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Cellphones Handhelds The Almighty Buck Hardware

The Days of Cheap, Subsidized Phones May Be Numbered 329

Posted by timothy
from the installment-plans-are-not-for-your-benefit dept.
In the U.S., subsidized phones are the norm: for post-paid, long-term contract use, getting a low up-front price on a phone is one of the few upsides. New submitter Apptopia writes "After T Mobile mostly did away with subsidized phone plans, the other major carriers (Verizon, AT&T, Sprint) are paying attention. Carriers lose money with phone subsidies for high-end smartphones (particularly Apple's iPhone). If they do away with the subsidy, you will have to pay full retail price for phones, but your monthly bill will be lower." If people had a better idea what they were paying for, though, manufacturers might fight harder on price. There are lots of well-reviewed, multi-band, unlocked phones on Amazon and DealExtreme from lesser-known companies, and Nokia's new Asha 501 (though limited in many ways, including availability, having just launched in India) shows that the "smartphone" label can apply even to a sub- $100 phone.
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The Days of Cheap, Subsidized Phones May Be Numbered

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  • confused (Score:5, Informative)

    by Anonymous Coward on Saturday May 11, 2013 @06:27AM (#43693699)

    It's always been cheaper to buy a phone outright and not have a contract

    • Re:confused (Score:5, Interesting)

      by allcoolnameswheretak (1102727) on Saturday May 11, 2013 @07:27AM (#43693887)

      It obviously depends on how much you use your phone. I own a prepaid 10€ stupidphone good enough for being reachable and making emergency calls. I buy a new 25€ credit about once in four months. As a matter of fact, I can't even remember the last time I payed cash.

      Maybe I'm the exception (and I'm a man so I don't need to have hourly chats with my friends every day). But I'm connected to the Internet all the time at work and at home 24/7. People say PC's are dying because of Smartphones and Tablets. For me it's the other way around. I feel I don't need a Smartphone or Tablet because I always have a PC with Internet nearby. And when I'm commuting, or going for a walk, or sitting in the park I'm quite thankful for not having any high tech around to distract me from nature, my thoughts or a good book.

      • Re:confused (Score:4, Insightful)

        by Anonymous Coward on Saturday May 11, 2013 @08:33AM (#43694129)

        Totally agree with you - in every sense of the word. The whole smartphone phenomenon has passed me by. I find my dumbphone very handy every once in a while, but you'd have to pry my work/home internet connected pc's from my cold dead hands......

      • by houghi (78078)

        You are not alone. I am the same and many of my friends are the same as well. We send each other an SMS and then we meet in person for drink or dinner.
        When I call my parents, I use VOIP, even though they do not have a PC. Using one of thes is cheaper when calling international: http://www.backsla.sh/betamax [backsla.sh] (And I need to do that if I want to call them)

      • Re:confused (Score:4, Insightful)

        by hairyfeet (841228) <bassbeast1968@@@gmail...com> on Saturday May 11, 2013 @09:23AM (#43694405) Journal
        I don't know how it is in your area but in mine the growing trend is the Walmart straight talk prepaid "all you can eat" plan (yes I know its actually 2GB before they start throttling, but many users don't use their phones for web kiosks) with Android smartphones. I can't say as i blame 'em, after trying out a friend's I may end up switching myself as his phone was just $70, the screen was clear and CPU powerful enough it was pretty decent at doing search by voice as well as being a PMP, all in all I'd say for $50 a month including unlimited talk and text it was a decent deal.
        • by punker (320575) on Saturday May 11, 2013 @10:01AM (#43694641)

          I bought my wife an iphone 5 for christmas to use on straight talk. Compared to a $75 per month subsidized plan, the payback period was 14months. There have been some hassles with MMS (which has been a bit of a big deal), and no LTE (yet), but that's fine because it turns the telco into a commodity (which is what we want).

          Additionally, if you watch the deal sites, you'll sometimes see 6 month refill cards for $220. That takes the monthly cost down to $36, which is right where I am willing to pay.

        • That is exactly the route I took. My phone cost about $85 - I was looking for a particular model that my boss had told me got excellent reception at our work place. It's nothing fancy, but it is adequate for all my needs.

