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With T-Mobile trailblazing, Verizon CEO sees the end of phone subsidies as a 'great thing'

Posted: , by Daniel P.

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With T-Mobile trailblazing, Verizon CEO sees the end of phone subsidies as a 'great thing'
It is a little experiment Deutsche Telekom is playing with its T-Mobile US affiliate to cut phone subsidies out of the equation, but a "great thing" for Verizon's CEO Lowell McAdam.

That was Big Red's chief comment during an interview today at the CES 2013 expo currently ongoing in Las Vegas. He actually joked that if the FDIC was willing to ban phone subsidies, Verizon will be all for it, and can "move to that very quickly," if the scheme proves popular with people.

AT&T's CEO was slightly less exuberant on the matter yesterday in his own turn, reminding us all that common folk have been groomed for too long to have the cost of the handset buried inside the monthly plan, and pay just a hundred or two upfront even for the best of them. "Our research says that they [customers] don’t like paying upfront for the phone. There didn’t seem to be the appetite for that kind of plan,” he commented.

Internal research and focus groups are one thing, however, and resistance to change a whole other, but the carriers have been warming up to the idea the whole of last year, and the trend is likely to increase in 2013, seeing the record profits they reap. All eyes are on T-Mobile now, which lets you pay for your phone on something like interest-free monthly payments, if you don't pony up the whole cash upfront, which, after all, the big two also do, jacking up plan prices to cover phone cost subsidies.

The carriers are ripe for change that will reveal the true cost of handsets for consumers, but are you ready to pay a couple of hundred more for your dream phone upfront in exchange for lower monthly plans? T-Mobile's experiment with the US consumer habits will tell.

source: WSJ

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posted on 08 Jan 2013, 15:23 3

1. downphoenix (Posts: 2416; Member since: 19 Jun 2010)


I'd be willing. I like having to not pay a lot for a phone, but at the same time, Im all for consumers buying something within THEIR budget as opposed to getting conned by carriers.

posted on 08 Jan 2013, 16:38 2

13. metalpoet (unregistered)


I hate spending $200-$300 plus the stupid upgrade fee of $30 for a phone so why would I want to spend $400-$600 for a phone? Plus my company will simply pull out of the mobile market altogether because very few Utahns are willing to spend even $200 for the latest and greatest devices, bunch of f***ing couponers! :( I hope they allow people the option to do one plan or the other with the phone cost.

posted on 08 Jan 2013, 18:48 2

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


I think once the subsidies ends, the plan price and phone prices will drop. Carriers will battle between themselves on network and pricing. Phone manufacturers will battle themselves on specs and pricing of their phones. For each market, the 2 things for each of them are what matters most to consumers.

posted on 08 Jan 2013, 19:59 1

26. Imbatman (Posts: 10; Member since: 07 Jan 2013)


you understand that there are countless countries that dont subsudized devices. Hell, Korea just recently Fined 3 of its companies for doing so in their home country. So why would the prices of devices drop if just the us stops subsudizing? People wont stop buying phones, they will still do so and the profit will just keep rising.

posted on 08 Jan 2013, 21:51 3

27. CRICKETownz (Posts: 980; Member since: 24 Oct 2009)


the only problem w/that theory is that when you have large group of people accustomed to what is considered "reasonable pricing" on equipment now being exposed to $400-$500 pricing there is going to be instant backlash. the mindset of people in the US is i want the best for the least amount of money. the amount of people coming asking for a free phone grows daily esp. when you have outlets like Sam's Club, Best Buy Mobile, Target etc. offering phones for $0.97...that won't go over well. it may be normal outside of the states but to take away the subsidy is going to mark the rise of the basic phone & the decline of smart phones.

posted on 10 Jan 2013, 19:32

37. metalpoet (unregistered)


CRICKETOWNZ: You have a point buddy, I know for a fact that I'll be out of a job as well as my employees if they start jacking up the prices of phones because ppl will simply go on ebay, newegg, and amazon.com to buy phones instead of coming in to brick and morter stores, thus eliminating hundreds of thousands of jobs in the wireless industry.

