Verizon CEO McAdam is thinking about ending subsidized pricing
when he said that ending subsidies would be a great thing. T-Mobile last month eliminated two-year contracts and subsidized phone pricing. Customers fork over a down payment and pay the remainder off in monthly installments. However, as we pointed out last week, while there might not be a contract binding you to T-Mobile for 2 years, the mobile operator will not unlock the phone until it is paid off. Essentially, this means that while you can leave T-Mobile at anytime, your phone can't until it is paid off. Customers of Verizon, AT&T and Sprint can leave before their contract expires, but would have to pay an early termination fee.
Besides Verizon, AT&T might also be leaning toward ending subsidy pricing. CEO Randall Stephenson said back in January that he found contracts-free pricing to be interesting and something that he will monitor to see how the market receives it.
1. Droid_X_Doug (Posts: 5993; Member since: 22 Dec 2010)
Phone subsidies going away would be a huge win for the carriers - the phone expense is generally charged in the month the phone is purchased, with the revenues for the service occurring over the 24 months of the contract. The front-end expense of acquiring the phone goes away with the end of carrier subsidies.
12. ibap (Posts: 725; Member since: 09 Sep 2009)
But they'll lose the handcuffs, or noose, or whatever you want to call it. The real question is will there be "unlocked CDMA phones" so you can change carriers at will?
48. HäckeMáte (Posts: 168; Member since: 28 Feb 2012)
Im assuming Verizon is refering to LTE since it uses a SIMcard. CDMA is their old technology that they will be phasing out.
54. jcarrigan (unregistered)
the problem is that Verizon is still the most expensive carrier and if they stay that way then no customer would pay a down payment on a phone and monthly payments on a phone AND the carrier plan if they do not drastically drop their prices.
34. TheMan (Posts: 436; Member since: 21 Sep 2012)
I agree that dropping subsidies would be great for carriers. For example, every study I read projected downward pressure on carriers' profit margins once they offered iPhone, partly driven by users more frequent model changes.
It would be interesting to see how market share would be affected by full retail pricing. I wouldn't mind (as long as monthly service price drops accordingly).
52. PAPINYC (banned) (Posts: 2315; Member since: 30 Jul 2011)
I agree!! But, I know alot of cheap people who would never fork over $700 plus for a phone; they would rather jump ship to something like Virgin Mobile on the outdated and bottle-clogged Old Yellar Network.
I have no problem paying "Full Retail" as long as the phone is worth it. That said, it has to have at least a 5.3" screen; it must have expandable memory; it's got to be at least Quad-Core; and, it can't be restricted to iLooneyTunes.
2. bojan (Posts: 188; Member since: 06 Oct 2012)
verzion is money hungry even if they remove subsidies there plans are very expenisve for less services they will never come close to Tmobile prices and service tmobile will always be best.
17. DFranch (Posts: 150; Member since: 20 Apr 2012)
No argument on prices, but coverage isn't great.
18. CoveyD (Posts: 8; Member since: 04 Nov 2012)
I dont understand how you can say VZW has less service, I have represented the top 3 carriers and have always found big red to be on top of the game. More expensive yes, customer service sucks yes, coverage and actual service, big red IMO.
29. roscuthiii (Posts: 1887; Member since: 18 Jul 2010)
I believe 'DFranch' was referring to T-Mo's coverage...
49. HäckeMáte (Posts: 168; Member since: 28 Feb 2012)
COVEY learn to read... ALL of the comment, before you say something dumb
3. cwdavis84 (Posts: 1; Member since: 28 Oct 2009)
as long as they let those of us that still have an unlimited data plan buy a phone using this method.
8. ibap (Posts: 725; Member since: 09 Sep 2009)
You know that saying about when Hades freezes over?
