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

By - Source: GeekWire | B 42 comments

"If I were king for a day..."

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.

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Top Comments
  • 13 Hide
    rex86 , March 10, 2012 12:09 PM
    When buying subsidized phone you are actually paying a lot more money. A lot more than $400.
  • 13 Hide
    frostyfireball , March 10, 2012 11:42 AM
    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.
  • 12 Hide
    amdphenomx4 , March 10, 2012 11:41 AM
    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.
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  • 12 Hide
    amdphenomx4 , March 10, 2012 11:41 AM
    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.
  • 13 Hide
    frostyfireball , March 10, 2012 11:42 AM
    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 Hide
    rex86 , March 10, 2012 12:09 PM
    When buying subsidized phone you are actually paying a lot more money. A lot more than $400.
  • 3 Hide
    leo2kp , March 10, 2012 12:13 PM
    Most phones are paid off via loan payback on your contract, around $15 a month. You still end up buying the whole thing.
  • 6 Hide
    guess who , March 10, 2012 12:32 PM
    There are NO subsidized handsets, regardless what the clueless pundits keep writing. It is the same situation as financing a car purchase; a little bit down and the rest over 24-36 months. Just because it is not itemized on your statement does not mean it is not there.

    I like this model however. I can pick up used HW for a song, precisely because this sales model devalues HW. If you only think you paid a hundred or two for it, you'll sell it to me really cheap, right?

    I love a sucker.
  • 2 Hide
    victorintelr , March 10, 2012 1:01 PM
    I think the CMO's point is that even though people payback the phone with the 2 year contract, it stays in their mind more the price they paid upfront (let's say, 200 dollars) than the real price that they end up pays because at the end of the 2. years the person will be thinking "I only paid 200 dollars for this, I'm gonna replace it now " even though they probably paid much more for the phone and by just changing it they depreciate the original value of it 'cause guess what, is not only one, is most people that do it.
  • -9 Hide
    tnai , March 10, 2012 1:16 PM
    Say NO to T-Mobile. I had a 2-year family plan and when I tried to exit the plan, they said it was the 3-year plan. No good connections (can't receive or make calls often). It was under someone else name. When I switched to AT&T and ported my old number, they came up with $49.99 fee for nothing. Never ever try these suckers.
  • 7 Hide
    jojesa , March 10, 2012 1:56 PM
    I would agree to pay the full price of the hardware if T-Mobile will have a better service plan: Unlimited service for $39.95 (voice, data, text).
    They all overcharge for the hardware and service, that is the only reason we sign two-year contracts.
  • 5 Hide
    hoofhearted , March 10, 2012 2:02 PM
    rex86When buying subsidized phone you are actually paying a lot more money. A lot more than $400.


    Your logic is flawed. Your are not paying a lot more money because the carriers do not offer a cheaper price when you bring your own phone. They are ass-raping us with jackhammers in this country. There are only two GSM providers which means you can just get another simcard. All of the rest are CDMA which means they lock the phone to their service anyway and blacklist others.

    I am sure this t-mobile ass-clown is just saying this for good pr. If they really were about the consumer, they would discount your rate after your contract was up.
  • 11 Hide
    Lekko , March 10, 2012 2:13 PM
    It would also be nice if carriers would drop the rates for off-contract users, only they don't. You still end up paying the 'subsidy price' as your monthly rate without actually getting anything out of it. I've seen many people go years off contract, still paying the subsidy price without ever getting a new phone because they hate contracts. In that case, the carriers win because you are overpaying for service.
  • 0 Hide
    Anonymous , March 10, 2012 2:16 PM
    If they're not going to subsidize the cost of the phone, then the quality needs to go way up. Sure the phones are feature rich, but they don't last much more than two years. If they did, the telco would make you sign a longer contract. Also, good luck finding someone to make a cross-carrier phone - half of the telco's expenses go to paying a phone maker to make a phone for their network. The phone makers aren't going to give that up.
  • 2 Hide
    SmileyTPB1 , March 10, 2012 2:46 PM
    All I can hear is Thompson Twins in my head.
  • 6 Hide
    panders4 , March 10, 2012 2:56 PM
    hoofheartedYour logic is flawed. Your are not paying a lot more money because the carriers do not offer a cheaper price when you bring your own phone. They are ass-raping us with jackhammers in this country. There are only two GSM providers which means you can just get another simcard. All of the rest are CDMA which means they lock the phone to their service anyway and blacklist others.I am sure this t-mobile ass-clown is just saying this for good pr. If they really were about the consumer, they would discount your rate after your contract was up.