posted on 08 Jan 2013, 15:24 4

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


Screw phones with carrier branding... not to mention delay of phone updates and bunch of other crap. I'm all for the end of phone subsidies.

posted on 08 Jan 2013, 15:45 2

6. NexusKoolaid (Posts: 314; Member since: 24 Oct 2011)


Amen. I haven't had a subsidized phone since the Nexus One. No carrier bloatware. No OS modifications or any bugs they happen to introduce. And yes, faster updates.

posted on 08 Jan 2013, 15:57 4

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


Perhaps it'll also bring an end to carrier exclusive devices.

posted on 08 Jan 2013, 16:40 1

15. metalpoet (unregistered)


Now that i can get on board! im sick of Verizon being the ONLY thing that works in my area and they have the ugliest devices!

posted on 09 Jan 2013, 00:09 1

31. Mittal (Posts: 448; Member since: 14 Dec 2011)


But i have a question...
Dont the consumers in the US have a choice to buy an unlocked phone off contract and choose any carrier and a cheap plan ?

posted on 09 Jan 2013, 04:49

33. TheMan (Posts: 424; Member since: 21 Sep 2012)


Americans can buy a phone at full price, thereby avoiding a contract BUT: 1. This option, while available online is rarely mentioned at any point of sale, advertisement, etc.; 2. Monthly rates for the unsubsidized buy are typically the same as the subsidized one; 3 The carriers themselves are the primary source of phones and often the point of differentiation, branded and locked for use on that carrier.

Many (most?) Americans wouldn't know where to turn for an unlocked options, which may not work on all carriers.

posted on 10 Jan 2013, 00:48

35. Mittal (Posts: 448; Member since: 14 Dec 2011)


Thanks for the reply
"Monthly rates for the unsubsidized buy are typically the same as the subsidized one" If thats true then thats total bulls**t, almost extortion!
Yes and as u mentioned, many international versions may not be compatible with some 3G/4G network of some carrier which again puts the consumer in a confused state....
These seem to be bad practices being followed in the US

posted on 10 Jan 2013, 07:06

36. TheMan (Posts: 424; Member since: 21 Sep 2012)


No argument here. T-Mobile US first tried to price service 3-4 years ago at a lower rate for full-price mobile purchases, but the oligopoly of Verizon-AT&T-Sprint have yet to adopt.

Carrier control of handsets helps contribute to the U.S. having the highest service rates in the world (Canada's #2). I don't see that changing any time soon, sad to say.

posted on 08 Jan 2013, 15:36 1

3. MartyK (Posts: 726; Member since: 11 Apr 2012)


Instead of locking you into a 2 years contract, break payments into 6 month chunks; this will work better for everyone.

And for added security for the carrier, warehouse (Red list) all phones that was not pay-in-full.

posted on 08 Jan 2013, 16:55

18. phoenixpr (Posts: 167; Member since: 28 Mar 2012)


Agree! or I believe people will be willing to purchase the phone full price and not have it subsidies. If it's a phone that can be taken on to any carrier. But to pay full price and then hate the carrier. Then trying to regain your money back on eCrap (eBay) is a waste of my time. I would gladly pay $400 -$800. It's like buy a $4000 TV in NYC, then moving to California and TV isn't compatible with the cable company in the west coast. Make a phone that works on all carrier. Have an app that on the phone that I can chose what ver carrier to activate. We can put a man on the moon, we can do this.

posted on 08 Jan 2013, 15:36 3

4. jcpwn2004 (Posts: 314; Member since: 18 Jan 2012)


I'd be all for it, carriers are afraid because then they would have to compete on plans instead of being able to hide the phone costs in 100$/mo bills.

posted on 08 Jan 2013, 15:38 2

5. Jyakotu (Posts: 823; Member since: 12 Dec 2008)


There are plenty of prepaid options and even if you want to stay with a Big 4 carrier, most of them have prepaid options as well, which require you to pay for the phone upfront anyway. Still, I don't know if I'd pay $300+ for a cell phone. Sure, the monthly plan would be cheaper in the long run, however, with phones constantly updating and changing, it's kind of hard to spend that kind of money on a device unless you knew for sure it was going to be supported by the OEM.

