Verizon CEO McAdam is thinking about ending subsidized pricing

Verizon CEO McAdam is thinking about ending subsidized pricing
Lowell McAdam, at one time the CEO of Verizon Wireless, is now the Chief Executive of the parent company. With his experience running the carrier, he has been monitoring the customer response to the end of subsidized pricing at T-Mobile. At a company event in New York on Wednesday, McAdam said that it would be "pretty easy" for the nation's largest carrier to end contract pricing on new phones. He added that he would consider the idea if customers request it.

McAdam had made similar comments earlier this year 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.

source: PCMag

FEATURED VIDEO

55 Comments

1. Droid_X_Doug

Posts: 5993; Member since: Dec 22, 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: 871; Member since: Sep 09, 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: Feb 28, 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: 494; Member since: Sep 21, 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

Posts: 2315; Member since: Jul 30, 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: Oct 06, 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: 557; Member since: Apr 20, 2012

No argument on prices, but coverage isn't great.

18. CoveyD

Posts: 8; Member since: Nov 04, 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: 2383; Member since: Jul 18, 2010

I believe 'DFranch' was referring to T-Mo's coverage...

49. HäckeMáte

Posts: 168; Member since: Feb 28, 2012

COVEY learn to read... ALL of the comment, before you say something dumb

3. cwdavis84

Posts: 1; Member since: Oct 28, 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: 871; Member since: Sep 09, 2009

You know that saying about when Hades freezes over?

4. yonith

Posts: 228; Member since: Sep 11, 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: Nov 03, 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: Jan 24, 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: 871; Member since: Sep 09, 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: Apr 09, 2012

because you can keep using the phone for 2+ years, but dont have to keep paying the high monthly fee

5. bubbadoes

Posts: 1225; Member since: May 03, 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: Jun 08, 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: Apr 04, 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: May 02, 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: 1225; Member since: May 03, 2012

http://coverage.sprint.com/IMPACT.jsp?INTNAV=SJS:HE:Cov don't get LTE confused with 4G wimax

9. Jeradiah3

Posts: 1149; Member since: Feb 11, 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: Feb 28, 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: Apr 04, 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.

15. bubbadoes

Posts: 1225; Member since: May 03, 2012

i love it

16. iammobilechris01

Posts: 11; Member since: Apr 01, 2013

verzion is money hungry. Tmobile prices and service are best. Contracts are wack.

21. androiddownsouth

Posts: 598; Member since: May 02, 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: 248; Member since: Oct 17, 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.

Latest Stories

This copy is for your personal, non-commercial use only. You can order presentation-ready copies for distribution to your colleagues, clients or customers at https://www.parsintl.com/phonearena or use the Reprints & Permissions tool that appears at the bottom of each web page. Visit https://www.parsintl.com/ for samples and additional information.