Are we seeing the end of subsidized phones?

[Mondozei]

There's widespread dissatisfaction in the industry about subsidizing phones for customers but they're afraid to take it away in order not to lose customers to rivals who will do price wars etc.

But still, over the long term, could we end up with no subsidies at all?

http://www.telecoms.com/165562/the-last-hurrah-of-the-handset-subsidy/

And would it be a good thing?
I'm not sure if it would impact me since I'd just buy them unlocked and then resell them later, but then again I switch phones a lot so the chances of selling a 6 month to a 1 year device isn't that bad. If you're the type that hangs on to a phone 3+ years, having it subsidized from the beginning wouldn't be a bad thing.

 

[Trombe]

Wouldn't be surprised if the ATT Next/Verizon Edge garbage is their way of testing the waters while they have their cake and eat it too for as long as they can. It's amazing and disheartening at the same time how obfuscating the numbers can lead to such ridiculously stacked results in favor of such business tactics.

I don't think the average American will get over the sticker shock of actual smartphone pricing anytime soon though; it's a major part of why T-Mobile has no choice but to offer zero interest financing options. Even in the middle of a contract there isn't really anything explicitly forbidding a customer from upgrading by paying full price and doing whatever they want with the subsidized phone as long as they don't terminate the contract, most people just don't do it and I imagine the price tag is by far the primary "disincentive."

 

[lopri]

Doubtful unless there is someone willing to take a HUGE risk, or some other exigent factors shake up the industry. Think about how much money carriers make from selling subscriptions and it quickly become obvious that device prices are like a drop in a bucket.

 

[peacefulheart]

Actually i don't think that this circumstance will end in the near future cos this is a industry inertia and there is no significant factor enfluences the whole flow ,so the result is obvious.

 

[corkyg]

There will always be market maneuvering and exploration. As phones become smarter and more like mobile mini-computers, the cost increaeses. But servicing them all with bandwidth is very expensive as well. I'm not sure subsidy is accurate. We are most likely just buying phones on time and not fully aware of the actual cost.

 

[maevinj]

I'd have no problem paying full price for a new phone, if the other carriers would structure they're pricing like T-Mobile, where once your phone is paid off, your monthly bill goes down. As of right now, you're better off taking the subsidized price because it's already factored into your monthly bill

 

[vi edit]

If it meant $20-$40 a month cheaper bills, unlocked phones and no contracts, sure. Maybe it'll actually pave the way for cheaper phones too since consumers will be seeking out the best prices available instead of just going to AT&T/Verizon resellers and paying the fake subsidized prices every couple years.

 

[AnitaPeterson]

Good.

Make people pay the full value of equipment they own. So they can comprehend that this is not throwaway technology, and should not be treated as such.

Fewer idiots upgrading all the time will undoubtedly mean longer turnaround times for innovation in the industry, and longer times between new generations/models. So be it. It's a small price to pay for putting an end to this madness. How many people change their phones every year, not because they exhausted all the capabilities of the old devices, but as a fashion statement?

 

[blairharrington]

The majority of consumers in America will not purchase a phone for more than $200. I don't see subsidies going away anytime soon. I also think the price for an unlocked phone is ridiculous. Especially a 64GB iPhone 5, etc.

As much as I love my S4 Active I'm open to the idea of purchasing phones unlocked that are $400 or less in the future because I never want to sign a contract ever again.

 

[Red Storm]

I'd have no problem paying full price for a new phone, if the other carriers would structure they're pricing like T-Mobile, where once your phone is paid off, your monthly bill goes down. As of right now, you're better off taking the subsidized price because it's already factored into your monthly bill

Well I think it's more accurate to say you finish paying full price for your phone, so that 2nd cost is taken care of leaving only your plan bill which doesn't change.

 

[vi edit]

The majority of consumers in America will not purchase a phone for more than $200. I don't see subsidies going away anytime soon. I also think the price for an unlocked phone is ridiculous. Especially a 64GB iPhone 5, etc.

Then what will have to happen is midrange devices available at that price point and an honest effort by OS and App developers to make the most of it. For the first several years of Androids life the only way to "make it faster" was to throw more power and RAM at it. That won't fly as much going forward. You need to make the software more efficient. There are still a lot of iPhone4's out there. For most purposes, that's still a fairly usable device and it's over 3 years old at this point. Devs are going to need to step up provide workable solutions on low/mid range products. You'll see a shift to deluxe phones having more storage and screen size/type instead of core numbers and speed.

