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T-Mobile executive: Get rid of subsidies on new phones

T-Mobile executive: Get rid of subsidies on new phones
You know how you only paid $199.99 or $299.99 for that great smartphone in your hand? If it were up to T-Mobile's CMO, you would be paying the full retail price for the device. Cole Brodman, speaking at the GeekWire Summit said that carrier subsidies on new handsets are ruining the industry. The subsidies prevent OEMs and carrier from playing on a level playing field, according to Brodman, and it also cheapens the phones themselves by making them a disposable item.

During his talk, Brodman said that he would love to get rid of subsidies. When Swype CEO Mike McSherry reminded Brodman that he did have the power at T-Mobile to kill the program, Brodman reminded the audience that T-Mobile is just one of four major U.S. carriers and that it would be very hard for T-Mobile to make this move alone. The executive said that customers always go for the discounted phone over a lower priced rate plan or a bundled rate plan. He noted that T-Mobile had experimented with this more than any other carrier in the States.

Brodman was asked if the nation's fourth largest carrier could compete without offering the Apple iPhone. The exec responded by saying that T-Mobile offers a great lineup of Android, BlackBerry and Windows Phone devices and that many of them do things that rival the iPhone whether it is the "app experiences, network experiences or the devices themselves. In many cases, he says, some of the phones on T-Mobile's lineup do things better than Apple's smartphone. The CMO did add that he didn't believe it was healthy for the industry to have one OS dominating. He said it would behoove everyone to watch Windows Phone to see if the developers will start writing for the platform. A strong Windows Phone presence would help the balance in the industry according to Brodman.

Check out the CMO's comments by clicking on the video below.

source: GeekWire via TmoNews

42 Comments
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posted on 08 Mar 2012, 20:03 16

1. Sniggly (Posts: 7089; Member since: 05 Dec 2009)


Carrier subsidies are the only reason why the mobile phone industry exists as we know it today.

posted on 09 Mar 2012, 07:53 5

26. JunitoNH (Posts: 907; Member since: 15 Feb 2012)


Correct, I don't see too many people paying $500 - $800 out of pocket for a "phone" - it's just a phone. Let them try it, you will see the return of flip phones.

posted on 03 Mar 2013, 18:01

42. jfuente11 (Posts: 29; Member since: 06 Nov 2012)


Subsidized/FREE phones are actually NOT subsidized/FREE phones. You actually have to sign up to a 2 year contract service and the actual price of the phone is divided into 20 to 24 months and add it to the cost of the rate plan that you are paying for. (The rate plans are overpriced to allow the service carrier to recover the cost of offering the phone at a discounted price or for free.) What if you stayed with them for 30 months? Then you are overpaying for the phone by paying a rate plan that was overpriced. I love T-Mobile because they have the Value Plan for customers who wish to purchase the phone for full price with an option to pay it in installment.

posted on 08 Mar 2012, 20:07 8

2. protozeloz (Posts: 5378; Member since: 16 Sep 2010)


this is a retarded idea, and will reduce the amount of people willing to get a phone, plan cost is on of the things that keep people at at margin of getting a better device for themselves so I have to make a new contract and i get no advantage of being forced to stay with you for two years? what a load of *****

posted on 08 Mar 2012, 20:26

8. frazier2127 (Posts: 3; Member since: 08 Mar 2012)


if they got rid of subsidies i highly doubt they'd have contracts still. i know companies love money but they dont think we are stupid enough to pay 700+ for a phone and sign a contract??

posted on 08 Mar 2012, 20:30 1

9. protozeloz (Posts: 5378; Member since: 16 Sep 2010)


plus with all the fuzz, you buy an ATT phone what only get service in ATT or you have to pay more money to use it elsewhere, special Tmobile phones.... those will get 2G only outside Tmobile. the way is currently planted that model wont fit US

posted on 08 Mar 2012, 21:43 5

16. remixfa (Posts: 13913; Member since: 19 Dec 2008)


that is absolutely not a retarded idea proto. A subsidy is a lie. The cost of that phone is buried into your service. And its an average cost buried into that service, so if you get an iphone (650 full retail) or a Hawuai comet (120 full retail), you are paying the same amortized cost buried into the plans.

Many non-american companies do not have big subsidies. T-Mobile has been doing the "Value" plan which is exactly that, subsidy free. It shows you the full retail of the phone, and if you like, you can bill it to your account. But the bill is much much cheaper that way because there is no inherent amortized phone cost built into the plan before u even pick out the phone. Its a much more honest and fair way of doing it.

