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I don't think customers in the US and UK markets are addicted to handset subsidies -- they just don't know any better. I recently moved to an MVNO that uses the

• cleis 14y ago
  The point made by Legere (T-Mob CEO) a few months ago was that we need to start seeing handsets for the sophisticated, lasting, pieces of technology that they are. He argued that handset subsidies have pushed us into a mindset where we see our phone as disposable, destined for upgrade every 2 years. When we take this perspective there is no shortage of available phones, we should just be comfortable with upgrading our handsets much less often than we are currently accustomed to. Also, T-Mobile still allow you to pay off the cost of your phone over the length of the contract, so people will still be able to get state-of-the-art phones for a low upfront cost.
  • bhb916 14y ago
    In general I like Legere but I don't see that happening mainly due to people's preferences. As mobile phone computing power and capabilities progress consumers are going to want the latest and greatest to hit the shelves. Also, I'm not sure the economics of the hardware market would even be conducive to "sophisticated, lasting, pieces of technology" without a big jump in price.
  • gadders 14y ago
    That would be good if phones lasted more than two years without malfunctioning. My S2 is now coming up to 18 months and repeatedly crashes. I could imagine paying £250 for a Nexus 4 to keep for 2-3 years, but not £600 for an iPhone.
    • dfxm12 14y ago
      Is the cost to repair the S2 less than the cost for a new one? Maybe all it needs is a fresh install of Android. Of course I understand that you can't always simply reflash your phone, especially locked ones (as subsidized phones usually are).
• bradleyland 14y ago
  I'm not sure I buy the ignorance argument. We're talking about two options here: 1) Pay a high cost for the phone up front in exchange for a lower monthly payment 2) Pay a higher monthly fee and receive a free (or much lower cost) phone upgrade every two years To understand the attractiveness of #2 to consumers, we can look at the reasons for financing anything. Financing allows us to spread out capital outlays in exchange for a finance premium. For many consumers, the attractiveness of financing is that they can get the product they want now, rather than later. Even for consumers who might be willing to delay a bit, there's the matter of planning. Planning takes effort, and the finance costs are an easy offset for them, because they perceive that their chances of successfully executing their savings plan is low. There is also a price psychology issue. An unsubsidized smartphone can easily cost $600. That is not an insignificant one-time cash outlay. The simple price deterrent factor pushes consumers toward obscene, but ultimately bearable, finance terms. The real "ignorance" comes in the fact that we don't have a clear method of separating out subsidy costs. Yes, we can look at MVNO's, but they fail the "all things being equal" test. That is to say, an MVNO is not an apples-to-apples comparison to a large network provider like Verizon or AT&T, both of which have more coverage with their fast networks. We can't adequately separate subsidy costs with T-Mobile, because they don't differentiate between subsidy plans and non-subsidy plans. This means that if you bring your own device to T-Mobile, you're actually paying a subsidy penalty for everyone else's phone. I think saying that consumers are addicted to subsidies is really just another way of saying that consumers are addicted to financing. This is definitely true of American consumers. I don't think we'll see a shift in the way consumers purchase cell phones without a broader shift in the way consumers pay for goods.