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T-Mobile Exec Calls For End To Cell Phone Subsidies

timothy posted more than 2 years ago | from the shipping-and-handling-fees-may-apply dept.

Cellphones 355

MojoKid writes "T-Mobile's Chief Marketing Officer Cole Brodman has an interesting idea for revamping the mobile industry, and it involves killing the subsidy plans that have driven smartphone adoption over the past five years. Asked what one thing he'd change if he had the power to do so, Brodman pointed to subsidy programs. 'It [device subsidies] actually distorts what devices actually cost and it causes OEMs, carriers — everybody to compete on different playing fields ...' Brodman isn't kidding about an irregular playing field. The HTC Titan is the most subsidized device in the chart seen here (unsubsidized at $549, $0.01 on contract). Microsoft is obviously desperate to gain market share in mobile but both the iPhone 4S and the Galaxy Note carry $400+ discounts too. The cheapest smartphone AT&T offers without a subsidy is the thoroughly mediocre HTC Status, for $349. To add insult to injury, it's only available in mauve. It's an interesting idea, but practically unworkable as far as the mass market is concerned. Carriers have built a market structure in which consumers gladly accept a new bauble every 18 months in exchange for paying for text messaging (which literally costs carriers nothing) and overage charges in which 300MB of data for $20 is a fair market value."

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355 comments

Apple is killing text messaging (-1)

Anonymous Coward | more than 2 years ago | (#39311629)

The carriers may not have noticed it yet, but iMessage is the death of text messaging. Once Apple has comfortably established it, they'll open it to others, possibly via a small license fee, and then poof, text messaging as a cost is dead.

Re:Apple is killing text messaging (4, Informative)

Junta (36770) | more than 2 years ago | (#39311653)

Don't know why you'd give particularly extra credit to Apple, gTalk, AIM, skype, et al already give people little incentive to consider anything particularly extra for SMS. I fail to see what 'iMessage' gives that these do not. SMS use in the face of all those is generally amongst people who aren't about to change their ways, most of who now have plans where messaging really doesn't impact them one way or another (for example I don't use SMS yet I couldn't get a plan with the features I wanted without unlimited SMS).

Re:Apple is killing text messaging (4, Informative)

Richard_at_work (517087) | more than 2 years ago | (#39311721)

iMessage gives you ease of use - I don't have to care whether the person I am messaging has iMessage or not, the messaging app works it out for me without any input from me at all on the matter. This way, I don't have to treat one block of contacts different to any other, it just happens.

Re:Apple is killing text messaging (0)

Anonymous Coward | more than 2 years ago | (#39311963)

Everybody has SMS and I think most prefer not to demand that people install Yet Another Instant Messaging Program just to talk to them

Re:Apple is killing text messaging (1)

CrackedButter (646746) | more than 2 years ago | (#39311967)

Text messaging from an iPad/iPod Touch, even a Wifi models (for the iPad) is a really good enabler. Skype is cool and all but it has to load up, find the person then wait for them to come online. iMessages is more sublime than that.

Re:Apple is killing text messaging (1)

ColdWetDog (752185) | more than 2 years ago | (#39312017)

Sublime?

I don't think that word means what you think it means.

Re:Apple is killing text messaging (0)

Anonymous Coward | more than 2 years ago | (#39312185)

Um, according to merriam webster, it appears to be a valid use to me. As an adjective, "of outstanding spiritual, intellectual, or moral worth." Or "tending to inspire awe usually because of elevated quality."

Re:Apple is killing text messaging (4, Informative)

ceoyoyo (59147) | more than 2 years ago | (#39312039)

iMessage hides it from you. You just text somebody, and if they have an iPhone the text gets sent using cheap data instead of expensive SMS. The only distinction is what colour background the text has. Apple instantly made a chunk of carrier text revenue disappear without any effort on the part of the user: no getting your friends to sign up, no downloading an app, no remembering who has Skype accounts and who doesn't.

Blackberry figured out the built-in, just-like-texting thing first, but BBM used silly PIN numbers and didn't fail over to regular texts.

Re:Apple is killing text messaging (4, Informative)

Thomas Charron (1485) | more than 2 years ago | (#39311695)

You DO know iMessage is just XMPP, right?

Re:Apple is killing text messaging (3, Insightful)

Richard_at_work (517087) | more than 2 years ago | (#39311831)

I'm not entirely sure that matters one bit - it's the fact that it works seamlessly that makes it effective, not the underlying transport mechanism. Again, implementation is what has set it apart from the other alternatives tried.

Re:Apple is killing text messaging (-1)

Anonymous Coward | more than 2 years ago | (#39311879)

> I'm not entirely sure that matters one bit - it's the fact that it works seamlessly that makes it effective, not the underlying transport mechanism. Again, marketing is what has set it apart from the other alternatives tried.
FTFY

Re:Apple is killing text messaging (4, Insightful)

Richard_at_work (517087) | more than 2 years ago | (#39311987)

No, you didn't "FTFM" at all, you put your own bias on my words and nothing more. I don't use iMessage because of marketing, I use it because it seamlessly worked on my iPhone - I didn't have to set any contacts to use it, I didn't have to configure anything, it just worked. Thats got nothing to do with the transport mechanism, and everything to do with the implementation - no alternative has that. The implementation works out how to deliver the message, not the transport mechanism.

If something else had seamlessly worked, I would be saying the same thing for that.

Re:Apple is killing text messaging (1)

Desler (1608317) | more than 2 years ago | (#39312053)

What a terrible "fix" attempt. Shouldn't you have fixed the first sentence as well since you claim first that its seamless implementation is what makes it effective then you fixed the second sentence to say it's only marketing. FAIL.

