4 ms·

Can anyone shed some light on why the subsidy model is going/has gone away? It seems to me cell providers would not want to stop essentially requiring 2-year co

Can anyone shed some light on why the subsidy model is going/has gone away? It seems to me cell providers would not want to stop essentially requiring 2-year contracts, so why have they? Fear of government action, or market competition? Or was the subsidy model actually bad for the networks somehow?

brianwawok 10y ago
T-Mobile changed so others had to to keep up. Basically most cell phone contract innovation in the last 5 years has been through T-Mobile.
- s3bast0m 10y ago
  You do realize that US and T-Mobile was one of the last holdouts with this "bundled"system and in Europe we had this "new" system in place for at least 5 years.
  - brianwawok 10y ago
    I don't think it matters to a US consumer what Europe did first. US had a crappy system. TMobile innovated. Even if that innovation was to copy a system from another country, to our market it was an innovation.
  - deleted 10y ago
    [deleted]
- Drakim 10y ago
  "Innovation" isn't the word I would use here, it was simply that the US caught up to the rest of the western world.
  - brianwawok 10y ago
    Why not? Before T-Mobile did this, could an American sign up for say a French phone plan and use it from their house in Flordia? I could update my statement to say "Most innovation in the AMERICAN cell phone market has been through T-Mobile"
houselouse 10y ago
I'd love to know why these went away too -- not that I liked them, but they seemed well suited to the ignorance level of most people that I know. Even though they've been replaced with ATT Next/Verizon Edge/... plans that are appealing to technophiles, as well as easy 3rd-party financing (just not through the provider), I'd like to know the "illuminati" reason that the market shifted.
godzillabrennus 10y ago
I speculate that it's a couple of things. First, carriers are putting out big capital outlays to the phone manufacturers to get customers on new phones either under a contract with a subsidy or a payment plan. Second, the carriers are smart enough to realize that even with relatively old phones data usage is still pretty high. The carriers now make their money on metered data so they want to avoid the capital outlay required to subsidize a phone if they don't need to for customers to stay data hogs. T-Mobile provided a real world experiment that likely found attrition to be low enough even with contracts gone that it was worth removing the subsidy. Tl;dr The carriers are cheap and don't want to lend you money for a new phone when you still pay them a lot to use your old one.
majormajor 10y ago
Someone had to blink, especially as basic Android phones got better and cheaper. Pre-iPhone, most contracts were one-year, and typical expensive phones cost $3-400 unlocked. Post-iPhone, phone costs go up, so contracts get longer, but now the carriers are in a position where they're treating expensive iPhones the same as the same as less-expensive base-model Androids. Sure, they can make a killing on the less-expensive phones in that model - since the subsidy amount is greater than the cost of the phone - but it gave T-Mobile incentive to ditch the model and pass on some of the savings to budget-conscious consumers. And ultimately, that's not such a bad thing for the carriers, but it is a bad thing if almost all the phones you sell are on the "more expensive" side, since you're now competing more directly on price.
jeevand 10y ago
Carriers want diversity so that they can do better bargaining with the phone makers. ex: My HTC M7 phone came with lots of preloaded shitty apps made by AT&T which i can't delete, Apple will not allow AT&T to twist their arm like that. Similarly they want diversity in the chip makers as well. If the phones are subsidised most people will go with iPhone.

brianwawok 10y ago

T-Mobile changed so others had to to keep up. Basically most cell phone contract innovation in the last 5 years has been through T-Mobile.

s3bast0m 10y ago
You do realize that US and T-Mobile was one of the last holdouts with this "bundled"system and in Europe we had this "new" system in place for at least 5 years.
- brianwawok 10y ago
  I don't think it matters to a US consumer what Europe did first. US had a crappy system. TMobile innovated. Even if that innovation was to copy a system from another country, to our market it was an innovation.
- deleted 10y ago
  [deleted]
Drakim 10y ago
"Innovation" isn't the word I would use here, it was simply that the US caught up to the rest of the western world.
- brianwawok 10y ago
  Why not? Before T-Mobile did this, could an American sign up for say a French phone plan and use it from their house in Flordia? I could update my statement to say "Most innovation in the AMERICAN cell phone market has been through T-Mobile"

houselouse 10y ago

I'd love to know why these went away too -- not that I liked them, but they seemed well suited to the ignorance level of most people that I know. Even though they've been replaced with ATT Next/Verizon Edge/... plans that are appealing to technophiles, as well as easy 3rd-party financing (just not through the provider), I'd like to know the "illuminati" reason that the market shifted.

godzillabrennus 10y ago

I speculate that it's a couple of things. First, carriers are putting out big capital outlays to the phone manufacturers to get customers on new phones either under a contract with a subsidy or a payment plan. Second, the carriers are smart enough to realize that even with relatively old phones data usage is still pretty high. The carriers now make their money on metered data so they want to avoid the capital outlay required to subsidize a phone if they don't need to for customers to stay data hogs. T-Mobile provided a real world experiment that likely found attrition to be low enough even with contracts gone that it was worth removing the subsidy. Tl;dr The carriers are cheap and don't want to lend you money for a new phone when you still pay them a lot to use your old one.

majormajor 10y ago

Someone had to blink, especially as basic Android phones got better and cheaper. Pre-iPhone, most contracts were one-year, and typical expensive phones cost $3-400 unlocked. Post-iPhone, phone costs go up, so contracts get longer, but now the carriers are in a position where they're treating expensive iPhones the same as the same as less-expensive base-model Androids. Sure, they can make a killing on the less-expensive phones in that model - since the subsidy amount is greater than the cost of the phone - but it gave T-Mobile incentive to ditch the model and pass on some of the savings to budget-conscious consumers. And ultimately, that's not such a bad thing for the carriers, but it is a bad thing if almost all the phones you sell are on the "more expensive" side, since you're now competing more directly on price.

jeevand 10y ago

Carriers want diversity so that they can do better bargaining with the phone makers. ex: My HTC M7 phone came with lots of preloaded shitty apps made by AT&T which i can't delete, Apple will not allow AT&T to twist their arm like that. Similarly they want diversity in the chip makers as well. If the phones are subsidised most people will go with iPhone.