Verizon chief McAdam thinks ending phone subsidies is a 'great thing'

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.

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.

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...

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".

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.

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.

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.

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.

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

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

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.

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.

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.

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.

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.

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.

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.

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

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.

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.

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.

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.

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.

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

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.

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

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.

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.

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.

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

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

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.

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.

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.

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.

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

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.

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.

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?

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.

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.

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.

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

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...