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T-Mobile Exec Calls For End To Cell Phone Subsidies 355

Posted by timothy
from the shipping-and-handling-fees-may-apply dept.
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."
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T-Mobile Exec Calls For End To Cell Phone Subsidies

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  • The carriers won't agree, because it would eliminate or restrict the ability to get people to sign two-year contracts.

    • by bondsbw (888959)

      True but I think the carriers would offer a discount on monthly charges for people who sign contracts.

      • Re: (Score:3, Insightful)

        by Anonymous Coward

        A discount?? I think you give carriers more credit than they deserve. They will continue their current practices. 2-year contracts, $60+/month plans, little add-ons for text, night/weekends, "premium" data, etc. They are a cartel. What one does, all do. They don't compete; they collude.

        • by newcastlejon (1483695) on Saturday March 10, 2012 @12:10PM (#39312287)
          SIM-only contracts [o2.co.uk] in the UK are somewhat cheaper than ones that include a handset subsidy (between half and two thirds).
          Then again, it seems like the US is a special case; apparently no-one else screws one over quite as hard as an American mobile phone company.
        • by Teun (17872)
          I know this discussion plays in the USofA but T-Mobile is acutely aware of the markets outside the US.

          I started with a prepaid monthly SIM in my own N900 and after about a year the phone company made me an offer for a two-year contract with about double the data I typically used for half the price.

          So yes, they don't mind to give a nice discount for a longer contract.

    • by NFN_NLN (633283)

      Part of the problem is businesses that reimburse you for cell phone bills

      I have two choices. Either lock into an expensive cell phone plan which effectively pays for my phone. Or buy a phone and have a cheaper monthly bill and no lock-in contract.

      Unfortunately with the later the company won't pay or even help pay for a phone even though that is what they are doing in the first option. So I would be a sucker not to get the more expensive plan.

      • by Anthony Mouse (1927662) on Saturday March 10, 2012 @11:28AM (#39312045)

        There is a pretty obvious way for the phone companies to solve this. You offer a series of plans, some of which include no subsidy and are correspondingly much cheaper, others of which provide a fixed subsidy (e.g. $400) that you can apply toward any phone once every two years, and have correspondingly higher monthly fees. Those who get reimbursement can choose the latter plans (which will be much less distortionary because the subsidy is a fixed amount rather than varying based on device type), and everyone else can choose the cheaper plans and then choose a phone based on a combination of features and price.

        I'm not even seeing any particular reason why a single phone company couldn't do this unilaterally -- the fixed-amount subsidy should still be competitive with other carriers' subsidized plans. You can even just come right out and say it: We have new unsubsidized plans, they're much cheaper because it's BYOD. It's not like the customer is going to be angry that you've giving them a chance to take a less expensive phone and get a discount for it.

        I mean they've got marketing departments. If you actually want customers to realize that they're better off paying $55/month but paying $500 up front for a phone (or, once you have that choice, maybe $400 or $350) than they would be paying $80/month for two years to subsidize a $500 phone, you can make that clear to them.

        • They already do (Score:5, Informative)

          by manekineko2 (1052430) on Saturday March 10, 2012 @01:43PM (#39312981)

          T-Mobile is the single company doing this unilaterally.

          They're the only American major carrier to offer cheaper plans if you bring your own phone.

          Their most impressive cheaper plan for those of us that don't do a lot of talking on our smartphones anymore is an impressive attempt to bring European-style bring-your-own-smartphone plans to America. $30 a month, no additional taxes or fees, no contract for 5GB of HSPA+ 4G, unlimited 2G, unlimited text, and 100 minutes. That's not many minutes, but you can go pretty heavily over on minutes and still have it be a great deal. It doesn't take a long time on $30/month for your smartphone to start saving over a traditional American carrier smartphone plan.

      • by ceoyoyo (59147)

        Um, no, if you actually get a cheaper monthly bill, it might well be worth your while to buy a phone outright.

        My choice was to get locked into a contract and get a discounted phone or buy my own phone and get a MORE EXPENSIVE monthly contract.

