If you want to buy a cell phone without a “plan” it will cost you and arm and a leg. A couple of hundred or so. Why is this? It is simply a box of electronics essentially no different than other items costing much less.
What items costing much less? The nearest small electronics that I can think of that are comparable are digital cameras, GPS receivers, PDAs and upscale mp3 players. All are in the “couple of hundred dollars and up” ballpark.
A couple of hundred dollars is not really that expensive for a feature-packed, ultra-miniaturized “box of electronics” with a color LCD screen, more memory than most computers had ten years ago, and a built-in transmitter/receiver. Not to mention that model obsolesence driven by fashion and new feature creepage means that it’s increasingly difficult to recoup engineering and design costs.
If I had to guess, it would be that they are pretty much sold at or below cost due to competition and the desire to get you to sign on to a (much more profitable) service plan.
Of course, if you don’t * want * a built-in camera, color screen, instant messaging, ring tones, and are just interested in a device that you can pick up and talk to people with – that one you can get for much less money. But that’s not what you’re looking for, is it?
Virgin Mobile is a pay as you go cell company. I would guess these phones are closer to the price they would be sold if no plan was attached to them whatsoever. 
I am also confused about why you think cell phones should be cheaper than they are. Those are some very complicated electronic devices with screens, transmission devices, embedded software etc. Development of each one cost in the millions to many millions of dollars.
Why do you think that something like that should run $50 or so? What else with that level of complexity do you see being sold for less than $100 dollars?
Those are serious questions.
Basically if there was a market for a cell phone that just did text messages and calls and had a 2 line B&W display in a medium sized plastic container, you could probably still sell it at a profit for $25. In a lot of phones the color screen itself can be around $20 in COST to the manufacturer. The application processor, the audio chip, the lens, the CMOS sensor for the camera, etc. It all adds up, plus the R&D cycle to jump onto all these technologies as they become available.
What kind of phone? Since I suscribed recently to a “plan”, I bought at the same time a cell phone at a reduced price, with various features ( camera, files,internet access, etc…). Had I bought it without the “plan” it would indeed have costed a couple of hundred.
However, I previously used a basic cell phone without any of these features and I paid it one third of this price, or somesuch.
I wouldn’t call a thing that you can use to pass a call, to take a picture, to store a file, to play a game and probably, if I looked at the manual, to make a cup of coffee, a basic box of electronics.
I recently lost a phone and had to buy a new one, and at cingular at least, the cheapest phone is 130 dollars.
Well, the average PCS mobile out there does not only have the communications device – a pretty nifty piece of work in itself – but also the equivalent of a basic PDA in order to store the phone numbers, download ring tones, process SMS, maybe a game or two. Virgin Mobile’s basic “cheap” Nokia is $40 on sale… and even that is not really “box” price since the device is NOT “open” – you do have to buy time on the VM network in order to get the sale price and use the unit.
I’d buy one. All I want is a box that takes phone calls. I don’t NEED my phone to play games, tell me where I’m standing, remember phone numbers and so on. I can do those things by myself, thank you.
A 40-hour TiVo–sans the $12.99 monthly fee–is $50. Do I win the grand prize? 
Is that a special promotion? The hard drive alone in one of those things costs more than that.
I saw the same price for a TiVo in today’s newspaper. Best Buy, I think.
Used Motoral StarTac, $14.95
p.s. Tivos don’t count, they get you for $250 on the lifetime service, or something like $10/month. So it’s subsidized like a cell phone with the plan.
The good news: Companies are competing to produce really cheap phones. Motorola designed one to cost less than $40.
The bad news: They are only being sold in third world countries.
I remember reading a few articles like this earlier this year. I’ve seen more detailed articles but I can’t find them now, with details on phones that have simple B&W text screens. I think that the mobile phone market in developed nations is kind of like the software industry, in that everything gets bloated just because the technology is there and some consumers pick their product based on feature count alone.
I agree with the rest of your post, but really I’d say it’s the companies driving the fashion obsolesence with a desire to get users to trade up to hipper phones. I’m using a 2.5 year old phone, and I’d be happy getting the exact same one again, but its 3 models behind, they don’t support my phone any more (for buying batteries, car-chargers, etc), and the new model contains basically no value-added features.
Certainly these are pretty nifty pieces of technology, but a great deal of the design costs are done specifically to inspire more sales to people who already own the product. The argument that they’re expensive because of the design costs at this point is a pretty poor one. The basic technology r&d has been paid for years ago (for your relatively basic and not-quite-as-basic phones).
Perhaps I should elaborate. “IF” I wanted a cell phone - I’d get a bare bones model. I have no interest in getting a cell phone, at all.
Well, here’s an article which points out at least one reason cell phones shouldn’t be cheap:
The wonder isn’t that phones are expensive, it’s that they’re so cheap. A cursory Ebay search (I searched for GSM compatible, SIM unlocked phones for maximum portability worldwide) and came up with brand new phones for as little as ten bucks. We’re talking color LCD 128 x 128 pixel 16K color, polyphonic ringtone support, text messaging capable with AIM embedded client software, calculator, organizer, voice dialling, etc. Expensive? Are you joking?
Americans are spoiled rotten by subsidized phones from their wireless carriers. In Europe you buy your own phone at full price, THEN get service with whatever carrier you want. No contracts, but then again no price breaks either–TANSTAAFL.
Verizon has a few cheap phones, or at least they did a couple of years ago. I have a good $100 Kyocera phone.
Right on… more power to ye
I used to work for a cell company that is now part of AllTel. Cell phones by themselves really are expensive, and the service company sells them or gives them to you at a loss to get you to sign a service contract. There is a reason you have to pay a fee when you break a contract early - part of it is to recover the cost of that cell phone you have.
People came in all the time wanting new phones for cheap or free without extending or signing a contract because they thought that we got them for next to nothing, but we really did have to pay $100-200 for that feature packed phone. The company needs you to pay a monthly fee for a certain amount of time to pay for that cell phone (of course they are making a profit, too.)
Of course as new phones come out older technology that is still perfectly fine will get cheaper, but the service providers usually don’t offer years-old cell phones because people want the latest. Sometimes if you ask they will have a used or older cell phone tucked away somewhere they will sell to you, I have gotten basic phones that way before. The problem I have now is I have an older style phone and AT&T who I am with has switched to GSM technology, so next time I want a new phone I will have to switch and also get a new plan.