T-Mobile Exec Calls For End To Cell Phone Subsidies 355
MojoKid writes "T-Mobile's Chief Marketing Officer Cole Brodman has an interesting idea for revamping the mobile industry, and it involves killing the subsidy plans that have driven smartphone adoption over the past five years. Asked what one thing he'd change if he had the power to do so, Brodman pointed to subsidy programs. 'It [device subsidies] actually distorts what devices actually cost and it causes OEMs, carriers — everybody to compete on different playing fields ...' Brodman isn't kidding about an irregular playing field. The HTC Titan is the most subsidized device in the chart seen here (unsubsidized at $549, $0.01 on contract). Microsoft is obviously desperate to gain market share in mobile but both the iPhone 4S and the Galaxy Note carry $400+ discounts too. The cheapest smartphone AT&T offers without a subsidy is the thoroughly mediocre HTC Status, for $349. To add insult to injury, it's only available in mauve. It's an interesting idea, but practically unworkable as far as the mass market is concerned. Carriers have built a market structure in which consumers gladly accept a new bauble every 18 months in exchange for paying for text messaging (which literally costs carriers nothing) and overage charges in which 300MB of data for $20 is a fair market value."
There needs to be a way to avoid the subsidy. (Score:5, Interesting)
One problem with subsidies in the US is that if you pay full price for your phone, your monthly bill isn't reduced to compensate for not having the subsidy.
In other countries when you buy a phone subsidy-free you pay less per month. This is common sense, yet the US providers don't do it. I'd rather pay full price for my phone and pay less per month. Basically if you keep your phone for longer than 2-3 years, you are now losing financially because you're monthly cost includes a subsidy you're not taking advantage of.
I bet T-Mobile is following Free Mobile in France (Score:5, Interesting)
A fourth operator just entered the market two months ago in France and has caused a hell of an uproar. The French market has been traditionally dominated by Orange (of France Telecom, former monopoly), SFR, and Bouygues. Two months ago Free finally launched their offer after years of the government and the other telecoms trying to stop them. Their offer: 20€ a month for unlimited calls and texts (even internationally to many countries), with 3GB of data for whatever you want to do (meaning tethering, etc.), and 16€ if you have their internet package as Free is traditionally an ISP. They also have a plan for 60 minutes and 60 texts for 2€ a month. This is a huge change from the 85€+ a plan like this would traditionally cost. And they don't offer a subsidized phone with it, so you either buy the phone separately in full (but at good prices), or pay for it monthly in your choice of months (12 or 24). Or, you just use the phone you already have.
To be frank, the other telecoms have flipped their shit over this and have lost about 2 million subscribers in 2 months. They've brought out their attacks on Free and said that people have become violent in their stores because of Free saying that people have been screwed by the Big 3 for years (they were actually fined half a billion dollars in 2005 or 2006). It's caused a huge stir in the mobile market and the traditional operators have followed suit and (in anticipation) launched their so-called low cost offers online without a subsidized phone. I think it would be very interesting to see someone do the same thing in the US, especially someone established like T-Mobile and force telecoms to compete on services and plans (unlimited texts, "we'll give you more data than the competition", etc.).
2600 model phones (Score:5, Interesting)
In ye olden days, ma bell would rent you a phone for $5/month. Why would you pay $20 for a phone at walmart if ma bell would give you one "for free"? This had two effects:
1) Ma Bell ancient telephones were indestructible and reliable because any problems meant the manufacturer faught with one of the worlds largest corporations, not some individual peon. Thats why a 1960s phone worked great and lasted forever, and you can only buy garbage now. The days of a mobile phone lasting more than a couple months are going to go away if cell phone subsidies go away... why shouldn't they?
2) Ma Bell made fat stacks of cash on the ghetto rent to own model. You'd laugh at a guy in the lowly socioeconomic circumstance of paying rent-to-own for a couch or TV, but supposedly that biz model is what the cool kids use when they get phones... You can't seriously think the telco is acting as an intermediary out of the goodness of their heart, can you? Basically, they're in the loanshark / payday loan biz, if you're too ghetto to front a couple hundred, they'll do it for you, at a long term cost of thousands. They have shareholders to support... this is a profitable operation, if competently run (which might be asking too much).
And even if forced... (Score:4, Interesting)
In Israel, the government made a valiant effort attempt at fixing this distortion. First, they forbid the carriers from signing customers up on binding contracts (i.e. - any contract can be terminated by the client at any point). They also forced the carriers to allow clients to take their phone number with them when they switch carrier. Last, if you buy a phone shipped by a carrier at an outside shop, the carrier is required, again, by law, to give you the same subsidies it would give you if you bought the phone from the carrier (which means that for, e.g., the Galaxy SII, the carrier winds up over a period of three years paying you about twice what you paid for the phone yourself).
Guess what? Roughly 95% of the people still buy their phones from the carriers, and still stick with the same carrier.
Shachar
Unworkable ?!? 2$ plan in France (Score:5, Interesting)
So 'unworkable' my ass.