6 ms·

It's Time To Stop Subsidising Mobile Phones

18 points by bensummers 16y ago

mgkimsal 16y ago
It's been time for about 10 years.
mallipeddi 16y ago
In India actually most people buy their phones separately -no 2-year lock-in contracts with the carrier. Even the iPhone was launched this way.
- ZeroGravitas 16y ago
  Surely someone must have studied the comparision of countries with and without this system and came to some conclusion about how it affects tariffs, the amount spent on phones, upgrade cycles etc.
  - mzl 16y ago
    I would guess such things have been studied. It is probably very hard to change an entrenched model though, so even though people might spend more money on phones and services in model A than in model B, that result might only be valid if all players switch.
jswinghammer 16y ago
I look at it as a pay now or pay later sort of situation. The charge for my iPhone was low enough that I was willing to get it for $200. I wasn't willing to get it for $800. I love my iPhone but not $800 worth of love. I might pay that back over two years but I'd rather do that than put down $800 for a phone. I'm not even sure that I will pay it back because I am getting service in exchange for staying with AT&T for two years. I feel like I end up breaking even on this deal and if I lose a little then I'll live with it. I just can't put down $800 for an iPhone when I could get an iPad 3G for that.
- ZeroGravitas 16y ago
  There seems to be some confusion on this in the linked comments too, even though the very first commenter hit the nail on the head, but: You don't need to pay for anything, including phones, up front any longer. Credit is (too) easily available and basically guaranteed to be cheaper and more flexible if you unbundle it from the actual purchase. These disguised loans should really only be attractive to people with low incomes and terrible credit ratings, and they will be taken advantage of because they have no other options. The fact that you seem to be repulsed by the idea of paying amount $X for a phone, but think that paying that exact same sum, plus interest, plus hidden markup is acceptable as long as it's made complicated and so hidden in plain view is mind-boggling to me.
  - nijikunai 16y ago
    Though it's very bad for consumers, it's very advantageous for the carriers. By locking you to a particular plan they're making it hard for you to move to another carrier with cheaper plans.
  - mcknz 16y ago
    Correct, but convenience is a strong motivating factor -- why else would people pay 20-30% interest just to take their own money out of an ATM? Most people just want to get a phone with service, and don't really want to mess around with the specifics.
  - dagw 16y ago
    I was looking at some phones the other day and overheard a customer who agreed to basically pay 15$ more a month for the next two years, just so that they could avoid having to pay $120 up front. That sort of thinking is strange (unless you are a cell phone carrier, in which case it is awesome).
    - pbhjpbhj 16y ago
      So the answer is to extend your credit elsewhere and third the overall costs - which is fine if you have access to an easily extended line of credit. It's not always going to be cheaper for everyone to pay up front but on the whole it does seem better.
Tichy 16y ago
I suspect human nature is in the way. Isn't buying a phone for "0€" equivalent to buying stuff by credit card? I hear in the US spending by credit card works to get consumers to buy all the time.
starkfist 16y ago
In the USA, isn't the real issue that you can indeed buy your phone unsubsidized, it's just a hassle (or impossible) to get your new phone's fancy features working on a carrier? Why would someone want to pay $700 for an iphone/android and then have half of the features not work, because they can't get a compatible plan?
- stcredzero 16y ago
  Buy a mobile broadband device, and things work well. You don't get GPS, but the WiFi location is pretty darn good.
stcredzero 16y ago
I will be buying an unsubsidized Factory unlocked iPhone 4. (Without paying eBay markup!) My current jailbroken 1st gen iPhone is entirely prepaid with $0.11/min calling and $0.10 for sending a text and $0.05 to receive, but I will switch to an Unlimited calling and text plan for $50/month. Mobile bandwidth is through WiFi through a Sprint 4G device, which will double as my home Internet.
- jrockway 16y ago
  Sprint 4G device, which will double as my home Internet Hope you have a backup plan. Since the Evo came out, Sprint's 4G is significantly slower than their 3G, at least in the places where I use it.
  - stcredzero 16y ago
    Good to know. I've already been vetting the device. At home, 4G is the same speed as 3G, but with unlimited use.
jrockway 16y ago
T-Mobile does this. If you buy a N1 at full price, you get a $20/month discount on your service plan; making the total cost of the phone over 24 months the $600 that you pay initially. If you buy it subsidized for $179, then you are locked into a 24 month contract with ETF, and you end up paying $659 for the phone. (Not a terrible interest rate, but you're not "saving money" as you may think.)
gamble 16y ago
The issue isn't subsidies, but the fact that almost every carrier in the US and Canada refuses to lower your monthly bill when the subsidy has been paid off. Until that changes, the only sensible response is to get a new subsidized phone as often as your contract allows.
ben1040 16y ago
I wonder if non-subsidized phones would cause the manufacturers to think harder about quality, as well. In the US, with Sprint, AT&T, & Verizon you pay the same price for service whether or not you bring your own phone, so you may as well take the subsidized device. To a person who buys a smartphone on subsidy for $200, as far as they're concerned that's the price and they expect an equivalent amount of value. If the subsidy were out of the equation, and you had to pay $600 for that device, wouldn't you expect more from the phone than you would if it were perceived as a cheap throwaway? It seems like that would get the manufacturers to step up their game a bit, which is good for the consumer.
- CaptainMcCrank 16y ago
  Nexus 1. Has it shaken the industry? No manufacturers are stepping up their game and google is crying uncle on the goitalone, unsubsidized model.
  - ben1040 16y ago
    My take is the N1 wasn't disruptive to the carrier controlled/subsidized model because in the US, you had two separate N1 models that effectively only worked on one carrier (unless you found EDGE data service to be acceptable). An unlocked N1 sold for the T-Mobile 3G band can't be used with full functionality on AT&T, and vice versa. You can't buy an N1 and still have the flexibility to choose a carrier who meets your needs at that particular time.