      • by RoboJ1M (992925)

        I'm the complete opposite. My PC has been relegated to storing and serving media and other services to the TV, tablet and smartphone.
        Tablet and phone are for internet access and the odd phone call and sms.
        I switched to buying my hardware outright and use cheap rolling month contract data-focussed mobile plans.
        Started with the Nexus 4, will never sign up to a 24 month contract ever again.
        The only task I haven't been able to move away from the PC yet is programming.

    • Re: (Score:2, Interesting)

      by Anonymous Coward

      Exactly. "Cheap" subsidized phones?? More like expensive subsidized phones.

      It's like saying a normal bachelor house is "cheap" because your first payment is only $1... even though the following payments are $20k for 20 years.

    • by erroneus (253617)

      Your confusion is not without merit. It is the LIE whose days are numbered. There is no such thing as a "cheap subsidized phone." When they sell you a phone "cheap" (and it is never cheap actually) is more than paid for in contract requirements which include overpriced data plans and all the like. When given the option, many people will pay for what they use and even opt out of data plans entirely. Wfi is everywhere.

      People have been sold bad math as truth for so long that this change represents "someth

      • The problem is marketing full knows price doesn't depend on cost and, for the most part, contracts without subsidized phone are basically priced the same so they end up being even more expensive than those with a mobile included.

      • Wfi is everywhere.

        Not on city buses yet. At least not without paying $600 per year for a mobile hotspot.

    • by mlk (18543)

      Depends on how you look at it.
      My Note is on a £35 a month 24 month contract with an upfront fee of £70. The total cost of ownership £910.
      An unlocked Galaxy Note 2 was at the time £450. The same plan is £12.90 on SIM only, over two years that is £310, total cost of ownership £760.

      Now I'd don't have £450 to drop on a new phone. So I'd have to take out a loan. Looking for a loan would cost, getting one for such a small amount would cost. Going direct to the mobil

      • The loan was for two years, with interest payments of £150 (so, £75/year) on a total of £450. That works out at about a 17% AER. On other words, you'd have been about as well off to get the first credit card offer that came through your door, buy the phone outright, and pay back the money at the same rate. You'd have been a lot better off if you could afford to pay back £50 on your credit card bill every money. A quick search tells me that the Sainsbury's credit card has a 7.8% A

      • Re:confused (Score:5, Insightful)

        by Anonymous Coward on Saturday May 11, 2013 @09:30AM (#43694451)

        Now I'd don't have £450 to drop on a new phone. So I'd have to take out a loan.

        This right here is what's wrong with consumerist entitled way of thinking and why corps have no problem shearing people as they wish, including these OMGFREE! subsidized phones.

        See, my train of thought would be "Now I'd don't have £450 to drop on a new phone. So I'd have to look for cheaper options or make do for a month or two with my old trusty Nokia", not "I can't afford it, therefore I'll overpay 30% because BUT I NEED THIS NEW SHINY NOW!".

    • Ah you must be from the other side of the pond.

      Some US carriers do not offer an un-subsidized price.

    • There's an important part of the summary that is probably causing the confusion.

      Carriers lose money with phone subsidies for high-end smartphones (particularly Apple's iPhone). If they do away with the subsidy, you will have to pay full retail price for phones, but your monthly bill will be lower.

      I'm guessing that's not going to happen, what's actually going to happen is that they'll eliminate the subsidy for phones, so you have to buy your own, and make everyone pay the subsidized rates.

      I don't know the details, I just know that prices don't really go down in the duopoly.

    • It's always been cheaper to buy a phone outright and not have a contract

      Until recently, this has rarely been the case in the US.

      I've been with T-Mobile since the original PCS carrier was purchased. Anyway prior to their no-contracts gimmick I was able to purchase any smart phone for $150 in exchange for staying with them for 2 years. They had the cheapest rates so it was a Win/Win.

      Now that T-Mobile has implemented their no-contracts plans, my basic rate hasn't change yet now I must pay more for my phone.

  • Who gets a new phone every month? I still have a Blackberry 9700 and that does everything that I need.

    • by Mike Frett (2811077) on Saturday May 11, 2013 @07:14AM (#43693845)

      It's a Monkey see Monkey do kinda of thing. Some Teen sees his friends with the newest Phone and they want one also. They would probably be laughed at and bullied if they didn't. But I agree with you, I'm fine with outdated Tech as long as it still does what I want it to do; I don't even own a phone, I don't have a use for one currently.

