Android CentralAbout a month ago  Deutsche Telekom AG announced that T-Mobile USA would completely stop subsidising phones in 2013, and instead continue to offer what equates to interest free financing. The bright side for us as consumers is that the monthly bill gets cheaper because there is no equipment to pay for, and it makes it easy to bring your own device. Today the Wall Street Journal is reporting that Verizon Chief Executive Lowell McAdam is pretty interested in how all this will play out, and thinks it is "a great thing".

While he may like the idea of ending subsidies (what CEO wouldn't like to cut out a costly policy) he is not very sure that the customers will bite. AT&T Mobility Chief Ralph de la Vega also said that they are watching the T-Mobile strategy, and AT&T could make a similar move if it becomes popular.

As it stands now, neither of the big two US carriers think customers like the idea of paying for their own phone and saving money monthly. With good reason -- people hate change, and people hate spending hundreds of dollars in up front costs. But if Verizon (or AT&T) would cut back on the monthly fees like T-Mobile has done, we think this would be a great thing as well. 

What say you? Holler in the comments.

Source: Wall Street Journal

 
There are 91 comments

ithinkimjoe says:

We should all know by now that if VZW decides to end phone subsidies, they WON'T lower the monthly cost. Instead they'll just swim in the extra profits...

judasmachine says:

They will lower them to where T-Mobile's prices are right now (pre-death of subsidies,) and still be the most expensive (but the best coverage) carrier.

mwara244 says:

After my contract was up from my 2 yr with My D1 my bill did not change on Verizon, wtf? Even when the contracts up you pay the same amount, omly thing is Verizon is saving money by not subsidizing phones when you get them. It is well known ATT and Verizon were paying apple for the iphones and were not profiting for the phone itself. That's where the $30 upgrade fee for a subsidized phone came from to pay for new iphones subsidies.

Since when does Verizon give a Sh$t about customers anyways, people wanted unlimited data and they took it away, people who wanted shared data sure as heck didn't want an overly priced gouging data plan like the one they put in place, especially since LTE is cheaper to maintain than the previous.

shodges87 says:

Thank you for pointing that out about iPhones. I work at a verizon store and I don't think customers realize how close to full retail cost we actually have to pay for the phones from the manufacturer. It's outrageous. So many people break their iPhone 5 without insurance and throw a fit when we won't sell them a new one off contract for $650 and say things like "you'd THINK a company wold jump at the chance to make $700 in profit!" We literally make NOTHING from selling an iPhone 5 off contract. Honestly don't blame verizon, take a look at the outrageous prices the manufacturers themselves (apple, Samsung, etc) charge the cell carriers to carry the products. That's what's driving costs up.

mwara244 says:

After my contract was up from my 2 yr with My D1 my bill did not change on Verizon, wtf? Even when the contracts up you pay the same amount, omly thing is Verizon is saving money by not subsidizing phones when you get them. It is well known ATT and Verizon were paying apple for the iphones and were not profiting for the phone itself. That's where the $30 upgrade fee for a subsidized phone came from to pay for new iphones subsidies.

Since when does Verizon give a Sh$t about customers anyways, people wanted unlimited data and they took it away, people who wanted shared data sure as heck didn't want an overly priced gouging data plan like the one they put in place, especially since LTE is cheaper to maintain than the previous.

Think forward a bit. Multiband LTE devices, no more Verizon and Sprint CDMA games where they tell you what to do with the hardware you pay for, and being able to use any phone on any of the 4 US networks. Verizon would be forced to lower costs if they drop subsidies or people will just leave for AT&T or Sprint -- who will both have a pretty damn good LTE network by then as well -- or for whoever buys T-Mobile (lol).

TBolt2011 says:

I'm sure Verizon will still be trying to control 100% what YOU do with THEIR hardware...

briankurtz79 says:

Without subsidies there is no leverage to hold customers to a contract.

Duri says:

That is true. But competition is a good thing.

brendilon says:

What's more, it takes liability off the carrier.

icebike says:

Gee, then they would have to actually compete!

Look, they are still going to be selling phones. It will be exactly like T-Mobile, they will sell you a phone on installment payments, as a separate contract. They will secure that with your credit card. But then the contract is paid off, its yours and you no longer make that payment.

The carriers are seeing device prices rise to gobble up the available subsidy, and making customers pay for that out of pocket is their way of telling the manufacturers that they are getting too expensive.

estockda says:

Whatever happened to the FCC condition on the 700MHz auction's C-Block to require that the winner allow any device to use the network? Verizon won this and they still force you to use their phones.

icebike says:

You can do that, but good luck finding a phone from any other source that runs on their network.