 

[Midwayman]

The majority of consumers in America will not purchase a phone for more than $200. I don't see subsidies going away anytime soon. I also think the price for an unlocked phone is ridiculous. Especially a 64GB iPhone 5, etc.

As much as I love my S4 Active I'm open to the idea of purchasing phones unlocked that are $400 or less in the future because I never want to sign a contract ever again.

With financing I don't see that as a big problem. Overseas it looks like most carriers offer options like tmobile. You pay in installments for the phone in addition to the service.

I really hope they do go away. It'll make the market much more consumer friendly in the end if they can separate the device purchase from the service. OTOH that's probably exactly why it won't happen. It'll be harder to lock people into contracts and pricing will have to be more transparent.

 

[openwheel]

taking away subsidies is the only way to keep our cellphone bills from skyrocketing.

 

[MonkeyK]

I hope we are seeing the end of subsidized phones. Carrier subsidized phones provide no incentive for phone manufacturers/retailers to compete on cost.

 

[blairharrington]

With financing I don't see that as a big problem. Overseas it looks like most carriers offer options like tmobile. You pay in installments for the phone in addition to the service.

I really hope they do go away. It'll make the market much more consumer friendly in the end if they can separate the device purchase from the service. OTOH that's probably exactly why it won't happen. It'll be harder to lock people into contracts and pricing will have to be more transparent.

People would rather pay $200 up front versus spreading out their cost over a 2 year period. Also keep in mind that you are paying less for the phone up front versus the entire cost of an unlocked phone over 2 years but in monthly payments.

Some will counter that our monthly service bills are high because we are still paying for the phone if we signed a contract and got a discounted phone on contract. I honestly don't know if this is true or not. If it is then the American consumer will always be screwed because we are brainwashed to just pay that $200 and it will not change anytime soon or maybe ever in America.

 

[blairharrington]

Then what will have to happen is midrange devices available at that price point and an honest effort by OS and App developers to make the most of it. For the first several years of Androids life the only way to "make it faster" was to throw more power and RAM at it. That won't fly as much going forward. You need to make the software more efficient. There are still a lot of iPhone4's out there. For most purposes, that's still a fairly usable device and it's over 3 years old at this point. Devs are going to need to step up provide workable solutions on low/mid range products. You'll see a shift to deluxe phones having more storage and screen size/type instead of core numbers and speed.

I hope so. Android OEM's need to provide more on board storage. If we truly lose SD card slots one day then we better have the option to go 32/64 and larger from day one. Relying on the cloud is not an option when most of us have monthly data limits.

 

[openwheel]

People would rather pay $200 up front versus spreading out their cost over a 2 year period. Also keep in mind that you are paying less for the phone up front versus the entire cost of an unlocked phone over 2 years but in monthly payments.

Some will counter that our monthly service bills are high because we are still paying for the phone if we signed a contract and got a discounted phone on contract. I honestly don't know if this is true or not. If it is then the American consumer will always be screwed because we are brainwashed to just pay that $200 and it will not change anytime soon or maybe ever in America.

It's factual. Customers are actually not getting the phone "subsidized" because customers are paying for it with high monthly service cost.

 

[sweenish]

Subsidies don't "have to" go away, what has to stop is the carrier continuing to charge you a subsidy fee after the phone is paid off.

 

[blairharrington]

It's factual. Customers are actually not getting the phone "subsidized" because customers are paying for it with high monthly service cost.

How much lower do you think we'd all be paying if we all bought our phones at full price from the start? Also notice that T-Mobile forces you to pay full price for your phone and they are just as expensive essentially as the other 3 major American carriers.

 

[openwheel]

$15-$20 lower roughly would be my guess. The dollar figure will eventually level down without subsidies.

At the end of the day, we have make all carrier compete, as well as phone manufacturers compete each other. Having a so-called "subsidized" system that forces the consumer to eventually pay full retail is holding back competition because Apple and Samsung are sitting fat and happy selling all phones at insane prices. Carriers paying outrageous fee to sign contract with Apple does not help the consumers either. That money should go into infrastracture, NOT device manufacturers. All we get are Samsung's Next Big Thing ads.