posted on 08 Jan 2013, 15:49 3

7. torr310 (Posts: 452; Member since: 27 Oct 2011)


So that means T-Mobile is doing the right thing.
I hate the limited handset choices and bloatwares/slow update of the subsidized phones.

posted on 08 Jan 2013, 15:58 5

9. Bernoulli (Posts: 1619; Member since: 01 Sep 2012)


it couldn't get better, I'm with t-mobile and 5 lines with unlimited texting and all smartphones with unthrottled data we pay hardly 140$ a month, it couldn't get better than that, value plans are the way to go

posted on 08 Jan 2013, 16:24 2

10. akhi216 (Posts: 61; Member since: 01 May 2011)


It should pave the way for carriers allowing people who have good credit to pay unsubsidized prices for phones in installments, which should have happened in the first place to help keep monthly fees down.

posted on 08 Jan 2013, 16:43 2

16. Larry_ThaGr81 (Posts: 295; Member since: 26 May 2011)


That still will hurt their profits because all the consumers out their that don't have good credit won't be able to buy smartphones and tablets with monthly installments.

posted on 08 Jan 2013, 16:34 1

11. Larry_ThaGr81 (Posts: 295; Member since: 26 May 2011)


No, we the consumers should be asking all the carriers who choose to adopt this plan are they ready to see the products sales to a severe drop due to people being unable to afford these over priced smartphones and tablets. Let's face it, all the carriers will still overcharge for the phone because they want to make a profit on the products themselves and they will try to make up for the lack of product sales. Do the carriers want to loose the ability to keep consumers locked into two year contracts because we all know that the carriers make more money on a two year contract agreement over two years than it would cost to buy the phone out right.

posted on 08 Jan 2013, 16:40 1

14. Larry_ThaGr81 (Posts: 295; Member since: 26 May 2011)


If that's suppose to be a threat from Verizon CEO that they would like to see subsidies go, then they are shooting themselves in the foot and really opening up the door for people to jump ship as soon as Verizon does something that puts consumers at a disadvantage, which is becoming a common theme for them.

posted on 08 Jan 2013, 22:06

28. CRICKETownz (Posts: 980; Member since: 24 Oct 2009)


actually carriers would much rather you buy the phones outright instead of taking the subsidized pricing b/c that is straight revenue that they don't have to recoup from losing money on selling you a $650 for $200. if you're paying what they are paying for the phones (which they don't have to worry about making up the cost since you paid it) plus getting the monthly service from you that is a carrier's fantasy. it takes most carriers months of you paying for a service to start making the money up that they lost so if you just buy the phone that means the company starts making money from day one. your theory is backwards. the only thing there is a greater risk factor involved b/c that customer isn't under contract so the door is always open for them to leave.

posted on 08 Jan 2013, 16:38 1

12. Larry_ThaGr81 (Posts: 295; Member since: 26 May 2011)


Take Verizon for example 1 smartphone line nowadays would cost a miniumum of $70 per month excluding taxes over the course of 24 months, which adds up to $1680. The $70 dollars comes from their current pricing structure at $40 for the smartphone and $30 for 2GB of data.

posted on 08 Jan 2013, 16:52 1

17. phoenixpr (Posts: 167; Member since: 28 Mar 2012)


You all have it WRONG, I believe people will be willing to purchase the phone full price and not have it subsidies. If it's a phone that can be taken on to any carrier. But to pay full price and then hate the carrier. Then trying to regain your money back on eCrap (eBay) is a waste of my time. I would gladly pay $400 -$800. It's like buy a $4000 TV in NYC, then moving to California and TV isn't compatible with the cable company in the west coast. Make a phone that works on all carrier. Have an app that on the phone that I can chose what ver carrier to activate. We can put a man on the moon, we can do this.

posted on 08 Jan 2013, 17:05 1

19. Larry_ThaGr81 (Posts: 295; Member since: 26 May 2011)


Hell I'd pay full price with the understanding that I can take my phone to any carrier, but again not everyone has the means to be able to do that.