      • To think of Cost is not foolish, to think of obaying ones Master is.
    • by Sun (104778) <shachar@shemesh.biz> on Saturday March 10, 2012 @12:33PM (#39312417) Homepage

      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

    • T-Mobile has plans that have no subsidy, and require no contract. Typically $10 less per month than a regular plan - so if your phone costs less than $240 it's an instant win. If you buy a $400 smartphone every four years it's still a win.

      Problem is, they don't advertise them, and they don't show up on their web site. (They *used* to advertise them as the "Even More Plus" plan a few years back).
  • by ZorinLynx (31751) on Saturday March 10, 2012 @10:38AM (#39311655) Homepage

    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.

    • by Anonymous Coward on Saturday March 10, 2012 @10:43AM (#39311703)

      On T-mobile it is. I paid $400 for my phone and am saving $200 over the life of the contract. And yes, I did factor the up-front cost of the phone into the calculation.

      • I paid $400 for my phone and am saving $200 over the life of the contract. And yes, I did factor the up-front cost of the phone into the calculation.

        Did you include the forgone interest that could've been earned on the difference in principal between paying up front and paying over time less the amount of the increased monthly payments for the subsidized option over the life of the contract?

        • by WrongSizeGlass (838941) on Saturday March 10, 2012 @01:31PM (#39312883)

          Did you include the forgone interest that could've been earned on the difference in principal between paying up front and paying over time less the amount of the increased monthly payments for the subsidized option over the life of the contract?

          At the moment interest rates for saving accounts (in the US) are nearly non-existent. If you could find a 2-year CD that will allow a $200 minimum you're only looking at an interest rate of between .5% and 1.5% (if that high). The interest probably isn't worth the time or effort to buy the CD. There may be other investment vehicles that might pay a higher rate, but a $200 investment isn't going to open many interest-bearing opportunities.

        • by manekineko2 (1052430) on Saturday March 10, 2012 @01:47PM (#39313005)

          If you assume 5% interest on $400 for 2 years, that's going to be only $441 after 2 years.

          That's still a decent savings.

        • by cdrguru (88047)

          What is this concept "interest earned"? For the last 10 years or so "interest earned" has been something of a joke. You can walk into any bank or credit union and someone will tell you their savings account offers an interest rate of 0.01% on an annual basis.

          This of course is in contrast to a time when interest on savings was 3.5% and home loans were 4.5%.

          I recently was offered by someone in all seriousness an interest rate of 1.11% on 300K in a 48 month CD. That is pretty much an assured loss of more th

    • by Monoman (8745)

      Exactly. You should pay less per month once you are at the end of your contract or buy the phone out right. They probably won't ever actually call it a subsidy but everyone knows that is what it is. Eventually some lawyers will probably put together a class action lawsuit and we will all get some free SMS messages as a settlement.

    • by Bluecobra (906623)

      T-Mobile does this:

      http://www.t-mobile.com/shop/Packages/ValuePackages.aspx [t-mobile.com]

      For $50/month you can get 500 voice minutes, unlimited text, and 2GB of data.

      In comparison to AT&T, they offer a subsidized plan for $90/month and that includes 450 voice minutes, unlimited text, and 3GB of data. Let's say with T-Mobile you get the above plan for $50/month and a phone for $550. At the end of 24 months you will have paid $1,750. If you got AT&T and paid $200 for a subsidized phone, you will have paid $2,360

      • by Olivier Galibert (774) on Saturday March 10, 2012 @11:12AM (#39311913)

        Wow, and here in France for $27/month we get unlimited voice, unlimited text and 3Gb of data. And you can stop whenever you want without cost. You guys are really getting fucked sideways.

            OG.

        • We have MVNO providers that offer a pretty low price for similar. Simple Mobile has a $40/month plan that is unlimited voice, unlimited text, and unlimited 3G data. For $60/month you get the same, except unlimited 4G data (it's HSPA+ on T-Mobile). Straight Talk offers unlimited voice, unlimited text, and unlimited 3G data for $45/month on T-Mobile or AT&T and you can bring your own phone.

