Are we seeing the end of subsidized phones?

[jpiniero]

That's because you can't.

Not going to read the whole thread, but the premium of AT&T and Verizon has to do with the better coverage and speeds as opposed to T-Mobile or Sprint, and not the subsidy. The Subsidy is there as a carrot to sign the contract. I fully expect both to slash/eliminate the subsidy eventually, but monthly prices aren't going anywhere. Lower ETF, yes.

 

[pandemonium]

The link I provided shows how absolutely wrong you are in post #41. It completely contradicts you. Not only that, you have the balls to talk down to me like I'm the idiot here.

I'm no fan of subsidies if it means costly monthly plans but at the same time most American consumers will never pay $400 or more for a smartphone. Supporting T-Mobile isn't going to do shit to change that or anything else.

I'm not trying to be a dick here, but how you do you think carriers recover their losses? Yes, that article points out that their net gains are dropping due to the larger subsidies on more expensive devices, but how are you expecting the carriers to eventually maintain workable incomes if devices are becoming more and more expensive and consumers don't want to pay more for their devices?

From the article you linked:

All smartphones weigh on carriers' margins, since wireless carriers pay a hefty subsidy up front to buy the phones from the handset manufacturers. They make up the difference over the life of a two-year contract.​

​

This is how it works.

This is why I still buy an unlocked phone and don't [am not forced to] change my plan to the more expensive, largely subsidized, modern plans. This saves me several hundreds of dollars over the course of a typical 2 year device upgrade frequency (read as: 2 year contract).

 

[blairharrington]

You think Googling for an article online proves you right? I see your CNN Money article and I'll raise you a WSJ and FoxBusiness. My linked articles directly supports my claim, while your article side steps yours.

Too bad for you, I got the balls of steel and I am a straight shooter.

Instead of thinking you know what Americans will or will not pay up front for a phone, why not let the market decide instead? I never said I "support T-Mobile". In fact, I don't even pay for cellular service myself. I just see the subsidy business model a bad one for the consumers. Quite frankly I don't really care if you get the point we are trying to make, but it's very difficult for you to try to go against the current to prove something.

Except for those who sign a contract, take the shiny new phones and then bail on the carrier, then the consumer wins (assuming one does not care about one's credit history). That's another story.

I provided the CNN article because you said the exact opposite in the message prior to when I linked it. You expressed disbelieve that I was saying that carriers take a hit up front when that's exactly what happens.

You have balls of steel? You are a child. You attacked me and were talking down to me from the start of the thread for no reason whatsoever. You implied you were talking to a wall when you in fact we're stating things that were dead wrong.

Your links provide nothing that I didn't know already or anything that contradicts what I said earlier. As I said before the subsidy model in America shows zero signs of changing. As long as smartphones remain. Expensive off contract the American consumer will continue to sign up for contracts.

I am done with this thread and especially talking to an imbecile like yourself. It's a completed waste of my time.

 

[blairharrington]

I'm not trying to be a dick here, but how you do you think carriers recover their losses? Yes, that article points out that their net gains are dropping due to the larger subsidies on more expensive devices, but how are you expecting the carriers to eventually maintain workable incomes if devices are becoming more and more expensive and consumers don't want to pay more for their devices?

From the article you linked:


This is how it works.

This is why I still buy an unlocked phone and don't [am not forced to] change my plan to the more expensive, largely subsidized, modern plans. This saves me several hundreds of dollars over the course of a typical 2 year device upgrade frequency (read as: 2 year contract).

I'm fully aware of how it works. I even said carriers make up their initial loss with service earlier in this thread. Goodbye thread.

 

[OBLAMA2009]

within a couple years, phones will reach a point. like pc's did, where they just stop improving dramatically and people will stop wanting a new phone every 6 months

 

[Trombe]

I'm fully aware of how it works. I even said carriers make up their initial loss with service earlier in this thread. Goodbye thread.

That's the thing...they aren't charging you just for service on a contract, all the major carriers except TMobile direct (this still is happening for the third party resellers of TMobile) are basically charging the remaining average cost of the "$200" phone you're getting over time. Just look at ATT, Verizon, and Sprint compared their own prepaid offerings.

ATT GoPhone: unlimited talk and text, 2GB data = $60
ATT Data Share contract: unlimited talk and text, 2GB data = $95
ATT Individual Line: 450 minutes, unlimited text, 3GB data = $90

Verizon prepaid: unlimited talk and text, 2GB data (no LTE) = $60
Verizon contract: unlimited talk and text, 2GB data (with LTE) = $100

Sprint Pay As You Go*: unlimited everything = $70
Sprint Unlimited My Way: unlimited everything = $80
*you must buy one of the four approved phones up front

(everything calculated for a single line plan as that is the only fair way to compare to prepaid)

The Sprint numbers are closer together than expected, but what could possibly justify $30+ upcharges monthly from ATT and Verizon for service on a contract VS their own prepaid offerings? It's just roaming agreements, making up the remaining cost of the device that was sold up front (and this is where openwheel is arguing there isn't any real subsidy, just a loan in disguise), and pure profit (and in Verizon's case LTE access as a feature). Even then, TMobile still applies their roaming agreements to postpaid and their prepaid VS postpaid prices are the same, taxes/fees aside.

Just because the companies don't explicitly say that's what the extra charges are for doesn't mean that's not what they're actually doing. It's big business as usual.

 

[openwheel]

Amen Trombe, Amen!

 

[Mondozei]

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.

Yeah, that's probably one area that I'd be willing to consider it, too.
Then again I am already doing the unlocked route for the most part, but that's also because the smartphone evolution has been so brisk these past 2-3 years. Next year's middle-model will get you a 1080p, probably a S800 processor(if you get one toward the end of the year) which also means LTE-A and decent speeds, GPU performance.