posted on 09 Jan 2013, 00:18

32. Mittal (Posts: 448; Member since: 14 Dec 2011)


i beleive so too buddy !!
Here in India, That is exactly the way it happens. Any GSM device runs on all carriers and we r not bound by any contracts. Its swell!!

posted on 08 Jan 2013, 17:05

20. Larry_ThaGr81 (Posts: 295; Member since: 26 May 2011)


The vast majority of phone carrier consumers are under contract now when they've always had the option of buying the phone at full retail and avoiding being locked into a contract. If people could afford full retail prices, I'm sure the idea of not being locked into a two contract alone would have been enough for many people to pay full price.

posted on 08 Jan 2013, 18:13 1

21. roscuthiii (Posts: 1873; Member since: 18 Jul 2010)


If Big Red's CEO is for it, then I'm certain this whole unsubsidized thing means just that. Unsubsidized... you pay the total cost up front. However, I don't think it would be exactly like buying an unlocked phone.

posted on 08 Jan 2013, 18:29 1

22. corporateJP (Posts: 1852; Member since: 28 Nov 2009)


LOL@all of you who think that this is a great idea, especially coming from the CEO of Verizon. I'm shocked it came out of his mouth and not that little jackyl CFO of theirs.

Here's where they'll get you: the phones will become unsubsidized, but the overpriced plan structure will stay the same.

Repeat: THE PHONES WILL BECOME UNSUBSIDIZED, THE PRICE PLANS WILL REMAIN THE SAME: OVERPRICED.

I'd guarantee it.

That's how Verizon operates these days, it's their M.O.

There's thousands of people non-contract on postpaid Verizon plans, a good portion bought equipment "unsubsidized", Verizon adds no incentive...zero. Your plan is the same unsubsidized or not, forget the "Keep Unlimited Data" carrot with the "BYOD" option.

Let me know when most of you wake up.

posted on 08 Jan 2013, 18:54

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


When the carriers drop subsidies, the main thing that entices the consumers right now: phones, will no longer be reason to attract consumers. It'll come down to network speed and pricing. T-Mo's 2 million iPhone users will be the best example. If one carrier start doing so and benefit from it... the rest will follow. That's just how it is.

posted on 08 Jan 2013, 22:30

29. CRICKETownz (Posts: 980; Member since: 24 Oct 2009)


call me crazy but being able to use my phone when i need to...also having ridiculously fast internet is not necessarily zero incentive. this article is completely mind-boggling...here you have people that are constantly griping about high bills - Verizon charges too much, yadda yadda yadda...but yet these same people are going to be okay w/paying $500 for a phone? bs. watch these same people gripe about the unsubsidized pricing if this becomes a reality. you have a family of 5...each paying $400-500 a phone? please. you want a lower bill? fine, but remember you asked for it so don't complain when the other facets of your service change (possibly to the detriment of your pocketbook) as well. remember, companies are gonna do what's profitable to the company first & foremost. if the customer benefits that's a secondary thought and that's every company under the sun...

posted on 08 Jan 2013, 18:35 2

23. pokerc (Posts: 57; Member since: 24 May 2012)


If Verizon likes that idea,it must mean that they'll make more money from it. It's not in the best interest of the consumer

posted on 08 Jan 2013, 22:46

30. CRICKETownz (Posts: 980; Member since: 24 Oct 2009)


me personally, i'm ok w/2 year contracts & i def. don't want to pay more than $300 for a phone. for example, just bought an iPhone 5 32GB at $299.99 w/contract (sold my GS3 $350 so kind of made out) but based on this new way of doing things i would of paid $749.99 for that same phone. that's ridiculous to me, for a phone anyway...for a house or apartment, that's totally fine - phone? no. the thing that doesn't make sense to me is that people will stay w/the same carrier for 10 years continuously off contract but will worry about a signing up for a 2 year contract. smh.

posted on 09 Jan 2013, 09:42

34. RedPhantom07 (Posts: 9; Member since: 21 Jul 2012)


I specifically switched to StraightTalk, bought an iPhone 5 at $650, so that in the long run I would save ~$900 in the course of those two years. If you can force a fight at the big carriers for service plans by making them compete without subsidization, you'll have much more affordable rate plans with good networks.

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