          So, why do I still have Verizon and am paying $156/month for two Android phones with "unlimited" data, 700 minutes

          • by saihung (19097)

            Bingo. I bought my own Nokia E6-00 for $350. I pay Simple $40 a month for the same unlimited everything that I'd have to pay AT&T ... well, forget it, because AT&T doesn't offer any such plan. But for something roughly similar I'd be paying AT&T $150 per month. That means my phone pays for itself in three months. In two more months I paid back AT&T for its early termination fee when I walked away from my contract. The one thing - the only thing - I don't have from Simple is internation

        • It's worse (Score:5, Insightful)

          by MDMurphy (208495) on Saturday March 10, 2012 @01:04PM (#39312685)

          It's probably even worse than it sounds. Here in the US we use up minutes for both incoming and outgoing calls.

        • GP just doesn't know where to look for a good deal. T-Mobile has a $30/month prepaid plan that gives you unlimited text, unlimited data (throttled down to EDGE speed at 5Gb), and 100 minutes voice. And between Google Voice and Skype, I find that I barely use 10 minutes in a month, so...

    • T-Mobile has always had plans where you save money by not subsidizing the phone. It used to be called the Even More Plus plan (yeah horrible name), and is now Monthy4G no annual contract plan (which does have price tiers without data plans despite the name). If they want to push this transition, they ought to start listing phone subsidy as a separate line item on their with-contract bills, and then later eliminate the distinction between the two plans and just have a (contract requirement) phone payment pla

    • by oakgrove (845019) on Saturday March 10, 2012 @11:10AM (#39311901)
      T-Mobile gives a 10 dollar discount on you plan if you bring your own device. There is also a carrier you don't usually hear about called MetroPCS that only does unsubsidized phones and their plans are much cheaper than the other carriers.
      • by Solandri (704621)
        The FCC needed to stop this over a decade ago. Carriers should be required to treat this as a loan (they already check your credit for service anyway). If you pay $200 for a $600 phone, that's a $400 loan. Over a 2-year contract, the principal + interest should work out to an extra $20/mo or so on your bill. This should appear on your monthly bill as a separate loan repayment item. Once your loan is repaid, the item disappears from your bill.

        This also solves the thorny issue of early termination fee
    • I bought a factory unlocked iPhone, at full price, and now can use whatever GSM prepaid "plan" I want (I use a six-year-old T-Mo To Go account), no contract, no BS. There's also no access to phone network data, but I find WiFi to be more than adequate for me. I now have a phone that costs me as much as I want to spend on phone minutes (and no more) that is also a handheld WiFi computer.
    • 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.

      They don't do it because they don't have to. People still sign up for service and pay the higher monthly bills. This translates into more profits for the telecom companies offering these plans. It makes perfect sense once you view it from the standpoint of the telecom companies. Although even here in the US there's still a small advantage in having a non-subsidized phone. If the phone isn't subsidized, it's possible to get a month-to-month plan without an early termination fee. Granted, this is of scant adv

    • 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.

      that's because US companies would prefer to look you into a known revenue stream than have you jim in and out based on the cost of service. A look ensures a consistent revenue stream, whereas no contract service could result in more churn and higher costs per customer. In addition, once a customer goes off contract they would want a discount, lowering the revenue and profits; especially if customers forgo getting a new phone every two years. Delaying purchases hurt the cell phone manufacturers, so the subsi

  • by david.emery (127135) on Saturday March 10, 2012 @10:39AM (#39311663)

    That's how it comes across to me. Furthermore, wouldn't this come too close to being an illegal restraint of trade?

    What's interesting is that we have 2 classes of subsidies, one from the TELCOS, and the other from the handset (including handset software) makers. Does Mr Brodman include both classes of subsidies in his proposal? How far would this go, would this also preclude 'limited time offers' or 'for the first year' discounts?

  • 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."

    Why do I suspect that under this interesting new vision, the above would all still be true with the addition of a hefty cost for the bauble. The carriers will give up their long term lock-ins and overpriced data/text when you pry them from their cold, d

