3 ms·

There are a number of things wrong with they way our current cellular network industry works in the US. The biggest issue IMO is subsidizing phones. When we pay

There are a number of things wrong with they way our current cellular network industry works in the US. The biggest issue IMO is subsidizing phones. When we pay phone bills, we're also paying for the cost of the phone. When we buy more expensive smart phones (which make excellent use of a data connection) we pay more via data plans. These data plans also have the cost of the phones built in. From the carrier's perspective, grandfathered unlimited data plans are acceptable because the cost of the subsidies have already been recovered. More expensive newer phones require higher subsidies to be palatable to consumers, so data pricing is adjusting accordingly. I would be happy to pay by the GB for my data if it were charged at the market rate, but it isn't. Cellular bandwidth is charged at the market rate + the subsidy recovery.

JumpCrisscross 15y ago
Or at least disentangle phone financing from data & voice. Having financing and pipe compete independently would allow consumers to get a better idea of the (now implicit) financing rate they pay to have their phone subsidised while allowing more freedom for a financed phone, e.g. switching carriers without worrying about cancellation fees.
huxley 15y ago
Not so: http://www.mondaynote.com/2012/03/11/carriers-whine-we-wuz-robbed/ http://www.mondaynote.com/2012/03/11/carriers-whine-we-wuz-r... "The average ARPU for smartphones on AT&T's network is 1.9 times that of the company’s non-smartphone devices." For an iPhone, the subsidy comes to less than $20/month in exchange for significantly more revenue per user. The carriers are making out like bandits and then claiming they are the victims. From a carrier's perspective, grandfathered "unlimited" data plans are acceptable because it costs virtually nothing to keep the customer at their usurious rates.
- telcodud 15y ago
  "The average ARPU for smartphones on AT&T's network is 1.9 times that of the company’s non-smartphone devices." For an iPhone, the subsidy comes to less than $20/month in exchange for significantly more revenue per user. The carriers are making out like bandits and then claiming they are the victims. I dislike[1] the US carriers and their absurd data plans as much as the next guy, but the above logic has always baffled me. Everyone seems to confuse revenues and earnings when talking about smartphone subsidies. The subsidy of $20/mo (as quoted above) is paid out of carrier earnings, while the phone ARPU gets added to their revenues. Assuming a generous profit margin of 40%, unless the additional ARPU, compared to non-smartphone devices, is greater than $50/mo (2.5x the subsidy), the carriers are not exactly making out. This is the case more so for iPhones, where I understand the subsidies are higher than other smartphones, but the ARPUs are equivalent. [1] I'd prefer the model where the customer brings in an un-subsidized (smart)phone and pays lower on monthly plans.
  - huxley 15y ago
    When it comes to accounting for it, subsidies like all other expenses by definition come out of revenue, not earnings. According to JL Gassee, the ARPU for most cellphones is $46.09, for iPhones it is approaching $120 (inclusive of the subsidy). He quotes: "AT&T CEO Randall Stephenson pronounced himself happy with the 'over $100' ARPU from iPhone subscribers." There is a very healthy amount there to absorb the subsidy plus cost of providing voice + data.

JumpCrisscross 15y ago

Or at least disentangle phone financing from data & voice. Having financing and pipe compete independently would allow consumers to get a better idea of the (now implicit) financing rate they pay to have their phone subsidised while allowing more freedom for a financed phone, e.g. switching carriers without worrying about cancellation fees.

huxley 15y ago

Not so: http://www.mondaynote.com/2012/03/11/carriers-whine-we-wuz-robbed/ http://www.mondaynote.com/2012/03/11/carriers-whine-we-wuz-r... "The average ARPU for smartphones on AT&T's network is 1.9 times that of the company’s non-smartphone devices." For an iPhone, the subsidy comes to less than $20/month in exchange for significantly more revenue per user. The carriers are making out like bandits and then claiming they are the victims. From a carrier's perspective, grandfathered "unlimited" data plans are acceptable because it costs virtually nothing to keep the customer at their usurious rates.

telcodud 15y ago
"The average ARPU for smartphones on AT&T's network is 1.9 times that of the company’s non-smartphone devices." For an iPhone, the subsidy comes to less than $20/month in exchange for significantly more revenue per user. The carriers are making out like bandits and then claiming they are the victims. I dislike[1] the US carriers and their absurd data plans as much as the next guy, but the above logic has always baffled me. Everyone seems to confuse revenues and earnings when talking about smartphone subsidies. The subsidy of $20/mo (as quoted above) is paid out of carrier earnings, while the phone ARPU gets added to their revenues. Assuming a generous profit margin of 40%, unless the additional ARPU, compared to non-smartphone devices, is greater than $50/mo (2.5x the subsidy), the carriers are not exactly making out. This is the case more so for iPhones, where I understand the subsidies are higher than other smartphones, but the ARPUs are equivalent. [1] I'd prefer the model where the customer brings in an un-subsidized (smart)phone and pays lower on monthly plans.
- huxley 15y ago
  When it comes to accounting for it, subsidies like all other expenses by definition come out of revenue, not earnings. According to JL Gassee, the ARPU for most cellphones is $46.09, for iPhones it is approaching $120 (inclusive of the subsidy). He quotes: "AT&T CEO Randall Stephenson pronounced himself happy with the 'over $100' ARPU from iPhone subscribers." There is a very healthy amount there to absorb the subsidy plus cost of providing voice + data.