Why should the guy with the cheap phone have to pay the averaged subsidy for the guy with the expensive phone? That is exactly what happens now. Thats why ATT upped their upgrade fee and termination fee, thats why they are pushing tiered data, and thats why VZW LTE phones are 300 bux.. to pay for the iphone subsidy.

posted on 08 Mar 2012, 22:15 1

19. protozeloz (Posts: 5378; Member since: 16 Sep 2010)


I know the user gets charged an X amount of money for their phones in their plans and that amount is charged "equally" to everyone, yet still is a bad idea, I think transparenting the bill may sound better, but removing the "subsidy" will make more people hesitant, people truly see the present and not the future, people will see that today a 200 bux att phone cost 500 at t mobile even when they pay 20 less for the plan, and those 20 x 24 months = 480 bux. with all of the current limits given by the carriers and all the rules they play like grabbing money to put apps on my phone, making my updates slow, or unusable outside their "wing" will be the things will have to deal with anyways

a better idea would be to make subsidy a clear part of your bill, just like they give you details of phone calls and other things depending on the price point of your device you get a different fee. so the guy with a cheap phone pays less for his phone and the guy with the expensive iPhone pays more on his bill and everyone is happy, companies can make offers and customers can decide how to pay their "subsidy" but simply killing it is a horrible idea

let me put you an example

if I bough the Galaxy S2 outside US and had it on att on the 10th I'll be getting ICS, att release date is yet to be knows, my Galaxy S2 will not have bloat apps or features removed, nor ATT branding.

so when I I get A device from tmobile and I pay full price for it this are the questions I ask

-will the phone have bloat?
-will get updates with an unlocked version or do i have to wait for tmobile to "feel like it"
-will the device be fixed to only operate with tmobile

so if tmobile is selling me the same device I can buy with no restrictions elsewhere.... why should i buy it there?

posted on 08 Mar 2012, 22:20

21. ngo2dd (Posts: 783; Member since: 08 Jul 2011)


No it is not much much cheaper for T-Mobile. With unlimited talk and text and 2 gb of full speed it is still 60 dollar. Unless you are running some special deal. T-Mobile is no where close to to virgin, boost or metro. T-MOBILE is in 4th place for a reason, if you don't live in a big city there network suck. I live in a college town with 22k students and no services, that is just dumb.

posted on 09 Mar 2012, 00:56

23. JacobSmile (Posts: 2; Member since: 09 Mar 2012)


I completely agree with you on this one, t-mobile has been doing this for awhile. They have been selling "Value" plans which is a cheaper phone bill but you pay full price for the phone. If you want to pay a low initial amount they set it up so you could pay a deposit then work the rest of the cost into a no interest monthly payment over the course of 20 months. The benefits actually also go past the price too. It allows you to purchase phones not from t-mobile that support its bandwidths. It also helps people who don't upgrade their phone every 2 years. As the prices incorporate the price of the phones. To me this is the fairest way to go about it. The plans are usually always less or equal to the "Classic" plans (The plans with a subsidized phone) when you crunch the numbers together.

posted on 09 Mar 2012, 09:25

29. iami67 (Posts: 318; Member since: 18 Oct 2011)


These value plans are a joke. I used to work for t mobile and these plans are one of the many reasons I quit. Besides the 50 percent return rate on new line cause lack of service anywhere people would always come in for the advertised price that says with new two yr contract. Id pull up there plan and see because there only saving ten dollars a month I can not give them this price. Then they would sit there and yell at me in the store and nto understand why and then swear that when they got the plan for 10 bucks less it was because they were long time customers and tmobile over the phone promised them a discount and no one told them they wouldnt be able to get a phone at sale price. So this doesnt work in America its to late everyone is used to getting free phone or top tier phones at only three hundred.. now im with vzw and if a customer comes in with no upgrade they flip when i tell them the free phone is 200. There like that is crazy ive nev er paid for a phone and im not gonna start now. gl with this tmobile youll be out fo bussiness soon

posted on 10 Mar 2012, 04:17

38. remixfa (Posts: 13913; Member since: 19 Dec 2008)


your lying out your ying-yang. If your return rate was that high, you were a horrible sales rep. I had 10 returns for all of 2011.
We have people foaming at the mouth to get on the value plan once its PROPERLY EXPLAINED.. because yes, it does take a hot minute to explain to the customer what it is. Its actually much easier and more honest but people are programmed to the 2 year contract mess.

Proto,
I work in the business, its obvious you dont. The last thing I want is to have another charge on the bill. Every time Obama adds a new tax or raises a current one, we have swaths of customers come in screaming about it. "whats this new charge.. why are u ripping me off!!", even though we have nothing to do with it. The bills are over explained as it is as most people get confused by seeing everything broken down. Its very sad but also very true.