Who else would sell a phone to work on their cockamamie conglomeration of CDMA, WCDMA, GSM and LTE in their specific bands? Maybe in 5 years when Verizon starts shutting down CDMA. But until they get that patch work Frankenstein of a network into the modern era, they will always be stuck supplying phones.

Homncruse says:

The short answer is because Verizon does some of their magic on other frequencies. 700 MHz alone isn't enough.

dan1431 says:

Jerry, I am not sure VZW will just remove the handcuffs so to speak regading devices activated on their network.

Even with multi-band LTE devices on the horizon, VZW has a track record of controlling the entire ecosystem. They claim that is what makes their network so reliable (and profitable) and I just do not see them releasing their grip.

Added to that CDMA is not going away anytime soon and as long as VZW uses CDMA for voice transmission, registration of the ESN/MEID is going to be required, which means you are going to be buying your device from VZW.

One last note, VZW said one can keep their unlimited plan as long as they buy their phone at full retail, i.e. no subsidy. I am sure at&t would have done that as well if they were not GSM (thus being free to buy a device elsewhere pop in a SIM and go) and could ensure that all users were required to buy their handsets directly from at&t. Instead at&t had to throttle grandfathered Unlimited users and hope and pray they would jump over to a tiered DATA plan or even better (for at&t) a Shared DATA plan.

Selling handsets directly is big business as it allows the carrier to control everything and ensure that users do what they (the carrier) want with their (the end user) handsets.

Dan

aergern says:

Yes, but VZW has said over the last few years that they want CDMA to go away by end of 2014 and that most handsets will be LTE using VoLTE for voice ... so if chip makers can make multi-freq chips then this will be a non-issue.

Verizon is like Apple in regards to their obsession with control. Verizon will find a way to keep it all under their roof.

DWR_31 says:

Verizon & AT&T are scared.

DWR_31 says:

Now if they stop subsidies, what would be the incentive to sign a contract?

Bryce Haryu says:

The fact youll have to pay full price for a device unless you sign a contract for one.

I agree. This is just lip service from the Verizon guy. The only reason Verizon would go that route is to collect the extra profits for the execs.

judasmachine says:

Well there goes my tax return. Every year...

TBolt2011 says:

I think the hundreds of dollars up front thing will be the deal breaker in this. It could even be a hinderence to moving phone technology forward since now consumers would have to drop $750 up front for a "nice" phone, and manufactures might cut out new technology as a result of cost.

Terrible idea, in my opinion. This only helps Google and the Nexus series get sales though, speaking short-sightedly.

movielover76 says:

They have financing (you don't have to drop $750 all at once) and your savings on service more than make up for the cost of the device over two years, sadly it's you and most americans who are short sighted, only looking at the sticker and not considering the true cost of the smartphone over the life of your contract.

TBolt2011 says:

First of all, that's a terrible generalization. I actually have a lack of credit because I believe firmly in paying upfront for things I can afford. But to pay $750 for a phone that you can just add to a monthly bill you're ALREADY paying anyways is a little different in comparison to maxing out a credit card just to get 5% back, which is more like the type of situation that you're insinuating that I enjoy getting myself into.

Edit: I believe that there should be the option is all. If you can afford $750 out of pocket on a whim then by all means pay it and get a new phone whenever you want and paying another however-many-hundreds for that one. But to expect all mobile customers to be able to shell out that kind of cash like nothing is a pretty optimistic thing.

movielover76 says:

I don't know what t-mobile's credit requirements are, for people who can't meet them maybe this would be a problem, but I suspect that for the vast majority of people if you can get accepted for a post-paid account, financing will be available. If it's not I do understand that that could be an issue for some people.

And I'm sorry it's not like signing up for a credit card for 5% cash back. credit cards usually have interest, this is no interest. The difference is extremely subtle, you either sign a contract agreeing to use and pay for service for two years with a subsidy (effectively paying off that device over the course of the contract )or you sign a contract for a service plan and a contract for a financing agreement. Either way you are agreeing to defer paying off the cost of the cell phone over the course of your contract, you pay for it over the course of the contract either way.

In fact if you believe so firmly in paying for things up front, your words not mine. You should prefer to pay for the phone up front and not defer the cost over two years, Financing is the same as what your already doing and you'll save a little money in the long run. At least with T-mobile's plan, I cannot comment on what AT&T or Verizon might do when they eliminate subsidies, if the savings on the plan does not at the very minimum make up for the cost of the phone, then customers are getting a bad deal.

gtricecakes says:

There is an option now, but the problem is, we all pay the same, just some are on contract. People can buy phone outright, but the mobile plans are still ludicrously expensive. The idea is the get the overall plans cheaper.

