This two-post series focuses on Ringing Bells’ newly launched smartphone, Freedom 251, which has been creating waves recently. The phone was launched at a price of Rs. 251, and the company claims that the first device will be delivered by June 30th. Ringing Bells’ incredible claim has been rife with controversy and doubt. The first post discusses the significance of Freedom 251’s price and the factors involved in smartphone prices, while the second post discusses the problems with Freedom 251’s claims.
The Digital Divide
One of the biggest difficulties in passing on the benefits of the information age to everyone has been the economic digital divide. As empowering as the internet can be, issues of access and affordability invariably come in the way. Some minimum hardware is necessarily needed to be able to access the internet, and this hardware costs. It is only recently that the cost of decent, functional smartphones has dropped below Rs. 10,000. Even so, smartphones are unaffordable for a large part of society. A 3G smartphone priced at Rs. 251 would be truly ‘disruptive’, allowing for an increase in the pervasiveness of technology at a truly massive scale. At this price, the device would even see a multitude of custom uses, along the lines of the Raspberry Pi.
Smartphones and their Pound of Flesh
There are multiple factors that go into determining the cost of a smartphone. A substantial portion of the cost of a smartphone is also IP licensing fees, a topic which Ringing Bells has not addressed yet. Also relevant are other factors such design and development charges, marketing and advertisement costs, none of which Ringing Bells seems to be skimping. Component costs alone are limiting enough to establish a substantial baseline. The Indian Cellular Association (‘ICA’), in fact, has written to Telecom Minister Ravi Shankar Prasad, stating that it is not possible to sell such a phone below Rs. 4,100.
Thus, by component cost and royalty costs alone, it should be impossible to manufacture a phone at the price of the Freedom 251. As the ICA notes in its letter, the bill of material value for such a product should come up to a minimum of Rs. 2,700, which would come up to Rs. 4,100 after adding duties etc. An analysis of the Bill of Materials indicates that even if we import all materials and assemble the device in India, including making the PCB, the cost would be more than Rs. 3000.
This is without even considering the costs of marketing and distribution, the cost of setting up the factory – which Ringing Bells doesn’t have yet – and of running an entire company, with all its necessary overheads. The phone has seen a massive advertisement campaign already, with full front-page newspaper ads promoting it and promises an extensive service and repair network, both of which are unlikely to be cheap.
And yet, the Freedom 251 boasts a strong specification profile, seemingly taunting the fact that the royalties on these alone should be enough to make its price fantastical. The phone claims a 8GB storage, cameras up front and at the back, a 4 inch qHD IPS display, a 1.3GHz quad-core processor, 1 GB RAM, and microSD storage. It also boasts 3G, WiFi, Bluetooth and GPS compliance and runs Android 5.1 – all of which require licenses.
Ashok Chadha, President of Ringing Bells, admits as much, stating that ‘The real cost of the device is Rs 2,500, which will be recovered through tie up with startups, innovative marketing, reduction in duties, economies of scale, and selling the device using the online media.’ The latter part of this statement is quite troubling, as we’ll see later, but it is the former that highlights the problems with credibility of the claims made by Ringing Bells.
Thus, while the price of the Freedom 251 may be powered by major innovations, from what is currently known, it is unlikely that a company could price a phone so cheap and still function. Moreover, a spate of related controversies amplifies these concerns, as we’ll see in the second post.