      In my opinion, Tech is the new Religion, most of it is a want, not a need. It's a Crutch.

      • While you don't need a smartphone, it's a good idea to have a simple phone with you in case you've got an emergency. Being able to call for help immediately may make the difference between life and death. Given that simple phones are very cheap these days, there's IMHO no good reason not to have one.

        • it's a good idea to have a simple phone with you in case you've got an emergency.

          I thought that's what payphones were for. Even dumbphones have a $80 to $100 per year minimum buy-in to keep your service active (source: Virgin Mobile and T-Mobile); payphones do not.

  • by cas2000 (148703) on Saturday May 11, 2013 @06:33AM (#43693715)

    ...but bizarrely distorted from reality.

    telcos and their allegedly-"subsidised" phones are the reason why phones are still so ridiculously expensive. they remove the normal effects of competition in the tech market-place, so we're still paying $600-$1000 for a current gen phone just as we were 10 or 15 years ago.

    every other tech device - including extremely similar devices, tablets - have come down in price at least four-fold if not ten-fold over the same time period.

    phones remain expensive to buy outright because the customers that the phone manufacturers are targetting are their largest customers, the telcos. if new phones were cheap to buy outright, people would be far less inclined to sign up for abusive two year contracts to get a hire-purchase phone (not "free" and not "subsidised" - the price is embedded in your contract)

    • by iampiti (1059688)
      Are you sure about this?
      European cell phone market started a similar transition a while ago and I haven't seen any decreases in phone prices. Granted, it can be difficult two relate the two but I haven't seen it happening anyway.
      Also, I disagree too with what you say about phones not having decreased in price in the last few years: Yes, the top phones still cost 600$ or more but this year top of line phone also has 2x the power in CPU and GPU, and a better screen (among others) than the last year's top ph
      • by cas2000 (148703)

        tablets have had similar or better performance improvements as well as huge price reductions.

        (android tablets, anyway. ipads are still priced as luxury items because Apple customers are willing to pay that much)

      • by whoever57 (658626)
        Compare the cost of buying a Nexus 4 from the Google Play Store against the "unsubsidised" price from T-Mobile.
    • by flyneye (84093)

      " you will have to pay full retail price for phones, but your monthly bill will be lower."

      'N' monkeys might fly out my butt, too. You might see a temporary drop, but eventually there will be a surcharge to cover the janitor scrubbing the executive toilets, to make up the difference. Prices never really go down. NEVER.

      "Never trust a whore who says she doesn't want any money, what she really means is; she wants MORE money" --Wm. S. Burroughs

      • You might see a temporary drop...

        Yes, it is amazing how people repeatedly fall for the same scam:

        we will lower the tax rate, but increase appraisals (you pay more)
        we will lower the price, but make it a subscription (you pay more)
        we will [do seemingly helpful thing], but [do devious unhelpful thing] (you pay more, more, more)

  • they haven't been cheap. you've been fucked over them. look, if you want to buy something on partial payment: FUCKING DO IT! you don't need the phone company for it - and shouldn't, because you should see how much your service costs and how much your phone costs separately.

    • you should see how much your service costs and how much your phone costs separately.

      Carriers that aren't T-Mobile have historically refused to itemize those. They have been particularly unwilling to reduce the monthly bill after the subsidy is paid off.

  • by alen (225700) on Saturday May 11, 2013 @06:34AM (#43693721)

    As long as I can remember from the late 90's living in Europe

    • by gl4ss (559668)

      As long as I can remember from the late 90's living in Europe

      well there was exceptions about a decade ago... treos & etc "american" smartphones were 1000 euros+. nobody, really nobody, bought them if they saw the price sticker, but subsidizing them with 120$ / month service charges apparently worked in america. (this was around when say, 3650 s60 phone had an actual cost of 230euros)

    • Re: (Score:3, Informative)

      by EEPROMS (889169)
      Only idiots with to much money and no internet skills pay more than $400 for a so called high end phone. One of the guys at work recently purchased a 5.7" quad core IPS screen mobile from china for a little over $300 (Model# N7300, google it). I was thinking, naaw it will be a heap of crap, well it arrived and worked and not only that "it was pre-rooted". It played 720p mkv movies with no issues and has a dual sim and a SDCARD slot.
      • Re: (Score:3, Insightful)

        by timmyf2371 (586051)

        Absolute nonsense. Some of us "idiots with no internet skills" have simply considered all the options and decided we would rather buy a device from Samsung/HTC/Apple/Nokia etc.