18 points by bensummers 16y ago

It's been time for about 10 years.

In India actually most people buy their phones separately -no 2-year lock-in contracts with the carrier. Even the iPhone was launched this way.

ZeroGravitas 16y ago
Surely someone must have studied the comparision of countries with and without this system and came to some conclusion about how it affects tariffs, the amount spent on phones, upgrade cycles etc.
- mzl 16y ago
  I would guess such things have been studied. It is probably very hard to change an entrenched model though, so even though people might spend more money on phones and services in model A than in model B, that result might only be valid if all players switch.

jswinghammer 16y ago

I look at it as a pay now or pay later sort of situation. The charge for my iPhone was low enough that I was willing to get it for $200. I wasn't willing to get it for $800. I love my iPhone but not $800 worth of love. I might pay that back over two years but I'd rather do that than put down $800 for a phone. I'm not even sure that I will pay it back because I am getting service in exchange for staying with AT&T for two years. I feel like I end up breaking even on this deal and if I lose a little then I'll live with it. I just can't put down $800 for an iPhone when I could get an iPad 3G for that.

ZeroGravitas 16y ago
There seems to be some confusion on this in the linked comments too, even though the very first commenter hit the nail on the head, but: You don't need to pay for anything, including phones, up front any longer. Credit is (too) easily available and basically guaranteed to be cheaper and more flexible if you unbundle it from the actual purchase. These disguised loans should really only be attractive to people with low incomes and terrible credit ratings, and they will be taken advantage of because they have no other options. The fact that you seem to be repulsed by the idea of paying amount $X for a phone, but think that paying that exact same sum, plus interest, plus hidden markup is acceptable as long as it's made complicated and so hidden in plain view is mind-boggling to me.
- nijikunai 16y ago
  Though it's very bad for consumers, it's very advantageous for the carriers. By locking you to a particular plan they're making it hard for you to move to another carrier with cheaper plans.
- mcknz 16y ago
  Correct, but convenience is a strong motivating factor -- why else would people pay 20-30% interest just to take their own money out of an ATM? Most people just want to get a phone with service, and don't really want to mess around with the specifics.
- dagw 16y ago
  I was looking at some phones the other day and overheard a customer who agreed to basically pay 15$ more a month for the next two years, just so that they could avoid having to pay $120 up front. That sort of thinking is strange (unless you are a cell phone carrier, in which case it is awesome).
  - pbhjpbhj 16y ago
    So the answer is to extend your credit elsewhere and third the overall costs - which is fine if you have access to an easily extended line of credit. It's not always going to be cheaper for everyone to pay up front but on the whole it does seem better.