Lots of people have bad credit these days, but that goes with the territory.

misterfan says:

From your response I gather you don't understand how it works. TMobile's monthly plans have been reduced. If you own a phone (Perhaps you bought one off ebay/craigslist or simply an old phone) You simply pay for the TMobile service at around $50-something dollars a month.

If you want to buy a new phone from them, you can either pay the entire price, or $199 down and pay monthly at about $15-20 a month on your bill costing you around $65-70 a month for service and a phone. Once your phone has been paid off, your bill goes down to the price of service (around $50-something dollars a month).

bp3dots says:

$750 is more than any phone costs. (except maybe the big storage iPhones) At $600 which is most flagship type devices, someone could buy one every year by saving 40ish bucks a month. Half of that and stay on the 2 year upgrade schedule most contracts offer. A little planning and patience makes this much easier. And if they drop the plan price to be competitive, you'd still be saving money at the 2 year pace.

fechhelm says:

The nexus 4 is $300-350 and one of the best phones available right now. And besides I believe the $700 prices you see are inflated prices from manufactures because they know the carriers are going to subsidize. So to end subsidizing would ultimately lower the msrp on all phones.

Ravi Shah says:

Stop it, your starting to make sense!

icebike says:

Quote: "I actually have a lack of credit because I believe firmly in paying upfront for things I can afford."

Well this will be your opportunity to establish a credit line.

They will sell you a phone, because they know you have been paying our bill every month.

You can pay it all at once, or buy it on installment payments, in which case the phone will be on a separate contract, one that actually ends.

You will have exactly what you want.

aergern says:

Why does it work so well in Europe? :)

Whether everyone is using the same GSM frequencies or in our case the same LTE frequencies ... this should work. If they are willing to float folks to pay over say a 12 month period and it's stated up front ... unlike today ... then what's the problem? You think they just eat the subsidy? Oh hell no. The customer pays that part of the cost of the phone as well ... they just don't know it today.

I think having all carriers on the same frequencies and being able to jump when folks want to jump is a good idea. It might cause some real competition instead of the carrier lock in we have today.

" now consumers would have to drop $750 up front for a "nice" phone"

The only way that becomes untrue is if Google does what they did with the nexus 4 for ever nexus succeeding it. Google got me off Verizon because of the nexus 4 and I'm very happy. Granted, my Verizon contract isn't up and I'm still paying for the phone (it's really just a wifi hotspot now since it's a rooted gnex) and that still works to my advantage since I don't pay for 3rd party internet right now. For both phones i pay under 100 dollars. 30 dollars on t moobile, 60 on verizon with unlimited data (i use google voice for texting which saves me 20 per month and i also have a 22% discount since i was :-D a fedex employee). I'm never going back to Verizon. Tmobile can only improve now that they've bought metropcs.

edmicman says:

If they actually did lower the monthly plan costs then I'd probably get behind it. But at this point if the monthly cost of a plan is going to be $50-$80 on or off contract, I'd much rather get a subsidized phone over those two years than not. I plan on using my phones pretty much for 2+ years anyway...I'm not going to be dropping $500+ for a new unsubsidized phone every year, either.

movielover76 says:

The chance of AT&T and Verizon reducing rates the same as T-mobile are unlikely, even if you only consider it as a flat $20 off a month, let along if you consider it as a percentage of the entire bill. They would lose money as they can't collect their subsidy fee after the device is already paid for.

T-mobile's new plan is courageous, hopefully people realize that this will save them money, with 0% financing the only difference is paying your cell phone company less money over the course of your contract, but the problem is people are stupid.

Your still locked into to pay off the cost of that device over a two year contract, plus more when you've paid off your device. Other providers just don't break it out up front, like T-mobile does with it's value plans.

NexusKoolaid says:

One thing that different for TMobile is where you can get your phones. Being a GSM carrier I don't have to get a TMo phone, I can get a nexus, get an international version, or bring an unlocked device purchased from another carrier. That said, would Verizon be willing to loosen up on their control of what devices can use their network, of would I have to pay Verizon's unsubsidized price for one of the devices they choose to offer?

bsannes says:

If Verizon does do this and it's true that any phone will be able to use any network. I think it will push alot of people into a Nexus device. Think about awesome specs and up to date software at a cheap price.

Bkofman says:

At least one US service provider is already offering that option - Ting. No financing, though, you have to pay for the device upfront. They use the Sprint network.

silverfang77 says:

Sounds like a fine idea to me. No contract means VZW can't force people onto those godawful shared plans.

estockda says:

I would love this! Once we have multiband VoLTE phones, this is a possibility.
If you want cutting edge, you could get a new phone every year (selling the old phone on ebay/CL) or if you don't care, you'd save a TON of money holding onto your phone for more than 2 years.

