T-Mobile Says Device Subsidies Are Bad, But Change is Hard

The cost of a smartphone reflects just how powerful these phones have become. To snag one off contract, you'll likely end up paying upwards of $600. If you're willing to sign a two-year contract, you can get the phone for $200. That's a lot of savings and it's the reason carriers make you sign a contract. Their logic is that if they're going to subsidize the cost of your phone, they need to ensure they'll make that money back from you before you leave the network. Though this is often profitable for the carrier, it seems not all providers are fans of subsiding customers' phones.

T-Mobile Chief Marketing Officer Cole Brodman was recently quoted as saying that carrier subsidies are hurting the wireless industry. Speaking at the GeekWire summit in Seattle, Brodman said that if he were king for a day, he'd get rid of carrier subsidies. Brodman's opinion is that these subsidies devalue the hardware.

"It actually distorts what devices actually cost and it causes OEMs, carriers — everybody to compete on different playing fields,” GeekWire quotes Brodman as saying. "And I think it is really difficult, especially from a consumer perspective, because it causes consumers to devalue completely the hardware they are using…. It is amazing hardware, but it has become kind of throw away. So, it is unfortunate, you’ve got dual-core, multiprocessor devices with amazing HD screens that get thrown away at 18 months."

Though Brodman said if he could have it his way, there would be no more subsidies, he said T-Mobile's competitors don't seem to want to do the same, which makes it hard to compete.

"It becomes difficult because consumers vote with their pocketbooks, and they will almost always pick a low device price oftentimes over a low rate plan price or a bundled rate plan price," he said.

Follow @JaneMcEntegart on Twitter.

Create a new thread in the Streaming Video & TVs forum about this subject
This thread is closed for comments
42 comments
    Your comment
    Top Comments
  • rex86
    When buying subsidized phone you are actually paying a lot more money. A lot more than $400.
    13
  • frostyfireball
    I too wish the subsidies would go away; I'd gladly pay a little more upfront if I can then take my business anywhere I want with an unlocked phone, rather than being stuck with one carrier for 3 years even if they end up being a royal pain. I do that already, but the selection of phones is hurt considerably by the carriers locking their phones to their networks and I have to import my phones from overseas.

    Carriers would also compete on price for the plans more aggressively rather than the gouging they do currently in North America on most carriers.
    13
  • amdphenomx4
    Or you know, they could make phones cost on the level of tablets. It does not cost over 200 dollars to make most phones. Sell them around the price of tablets. 400-500 dollars. The manufacturers wont though, as they sell them for more than this to the carriers, and thus make more monies.

    Tl;Dr Tablets should be more expensive than phones, not the other way around.
    12
  • Other Comments
  • amdphenomx4
    Or you know, they could make phones cost on the level of tablets. It does not cost over 200 dollars to make most phones. Sell them around the price of tablets. 400-500 dollars. The manufacturers wont though, as they sell them for more than this to the carriers, and thus make more monies.

    Tl;Dr Tablets should be more expensive than phones, not the other way around.
    12
  • frostyfireball
    I too wish the subsidies would go away; I'd gladly pay a little more upfront if I can then take my business anywhere I want with an unlocked phone, rather than being stuck with one carrier for 3 years even if they end up being a royal pain. I do that already, but the selection of phones is hurt considerably by the carriers locking their phones to their networks and I have to import my phones from overseas.

    Carriers would also compete on price for the plans more aggressively rather than the gouging they do currently in North America on most carriers.
    13
  • rex86
    When buying subsidized phone you are actually paying a lot more money. A lot more than $400.
    13