4. yonith (Posts: 63; Member since: 11 Sep 2012)
The model seems very similar to me - pay a down payment and pay off the rest during monthly installments. How is this different than paying 200 and waiting 2 years for the contact to be over? You pay the remainder of the full retail price as an early termination fee if you leave the carrier to my understanding. Can someone clarify this for me?
6. ThePro (Posts: 26; Member since: 03 Nov 2012)
In contract you still have to pay the monthly fee, and you have to pay to end the service.
Without the contract you pay the price and keep paying the phone, but you can cancel the actual service and just keep paying the phone itself.
53. 9thWonderful (Posts: 232; Member since: 24 Jan 2013)
Or you can pay the early term fee and not worry about the service cost. full retail for an iPhone 5 is $650. its $199 w/a 2 year agreement and if you term early its up to $350 (prorates down as months pass) which ends the service agreement. $350 + $199 = $550 so you actually save $100 by doing a contract. to say you're not on a 2 year contract for the service but enforce an agreement for the device cost...is just shifting contracted terminology. its not diff. than subsidized pricing in any way b/c the device isn't unlocked until you pay it off. correct me if i'm wrong, but isn't this the same as paying a fee to terminate some form of a contract?
The only win/win is that carriers don't lose upfront revenue in subsidizing equipment and customers can leave if the service gets too much for them.
11. ibap (Posts: 725; Member since: 09 Sep 2009)
Depending on the price you pay for service, you can end up paying way more than the price of the phone over the 2 years. Plus, if you keep your phone, or get one from a family member or buy one on ebay, why are you paying the same monthly price as when you got a new phone?
35. laheelahee (Posts: 213; Member since: 09 Apr 2012)
because you can keep using the phone for 2+ years, but dont have to keep paying the high monthly fee
5. bubbadoes (Posts: 567; Member since: 03 May 2012)
good..i hope it happens..and when the subsidies go away, then so should signing a two year contract. Who has a phone anyway for two years, way too long. Get like T-mobile, pay $99 or so down, then pay the phone off in installments like 24 months or less. They are already doing tablets like this and they cost more than the phones. As for comment # 2. I hear you, but then I don't.. No one comes close to Verizon LTE, look at all the other carriers LTE network..pitiful. so you pay for what you get. i have 4G/PURE LTE everywhere I go, not some wifi- 3g wifi max or anything else the carriers are saying they have. Look at Sprints network coverage in Florida. No LTE anywhere!!! period..that is why they can afford to still offer unlimited..because they aren't spending money on their network, it's all tied up to Apple for the next years to come!!! That's my take. Let the thumbs down begin.
10. Twashbush (Posts: 47; Member since: 08 Jun 2011)
I agree with you as I have a 5 line family plan with unlimited data on verizon still and pay their price because I can travel to see my family in south florida,texas,northern missouri,Arizona,Cali and have 4g 90% of the time to steam music from my fav. home area stations with iheartradio or video for kids tablet. so yes i pay more but get more for it.
I for one would be ok with verizon ending subsidized pricing as long as they brought back unlimited data plans for all. As I have to pay full retail for my phones to keep my unlimited plan anyway
13. iansltx (Posts: 2; Member since: 04 Apr 2013)
Nah, Sprint just is being conservative with their coverage maps at this point because they got bitten when launching Atlanta, DFW, etc. WAY under-completed (which has since been fixed). A fair amount of FL now has LTE; my mom was in the West Palm Beach area last week, and was able to turn her Galaxy Victory into a WiFi hotspot, using LTE, without issue.
Before you say that I haven't used the awesomeness that is Verizon, I've taken plenty of trips between Texas and Florida (by car) with my LTE iPad. Sure, LTE is great, and VZW's coverage eclipses Sprint's right now. Verizon is also significantly more expensive than Sprint, unless you're buying a 1GB iPad plan or the like (even then, $20 for 1GB is expensive).