        Personally, I use an iPhone because I prefer the way its software operates vs Android. As a superior internet user, perhaps you would be kind enough to point me to the cheaper device from Asia which runs iOS?

      • I did Google.. And it's a dual Core 1GHz... Hardly impressive for the price (I paid $600 for a Note II off of Newegg for the wife)

      • by Nikademus (631739) * <renaud AT allard DOT it> on Saturday May 11, 2013 @09:14AM (#43694333) Homepage

        I would say, only an idiot would spend $300+ on a china unknown brand without any kind of warranty and not even any test. Most devices like the one you describe won't ever get any OS upgrade anytime soon (or even CM), and generally have pretty low end components, like a very low response touchscreen, weak battery, etc...
        $300+ for a chinese unknown device when you can get a Google Nexus 4 for $299, who's the idiot there...

      • by poity (465672)

        Be careful with those. There are unscrupulous vendors who modify the OS to display false hardware info (480p as 720p, dual core as quad core, and other attributes that are impossible to tell without close inspection). For domestic name brands like Huawei or ZTE, you're safe, but for any no-name phone you should always run benchmark software before doing anything else.

      • Are you trolling, or do you actually believe this is true? Do you not care about things like... oh... warranty on a highly integrated device that's hard to fix if something breaks? Support? Software updates?

        I like me some China-junk too, but I tend to limit myself to things I can fix myself in case something goes wrong - flashlights and other little gadgets and such. No way I'd risk it for more than $100.

  • by Mr_Silver (213637) on Saturday May 11, 2013 @06:36AM (#43693729)

    The US phone market is just going the way of the European phone market. You'll still be able to get a contract and subsidised handset if you want, but you can also get a SIM only deal and bring your own handset.

    Not everyone can afford to drop £500 on a phone outright so there are many people who still go down the contract route.

    The SIM only deals will be split into two. Either you top up the SIM at the beginning of the month and get a bunch of texts and data - or you can get a contract for your SIM which gives you a load of minutes, data and texts for a monthly fee.

    Last time I had access to a network operators stats (4 years ago), customers on contract were about 51% of the total base. I wouldn't be surprised if SIM only is now the majority.

    • by houghi (78078)

      I top up when I need. I am not a heavy user, so I top up perhaps once every two or three months for 25 EUR. Some people do with even less.

      Once a year I look if what I have is still the best deal for me. For now it is. The moment it isn't, I change operators (or just reseller) and get to keep my number.

      I have an Acer Liquid Metal, because I could get it very cheap about two years ago. 30 EUR or the like. Many people still use their old Nokia from several years ago. Indestructible and a battery life smart pho

      • I am not a heavy user, so I top up perhaps once every two or three months for 25 EUR. Some people do with even less.

        A lot of U.S. carriers will only let you do that with a dumbphone. If you try topping up a smartphone on Virgin Mobile with 35 USD (27 EUR), you'll lose service after a month. And no, you can't take the SIM out of a U.S. CDMA2000 phone because U.S. CDMA2000 phones don't use a CSIM [wikipedia.org]; instead, they program the subscriber identity directly into the handset.

    • Wow, really? That's still a ripoff (though cheaper overall, pay as you go plans are typically shitty value for money, because they jack up the rates to entice you into contracts). I have my smartphone on a monthly plan, but no contract. Same price as it would be with a dumbphone on the same plan with a contract.
  • ... but I'm not expecting more honest telcos out of the deal. Whenever I see phones sold outright by the carriers or their affiliates, the phone is locked to the service provider. Whenever I look at the service plans offered by carriers, the monthly fee is the same whether you're on contract or not (the big difference is that you're not locked into a contract, so you can change plans or carriers down the road).

    There are upsides. If carriers start refusing phone subsidies altogether, the price of phones s

  • by Dredd13 (14750) <dredd@megacity.org> on Saturday May 11, 2013 @07:13AM (#43693843) Homepage

    Part of the reason for subsidies is the disjointed, non-standardized nature of the US cellular network. Paying full price for a phone is much more tolerable to me if I can jump ship to any other carrier that I want, like I could in most countries.