The value plans are the most honest plans of the big 4 carriers. Once you wrap your head around it and dive in, you would never go back to a normal plan. I have customers thanking me all the time for putting them on it , because for once they have control over how much they are actually paying for a phone.

I also tell them all the time to save money by going to ebay/craigslist and buying a phone for cheap. What do I care? With reps no longer getting paid by selling them a new phone, it leaves more wiggle room for better options.

posted on 08 Mar 2012, 20:08 1

3. darktranquillity (Posts: 284; Member since: 28 Feb 2012)


May be this is why there's no carrier subsidy in india

posted on 08 Mar 2012, 20:10 1

4. protozeloz (Posts: 5378; Member since: 16 Sep 2010)


are you forced to stay on contract? when you get a plan?

posted on 09 Mar 2012, 08:03

28. JunitoNH (Posts: 907; Member since: 15 Feb 2012)


Reason why there is such a slew of Android devices.

posted on 08 Mar 2012, 20:11 5

5. LoneShaolin (Posts: 307; Member since: 14 Jan 2012)


No subsidies In Europe. You buy the phone you want, and go to whatever carrier you choose. That way the phone isn't limiting you to one carrier, and it all falls on carrier price/customer service which is the way it should be.

posted on 08 Mar 2012, 20:25 1

7. protozeloz (Posts: 5378; Member since: 16 Sep 2010)


as far as I know there are both, you can get a phone with no subsidy and the plan you want with no contract or break up fee, but you can also get on a contract and get a free phone or a low price

http://goo.gl/pFqOS

posted on 08 Mar 2012, 20:22 5

6. Mr.Best (Posts: 79; Member since: 17 Jan 2012)


Spoken like a true Wall Street douchebag! That's all they care about.

posted on 08 Mar 2012, 20:47 5

10. torr310 (Posts: 377; Member since: 27 Oct 2011)


ok, no susidies, no contracts. And plans need to be cheaper.

also, iPhones get the most subsidy from carriers. they will become less attractive as they are more expensive.

posted on 08 Mar 2012, 20:57 5

12. LoneShaolin (Posts: 307; Member since: 14 Jan 2012)


iLemmings would s**t if they had to pay $700+ for a phone!

posted on 08 Mar 2012, 22:16 2

20. chack_fu (Posts: 46; Member since: 19 Jan 2009)


They would have to get jobs and off their lazy a$$e$ @ wall street protests across the country!

posted on 08 Mar 2012, 21:42 6

15. squallz506 (banned) (Posts: 1075; Member since: 19 Oct 2011)


lucky for me i have monthly4g.

"no susidies, no contracts. and plans need to be cheaper"

check, check, and check.

no SUBSIDIES, no contract, i pay $30/mo.

i had to drop $300 for my g2x unlocked, but i can upgrade or drop service at the drop of a dime. no hidden fees, no TOS alterations, no data plan hikes, no iphone subsidies.

posted on 08 Mar 2012, 21:45

17. remixfa (Posts: 13913; Member since: 19 Dec 2008)


exactly. And look how cheap your service is because of it.

posted on 08 Mar 2012, 20:55 1

11. fonefan (Posts: 3; Member since: 27 Apr 2011)


Great idea. It will never happen with postpaid because then the carriers would have to separate out what they would charge just for voice and/or data without hiding subsidies in the price. That would start too much price competition.

posted on 08 Mar 2012, 21:45 1

18. remixfa (Posts: 13913; Member since: 19 Dec 2008)


Tmobile has been doing it for a while. Its called the "Value Plan". Its the best plan on the major carriers by far.

posted on 08 Mar 2012, 21:02 1

13. darktranquillity (Posts: 284; Member since: 28 Feb 2012)


I think in a contract, the carrier knows you'r not going anywhere for two years and that you'r gonna pay them nicely for that period. That restrict them giving you offers and call rate reductions. In india there's no carrier subsidy, so the network have to keep giving attractive offers to retain the customers unless they want to see their customers being lured away by other networks. This is why india got the lowest call rates in the world as low as .30paise/minute. I remember sending a mnp(mobile number portability) sms and within an hour my call rate is down to 30p/minute from .60p/minute and their agent calling me to tell "don leave our network":-P.