23. androiddownsouth (Posts: 598; Member since: 02 May 2012)
And Verizon reinvests more money into it's network than any other provider. The coverage area proves that. Verizon will have full LTE rollout done by the end of the year, and then looking towards LTE Advanced next year. No other carrier is even CLOSE to that level of service provided. Don't expect a BMW when you are on a Kia budget.(No offense to Kia, they are building better cars these days, but they are not close to BMW, imo)
7. bubbadoes (Posts: 567; Member since: 03 May 2012)
don't get LTE confused with 4G wimax
9. Jeradiah3 (Posts: 1012; Member since: 11 Feb 2010)
Those that are tech savvy knows the difference between LTE and WiMax and theres no comparison that LTE blows away WiMax lol. As for ending subsidized pricing, I dont know what to think about that. whether you are locked into a 2yr contract OR make monthly payments on a phone but not locked into a carriers plan..................you're still paying alot of money for a phone. I dont see the difference between the 2. I do agree that most people dont keep their phones for the full 2 year contract. what they should do is to make people upgrade eligible after a year. with they way technology is advanceing by the minutes, it makes more sense
50. HäckeMáte (Posts: 168; Member since: 28 Feb 2012)
The difference is when your done paying for your phone the price drops. While subsidized you pay the same high price foreverrrr
14. iansltx (Posts: 2; Member since: 04 Apr 2013)
If you knew what you were talking about, you'd be looking at Sensorly coverage maps. Not the atrocities that the carriers pass off as coverage maps. I mean, look at Verizon's data map.
16. iammobilechris01 (Posts: 11; Member since: 01 Apr 2013)
verzion is money hungry. Tmobile prices and service are best. Contracts are wack.
21. androiddownsouth (Posts: 598; Member since: 02 May 2012)
Tmobile service is best? That is laughable dude. Maybe in the rare spot, but overall, Verizon is the best service, like it or not. There isn't a Verizon customer alive that doesn't wish the service was cheaper, but at least you get high end service for that larger service fee, imo.
39. johnriii (Posts: 234; Member since: 17 Oct 2011)
I've been with verizon for ten years, and I travel a LOT. I bet I've dropped less than ten calls in that time, and I rarely, if ever have a problem getting a good signal. T-mobile is the in 4th place in a four division race. They're improving, but can't hold a candle to Big Red.
40. MorePhonesThanNeeded (Posts: 645; Member since: 23 Oct 2011)
Been with VZW for about 6 years and I had exactly one dropped call and it was during hurricane sandy, VZW are expensive yes but they do have an ace network. Now lets talk about getting those monthly charges lower eh? This would be a godsend as I can pay off a phone quickly and just enjoy no cuffs for exactly 24 months. If you can't figure out how to pay off a $650 tab in less than 2 years you need not own one such device.
41. iammobilechris01 (Posts: 11; Member since: 01 Apr 2013)
Didn't mean as in coverage with Tmobile, if you live a metro area its great which I do. But as in services they are on top... especially price wise, cant beat it and we have unlimited data with no sucky contracts.
42. iammobilechris01 (Posts: 11; Member since: 01 Apr 2013)
Plus If where I live, work and travel the most has me covered with coverage...thats all I need and what matters. Tmobile does that really well.
51. HäckeMáte (Posts: 168; Member since: 28 Feb 2012)
"especially price wise"? ...you mean ONLY pricewise.
I will gladly pay $120 a month for the excellent service I get with Verizon. Not just at my house, but EVERYWHERE I go.
BTW: I get 60mps on Verizons LTE.Yep pretty rediculous.
44. JDogg5281 (Posts: 64; Member since: 09 Aug 2012)
Im a tmobile customer and I know our coverage isnt the best. Verizon is...but here in Cincinnati tmobile coverage and speeds rival Verizon and At&t LTE and blows away Sprint speeds and coverage. Tmobile is great if you live near a city. If you get head towards the country Edge.
