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Verizon CEO: Consumers Still Want Handset Subsidies
CEO Touches on the New Sprint, T-Mobible Subsidy Plans
by Karl Bode 08:09AM Wednesday Jan 09 2013
Verizon Wireless won't officially unveil their fourth quarter 2012 earnings until January 22, but Verizon CEO Lowell McAdam insisted that the company had its "best fourth quarter in the history of Verizon Wireless," adding 2.1 million subscribers on the quarter. Speaking at a Citi conference in Las Vegas, McAdam praised SoftBank's acquisition of Sprint, insisting that "is far better than two strong carriers and bunch of weak carriers that are having a hard time meeting their capital demands."

In a Reuters interview McAdam also touched on T-Mobile's recent announcement that they'd be eliminating handset subsidies this year entirely:
quote:
He said he is open to eliminating subsidies on mobile phones that sharply reduce the cost of devices to consumers, but said buyers now prefer paying less up front and paying higher service fees during a long-term wireless contract...."It's very intriguing. Every carrier has thought about doing away with subsidies," he said, but "I don't think U.S. consumers are ready to buy an iPhone for $700."
Granted T-Mobile's plan involves also letting users pay $15 to $20 a month on top of a reduced wireless bill in order to pay off their device, something McAdam glosses over. T-Mobile's killing subsidies because they're a pesky market upstart; it's unlikely that duopoly-powered Verizon Wireless intends to follow them any time soon.

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DataRiker
Premium
join:2002-05-19
00000

2 edits

A good start.

Anything the encourages people to buy unlocked devices outright is a good start to eliminating the credit traps of the telco's

There is a huge value market of slightly used smartphones that can be had for almost nothing.

Transmaster
Don't Blame Me I Voted For Bill and Opus

join:2001-06-20
Cheyenne, WY
Reviews:
·CenturyLink

Re: A good start.

About time the European model is where to go. You own your device and can pick a your service and can switch much easier. Which makes for some very interesting relationships between carriers and their customers.
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I am quite sure now that often, very often, in matters concerning religion and politics a man's reasoning powers are not above the monkey's.
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NeoandGeo

join:2003-05-10
Harrison, TN

Re: A good start.

The European model sounds nice, but you're still screwed when you pay $600+ for a phone that should be sold at half that. Both models suck and treat you to either missionary or doggy style rape of your wallet.

mech1164
I'll Be Back

join:2001-11-19
Lodi, NJ

Re: A good start.

Yes that is always a steep cost, but if people won't pay that prices will fall. Look at Google with the N4, they can't keep it in stock cause of the price. Now though lets take that 600 you mentioned. If you have a cheaper plan that works for you. You can actually save over time. Problem is people want cheap up front but don't look at the total costs.

MovieLover76

join:2009-09-11
kudos:1
Do your homework on European wireless plans, they pay a lot less than us per month even after you consider the $20 or so a month that goes to subsidies. And the high MSRP's can be worked around by buying second hand, from ebay or something along those lines, I've outright bought and sold countless phones on ebay and you can get phones that are only 6 months old for half the MSRP.

Would it be nicer if the MSRP's dropped, no doubt. But contract less plans which are in the majority overseas, and inter operable phones that you buy outright drive down service prices.
Telco

join:2008-12-19
Both models do not suck and this is illustrated by actual data. We have one of the most expensive cells services in the developed world.

88615298
Premium
join:2004-07-28
West Tenness
said by DataRiker:

Anything the encourages people to buy unlocked devices outright is a good start to eliminating the credit traps of the telco's

Who says this is unlocked and you still have to sign a 2 year contract.

MovieLover76

join:2009-09-11
kudos:1

Re: A good start.

You can get the same unlimted voice/text/data on prepaid monthly 4G if you don't want the contract and can pay for the phone up front. While I can't promise that every phone is unlocked, a number of t-mobile's phone do come unlocked.
and you can simply buy an unlocked phone somewhere else and bring it to t-mobile.

DataRiker
Premium
join:2002-05-19
00000
said by 88615298:

said by DataRiker:

Anything the encourages people to buy unlocked devices outright is a good start to eliminating the credit traps of the telco's

Who says this is unlocked and you still have to sign a 2 year contract.

You can bring your own device. You don't have to. I did.
rradina

join:2000-08-08
Chesterfield, MO

Of course we want subsidies...

Is it really a choice to pay $X for monthly service, $199 for a new iPhone with a two year contract or $X for monthly service (same price!), no contract and ~$600 for the phone?

Right now I'm looking to make a change because I have an iPhone 4 and I'm four months past my two year contract. My AT&T rates didn't drop when I fulfilled my contract so where is my incentive to stay?

If the carriers would offer $Y for monthly service and no subsidy and folks could see that the subsidy is built into their price, then we'd have a choice.

I kind of like the idea T-Mobile is floating (I think it's T-Mobile). They are just helping you finance the phone by adding a charge to your monthly bill. However, if the monthly service cost isn't significantly cheaper, you are still getting screwed.

mech1164
I'll Be Back

join:2001-11-19
Lodi, NJ

Re: Of course we want subsidies...

Exactly

MovieLover76

join:2009-09-11
kudos:1
Take a second to look at T-mobile's data plans.
the Value plans that come without a subsidy are all $20
less than the old classic plan.
TheGuvnor9

join:2006-06-23
Beverly Hills, CA

Apple sees the writing on the wall

More and more people are realizing the convenience of paying month to month with an unsubsidized phone which is why Apple will be seeing more price pressure on their mobile sets.