posted on 08 Mar 2012, 21:20

14. Stuntman (Posts: 722; Member since: 01 Aug 2011)


I would love to be able to pay full price for a phone and be able to go to any carrier. In Canada, the mobile market is similar to the US. Subsidised phones are the norm with 3-year contracts. If you want to unlock a phone and go to another carrier, it's a convoluted process. You have to still buy the phone, sign up for a monthly plan, then cancel the monthly plan and then pay the carrier to unlock in. Then you can go to another carrier. That's the official way. The industry here pretty much forces the average consumer to change carriers if they want a phone that is not offered by the existing carrier.

posted on 08 Mar 2012, 22:39

22. gwuhua1984 (Posts: 1237; Member since: 06 Mar 2012)


With the way frequency bands are distributed in the States, his idea will never work...

posted on 09 Mar 2012, 01:12

24. Bluesky02 (Posts: 1439; Member since: 05 Dec 2011)


I say if all carriers stop paying those subsidies. You won't see $700 phone. Because companies knows not all people are going to pay high price. So they'll have to rethink their strategies by bringing phones below $500. Afterward you won't see any high advanced phone like Samsung Galaxy 2 or stuff like dual core, quad core. Companies will have to find cost effective measures leading to a slowdown in mobile technology.
Hence those carriers subsidies are important and helps to drive innovation through sales.

posted on 09 Mar 2012, 01:54

25. deacz (Posts: 151; Member since: 02 Nov 2011)


500 $ for a top of the line phone isnt too much, the galaxy 2 has some fluff in it for sure. but you cant even compere that to the massive margins in the iphone that costs over 650 €.

posted on 09 Mar 2012, 08:00

27. tward291 (Posts: 559; Member since: 14 Feb 2012)


you guys do know that tmobile already does this with there value plan were you pay a down payment on the phone and you pay off the phone for 22 months. as a result your plan is at a lower price. i figured tmobile would eventually switch to this only as the papularity of this plan has increased on there network its probably one of the reasons they dont have the iphone cause apple wants you to subsidize that cunt

posted on 09 Mar 2012, 10:51 1

30. cjjohnson86 (Posts: 29; Member since: 05 Jan 2012)


Actually this makes a-lot of sense. Regardless you still end up paying more on your bill in the end with subsidized/ contract phones. In many other country's, the full retail price is the only way to buy this phone, and the result is a much cheaper monthly bill. With T-mo I actually payed full retail price for my original galaxy S, but because of that my bill only came out to 49.99 a month for the 5gb of data, 1000min, and unlimited text. Where if it was on contract it was 69.99. ( This was prior to the data changes) That move alone save me $240.00 a year and $480.00 over 2 years, so that more then payed for the phone in the long run. People in this country just don't seem to think hard about opportunity cost. We don't want to pay 500-700 for a phone, but we will gladly pay up to 1000 for i-pads, guns, etc. Idk, what does that say about us???

posted on 09 Mar 2012, 11:01

31. tward291 (Posts: 559; Member since: 14 Feb 2012)


lol i mad you said that i just spent 450 on a glock but another reason you forget is that a gun is good for many years a lifetime even but a cell phone is outdated in sometimes the following month as for the ipad lol people love sucking apples balls

posted on 09 Mar 2012, 15:02

32. Jyakotu (Posts: 821; Member since: 12 Dec 2008)


Basically, he's all for prepaid. This could work IF all American carriers used GSM, but that is not the case. There are a lot of regional carriers using CDMA and both Verizon and Sprint use CDMA. Honestly, some phones aren't worth the price of $400+, hell, not even the subsidized $299.99 price.! But still, this isn't Europe where countries are smaller, hence, cell phone networks don't have to cater to billions of people like America does.

posted on 09 Mar 2012, 17:07

33. atheisticemetic (Posts: 377; Member since: 18 Dec 2011)


This is where i get confused why people always want "free phones" or the "cheap phone".....i would much rather pay out the ass for a smartphone and have a lower rate plan than have the cheaper phone and a stupid priced rateplan.

30 bucks times 24 months? you do the math

i'd pay 600 bucks for a smartphone any day of the week if it meant that i could make up for that cost on a cheaper rateplan in the end.

it's called INVESTMENT and VALUE.

I wish Tmobile was more popular for this reason alone that other carriers would jump ship on this "cheaper phones make customers happy" nonsense.

When will America wake up?

posted on 09 Mar 2012, 19:42

35. jjjsong (Posts: 57; Member since: 27 Dec 2011)


Not only will you get cheaper rates and make total spending after the 24 months less, you also have the freedom of leaving it and going to another network with no constraints (no ETF or anything like that)!