45. androiddownsouth (Posts: 598; Member since: 02 May 2012)
JDogg and mobilechris, if Tmobile works for you guys where you live and travel, then that is great. Different services work better or worse for different people in other areas. People that stay in predominantly urban areas will get decent to good service from Tmobile and Sprint most likely. But, get into areas such as in the South with so much rural area, Verizon really shines in quality of network when you get off the beaten path, as they say lol.
19. ProblemSolver15 (Posts: 217; Member since: 14 Jun 2010)
I have no problem with them doing away with subsidies as I never have a phone longer than 10-12 months anyway and I usually end up paying retail or eBay pricing for any new phone that I would get in order to keep my unlimited data. If they manage to make plan pricing cheaper then I am all for this. But, knowing Big Red, that may be wishful thinking.
I'm a capitalist and all, but be fair to your loyal customers.
20. DaNTRoN (Posts: 135; Member since: 23 Jul 2012)
It doesn't matter to much about unlocking most carriers will not unlock a phone under contract any way.
22. jcpwn2004 (Posts: 314; Member since: 18 Jan 2012)
lol of course he's for it, as long as the monthly bills remain the same that means more money in verizon's pocket. The telecom giants in the US are probably the most corrupt companies in the entire world. It's basically an oligopoly.
24. dorianb (Posts: 536; Member since: 24 Oct 2012)
In the future I see a Galaxy S or iPhone on AT&T will cost $500. T-Mobile $550. (But the plan is cheaper by $20/mo) Sprint $500 (But plan is $10 less than AT&T) Verizon $600 (& the most expensive plan!!!) (=_=* )
25. usvii (Posts: 2; Member since: 04 Apr 2013)
I agree that removing subsidies is a win, win for the carriers. Do the math folks. Typical high end smartphone today is 199.00x 325.00 cancelation fee= 524.00. Most full price high end smartphone start around 549.00 and up. The amount of people who buy there phone at full price is very small compared to those who fulfill there two year contract. If the the carriers would love to have everyone pay full price for there phone, cause they will save hundred of million of dollars in subsidies. They will be laughing all the way to the bank. No one is really tied in to a contract if you really crunch the numbers. If you pay 199.00 for a phone and 4 months in to the you decide you want out, it will cost you approximately 325.00. If you add the to together you will come up with roughly the full cost price of the phone. AT&T and Verizon will not lower the price of service if they remove subsidies from handsets and the mast amount of customers will lose lose.
43. tomn1ce (Posts: 112; Member since: 12 Mar 2012)
True but on top of the $325 that you pay for the early cancellation fee, you have to cough up the amount ($200+) for a new/used phone to use on another carrier. That's if you're leaving one carrier for another and the former carriers was a cdma carrier (vzw/sprint).
If with the current pricing they would lower your bill after the 2 year contract is up people would keep their phone longer than 2 years. People would see the savings and they would keep using the 2 year old phone.
26. Daftama (Posts: 592; Member since: 03 Nov 2012)
Even if the get ride of contract your monthly woudnt be any different. By the the time you paybit off it will be 20 months or so which is the same as having a contract. If thats the case why not get prepaid that works out they want it to be like 3rd world ppl buy the phones full price and pay for prepaid service..instead overe they are bill ing you monthly for it where is the win win win all I see is win win lose
27. usvii (Posts: 2; Member since: 04 Apr 2013)
I usually pay full price for my phones anyway, cause I change phones often. That's just me, but most people don't therefore buying a phone on subsidies is a better deal for them and not the carriers. On another note different carriers work for different people depending on where they are located. T-mobile might be cheaper but its a known fact that there service isn't that great, but if it works for you or your area is widely covered then great for you.
28. rallyguy (Posts: 614; Member since: 13 Mar 2012)
Of course it works out better for the carrier or else they wouldn't be interested in doing it. Is this a win for the consumer? Only if we would save more than the full cost of the phone. I doubt this is going to happen.
As far as T-Mobile, I think it's a marketing gimmic. They can't charge what the other carriers charge because their coverage stinks. So their prices are lower. But now they also charge full price for a phone.