  • by Anssi55 (729722) * on Saturday March 10, 2012 @10:42AM (#39311691) Homepage

    Here's how it works here in Finland:
    You either
    a) buy the phone yourself (HTC Titan is ~590 EUR ~= 773 USD), and then have a plan without a phone. Example plans:
    0.66e / month, 0.066e / min, 0.066e / sms
    3.90e / month, includes 3000min in-network calls, others 0.069e/min, 0.069e/sms
    38.90e / month, 3000 min to all networks, 3000 sms messages.
    Unlimited non-NATted incoming-ports-open mobile broadband (HSPA+, max 15Mbps) is 13.90e / month (other speed classes exist), or 20.85e / month total for an extra SIM card ("MultiSIM") + USB modem (i.e. you get unlimited broadband in both your phone and computer for that price).
    These contract are normally non-fixed-term, so you can cancel/switch operators anytime. Note that in Finland only outgoing calls are paid by the mobile user, incoming calls are paid by the caller (mobile numbers have a separate number block).

    or b) buy a plan with a phone. This is a bit different from the US subsidies in that you pay *nothing* up-front, and the plans are actually the same as in (a) above, but there is an additional separate monthly cost for the phone. However, the "subsidy" is very small, only a few percents (e.g. HTC Titan total additional cost is 576 EUR, just 2.5% below normal market price). These are generally 2 year contracts. AFAIK these kind of bundling contracts are generally not allowed, but a special time-limited law was enacted in 2006 allowing such contracts to be made for 3G phones only, and it has been extended at least once since.

    The prices above are for Saunalahti, but other carriers have very similar pricing and plans.

    At least my impression from all this is that we seem to pay more for the phones, but our plans are otherwise way cheaper (when compared to the US)...

  • by catchblue22 (1004569) on Saturday March 10, 2012 @10:44AM (#39311711) Homepage

    I bought my Nexus S unsubsidized for a reasonable price. It is unlocked and portable. I even bought from a different mobile provider, and dropped in the chip from my current provider. My plan is minimalist but very cheap ($20/month). My provider does sell phones on what amounts to a payment plan...you are charged the full price, and then every month you pay a certain amount off your tab...there is no contract tying you to the provider, except that if you leave you must pay off your tab. It is a much more honest way of showing the true price of the phone.

    The summary asserts that changing the way the market functions is unworkable. If consumers knew that their paltry $500 discount on their smartphone actually cost them $1500 in extra billing over three years, I would expect that would be a little less willing to fall for the tricks. What it will take is one company to take the plunge, possibly on the model I described above. Allow customers to get their "free" phone, but make it clear they are actually making payments on it.

    • Here in the UK people understand this, but are quite happy to pay less now, it's that simple.

      I bought my new 4S on PAYG and have put only a tenner on it since 6 weeks ago (tenner got me 500 free texts and 500MB [500MB only lasts a month though, the upshot of this I have turned off the 3G chip, saving battery power, I'm surrounded by Wifi anyway]). I'll come out ahead on TCO in no time and easily sell it on.

  • by Roogna (9643) on Saturday March 10, 2012 @10:46AM (#39311725)

    The subsidies are a contractual agreement. They're not really the issue. The bigger issue is that the majority of carriers no longer provide any real discount for bringing a already paid for device to their network. The iPhone being the perfect example, I can buy it unlocked for full price. AT&T doesn't lower the bill one bit for this. T-Mobile will (from what I've heard) but can't support the device in most cases as a actual 3G device (This is changing slowly in some areas).

    What we need isn't about the subsidies, it's that this country needs to require phones being sold now to support all the frequencies (the chips certainly can now) and to go -unlocked- at the end of the subsidy period, or to be unlocked if full price was paid. No exceptions. If people could take their phone and move to another provider, we might actually have some competition.

  • by Anonymous Coward on Saturday March 10, 2012 @10:49AM (#39311743)

    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.).

    • by Strange Ranger (454494) on Saturday March 10, 2012 @12:16PM (#39312313)

      A close family member of mine worked for AT&T Wireless since it was called Cingular. He would tell you that that business model would fail spectacularly here in the US. People here don't shop for plans, they shop for phones. They especially shop for phones they can't actually afford. Worse, they don't shop with money they've saved up. They shop with whatever flexibility they have in their monthly expenses. "What?! You don't offer a phone with that? See ya!!"
       
      We are a month to month culture. Buying something for 500 bucks is a huge decision for most people. Adding 40 bucks a month (or whatever) is just another bill.
       