Also, it takes carriers out of the equation on software updates. Once the manufacturer releases an update, you could get it.

movielover76 says:

I already do this with GSM pentaband Nexus devices, and prepaid. It's much much better than any contract and subsidy.

What do you mean, the bill gets cheaper? They will keep the bill the same, and they'll all still use proprietary LTE radios that aren't interchangeable.

bed269 says:

Sounds good but I doubt Verizon would end it because the new phone locks you into a new 2 year contract. Churn would go up if customers could come and go when they wanted.

dahova44 says:

Don't be fooled. Doing away with the subsidy will only allow then to add a charge to use their network. So in the long run customers are still losing.

SoreAintya says:

Answer me this, what incentive would customers have in resigning a new contract if subsidiary phones are offered?
How do they plan on keeping "loyal/long term" customers from jumping ship every few months/years when the competition has a better device or plan?
No contacts =no ETF

hegemon13 says:

I don't know. Maybe the old-fashioned way: provide an excellent product and/or service at a fair price with stellar customer service. People generally switch because they are dissatisfied, not to save a few bucks. Heck, people will LOSE big money on termination fees to leave a carrier because of dissatisfaction. Contracts do little to prevent churn in the long run, but rather only control WHEN it happens SOME of the time.

This move is a great one for customers, but the biggest carriers will probably never allow it.

bp3dots says:

Verizon operates on having the best network. They don't ever deny being more expensive, and usually have a good selection of phones.(at least for most consumers) People keep renewing with them knowing all of these facts.

Let me rephrase it “Stupid and lazy people hate changes” smart consumers know what they get into.

iowabeakster says:

This would be big change for us in the states. People are already complaining, above, about the "extra" cost of the phone that would cause. They are already paying that cost, and substantially more, with the current subsidized model. It's just spread out over the length of the contract. And currently they lose the ability to freely make changes, as changes in their lives happen. 2 year contracts would likely become something for the history books. Or at least signing a long contract would result in lower payments every month!

As long a google keeps the prices of their Nexi line right where it is. Google and Android would see a huge bump. I think Apple must be shaking in their boots at this idea because the carriers subsidize the iphone more than other phones. 16gig iphone is is $650, 300 dollars more than than a 16gig Nexus 4.

This would probably be good for HTC, and other smaller manufacturers, as "carrier exclusive" phones would likely begin disappearing at the same time.

I wonder if the instant sell-outs of the Nexus 4 (and long line of people still wanting it) with those people jumping to T-mobile or MVNOs has anything to do with this?

All I can say is this would be good for all of us. Taking the carriers out of the retail phone part of the business would be great news. Bloatware, locked bootloaders, slow updates, and of course most important... the savings.

gordol says:

As long as the end result is either the same or lower monthly charge, I do not see a problem with this. The monthly charge should be no higher than current when using a financing option, and significantly lower if bringing a compatible phone in with you. For example, my phone's subsidy is now repaid and I'm eligible for a new one. If I were to continue to use this phone on a new plan under this method, my monthly bill had damn well better drop by at least $25.

lgoldstein83 says:

As a Verizon customer who is still holding on to his Alltel plan with unlimited data kicking and screaming I can see this being a good idea for others. I am already at the point where a subsidized phone is no longer in my future. Of course if I were to switch to a new plan without the subsidy built in I would lose what I have. I think for the casual user the current plan is the way to go. It's for the rest of us who would like to have the latest and greatest phones that this sort of plan would work out the best. I like the idea of having the choice to subsidize a phone or have a cheaper monthly charge. Different plans for those with a different budget.

TenshiNo says:

I think if they went to a "financing" model, instead of a "subsidy" model people would be OK with it. Imagine if you wanted a new Galaxy S3, but couldn't pay $600 upfront: You pay $200 (just like you do now), then you'd get billed the (say) $50/month for service, plus $66/month for 6 months. And, once you had paid for the phone, your monthly service bill would be just the $50.

And, just like financing a car, if you can afford top-of-the-line, you get one a little cheaper to lower your monthly rate.

Right now, we're paying for the service and the phone together and we *never* finish paying for the phone. The difference is merely perception.

Suntan says:

I am all for this utopia where contracts are done for, monthly prices go down because subsidies aren't baked in, people can change carriers at will, etc. etc.

But I just don't see that being reality. If a VZW high-up thinks it is a good idea, he's already got a plan for making higher profits on the new venture. Hello increased "device activation fees."

The only thing that will improve monthly service costs is a very robust and competitive service provider business segment. Come on Sprint, ATT & T Mobile, get your LTE all over the map!

That said, I do think it would do good things for the handset market. No more having headsets with MSRPs twice as expensive as tablets with 4x the screen size and battery capacity.

