Everyone wants to sue Ringing Bells, the makers of Freedom 251. While the world’s cheapest phone could soon prove to be a costly mistake for its makers, it is unlikely that the actual buyers of the phone will sue the company. That is because the costs of litigation will far outweigh the cost of the phone.
If the company finally ends up failing to deliver the phone as promised, not many people will bother going to consumer court for something that cost them just Rs 251. Unless you have the drive to bring the company to book, thousands of customers who bought the phone won’t bother spending their precious time in courts for a refund of this amount.
In fact, some experts say the pricing gives Ringing Bells a big advantage. “They can actually pay back the money to the guys who pester them for the phone. Afterall, it is just Rs 251,” said the CEO of a tech manufacturing company.
There are still a lot of unanswered questions about the phone. The most important one still is who is subsidising the phone? While the phone is priced Rs 251, Adcom — the actual manufacturers of the units Ringing Bells showcased last month — claim the phones were sold at Rs 3,600 apiece.
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So who is picking up the tab for the Rs 3,350 that is due just on the cost of the phone? And if someone is subsidising the phone, what is responsible for this sudden outpouring of philanthropy? The only business model that can help sustain subsidised hardware is monetised content, and in India not even Apple or Google have been successful on that front, certainly not to the extent of being able to recover Rs 3,300 a year.
Some suggest that the idea behind the big launch of the Freedom 251 could have been brand building. You get a lot of press on the “world’s cheapest phone”, burn money by absorbing the subsidy to make this possible for a limited number of phones and then finally launch phones at a higher, more plausible, price point. “But by then your brand is made and everyone knows you,” says Datawind CEO Sunit Singh Tuli.
Tuli adds that this pricing has also muddied the waters for all companies planning to launch really cheap smartphones. Ringing Bells in a way took away a bit of Datawind’s thunder, as the company was reportedly working of a Rs 999 smartphone — which would have been the world’s cheapest had Freedom 251 not come along — for this year.
“Now, everyone will look at Freedom 21 as the benchmark, even if they are not able to deliver in the end,” says Tuli. The company had launched a smartphone priced Rs 1,999 last year.