Many things can happen within the 24 months. Maybe after 2 months into your 2 years, another service provider has a cheaper and better plan that fits you better.

posted on 09 Mar 2012, 19:38

34. jjjsong (Posts: 57; Member since: 27 Dec 2011)


Unlocked phone is pretty much the model outside of USA (or at least in most countries).

That's why there is this concept of "world phone" because that's how it really should work. You buy the phone by itself, then choose the service provider you like. Since the phone has nothing to do with the service providers, the phone makers will make them compatible with all of them.

The issue here in the US is that people are too used to buy phones directly off service providers. The seemingly discounted phones are exchanged with you paying extra $$$ to them for 2 years (or you can pay the ETF, which would add even more to that).

Because of all that, the manufacturers then have to go through service providers to really sell their product. This creates these "only work on XYZ" phones because the service providers of course request the manufacturers specifically make the phone only compatible to their frequencies/network. (in fact, everyone having different frequency is another issue in the US.. but that's another topic)

A lot of people may think "oh I don't mind staying with XYZ for 2 years, and if I can get extras off the phones, that's even better". Yes it is and it works that way, too. In fact, it would work even better if US is under this no-locked model. Imagine that you can now bring your own phone and sign contracts with XYZ and perhaps get the first 3 months free?

This model will only open up to more competition and consumers will only benefit from it.

posted on 09 Mar 2012, 19:53

36. Lboogey6 (Posts: 266; Member since: 31 Jan 2012)


ok guys soo heres the deal remixfa has it right and iami67 i do appologize but you're incorrect when we got the plans it was dumb and didn't make sense but people are inately impatient and cant handle truths so when we compared pricing saving ten dollars is still saving ten dollars you pay full price for the phone yes lets say $500 "omg thats sooo expensive im not paying that for a phone" - silly customer and iami67 .. the plan is $60.. the phone is $15 a month sooo thats.....$75 a month and last i checked thats cheaper than every carrier but it makes sense that its too much math you should just pay 200 for the phone and 90 a month .. ohh btw when the phones paid off the bill is 60 again versus paying 90 continously lol enjoy

posted on 10 Mar 2012, 01:03

37. Forsaken77 (Posts: 547; Member since: 09 Jun 2011)


People in the US will NEVER pay full retail for a phone, period. Like someone else said... we'd be back to feature phones over night. I love my high-end phones, but I would never drop that much at once on a phone.

I also think carriers should charge your plan by the model phone you get. Not everyone should have to pay for Apples over priced ipod that can make calls. I bet if a good law firm brought a suit against the carriers for making every customer pay a high premium to subsidize the Apple products, they'd win. They're charging most people for a product they didn't even buy!!

posted on 18 May 2012, 07:31

41. -RVM- (Posts: 329; Member since: 19 Oct 2011)


Is it that bad in the US ? I live in Slovakia (with much lower average wage) and i have no problem to pay 550€ (already preoredered) for Nokia 808. Even my previous N8 cost me 440€.

posted on 26 Mar 2012, 05:08

39. iWallE (Posts: 48; Member since: 10 Oct 2011)


It's a difficult question. On one hand subsidies drive volume sales, hence phonemakers earn more money and invest more in making even better phones. This also means complicated high-end technology ends up in the hands of more people. On the other hand subsidies deform the market. People never realize the actual value of their phones and end up thinking a 200$ gadget should be able to do it all.
But the worst bit is the current model is anti-competitive. The full retail price of an iPhone is at least 150-250$ more than any high-end droid. But subsidies make the price equal, or even make the iPhone cheaper. This raises the expectations for Android devices and suddenly the iPhone becomes number one in terms of value for money. If subsidies were equal or at least proportional to the full price of smartphones, Apple would have to work much harder to justify a premium price tag.
I belive subsidies should be revised so that at least they don't affect the market competition so much. Otherwise, I don't mind carriers paying the price for the development of technology instead of the common user. As for being able to choose your phone separately from the carrier - this choice always remains. And this is how I bought 4 of my last 5 phones. But this is a choice very few people make when they have the option of a subsidized phone from the carrier they'll end up in contract with anyway.

posted on 26 Mar 2012, 16:52

40. panther_911 (Posts: 2; Member since: 26 Mar 2012)


Subsidies dont work, never have-never will. (welfare is a "subsidie", hows that working?)
If you eliminate subsidies, service providers will be able to compete better for "services", & not be concerned about the 'next best product', or warranty issues of some phone makers sloppy designs.
If you eliminate subsidies, phone makers will need to compete amongst themselves for product sales so not only will innovation increase, prices will decrease due to competition (no exclusive carrier aggreements), & all phones will be available across all carrier lines/freq..
Its a win/win for consumers...

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