Business

Unravelling the Secret Behind the World’s Cheapest Smartphone

Should the Freedom 251, priced at Rs. 251, be held up as a shining example of Digital India? The new smartphone comes with warts, alleged copyright violations and an unproven business model.

New Delhi: ‘What’s the quickest way to become a millionaire?’, goes an old corporate joke. The punchline: ‘Start off as a billionaire. Get into the airline business. Watch your bank account deplete itself.’

In the light of the world’s cheapest smartphone being launched, it isn’t difficult to imagine the above joke being tweaked and re-purposed as such: ‘What’s the quickest way to spark controversy and cheapen the Digital India programme?’ Answer: ‘Have a senior member of your political party attend, and thus tacitly endorse, the launch of the world’s cheapest smartphone’.

The Freedom 251, a smartphone sold by Noida-based Ringing Bells, is many things and brands itself accordingly. It’s a Rs.251 phone that actually costs somewhere around Rs. 2,500. It’s a product funded by a humble family, with agricultural and small business roots, that is doing its best to support Prime Minister Modi’s ‘Make-In-India’ and ‘Digital India’ initiatives. It’s a phone meant for farmers and fishermen yet sold primarily online. It’s very existence is an affront to other smartphone companies, asking them “what on earth were you doing all these years?”

In the run-up to its launch and over the last two days, a number of commentators had a lot to say about the Freedom 251 and the claims made by Ringing Bells. Some people have called it an outright scam, based on how the company’s website and buying process is riddled with spelling mistakes and glitches. Others point to the smartphone’s blatant copyright infringement and intellectual property theft. A few people have raised concerns over the company’s partnership with components firm Adcom.

A reporter from IndiaToday who visited the company’s offices, found the building vacant on the day of the smartphone’s launch. BJP MP Kirit Somaiya raised concerns today over the authenticity of the company and alleged that the company had not got its smartphone products approved by the Bureau of Indian standards.

In the latest in a series of snowballing developments, news broke just a few hours ago that the Income Tax department is currently paying a visit to the company’s offices in order to question the firm’s employees.In a flash online sale that went live yesterday morning, the company got over 30,000 orders.  Irate buyers have started lining up in protest outside the company’s offices today, after apparently realizing that there is a good possibility they will never receive their smartphones.

Ringing Bells has not gotten back to The Wire’s requests for comment. The phone numbers that the company has put on its newspaper advertisements and on its website either keep ringing or are incorrect.

There are two ways of looking at this: does this company and its products look to be on the fishy side? If so – these are a set of possible questions and issues that need to be answered and looked into:

1) Where is Ringing Bells getting its funding from?

According to company president Ashok Chadha, Ringing Bells will require funding to the tune of Rs. 230 to 250 crores for its whole operation, which includes setting up two plants in Noida. Does the company plan to do this through debt or equity financing? An Economic Times story points out that the father of Ringing Bells Director Mohit Goel has loaned the cash required to start this venture. This funding needs to be looked into, which is probably what the income tax department is doing right now. This becomes doubly important because the money that the company received from the bookings yesterday has allegedly been placed in an escrow account and will only be touched by the company after it delivers the phones.

2) Have the Freedom 251 smartphone and potentially other products from Ringing Bells  been certified by the Bureau of Indian Standards (BIS)? Is it in violation of any copyright or is it guilty of intellectual property theft? 

At least one publication has pointed out that as of now, the company and its products don’t show up on the list of certified products. If it hasn’t been cleared by the BIS, which includes mandatory radiation tests, then it could be potentially unsafe. The cheap price tag shouldn’t allow it to cut corners. This applies equally to accusations of intellectual property theft that have been leveled against the smartphone.

Reviewers from Livemint and Hindustan Times point out how the icons for the phone’s apps bear a striking resemblance to the icons that are present in Apple’s mobile operating system. If this smartphone is associated with Digital India, it would be an insult if it ripped off of Apple and other smartphone companies. Which brings us to our third point.

3) How did the company get veteran BJP leader Murli Manohar Joshi and Defence Minister Manohar Parrikar (who didn’t eventually attend) to be guests at the launch of the company’s smartphone on Wednesday evening?