30. DonLouie (Posts: 594; Member since: 22 Dec 2008)
Supposedly, subsidy prices are included in plan pricing. How many of you think Verizon, AT&T or any other carrier will reduce plans if they got rid of them? Just because you tech junkies go through phones like toilet paper doesn't mean the average person, like me wants to pay $400-$700 for a phone or scour through used ones. Even if it is spread out over 24 months....
31. TBomb (Posts: 393; Member since: 28 Dec 2012)
Iphone 5 costs $649 full price... I dont know many people who will be willing to just drop that much for something that can fit in your pocket... this isnt a wedding ring people. Also, the prices may drop, but not to the price we want it to. It's not going to be free. They still will have to make enough money to cover all the expenses they pay to operate. Putting the cost of phones at full price elimnates covering for the phones in the monthly payments, great.... But they still have the cost of tower maintenance and employees and who knows what else that they need to pay for. Then, when the "cost of maintaning good service" goes up, the cost of our bills will go up. The cost to make phones won't go up though... so we'd end up paying what we pay now, plus the full phone price. thats the way i see this panning out.
32. Sprissy (Posts: 124; Member since: 11 Feb 2012)
In order for them to end the subsidies then they will be forced to lower prices, not that I think Verizon or At&t will lower them enough, but it's the only way customers will go for it. I wouldn't mind paying for a new phone as long as the monthly rates were reasonable, but I would buy it outright, no payment plan for me!
33. vincent95 (Posts: 17; Member since: 19 May 2012)
Give me back my ability to keep my unlimited data when I upgrade!
36. Larry_ThaGr81 (Posts: 308; Member since: 26 May 2011)
This would be a benefit for people like myself because I'd pay off the phone prior to two years, allowing me to leave VZW when I get pissed off at how much I have to pay for my plan.
37. jdubis (Posts: 14; Member since: 15 Jan 2012)
You can blame the apple fan boys for subsidies going away. Only once Apple can around did carriers have to subsidize $450 a handset, and have to pay the wholesale cost as retail cost is. I am for it, because many people think they should just be given a handset because they pay $70 a month for service. Keyword you pay for service, not the phone. You don't get landline service or internet without having a modem. If you don't have one you pay extra per month. As for unlimited data, those days are gone. It's what text messaging was in 2002. You will see higher data limits and lower monthly costs. Also for those people whom think they need unlimited data, and can use wifi, you really need to look at the fine print becasue home isp's have data caps as well. For instance AT&T is 150 GB a month.
38. JunitoNH (Posts: 1242; Member since: 15 Feb 2012)
This my friends, is a war we can't win. Verizon, is going to eliminate subsidizes, make you pay the full price of the phone, lower your bill, by maybe three dollars if we are lucky; then six months down the road, come up with some nonsense about profits and operating cost, and raise your price again by five dollars. Verizon operates like a central bank, to try to control all you do.
46. cjjohnson86 (Posts: 29; Member since: 05 Jan 2012)
The difference is that with t-mo you actually save money on your monthly bill. I know for dam sure that Verizon won't reduce there plans if they ended there subsidize. So its kinda pointless
47. androiddownsouth (Posts: 598; Member since: 02 May 2012)
Unless you are a Verizon executive, then you actually DON'T know for damn sure they wouldn't lower the plans.
And if you actually can see the future as you claim, then please give me some good guaranteed stock winners, not to mention some lottery numbers!
55. jherz6 (Posts: 216; Member since: 23 May 2008)
Are you people crazy??? How many people can afford to pay 650-800 for a new device? Even if the spread it out the payments, how much inerest would you pay? And others that have said that VZW and Im sure others wont lower there plans as some kind of compensation. By the time you would pay off the device youd be looking for a new device. I think most people wouldnt be able to afford the phone they want because theyd be to expensive. No thanks .