    But, today, if I bought an unlocked GSM phone, to use on AT&T, and then a year from now wanted to switch carriers, my choices are hampered by that lack of standardization. That phone is -- essentially -- worth only half as much because it only works on half the carriers (the GSM carriers, as opposed to the CDMA carriers).

    IMHO, that problem needs to be resolved before this works as a next step.

    • by stenvar (2789879)

      The problem is being resolved: all carriers are switching to LTE, and multi-frequency phones are becoming the norm.

      In addition, for each major network, you have a choice of several companies offering plans on it, as the major carriers all resell bandwidth in bulk.

      • by Dredd13 (14750)

        To your first point... yeah, LTE could solve this problem, but it'll be a number of years before that's ubiquitous enough nationwide to be relevant.

        To your second point... if your complaint and reason for leaving is "Gee, Verizon's network around here sucks," having as your main option "switch to some other carrier Verizon is reselling to" is completely unattractive. You're still on the same network, but now you're on a "partner" provider as opposed to the owner provider, so you'll generally get even worse

        • by stenvar (2789879)

          Well, if you don't like Verizon or their resellers, don't buy a Verizon phone. There are plenty of other carriers and phones you can move between them. I just don't get what all this bellyaching is about.

          • by Dredd13 (14750)

            You're missing the point. Go back and read my original post.

            TODAY, even unlocked phones offer next to no mobility. Other than GSM where you have a choice between two mostly-crappy GSM providers in the US (ATTW and TMO), phones are essentially locked into their "initial carrier". That means that an unlocked phone, really, isn't worth "full market value" because a given phone is only useable on a subset of the national mobile infrastructure.

            THAT aspect needs to change dramatically before "non-subsidized" phon

            • by stenvar (2789879)

              I understand what you're saying, but as someone who has actually been using unsubsidized phones for 15 years, I have to say that you're wrong: unsubsidized phones without a contract are already a better deal and they already give you lots more choices and flexibility than locking yourself into a contract.

              Of course, you're right that the value of a phone is greatly diminished by being tied to a particular carrier. So, don't buy a Sprint iPhone, it's a simple as that. Sooner or later, Sprint will figure out t

              • by Dredd13 (14750)

                (not sure why there's an AC version of this post, but I'll take credit for my own words)

                That's easy to say if you live in a metropolitan area with a level of GSM service which gives you, at minimum, two carriers to choose from. Then you CAN in fact, maybe, live off unsubsidized and unlocked GSM devices. WHERE YOU ARE, there may in fact be "lots more choices and flexibility", but that is nowhere near being true for anyone not living in a metro area.

                For lots of rural america, the GSM network just sucks fetid

                • by stenvar (2789879)

                  I don't live in a big metropolitan area. You seem to expect metropolitan-area cell phone service and coverage in a rural area with metropolitan-area competition and pricing, and I don't see why you have a reasonable expectation to get that. Lots of things are cheaper in rural areas, but some are more expensive. It's tradeoffs you make. Even once everything has switched to interchangeable LTE service and phones can move freely between carriers, Verizon can and should still charge people like us more in rural

    • by MtViewGuy (197597)

      I'd almost agree, but today's cellphones have vastly better cellular radio/antenna systems that can accommodate multiple frequencies in GSM or CDMA rather easily. As such, selling something like an unlocked Samsung Galaxy S 4 or HTC One is actually viable for a change.

      • by Dredd13 (14750)

        Is anyone actually selling unlocked CDMA phones, so that you can flip-flop between say Sprint and VZW if you so choose? I wasn't even of the belief that that was "a thing".

  • by the_B0fh (208483) on Saturday May 11, 2013 @07:26AM (#43693881) Homepage

    Are people really that stupid? There are plenty of comparisons showing how much money you save by going prepaid vs subsidized phone.

    That means the extra money is going into the carriers' pocket.

    That extra money means they're losing money...?! [shakes head at state of math among reporters]

  • Cute Theory (Score:5, Insightful)

    by whisper_jeff (680366) on Saturday May 11, 2013 @07:28AM (#43693891)

    If they do away with the subsidy, you will have to pay full retail price for phones, but your monthly bill will be lower.