-Suntan

misterfan says:

I think where the average consumer will turn and look the other way is when the word financing comes in. It's a harsh word considering regardless of credit it's 0% interest. Every dollar you pay goes right to your phone and once it's paid off, you're only paying for service (as it should be).

The article is right though, people hate change and a lot of people feel fine letting the carrier take care of everything. They make a monthly payment and everything is covered with nothing for them to *think* about when in reality they could be saving money.

TenshiNo says:

Sadly, I fear you are exactly right about people's mentality. It's an "invisible expense" because it's bundled into the service cost, so people don't think about the fact that they are, in effect, "paying off" their subsidized phone *forever*.

Imagine if you offered someone a car loan that they never finished paying off. I wonder how they would react to that idea? ;)

misterfan says:

Exactly!

Has any service provider ever cut costs for having your own device (or paying full price for one)? In my experience they do not.

movielover76 says:

T-mobile value plans that don't include a subsidy are $20 less than their classic plans which included a subsidy and are being phased out. Look at prepaid on GSM BYOP plans you can see the cost saving even more there.

Duri says:

I think that is a good thing. You in the U.S. pay very high fees. 100 USD a month is too much. Europe is expensive and there is a high VAT even though there are less mobile charges. For example, for unlimited calls, SMS and internet pay on O2 (telefonica Slovakia) 49 EUR max. And in Slovakia it includes 20% VAT. I think subsidising phones keep handset prices too high and spoil the competition. Customers pay unnecessarily extra profit to provider and manufacturer. Mobile operator has to provide a service rather than selling overpriced phones.

Go Android! says:

There has to be a catch if Verizon were to reduce end phone subsidies and reduce their prices. What's in it for them?

Plus, the only way I'd support this is if Verizon included all US LTE bands in their phones and had VoLTE, so I could take my phone to another carrier.

The big downside to this is it would hurt manufactures and technology. They currently charge whatever they want for a phone because the consumer doesn't have to worry about the price. Then manufactures finally would be forced to cut prices and features to compete with the Nexus 4.

TenshiNo says:

Not necessarily. You're assuming the price is the ultimate driving force behind all expenditure, which is simply not true. While the cost of an item certainly plays a part in the buying decision, and some people would undoubtedly be drawn towards cheaper products, the end result is not that much different than what we have now.

There is also an outrageous markup on some of these devices. Case and point: Best Buy currently offers the Samsung Galaxy S3 for $699, but I can walk into a Sprint store and buy the *exact* same phone for $549. Best Buy is charging a $150 fee on people who don't bother to price shop. The Note 2 from Best Buy? $799. Got mine from a Sprint store for $649.

Moral of the story: Best Buy is most certainly not always the best buy.

Well, actually, it's that you should always do your homework before making a large purchase, but I don't like Best Buy, so...

:)

TenshiNo says:

I would love to see different "non-subsidized" rates. I frequently buy my phones outright. I paid full-price for my current Galaxy Note 2 (about $700 after tax) because I was not eligible for upgrade. But, even if I hadn't, I would still be paying the same amount after my old phone was supposedly "paid off" and I was no longer on contract. Just like I will be doing with the Note 2.

Subsidized phones is the greatest trick the cell phone carriers have ever pulled on the american people. We need to stop "subsidizing" the phones and start "financing" the phones.

Think of it like this: imagine you bought a car that was subsidized by a gasoline company. So, once you made a small down payment, you paid higher gas prices and that partially paid for the car. But the difference is that, on a normal car note (financing) the car is eventually paid off and you no longer pay that bill. With the car paid for by the subsidizing, you will effectively *never* be done paying for the car, since you are locked in to buying the more expensive gas.

StuartV says:

I don't get what some of you people are saying.

1) You can go buy a phone from whoever you want and bring it to Verizon with no contract (or, at least, no contract that has a penalty for leaving whenever you want to). I bought my current phone on CL and activated it on Verizon. And kept my Unlimited Data plan. The phone just has to be compatible with Verizon's network. I.e. you can't buy an AT&T phone and use it on Verizon.

2) Where did anybody say that, if Verizon followed T-Mo's lead, consumers would ONLY be able to get a new phone by shelling out full price up front? I don't see why they'd be any different than T-Mo on that, either. Which means you'd have the option to supply your own phone, buy a phone from them and pay full price up front, or buy a phone from Verizon that is financed, so your bill is higher for the year or two that you're paying off the phone. Whether your bill stays the same and you bring your own phone (or buy up front) and your bill goes up $20 a month (or however much) and they give you a phone and a 2-year commitment, or your bill goes down and you bring your own phone and your bill stays the same and they give you a phone and a 2-year commitment is not the issue.