T-Mobile is a great example. It does not strap you to a contract. It allows you to buy new, buy used or utilize their payment plan. At the end of the day you are paying roughly equal to the other carriers, but you get your freedom back. To top it off, you force the manufacturers to more aggressively make better products because you now have real choices from other sellers.

There is nothing wrong with used phones. We buy used cars, so why can't we buy use phones too if we want to?

 

[blairharrington]

$15-$20 lower roughly would be my guess. The dollar figure will eventually level down without subsidies.

At the end of the day, we have make all carrier compete, as well as phone manufacturers compete each other. Having a so-called "subsidized" system that forces the consumer to eventually pay full retail is holding back competition because Apple and Samsung are sitting fat and happy selling all phones at insane prices. Carriers paying outrageous fee to sign contract with Apple does not help the consumers either. That money should go into infrastracture, NOT device manufacturers. All we get are Samsung's Next Big Thing ads.

T-Mobile is a great example. It does not strap you to a contract. It allows you to buy new, buy used or utilize their payment plan. At the end of the day you are paying roughly equal to the other carriers, but you get your freedom back. To top it off, you force the manufacturers to more aggressively make better products because you now have real choices from other sellers.

There is nothing wrong with used phones. We buy used cars, so why can't we buy use phones too if we want to?

But all T-Mobile is doing is allowing you to pay full price for a phone but in monthly installments. I don't see much freedom in that and I don't think what they are offering is really a big deal considering their service in many instances is just as expensive or close to the other big 3.

 

[hans007]

i think that most phone companies are sick of subsidizing apple.


since everyone is so used to the $200 with contract price point, phone providers get raped because they contract with apple at something like $650 a phone.

if you buy say an S4 for $200 it is not costing them $650 since there are many android providers and at&t or verizon have negotiating power there so samsung / htc etc dont have that kind of leverage. the mistake was agreeing to subsidies with apple in the first place, which now isnt even that important since the iphone doesnt quite have that must have desireability it used to. so they effectively make less money on any iphone user because the margins because of the high subsidy are less.

phone companies aren't sick of subsidizing phones, i think its they are sick of having to pay extra subsidies to apple or a particular phone manufacturer. if the subsidy were always a set amount (say it was $350 for 2 years ) and you just paid the difference up front i dont think phone companies would care at all if effectively what they are doing is giving you a loan for 2 years to help you buy a $550 device (which is pretty much what t-mobile is doing by making you pay off your device at all different rates month by month).

theres nothing wrong with subsidies. if anything its good for everyone if done right.

say it costs me $500 to buy an S4 . and i can go month to month on say verizon. verizon doesnt want that kind of churn and from a business standpoint it would probably be worth their effort to not have the churn and economically it'd be worth it for them to actaully give you money to lock yourself in.

i mean lets say you were going to be on verizon anyway. the net total of buying a phone + monthly for 2 years is $X. if you dont care about the flexibility of leaving because you werent going to leave, and verizon doesnt want that churn, you'd both benefit if verizon said "hey we';l give you an extra $50-100 off" if you promise not to leave. everyone wins. you get $50-100 you didnt have, verizon doesnt have to hire as many CSRs for churn / retention.

 

[shortylickens]

I'd like to point out the phones are actually not subsidized. YOU end up paying for them, just over a long period.

Ever notice how if you quit you have to pay a huge cancellation fee? Thats the phone you're buying.

I actually like the idea of this nonsense going away. Now people will actually think about what they're really paying.

 

[openwheel]

But all T-Mobile is doing is allowing you to pay full price for a phone but in monthly installments. I don't see much freedom in that and I don't think what they are offering is really a big deal considering their service in many instances is just as expensive or close to the other big 3.

You just don't see the obvious. Read my post again its very clearly explained. You gotta think about it from a savvy consumer point of view. Someone who wants more choices and encourage more competition in the market.

 

[blairharrington]

I'd like to point out the phones are actually not subsidized. YOU end up paying for them, just over a long period.

Ever notice how if you quit you have to pay a huge cancellation fee? Thats the phone you're buying.

Well yes and no. You seem to agree with others that our monthly bills for service are as high as they are because we are truly paying an undisclosed amount by accepting the contract price. The EFT is in place because carriers take a loss when they sell you the phone on contract. The EFT is in place so you can't screw the carriers out of a phone.