    It's cute that you think that monthly bills will be lower if people are required to pay full price for their phones...

    • Re: (Score:2, Informative)

      by Anonymous Coward

      I paid full price for my S3 and pay only $30 a month with T-mobile while my mom is paying like $300 a month for 3 phones on Verizon. Only difference is I get unlimited data (throttled after 5gb) and 100 minutes. Yes, you can pay less on your bill.

  • Submission claims they "lose money"
    They might make less money but they NEVER lose.
    Only the customers lose money.

    Is it just me or does everyone hate their cell carrier?

  • Nokia's new Asha 501 isn't a smartphone, it's a featurephone with a touch screen. Apps for it are written in J2ME with a bunch of Nokia-proprietary extensions - basically a slightly improved descendant of what your old Nokia 3330 supported. Apparently it doesn't even support 3G unlike newer featurephones.

  • This removes the phone from being buried in the cost of the contract and brings us in line with the rest of the world for cell phone standards. Now if only we can get unlocked cell phones and the ability to simply have our service tied to our SIM card instead of our phone and we'd be golden. This country desperately needs competition and this is a great first step in that direction and a very consumer friendly move.

  • There aren't that many people who are going to want to repeatedly shell out $600 for a phone that they lose or break in a year. It's about price points not about the phones. People will spend "X" dollars and give or take, no more. That translates in about $250 as the top end of the price scale people are generally willing to spend.

  • by Lumpy (12016)

    " If they do away with the subsidy, you will have to pay full retail price for phones, but your monthly bill will be lower."

    Really? then why is my AT&T bill the same price per month if I buy a phone outright and use it or if I give them $99.00 and get the phone from them?

    AT&T rapes, utterly rapes it's customers. And anyone thinks that that will change is a complete fool.

  • by suso (153703) * on Saturday May 11, 2013 @09:56AM (#43694605) Homepage Journal

    Of course a possible side effect (and a good one from an e-waste point of view) is that people would hold onto their old phones longer. I see this as a good thing.

  • by SternisheFan (2529412) on Saturday May 11, 2013 @10:31AM (#43694847)
    Firefox is getting into the cellphone market with a $50 phone. In a year all this arguing over $600 phones may be over. http://www.zdnet.com/firefox-os-puts-a-good-50-smartphone-within-reach-7000015212/ [zdnet.com]
  • by MacDork (560499) on Saturday May 11, 2013 @12:28PM (#43695677) Journal
    Plenty of sub $100 androids already available, but don't let that stop you from plugging Nokia. http://www.pacebutler.com/blog/android-mobile-phones-under-100/ [pacebutler.com]
  • by mysidia (191772) on Saturday May 11, 2013 @04:27PM (#43697155)

    I think the carriers should be required to eliminate termination fees, and structure the payment situation differently

    Instead of being allowed to have a 2 year contract, you pay for: (1) Financing charges on your phone. You have an option of either paying up front for the phone, fair market value. Or financing the phone; instead of a "$200 termination fee"; you have a principal balance on your loan for the phone.

    Instead of having a subsidy hidden within the monthly fee, you have: (1) a monthly subscription fee, and (2) a monthly installment on the financing for your smart phone.

    Then if you leave providers, you don't pay a $200 termination fee. You have the option to continue to make the repayment on your financing, and you have a right to unlock your phone and take it to the competitor, instead of having to get a new smartphone, and a new financing agreement.

    Furthermore, once the financing is paid off, your monthly price decreases, since the providers are required to keep the subscription fee separate in that case;

    That differs from the current situation, where you continue to pay the same high price, whether the carrier is currently financing your smart phone, or you chose to purchase it outright, or got a cheaper phone subsidized, or a more expensive one....

  • by fgouget (925644) on Sunday May 12, 2013 @06:23AM (#43701109)

    I'd love to get a subsidized phone. 'Subsidized' means I'm not paying full price for the phone, not now, not ever.

    If the operator reduces the upfront cost but then makes me pay the rest during the remainder of the contract, then I'm still paying the full amount or more; so the phone is not subsidized. Subsidized means someone else (The government? A charity? The not-for-pofit operator?) pays part of the phone. I have unfortunaly never found a case where the phone was subsidized. Where can I find such fabled deals?

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