The point is, with the T-Mo approach, you have a choice, you can pay less and supply your own phone (whether you get it somewhere else or pay full price up front) OR you can choose to pay more and have them supply a phone and you accept a 2-year commitment.

I totally WISH Verizon would do this. It really irks me to know that I can get a phone from CL and bring it to Verizon and I still have to pay the same price for my service as somebody who comes in and gets a $400 discount on their phone, even if we're both on Verizon for the next 2 years. For that 2 year period, Verizon is basically subsidizing the guy who got the new phone to the tune of $20/month, they're subsidizing me 0, and yet me and the other guy both pay the same for our service. That's BS. And that's what T-Mo's plan addresses.

pa7tip says:

The difference is you can leave VZW any time you want to, subsidized guy cannot. He gets the subsidized for his 2 year commitment.

StuartV says:

So what? The fact that I COULD leave doesn't mean it costs VZW any more to service my account that it does to service the guy who got a subsidized phone. So, there's no reason I should be paying just as much.

How about this: I bring my own phone and still sign a 2-year contract. Why should I be paying as much as the guy who gets a $400 discount on a phone with his 2-year contract?

misterfan says:

Yup, and with the new plans at TMo, the consumer wins... or loses less. However you want to look at it.

budwizer says:

A lot of the comments on here seem to be confusing "no subsidies" as equating to "no carrier contract". I don't expect that would be the case. Carrier contracts would still exist unless you were a month to month user. The benefit would be reduced monthly costs.

I buy my phones outright right now on Verizon as I don't want to lose my unlimited data on 3 of my lines. Having a cheaper monthly rate is appealing however I would expect to still need to be on a contract.

As far as carrier incentives they could reward loyal customers with a $100 or $200 service credit option every year or two years in lieu of the subsidized phone you get today.

StuartV says:

No, we're equating "no subsidies" to no Early Termination Fee. If you bring your own phone, then even if you have a contract, you can still leave any time you want without paying any penalty.

Jotokun says:

Great move on GSM carriers. Suicide for CDMA carriers since you cant bring your phone to other carriers.

If I bring my own device, why would I want to lock in an uncompetitive price for two years? I'm better off going prepaid and having the option to switch carriers for better deals whenever I want.

dcreed says:

Daughter's contract is already up, wife's is up in January. Both are due for new phones. I'll be considering T-Mobile very carefully.

campy614 says:

On T-Mobile, there are two plan options - the Classic and the Value. Please allow me to explain them both with examples that I'm pulling straight from the website.

Let's say you want a GS3 on T-Mobile, with unlimited everything.

Classic:
The usual "subsidized" model, of which all 4 US carries use to some degree. The GS3 subsidized price is $280. The classic plan unlimited everything plan is $90 per month. Without other fees (which will be higher for a subsidized plan), you'll pay $2,430 over the course of a 2 year contract for both the phone and the plan. This does not include higher fees that will be added to this plan.

Value:
The cost of the phone is $600. Usually they'd have this as $200 down payment (and sometimes they'll have the down payment either for lower or free, like they did on the holidays). This leaves $400 for the rest of the months. The value plan unlimited everything is $70 per month. I think on T-Mobile they finance it for 20-21. If it's 20 months, then you wind up paying $90 a month anyway. And after month 20, it drops to $70. If 21 months, then you'll wind up paying less than $90 a month. Plus it drops to $70 after the 21st month. In total you'll pay $2,280 for the phone and plan. You'll own your phone. Plus the fees are lower.

In total, pre-tax and fees, you'll save $150 bucks. Post taxes and fees, and you'll save even more. Plus you'll own your phone.

This will be even better cheaper if you have your own phone and pick up a value plan. The rates and fees will be lower.

misterfan says:

The beauty of the value plan is flexibility. You can pick up Nexus4 (assuming it's in stock) and end up paying around $1980 saving you an additional $300. This being one example, certainly there's a wonderful pre-owned market out there too for any device you like etc...

Wookie Claws says:

For us phone junkies this could be a good thing. If you could buy a phone for $200 down and make monthly payments on top of your cell plan to pay if off you could conceivably be eligible for a new phone as soon as the old one is paid off. Sell the old phone on e-bay and start over.

Now if VZW and AT&T would lower their monthly fee, that would make it a golden deal. If they just want to charge us for the phone on top of what we are paying now; I'd rather leave things as they are. Most companies have a hard time lowering prices though.