Would you need a radically better phone? I could see myself getting a good middle range phone next year when I sell my next one and then settle for that for 2-3 years on contract because I think the next stops on smartphones is basically battery life, 4K and thinness. All those are cool, but they are iterative updates.
Further, one thing that will be included in the future is fingerprint scanners(and in future I mean very near future). I'm not hugely keen on fingerprint scanners because I wouldn't trust any technology company to have such important information, whether in the cloud or on my phone.

I should mention that I do not live in the U.S. which means that where I live the major cost is not the actual plan itself, which is pretty modest($38 dollars for 3 gigabyte per person per month, full LTE acess, 600 free phone calls and 6000 free texts) but usually the device cost which is quite a bit more expensive than what Americans pay in our currency(thanks to VAT and other nasty stuff).

So if this were to become a trend globally, the calculus wouldn't necessarily change the same way the world over.

 

[shortylickens]

within a couple years, phones will reach a point. like pc's did, where they just stop improving dramatically and people will stop wanting a new phone every 6 months

I remember the good old days when you could just buy a really nice Nokia and go for like 2 years without caring.

 

[hans007]

within a couple years, phones will reach a point. like pc's did, where they just stop improving dramatically and people will stop wanting a new phone every 6 months

We are pretty close to that now. Even my tech geek friends a lot of them don't bother getting the latest phones anymore and just skip a generation.

I think last year when the snapdragon s4 based generation came out and my android phone actually had a battery that lasted most of a normal work day I stopped wanted to get every phone.

Had a thunderbolt and gnexus before my fairly low end RAZR m at this point and its a world of difference. I'd say the snapdragon 800 based phones really have as much power as anyone is going to really use in the next 2-3 years.


Phone companies are going to have to differentiate themselves with software , materials quality, and other things moving forward

 

[desura]

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.

if you get Virgin Mobile, that's what you get, actually. 2 yr cost of virgin mobile compared to sprint (same network) and VM is like $800 cheaper.

 

[cliftonite]

Even if we do I sincerely doubt we will see an equivalent drop in price on our monthly bills. What we need is another carrier force some competition. But with the cost of rolling out a nationwide network and the lack of spectrum I think we are screwed for the immediate future.

 

[akugami]

Not going to read the whole thread, but the premium of AT&T and Verizon has to do with the better coverage and speeds as opposed to T-Mobile or Sprint, and not the subsidy. The Subsidy is there as a carrot to sign the contract. I fully expect both to slash/eliminate the subsidy eventually, but monthly prices aren't going anywhere. Lower ETF, yes.

While there is no doubt some of the higher premium of AT&T and Verizon's services are because of better coverage and speeds, a large part is them recovering the subsidy fees and then milking the built in subsidy cost for those who are not frequent upgraders. Yes, the subsidy is a carrot to reel you into the plan but that's because AT&T and Verizon are counting on subscribers to not upgrade right after their contracts are up.

The majority of the "premium" you pay to AT&T and Verizon is really the subsidy cost with a small profit built in. A premium that doesn't disappear once your 2 year contract is up. While AT&T and Verizon may eliminate or lower the subsidy cost some day, don't hold your breath. That's where their billions in profits are coming from after all.

Let's look at AT&T's smartphone plans. First, let's take a look at the service/data plans. That's $40 and up. If you think that the cost of the cell service plan itself isn't calculated to make money then you're delusional. Now we add in the cost of each line which is as high as $45 for one line and a minimum of $30. It's a two year contract, so 30x24=720. That's not counting the $200 you pay up front for a premium phone line the high end Samsung Galaxy line or iPhones. So you're paying $920 for the phone in reality. iPhones cost $650.

So the premium is an extra $11.25 per month over the cost of the phone. Just under 12 bucks. That's really the true premium, the rest of it is the phone subsidy which will never get reduced unless you cancel your plan.

So after all that calculation, a "per smartphone fee" of $15 for every smartphone sounds reasonable if your contract is up. Especially since I am 100% sure the voice/data plan is designed to make them money already. Instead, if your contract is up, they are netting an extra $30 to $45 per smartphone. Every smartphone that goes over the contract nets them an extra $30-45 in profit every month. Anyone who thinks they will lower that voluntarily is delusional.

The bottom line is the subsidy is there to get you on the contract. A contract which already nets them hundreds in profits for each line. Then they're counting on you not upgrading or canceling immediately once your contract is up.

T-Mobile is doing this mostly because they are in a weaker market position. They need to pull in subscribers and are using price as an incentive. AT&T and Verizon has no such needs currently and likely not in the next 5 years.

 

[boomhower]

I have been forced into the end of subsidized phones in order to keep my unlimited data. That said, I'm not paying upwards of $700 for a cell phone, this is one reason why I am intrigued by what happens with the iPhone 5C.

 

[sze5003]

I have been forced into the end of subsidized phones in order to keep my unlimited data. That said, I'm not paying upwards of $700 for a cell phone, this is one reason why I am intrigued by what happens with the iPhone 5C.

Do you have metro pcs? I put my little sister on it. She used to be on my Verizon plan and it was mad expensive to have her on there with a non smart phone. She would even eat through 700 minutes whereas I'm fine with 450 just for myself. To keep my unlimited data I put her on metro and got her a nice smartphone. I pay $45 bucks a month for her plan and $83 for my Verizon plan. I have 450min, unlimited 4g, and unlimited text. I could drop the texting if I had a Google voice phone number but I never got one.

In my area metro is great I can't say for where you live. I've heard in other places it's not so good.

 

[jpiniero]

I have been forced into the end of subsidized phones in order to keep my unlimited data. That said, I'm not paying upwards of $700 for a cell phone, this is one reason why I am intrigued by what happens with the iPhone 5C.

It's still probably going to be $450 though.