Tichy 16y ago

I suspect human nature is in the way. Isn't buying a phone for "0€" equivalent to buying stuff by credit card? I hear in the US spending by credit card works to get consumers to buy all the time.

starkfist 16y ago

In the USA, isn't the real issue that you can indeed buy your phone unsubsidized, it's just a hassle (or impossible) to get your new phone's fancy features working on a carrier? Why would someone want to pay $700 for an iphone/android and then have half of the features not work, because they can't get a compatible plan?

stcredzero 16y ago
Buy a mobile broadband device, and things work well. You don't get GPS, but the WiFi location is pretty darn good.

stcredzero 16y ago

I will be buying an unsubsidized Factory unlocked iPhone 4. (Without paying eBay markup!) My current jailbroken 1st gen iPhone is entirely prepaid with $0.11/min calling and $0.10 for sending a text and $0.05 to receive, but I will switch to an Unlimited calling and text plan for $50/month. Mobile bandwidth is through WiFi through a Sprint 4G device, which will double as my home Internet.

jrockway 16y ago
Sprint 4G device, which will double as my home Internet Hope you have a backup plan. Since the Evo came out, Sprint's 4G is significantly slower than their 3G, at least in the places where I use it.
- stcredzero 16y ago
  Good to know. I've already been vetting the device. At home, 4G is the same speed as 3G, but with unlimited use.

jrockway 16y ago

T-Mobile does this. If you buy a N1 at full price, you get a $20/month discount on your service plan; making the total cost of the phone over 24 months the $600 that you pay initially. If you buy it subsidized for $179, then you are locked into a 24 month contract with ETF, and you end up paying $659 for the phone. (Not a terrible interest rate, but you're not "saving money" as you may think.)

gamble 16y ago

The issue isn't subsidies, but the fact that almost every carrier in the US and Canada refuses to lower your monthly bill when the subsidy has been paid off. Until that changes, the only sensible response is to get a new subsidized phone as often as your contract allows.

ben1040 16y ago

I wonder if non-subsidized phones would cause the manufacturers to think harder about quality, as well. In the US, with Sprint, AT&T, & Verizon you pay the same price for service whether or not you bring your own phone, so you may as well take the subsidized device. To a person who buys a smartphone on subsidy for $200, as far as they're concerned that's the price and they expect an equivalent amount of value. If the subsidy were out of the equation, and you had to pay $600 for that device, wouldn't you expect more from the phone than you would if it were perceived as a cheap throwaway? It seems like that would get the manufacturers to step up their game a bit, which is good for the consumer.

CaptainMcCrank 16y ago
Nexus 1. Has it shaken the industry? No manufacturers are stepping up their game and google is crying uncle on the goitalone, unsubsidized model.
- ben1040 16y ago
  My take is the N1 wasn't disruptive to the carrier controlled/subsidized model because in the US, you had two separate N1 models that effectively only worked on one carrier (unless you found EDGE data service to be acceptable). An unlocked N1 sold for the T-Mobile 3G band can't be used with full functionality on AT&T, and vice versa. You can't buy an N1 and still have the flexibility to choose a carrier who meets your needs at that particular time.