Carriers
Verizon CEO intrigued by T-Mobile’s move to end smartphone subsidies
January 8, 2013 | by Natesh Sood
AT&T, Carriers, T-Mobile, Verizon
T-Mobile is the only carrier in the United States that offers two main types of post-paid cell phone plans. The first is the Classic Plan, which is the traditional plan that offers subsidized costs on devices, but requires a higher monthly fee for service. The second is the Value Plan, which is the progressive plan that lacks subsidized devices, but offers lower monthly fees for services.
T-Mobile plans on removing all subsidies on phones in 2013 in order to convince customers to switch to a Value Plan, which will save them money in the long-term. CEO of Verizon, Lowell McAdam, believes T-Mobile’s move to phones without subsidies is “a great thing.” He believes Verizon can adopt a similar model should it prove appealing to its customers. The only reservation McAdam has about T-Mobile’s switch, which is a sentiment shared by AT&T’s CEO, is the customers will likely not be quick to embrace the change.
Current Americans are brainwashed by the idea of paying less for a phone upfront, but more per month in services. The higher fee per month is used to cover the initial low cost of a device. The benefit of T-Mobile’s value plan comes when you decide to keep your phone for longer than two years; the savings benefit will be enormous.
It will be interesting to see if AT&T and Verizon decide to pursue the subsidy-less model, and whether T-Mobile proves successful in their endeavor.
[WSJ]
This is a great way to force people making less money back to non-smartphones. No way most people I work with can afford to shell out the money for non-subsidized phones. Bad idea!!!!!!
No, this is a great idea. Let me choose my device, let me choose my plan. Maybe I’m fine with an older phone, but am willing to pay for unlimited data. Maybe I want a top of the line phone, but don’t need data at all.
Right now, Verizon, if I were to get my family members smart phones or even getting the shared data plan, adds new costs. If I go to the family share plan, I pay $40 a month for each smart phone, $30 for each non-smart phone, in addition to the $9.99 a month for each line. It’s outrageous and now they want to remove subsidized phones? Verizon, you’re moving in the WRONG direction.
For some, non-subsidized phones aren’t cheap enough to make a difference. For instance, I bought an Evo 4G when it first came out for $199. With my company discount I paid an average of $79 a month for unlimited everything (I say average because it began at about 76 and ended at about 82). It would have cost me $60 a month on T-Mobile for that plan and the phone would have been $699. So the T-Mobile Value plan would have saved me $56 over the 2 years but I would have had to pony up an extra $400 at the start.
The problem, and reason why people are “brainwashed” into wanting a subsidized phone, is because the price of Verizon’s plans doesn’t change after the contract. I have an un-subsidized GS3, yet my bill didn’t change, and I’m not on my contract. Of *course* people are going to opt for subsidized phones, since either way their bill is the same. (The difference is the contract, not the price.) If Verizon followed T-Mobile and actually had cheaper plans for un-subsidized phones, then I think more people can pull out a calculator (or smartphone!) and do the math to see it’s cheaper in the long run.
Hi folks, I appreciate all the responses! I do have a few points to make. If Verizon were to follow T-Mobile, I imagine the plans would cost significantly less, akin to T-Mobile’s Value Plan. No one would opt for non-subsidized devices when the per month service fees cost the same. Also, I think Americans do not fully comprehend how expensive a smartphone is. They do not realize that they usually cost above $600, and that carriers subsidize to make them more attractive at $199, and then the difference is made up through the contract lifespan.