Cliffs71 says:

I don't understand the controversy. I remember paying $600 for my first (!!8GB!!) iPhone in 2007. No subsidies. No questions. A ton of people bought brand new iPhones without a subsidy and nobody ever thought twice about it. I think this practice would serve people very well. When we moved to a new home a few years back (2008) my AT&T service was totally worthless (at least more worthless than usual). But what irked me most was that I could no longer use the phone (at this point a 3G) that I had just spent a few hundred dollars more on any other network. Lose the service and you lose use of the phone you had actually paid for.

I just recently moved over to T-Mobile after years with Sprint and about 9 months of 2012 with Verizon and I can say without a doubt that my monthly bill is the lowest I've seen in YEARS. Removing subsidies is only going to help that. Phones are becoming more and more like computers or Blu-ray players or gaming machines. You don't get a MacBook or Blu-ray player subsidized because you surf the web or watching a lot of movies. I think it's going to be hard for some people to wrap their heads around why this is so much better for them, but that's because most people don't tend to think more than an hour ahead.

I would hope this would also do away with the "XYZ has THIS kind of phone and ABC has THAT kind of phone." It would allow a system where manufacturers could make the phones they wanted work across all carriers and let the customer decide the carrier based on their service and NOT on their devices. It would force the carriers to really focus on service. Would AT&T potentially be as big as they still are if they didn't have the iPhone there to carry them for so many years? Talk about a subsidy... AT&T wasn't subsidizing the iPhone so much as the iPhone was subsidizing AT&T's shitty service.

StuartV says:

Seriously! People are just not reading, then jumping to conclusions.

If Verizon does this, it won't change anything compared to what you can do now - EXCEPT that it will allow people who want to bring their own phone (or pay full price up front) have the same plan for cheaper than other people who choose to sign a 2-year contract and get a new phone for a discounted price.

Whether this happens by Verizon lowering the price for people not on contract or by raising the price for people on contract is moot.

My bet is that they will lower their prices for people not on contract. They are already the most expensive. AT&T's network coverage is catching up quickly which means I suspect there are a lot of people (like me) who would have never considered leaving Verizon a year ago (just because of the superiority of their coverage) who are looking around now and seriously considering jumping ship to save money. I know I am (especially since I want a Note 2 and the AT&T version of that is better than the VZW version). If they keep their prices the same and tack on more for people who are financing their phones (i.e. signing a 2-year contract in order to get a discount), I suspect a LOT of those people WILL go to another carrier - and I suspect Verizon knows it.

fechhelm says:

If all carriers ended subsidies and everyone had to pay full price for a new phone you would see the prices of new phones drop because manufacturers would have to compete with each other on a level playing field. As it is now the prices are extremely inflated and they don't care because the carriers are subsidizing the phone.

blarelli says:

I switched to prepaid well before T-mobile stopped their subsidizing phones. Anybody capable of basic math can see it is much cheaper, even after paying full price for a current generation super-phone.

PRyan0417 says:

I've been doing this on T-Mobile since they started doing it about 5 years ago. Love it.

epperly.k says:

Me think it would be long time before I would be purchasing a new phone. Up front cost too high.

JeffDenver says:

The only people in favor of this are the ones who can afford to buy a good phone retail.

Sorry, but that leaves out a lot of people. Thats why this is not going to work. Look at the phones most people have on Cricket and contrast and compare with Verizon.

The "bottom line" is not the only variable here. Subsidies are popular for a really good reason.

Who? says:

You're not reading. And AC's analysis is incoherent. They say that T-Mobile offers interest free financing, so you're still not paying full price up front, so there's no up front sticker shock for consumers.

baerry says:

I have always bought my own mobile phone and found it always strange that in the US you only get a phone with a new serivce contract.

Keep a phone for full two years? I wouldn't want to that ever.

PhiPsi32 says:

I believe the other comments indicate that T-Mobile has a financing plan that allows you to place a deposit and pay for the phone over time. It's a good deal. When the phone is paid for your monthly bill goes down. If want a new phone, great. If you are happy with the one you have, you save money. And I see this boosting the secondary market as well. You can sell your old phone and use that as the deposit for the new one (in some cases anyway). I don't see the problem. It actually gives the consumer more options.

heathroi says:

Did the carriers always have subsidised phones even in the dumb phone days? if so why did they start doing that? if one can answer that then you'll be able to explain why they still do it? my gues is that the number of people taking up the brightest and newest wouldn't justify the expansion of the network except in major centers.

E90 Commie says:

In Sweden, when subsidies were replaced with monthly installment plans, people were equally concerned about the carriers increasing their prices - but that was completely unfounded.

A Samsung Galaxy Note 2 can be bought for approximately $50 per month including monthly installment and 5 GB of data for example. You usually pay $100-150 something in store. If you sign up for an "Unlimited everything" plan where the data is unlimited or 15-40 GB for example (on 4G LTE plans), you can get the device "for free" and pay around $60-80 per month.

