our customers seem to agree on the near-term reality of the US$25 handset, as they represent diverse points of view within the electronics industry, including semiconductor and device makers, handset makers, and wireless service providers. With the handset industry reaching maturity throughout the developed world, more economic cellular phone designs will be a key factor in securing 'the next billion' wireless subscribers".

Electronics company Philips is already aiming lower. Last month the company announced a global initiative to develop ULC mobile phones, with the first product from the project being a sub-US$5 system solution – an integrated hardware and software platform constituting all the electronics needed in a mobile phone – that Philips says will drive handset costs below US$20, and fuel already fast-growing markets in regions including China, India, Africa, South America and Eastern Europe.

Speaking at the Informa Ultra-Low Cost Handset Conference in Amsterdam , Thierry Laurent, business development, communications businesses, Philips Semiconductors, said that the initiative would be based at Philips’ facility in Shanghai , and that it would seek to drive down total handset costs for this market segment below US$15 by 2008.

"Right now, 77% of the world’s population lives within range of a mobile phone network, but only 25% of the world’s population subscribes to a mobile phone service", said Laurent, citing the World Bank and EMC figures. "All around the world operators have the infrastructure in place for mobile services, but the relatively high cost of mobile phones is holding back potential subscribers. By offering mobile manufacturers all of the electronics of a phone as an ultra low-cost single unit, we’re opening up a huge potential market for mobile phone services around the world".

But of course, it isn’t quite that easy. The price of the handset is only one element in the wireless affordability and market enlargement equations. Service costs are pretty critical too. To its credit, the GSMA acknowledges that there are other issues needing to be dealt with. "The price of the handset is only one hurdle. We are also pushing hard for further positive changes that can be effected by governments, such as more flexible regulatory decisions and a more favourable approach to taxation", says Rob Conway, GSMA ceo and board member. "In addition, we are encouraging innovative payment mechanisms that could further positively reduce the barriers to ownership".
John Williamson