If events continue to snowball, it would be a good idea for Joshi to talk about whether the government officially supports the launch of this product (thus vouching for its authenticity) or whether the party leader agreed to attend simply as a means of demonstrating the government’s commitment towards Digital India and Make in India. The common man is likely to be confused, especially with the amount of Indian flags that are plastered over the company’s product and advertisements.

If these three issues pan out and there is no evidence of any wrongdoing, then it becomes a waiting game to see whether customers eventually receive their smartphones in working condition. If they do, then there’s nothing wrong with the Freedom 251 smartphone. Questions surrounding how the company intends to make money by selling at a loss are important, but not indicative of anything if the company doesn’t answer immediately or even earnestly; most of today’s technology companies are built on burning venture capital money.

What is more niggling, however, is what Freedom 251 stands for, how people view it as an essential part of Digital India and our enduring love for everything cheap.

Freedom 251: The BJP’s Aakash tablet?

One of the things that Ringing Bells gets right, when it comes to dispersing and diffusing technology into the hands of India’s poorest, is the Freedom 251 smartphone itself. By all accounts, the smartphone is pretty decent to use. It’s functional; the phone is clearly worth Rs. 2,500 to Rs. 3,000. If given to people who don’t have a smartphone in India, it could be a usable product.

In other words, it’s the opposite of the Aakash tablet that was championed by the Congress party, or other cheap technology efforts such as the Mozilla Foundation’s Firefox OS phone. In these cases, technology was stripped down in order to sell it cheaply. The final product that was given to India’s rural population was a little more than a toy that barely served its own purpose.

Cheap technology efforts rarely work. In most cases, the product itself conks out in a couple of weeks or in the best case it works but doesn’t  give its users the productivity that they are looking for.

If the manufacturing and control quality process behind Ringing Bells is up to standard, then users shouldn’t have the problems that mar efforts like the Aakash tablet. But the million-dollar question with Freedom 251 is how Ringing Bells plans on making money. If it were that simple, surely multi-billion dollar corporations such as Samsung, Xiaomi and Huawei would have done it by now?

Chadha, in interviews with IBN Live and NDTV, waves his hands and primarily talks about ‘Make-in-India’ duty exemptions and economies of scale. A number of smartphone company executives The Wire spoke to, however, point out that it isn’t that easy. The Indian Cellular Association also points how this is exceedingly difficult.

“Look boss, the exemptions that he is referring to become much less when you talk about the assembly of components and not the manufacture of specific components. There’s simply no way to domestically source components such as processors, cameras and touch screens. And the time to set up a manufacturing plant can take over a year in some cases with the natural delays that happen. They are going to ship out their first few batches for sure at a huge loss,” the chief marketing officer of a Taiwanese smartphone told The Wire.

Connecting Digital India

At Rs. 251, the Ringing Bells smartphone could have basically been given away for free. Indian consumers and citizens love freebies, but pricing it so low betrays a deep misunderstanding of how technology diffuses to the lower sections of the population and how Digital India will truly empower the country’s citizens.

For instance, in the short-term, until the company can ramp up its demand, dealers in the gray market and unscrupulous retailers will make more money off the Freedom 251 smartphone than Ringing Bells. Middle-men will buy as many as they can and sell them for up to Rs. 1,500 because they will still be the cheapest phones on the market. The phone’s cheap price may not benefit most of its final users.

Ringing Bells also may be betting on state governments putting in huge orders of the Freedom 251 smartphone, who will in turn give them away as election freebies. This type of digital diffusion has been shown not to work. Rural citizens and the needy who were given laptops and other technological devices for free or for minimal amounts are more likely to sell them in the grey market or just simply not use them. Charging a certain amount, counter-intuitively, forces the unconnected to evaluate their choices, decide what types of technology they may need and then extract maximum value from their devices.

Building a use-case for technology, imparting technical skills and and ensuring that Internet services are easily accessed should be the pillars of Digital India. Supporting an economically unsustainable product, not so much.

Why not start slow? Price it at Rs. 500 or Rs. 1,000 and then work backwards? India’s smartphone manufacturing ecosystem is primarily marked by low-skilled assembly work. There’s a long way to go before we convert it into a true manufacturing ecosystem that is labour-and-capital intensive. If Ringing Bells can help in this, the cost of smartphones will inevitably drop, thus helping everybody in a sustainable manner.

Featured image credit: Freedom251.com

  • Sandeep Sandy

    What else you want for Rs.251/-