Originally, Sweden employed subsidies very similar to the US. A device could cost $299 in store and then 24 months of contract with very high rates (monthly cost $25-30, ¢80 per minute daytime, ¢30 per minute during nights and weekends). This was for talk (I am talking about the 90s).

When the subsidies ended, it happened gradually and monthly installments took over. Now, you select how much you want to pay per month and the price of the phone adjusts accordingly. Since there are competition among the retailers, there isn't really "elevated MSRP" (even if the carriers can have that). If you want to buy the phone outright, go to an independent retailer.

Those "$799" that is claimed as "full retail price" here in the US are nothing more than a fantasy, an elevated price meant to give the impression that "only $199-299 on contract" is a "bargain". Since a Note 2 imported can be bought for $600-680, the US carrier pricing is... very elevated.

With monthly installments, a "normal" price for a Note 2, US edition unlocked would be like $600 or perhaps less. I.e. full retail is $600, then you can pay for example $20 per month in 24 months in installment and therefore only pay $120 in store. Or select an installment of $10 instead and pay $360 in store etc.

It works perfectly in Sweden and it could work here too.

It is also necessary that the US finally reaches device standardization. I.e: ONE device for all, not 4-5 different versions of it. One Note 2 for example. One HTC One X etc. Not "Note 2 AT&T" or "Note 2 Verizon".

nsumner#AC says:

Here in Israel up to about a year ago things were much like in the states. But now well things are simply better.

1: Due to major increases in competition the monthly bills fell (unlimited everything (normally meaning 4-5gb of data), unlimited SMS (&MMS), Unlimited Talk & even unlimited calling to many other countries for a little less than $25/month (that is $25 after all taxes etc) but no phone subsidies.

Every network in Israel is now GSM or in the process of moving to GSM (the smallest network is iDEN and that is being migrated to GSM). The ministry of communications mandated about a year ago (maybe a little more) that every phone must COME unlocked, and even old phones had to be unloked by the providers. Fair enough, you bought the phone, you paid for the phone why should it be locked?

You can still buy your phone directly from a cell provider but you almost always pay TOO much (although they allow you to pay in 36 payments). Instead you can buy it on the open market and pay less, way less... The provider I am with even gives insurance etc, just bring in any phone they also sell (annoying but fair enough, they can't support every GSM phone in the world), to confirm it is in good working order and away you go... Of course when I got my S3 the people that sold it had not flashed on an Israeli ROM with Hebrew (or to be more precise exposing Hebrew) and the provider kindly offered to charge me $25 and flash on their ROM. Needless to say I didn't pay their $25 and 3 minutes later flashed on their ROM for free (long gone of course but had to prove the point).

Moral of the story, phone subsidies only work as long as you are paying too much on the cell service in the first place. But on CDMA networks you won't really get competition on the phones will you...

DC Damien says:

I buy all of my phones off of Craig's List as it is. No subsidy. But that doesn't reduce my monthly bill. It does keep my unlimited data. So it seems to me that if they drop the subsidies they probably won't drop the fees so we'll have to buy our phones and end up with the same cost at Verizon. The new share everything doesn't help. it saves $10 a month. big deal.

Derek32880 says:

I myself think this is a great Idea... as long as they lower the cost or at least offer something better. T-Mobile has 1 plan for this set up and it's the $70 unlimited plan which gives you unlimited talk, text and Data. While this might be a good deal/plan for some it's not for others. Some people (like myself) don't really want an unlimited plan but wants something better than what I am paying now as it is I am paying $90 for the family share plan with 1 line which give me unlimited talk text and 1GB of data this to me is unacceptable especially with how much Data 4G LTE will use when it becomes available in my area I recently emailed Dan Mead President and CEO of Verizon Wireless and explained how I thought this was an excellent idea with reasonable prices the plans that I gave was $50 for unlimited talk, text and 10GB of data this... to me is still a bit pricey but reasonable and much better than the measly 1GB I get now. The $40 price I pay now for just having a smartphone would actually go toward the price of the phone every month. I would still be paying the same price I am paying now (till the phone gets paid off) then I have the option of going down to $50 a month for the unlimited talk, text and 10GB of data (or buy another phone and keep the same price) there were other plans which offered unlimited talk, and text but also $55 15GB $60 20GB $65 25GB and $70 same as T-Mobile unlimited Data

brassmaster says:

I'm all for them getting rid of phone subsidies if they cut phone priced by 50% across the board. The Nexus 4 is arguably the most advanced phone available right now, and it costs $300, $350 for the top model. There is no reason that any phone should cost more than that. They already make insane profits on monthly service, and apparently they make 100% profit on the phones on top of that. This needs to stop.