      Pay 500 dollars now to save 40 or 60 bucks per month doesn't work for you if you ***don't have 500 dollars***. But your phone is dead and you need a new one. So what do you do? You could buy a super cheap one and get a low end phone plan. If you want that get a disposable or pre-paid phone. Otherwise you're going for the fancy smartphone without the 500 bucks. This is what most people want.
       
      So say you did the math and you have the 500 bucks... Offering you an unsubsidized smart phone is a losing option. They make too much money subsidizing your phone and most of their customers like it that way, so why should they make less while giving away the option for you to change carriers at the drop of a hat? Easier to collude with the other carriers and make sure you can't do that.
       
          It doesn't help the carriers until it helps them compete. There's not enough real demand to give up the lock-ins in favor of attracting a few new customers. It'll take critical mass and a lot more people demanding the unsubsidized option before it makes business sense to offer it. It's a cart and horse thing. So It'll never happen unless it's regulated to happen. Cole Brodman is correct that such regulation would vastly improve the market for consumers.

    • by MacDork (560499) on Saturday March 10, 2012 @12:34PM (#39312427) Journal

      T-Mo is doing that. Their $30/mo prepaid plan [t-mobile.com] is pretty sweet. 100 minutes, unlimited text, unlimited data. The only catch is the first 5GB is at 4G speeds. After that, you may be throttled to EDGE. So there's only 100 minutes... who needs minutes with an android + free calls with Google voice?

      As far as I'm concerned, it's the best thing to happen to the price of internet access since AOL's $19.95/mo flat rate.

  • by szquirrel (140575) on Saturday March 10, 2012 @10:51AM (#39311763) Homepage

    But how is a $548.99 subsidy not illegal dumping?

    • by tukang (1209392)
      because there is no subsidy. instead of adding a line item on your monthly bill that says "phone unit payment $20" they jack up the cost of your minutes by $20. so you're actually paying for the phone on a monthly payment plan. @tmobile 500 minutes with "subsidized" phone costs more than 500 minutes with an unsubsidized phone, so the "subsidy" is nothing more than a marketing gimmick.
    • by kervin (64171)

      Because it's a loan. You pay it back within 6-12 months on most Post-Paid plans. The cure for this is no-contract Pre-Paid.

  • I have an interesting to save money... pay as you go.

    I assumed they used the phone subsidies to keep me on a contract. I'll definitely be pay as you go when they stop giving me phones. No malice or anything, but the free phone is the only thing keeping me on contracts.

  • ...have a down payment on the phone, and a $20/mo charge, administered by the cellular carrier (because they can disconnect service for not paying your phone purchase bill).

    There, it functions just like subsidies, but reflects the true purchase price of the phone better.

    I also think that phone manufacturers should try that approach themselves, if they're selling a phone that a carrier doesn't want to sell themselves - rather than sell it for $600, sell it for $150 plus $20/mo for 24 months.

  • Literally (Score:4, Funny)

    by whisper_jeff (680366) on Saturday March 10, 2012 @10:58AM (#39311815)

    (emphasis in the quote is mine)

    ...paying for text messaging (which literally costs carriers nothing)...

    You are using that word and I literally do not think you know what it means.

    • Re:Literally (Score:4, Informative)

      by Anonymous Coward on Saturday March 10, 2012 @11:51AM (#39312189)

      I literally think you don't know how texting works.

      Very simplified,
      It utilises a frequency that the phone uses communicates with the tower, telling it that it is there. If no text messages are sent, the phone would still send out 140 characters of gibberish.

      No extra cost.

      IE, Nothing.

      • Re: (Score:2, Flamebait)

        by 787style (816008)
        There is the key that people gloss over. "No extra cost". You forget the (literally) billions of dollar it takes to put the infrastructure in place. It's illogical to think that money came from no where, and doesn't' have a value that should be properly compensated. While $20 may be on the high side, it gets really old to hear the "no extra cost" argument. Companies invest in infrastructure to make profit, news at 11. AT&T made $3.5 billion last year. Apple made $26 billion. If you are going to
        • No, it doesn't. The marginal cost of a text message is literally zero. The text-specific infrastructure (SMSC) is pricey, but over the entire network it's not that much - easily amortized into a few cents on each bill.