    You have to switch to a prepaid plan if you want the cheap off contract prices. I only pay 30 bucks a month for a smart phone with 5 gig of data on T-mobile. It's good enough for me.
  • 4 Hide
    shoooooggggggoth , March 10, 2012 3:40 PM
    hoofheartedYour logic is flawed. Your are not paying a lot more money because the carriers do not offer a cheaper price when you bring your own phone. They are ass-raping us with jackhammers in this country. There are only two GSM providers which means you can just get another simcard. All of the rest are CDMA which means they lock the phone to their service anyway and blacklist others.I am sure this t-mobile ass-clown is just saying this for good pr. If they really were about the consumer, they would discount your rate after your contract was up.

    Actually, your post is flawed because you quite clearly can talk shit but you're too dumb to do a little research first. T-mobile offers a ton of plans that are cheaper without a subsidized phone. Value plans are cheaper with a sim card, monthly plans are cheap and don't include a phone, and prepaid plans are cheap. Using a value plan you can get the same thing on Tmobile as on Sprint for $30 less, without a phone
  • 1 Hide
    sykozis , March 10, 2012 3:59 PM
    Instead of blaming subsidies for their inability to compete, maybe T-Mobile should focus on expanding and updating their network..... It's hard to compete when you have have spotty coverage compared to the companies you're trying to compete against. Oh yeah, that $300+ cancellation fee doesn't help either.

    frostyfireballI 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.


    Handsets being locked to a carrier has nothing to do with carriers subsidizing the cost of the handset. CDMA phones are locked to carriers due to the networks they use. Also, you can't use a CDMA phone on a GSM network.
  • -4 Hide
    sykozis , March 10, 2012 4:02 PM
    jojesaI would agree to pay the full price of the hardware if T-Mobile will have a better service plan: Unlimited service for $39.95 (voice, data, text).They all overcharge for the hardware and service, that is the only reason we sign two-year contracts.

    With T-Mobile's network and business practice....that deal would still be a rip-off. Unless they've changed their practices, T-Mobile is the only carrier that rounds up usage.
  • 2 Hide
    AznCracker , March 10, 2012 5:14 PM
    I go for the cheapest plan because $10 cheaper on the plan a month will equal out to $240 after the contract is up.

    I also think subsidizing phones is bad because if the consumer breaks their phone, they would have to pay the full price for the phone. Of course one could go through ebay or craigslist to get it cheaper than retail, but those prices are still very high.

    Like t-mobile said, the subsidizing makes us throw away a phone after the contract is up, which is a complete waste.

    If the phone are unsubsidized, the carriers could then lower the cost of plans because they don't have to recoup their loss from subsidizing your phone. Also unsubsidizing the phones will allow the phones themselves to compete instead of tying them to a carrier.
  • 2 Hide
    killerb255 , March 10, 2012 5:48 PM
    ...then again, this subsidiary model creates a market on eBay, Craigslist, etc. to sell phones there. Buy a phone used at a discount with no contract...why not?

    The only problem, of course, is trusting whether the phone is/can be unlocked without the help of a carrier (Google is your friend here), and if the phone was stolen. If it were stolen, then the ESN (if it's CDMA) may be blacklisted, and you end up buying a $150-$250 paperweight unless you know how to clone your ESN from your old phone to that one (which can get you in BIG trouble if you're caught)...
  • 1 Hide
    alidan , March 10, 2012 6:50 PM
    killerb255...then again, this subsidiary model creates a market on eBay, Craigslist, etc. to sell phones there. Buy a phone used at a discount with no contract...why not?The only problem, of course, is trusting whether the phone is/can be unlocked without the help of a carrier (Google is your friend here), and if the phone was stolen. If it were stolen, then the ESN (if it's CDMA) may be blacklisted, and you end up buying a $150-$250 paperweight unless you know how to clone your ESN from your old phone to that one (which can get you in BIG trouble if you're caught)...


    i want a use iphone or android, one of the better ones, to use as a bar code scanner/portable camera.

    if i go through a store... well i get screwed there, because they sell it barely cheaper than new
    if i go through a person... well i could spend 1-200$ on a stolen phone and if found out by cops, ill be out a phone and 1-200$ because of stupid laws.
  • 0 Hide
    Marcus52 , March 10, 2012 7:21 PM
    I've always thought the model was - dishonest, at best. All those "free phone" offers? Screw you! I just got to where I said (when they would call on the phone, before I got on the "Do not call" list) "Sure, send it out!" Of course, the answer was "Well, uh, you need to sign a contract."

    "Well then it isn't free, is it? Which makes you a liar."

    They certainly and obviously don't charge a carrier more than an end user for a phone, but they charge them quite a bit, and one thing it points out is how much money they make off of your subscription. Those phones aren't free for anyone, you are just signing up for a "pay (for the phone) as you go" plan - one that never ends, because the price doesn't drop after the phone is paid for.

    I suspect that one reason Brodman wants to see the sales method go away is that there is not as much per-minute profit on the services as there used to be when the model was established; it takes longer to get the company's investment cost back than he would like.

    The "incentive" I want is a lower cost on my service, not an introductory price break that I pay for in said service, ultimately many times over.

    ;) 

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