This is why Apple will be making a cheap version of the Iphone for their next release.
chgo_man99

join:2010-01-01
San Jose, CA

Bye T-Mobile bye bye

No one wants to pay full price for phone and still pay the same price monthly for service. they are not really much cheaper than their competitors. Still require contract for that?

aaronwt
Premium
join:2004-11-07
Woodbridge, VA

Re: Bye T-Mobile bye bye

said by chgo_man99:

No one wants to pay full price for phone and still pay the same price monthly for service. they are not really much cheaper than their competitors. Still require contract for that?

Exactly. I'm grandfathered in on unlimited. I'm considering replacing my HTC ReZound with an HTC Droid DNA. But to keep my unlimited data I need to pay $700 for the HTC Droid DNA. WHich over two years would be over $500 cheaper than being pushed to the limited plans they have available now. Since my monthly bill would go up over $50 and I still would have to worry about exceeding the data limit and be charged even more.

cdru
Go Colts
Premium,MVM
join:2003-05-14
Fort Wayne, IN
kudos:7
said by chgo_man99:

No one wants to pay full price for phone and still pay the same price monthly for service. they are not really much cheaper than their competitors. Still require contract for that?

Please learn about what you are going to talk about before talking about it.

Under T-Mobile's Classic plan, say you wanted a $600 phone and your monthly plan was $100. Under the value plan and Equipment Installation Plan (EIP), you would pay $200 down for the phone, and a maximum of $20/month for 20 months. Your phone plan would be $80 instead of $100, but the net effect is that it doesn't change vs the classic plan, for the first 20 months. For the remainder of the contract (4 months) you end up saving a minimum of $80 that you would have spent under the classic subsidized plan.

Don't want a $600 feature phone? Go find a cheap $20 unlocked flip phone or a used phone a year old that someone wants to get rid of. Don't pay the $20 EIP each month and save $20 a month. Content with your 2 year old smartphone and don't need a new one? Keep it, save the $20 a month or put it in a piggy bank to pay for your next phone if/when you want to replace your current one.

The maximum EIP per phone is $20/month for 20 months, for a total of $400. If the phone is over $400, then the down payment is the difference. If you want to put $400 down on a $600 phone, that's fine too. Your EIP monthly price is then $200/20 months or $10 a month. You can also pay it off whenever you want although you have to pay off all phones the entire amount at the same time, you can't just pay extra or pay one off and keep paying on others.

djrobx
Premium
join:2000-05-31
Valencia, CA
kudos:2
Reviews:
·Time Warner Cable
·VOIPO

Unfortunately the Verizon CEO is probably right

The original iPhone wasn't a big hit when it was $400 with a $20 data plan. When it became a $200 phone with a $30+ data plan, it became a smash hit. I much preferred the former.

The only thing that might change things is that modern touch screen phones last longer (less physical buttons to wear down, improvements in scratch resistant screens), so some might be enticed to move to a lower price point if they take their existing phones with them.
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IowaCowboy
Iowa native
Premium
join:2010-10-16
Springfield, MA
kudos:1
Reviews:
·Verizon Broadban..
·Comcast

I like the subsidies

I just bought an iPhone 5 32 GB, which is $749 full retail. I got it for $299 with the Verizon subsidy. I could not afford to buy it at full retail on my income so the carrier subsidy is nice. I also bought an iPad mini on the device installment plan.

The bad thing is Massachusetts hits you with the sales tax based on the full retail and not the subsidy price. If I would have had a working vehicle, I would have driven to Connecticut to buy my new iPhone where they tax based on the activation price or even better, New Hampshire which is tax free.

LightS
Premium
join:2005-12-17
Greenville, TX

Re: I like the subsidies

New England is lame. lol.

I dunno, I mean it really depends on if you like your carrier or not to me. I've got Verizon, and frankly I love them so I don't mind paying the subsidy. However, if I didn't like them or would prefer someone else, I'd be buying phones outright.

WHT

join:2010-03-26
Rosston, TX
kudos:5

Translaton

Before: Consumers still want handset subsidies
After: We want to keep them locked into contracts.
millerja01a

join:2005-10-03
Durham, NC

1 edit

Does the phone have to be new?

It's always a warm and fuzzy feeling to crack open shiny new tech. But it's also damn expensive. Seeing as tech refresh cycles are about every 12 to 18mos. You can buy a 1 to 2 yr old device and still be in the 'current' generation or one rev back and not have a terrible experience. And you'll most likely pay half the sticker. With the savings, you can save up for a replacement unit if something happens to the primary.

Also, here's something for homeowners who must have a new device. I've added a special computer rider to my policy. For $15 per YEAR, all my tech I own is covered against damage or theft minus a $250 deductible. Even if the incident happens away from home. So if you buy new, something like this may be a better idea to cover your tech than extended warranties.

One more thing. Typical Tier 3 devices(GS3, iP5, etc) avg around $650.

Save $28 x 24 months = $672, plus you could sell your previous unit to recoup some resale value. Combine that with BYOD pay as you go providers and that's more money back to you. You'll pay less over time and you'll have incentive to stay with modern devices.

It's your money, work it!
BiggA

join:2005-11-23
EARTH

Sadly he's true

Most people want the cost of their overpriced devices hidden in their plan. And others of us have lucrative loophole-ridden plans (i.e. the two dumbphones in my family whose upgrades I can steal) to get more devices than they would otherwise want to pay for.

redxii
Premium,Mod
join:2001-02-26
Sherwood, MI

If it worked on every network/provider with ease..

Otherwise what's the point? If you buy it out right and go month to month and at some point for whatever reason want to switch providers, but the phone won't work with the new provider (cdma vs gsm, fixed radio frequency, etc). Now you have to take a loss from reselling the phone or deal with your current provider.
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