          People understand that there are fixed costs to things like, say, electrical infrastructure, and they're fine with paying a nominal fee over time to support the fixed costs. It's not even like the SMS system has a capacity - it replaces the (useless) padding in the control messages that the p

  • ...US telecom is one X-normous pinball machine. Consumers, balls-in-play are holding traps, channel surfers, network managed nodes and billing bungled dupes all for a pitance EntryFee guaranteeing a couple years of fun for all

  • ... carriers will offer cheaper rates on locked in plans to attract users to them. At least we'll be able to see what those longer contract terms are worth without all the noise of a new shiny toy messing up the numbers.

  • On the Apple Website, a contract-free (although not carrier- unlocked) 8GB iPhone 3GS is priced at $375. [apple.com]

    A 8GB iPod Touch 4G is priced at $199 [apple.com].

    The entire iPhone 3GS carries a Bill of Materials and manufacturing costestimated at $178.96. [isuppli.com]

    The iPod touch 4g has a better screen (960x640 px at 326 PPI vs 480x320 at 163 ppi) and and a faster processor (1GHz A8 vs 600MHz A8) than the iPhone 3GS. There is research online [emsnow.com] indicating that Apple generally prices its iDevices at double the cost of the BOM and manufacturi

    • On the Apple Website, a contract-free (although not carrier- unlocked) 8GB iPhone 3GS is priced at $375. [apple.com]

      Indeed, it is carrier-unlocked [apple.com]. My mistake!

    • by ceoyoyo (59147)

      $80 for the radio, microphones bigger battery and all the licensing fees is actually not that far out. Yes, licensing fees - the technology is heavily patented. I believe Apple currently doesn't pay some of those fees because of negotiation problems, but they're surely saving for the future when they have to, retroactively.

  • by Kjella (173770) on Saturday March 10, 2012 @11:22AM (#39311989) Homepage

    Subsidies sound so good, like there was somebody else actually paying for it. Except it's not, you're paying it all back it's just a "hidden" loan payable over your contract. If this drives smartphone sales it's only because people are stupid, not because it actually gives people better value for money. In fact, quite probably worse as credit risk and premiums tend to be much higher for consumption loans than your mortgage.

    • by kervin (64171)

      Exactly. It's a high-interest loan that not many people really stop to think about. They just see "$99 IPhone" and they're sold.

  • 2600 model phones (Score:5, Interesting)

    by vlm (69642) on Saturday March 10, 2012 @11:28AM (#39312035)

    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).

  • by kervin (64171) on Saturday March 10, 2012 @12:02PM (#39312245) Homepage

    It's a high-interest loan. You pay it back within 6-12 months. Check it yourself by attributing the monthly Post-Paid Plan cost premium over equivalent pre-paid plans on the same provider.

    All major cell phone providers offer no-contract, Pre-Paid plans. Buy your phone outright and use one of those.

  • A slightly broader reading of US price fixing laws would find that it's already illegal.

  • by WillyWanker (1502057) on Saturday March 10, 2012 @01:12PM (#39312737)

    Let's then also sell handsets at a fair price instead of a grossly-inflated one, charge fair prices for text and data plans, stop throttling altogether, have options to cut off service in case of overages to eliminate bill shock, completely eliminate ETFs, and allow multiple devices to share a single data plan.

    What's that? You can't bank billions if you have to start treating your customers fairly and honestly? You don't say...

  • by dargaud (518470) <slashdot2NO@SPAMgdargaud.net> on Saturday March 10, 2012 @01:28PM (#39312863) Homepage
    In the last few weeks the internet provider company 'Free' has been doing exactly that to the french cell phone market. And they are kicking the hornet's nest hard. Before that there were 3 cell phone providers: Orange, SFR and Bouygue, all working on the same model of phone subsidy with hundreds of models and hundreds of different plans which you have no credible way to compare. 'Free' said clearly that they have only two plans: an unlimited 19E plan and a limited 2E plan and no phone subsidy. Since they started they've been taking 60 thousand customers daily (the max they can physically accept). The min plans from the concurrents start at about 30E and more like 80E for 'unlimited' smartphone. People who own their own phones because they don't like the crap that the providers install on them, people who root them, people who use mods, people who use old phones: basically everybody anyone who aren't tied down by their contract are leaving in droves.

    So 'unworkable' my ass.

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