Re:Apple is killing text messaging (3, Informative)

ceoyoyo (59147) | more than 2 years ago | (#39312055)

No. Transparent failover to SMS and using phone numbers as IDs are what set it apart. The user has to do NOTHING to use it. ANY other IM program at least requires you to get your friends to sign up. The point is that there's no marketing necessary. If you've got an i-device you use it automatically, transparently. If you were colour blind your first indication would probably be that your phone bill was smaller.

Re:Apple is killing text messaging (0, Flamebait)

Tihstae (86842) | more than 2 years ago | (#39311949)

It works seamlessly to those using an iPhone. To everyone else, it seems really stupid that you are sending text messages that show up as multimedia files. To anyone on an android phone, you are sending a picture of your text message. It is typical that an iPhone user would not know that though.

Re:Apple is killing text messaging (5, Informative)

Anonymous Coward | more than 2 years ago | (#39312091)

That's not what happens at all. If an iPhone user sends you a message, the iPhone checks with Apple's server. If the recipient's number is registered as an iOS device it gets transmitted as an iMessage. If not, it gets sent as a plain old text message.

If you're getting unreadable multimedia files from iPhone users it's likely that it's a contact card (VCF) attachment or map data.

Re:Apple is killing text messaging (1)

Anonymous Coward | more than 2 years ago | (#39312113)

It doesn't show up as a multimedia file. If the person you are chatting with doesn't have iMessage, it sends as a regular sms or mms.

I chat with my gf all the same. She has an iPhone,with iMessage, and I have a droid.

Re:Apple is killing text messaging (2)

Richard_at_work (517087) | more than 2 years ago | (#39312133)

Really? Because every message I send that goes to a non-iMessage capable recipient goes as a normal text message. My mother has an Android phone, and I've seen the messages she receives from me and they are normal text messages. My boss gets normal text messages from me. My wife got normal text messages from me until she got an iPhone. I got normal text messages from my iMessage using friend while I was on an Android phone prior to buying my iPhone.

In other words I have no idea what you are talking about.

Re:Apple is killing text messaging (1)

Overzeetop (214511) | more than 2 years ago | (#39312235)

No, I didn't. The cool thing is that I don't have to. If it comes to my phone, it gets delivered via my Google Voice number as a text message (or to iMessage if someone iMessages my email address). It goes to my wife's textfree number (or, again, via iMessage if someone uses her email address). My daughter's itouch gets iMessage no matter what.

It's one of those things that "just works" and if it had come around earlier I wouldn't have had to get a text free or google voice number to get free sms on my phone.

in other words... (-1)

Anonymous Coward | more than 2 years ago | (#39311645)

Also-ran CEO of a non-competiting carrier wants successful carriers to stop doing the things that have contributed to their market position. Also: "nyah nyah," and "I want a nap."

Re:in other words... (1)

jhoegl (638955) | more than 2 years ago | (#39311667)

Yeah, you had to understand what they mean by "subsidy" when they refer to it.
Subsidizing something does not automatically mean the government is doing it.
It is odd he would choose this word... wait... election year... recession, no... no it isnt.

Re:in other words... (1)

damnbunni (1215350) | more than 2 years ago | (#39311863)

I have never seen a word other than 'subsidized' used to describe a cell phone's cost being included in the plan.

What other word would you suggest they use?

Re:in other words... (4, Insightful)

TheRaven64 (641858) | more than 2 years ago | (#39312059)

High-interest loan would be more accurate. I did some calculations a while ago with my carrier's 'free' and 'subsidised' phones. Taking the difference between the SIM-only contract and the one with the bundled phone, and subtracting the cost of buying the phone new, it worked out that the 'subsidy' was a loan at around 20-50% APR. In other words, pick a random credit card offer with a crappy interest rate, buy the phone, and get a SIM-only deal, and even with the extortionate interest you get from the credit card, you'll be better off after a year. You also would have a shorter contract term, so you could switch more easily.

Note that I was assuming that the price I could get the phone for retail was the same as the price that the network paid. In reality, they are likely to pay significantly less. Want to kill this kind of bundling? Make it a requirement to show the interest as a separate line item...

Re:in other words... (1)

LifesABeach (234436) | more than 2 years ago | (#39312079)

Business types use the term Discount, Coupon, and Rebate. The use of the word Subsidy was aimed at the Elderly Embittered Ones(EEO) of the audience. I have found that EEO's don't understand the use of Subsidies, but it bothers them.

I have one question though. Did Cole-B just finish reading one of Lyman Frank Baum works, and thought that the Wizard living in the city of Oz had a great business model? And wasn't the Wizard a salesman from the mid west?

Re:in other words... (2)

macs4all (973270) | more than 2 years ago | (#39311895)

Also-ran CEO of a non-competiting carrier wants successful carriers to stop doing the things that have contributed to their market position. Also: "nyah nyah," and "I want a nap."

That's exactly what I was going to say.

I read his whole rant as "We can't get as good a deal on phones as the other guys."

Re:in other words... (1)

ceoyoyo (59147) | more than 2 years ago | (#39312069)

I read it as "we still want to trap you in contracts and lock your phone, but we'd prefer not to pay for it."

The carriers won't buy in (1)

dougsyo (84601) | more than 2 years ago | (#39311651)

The carriers won't agree, because it would eliminate or restrict the ability to get people to sign two-year contracts.

Re:The carriers won't buy in (1)

bondsbw (888959) | more than 2 years ago | (#39311731)

True but I think the carriers would offer a discount on monthly charges for people who sign contracts.

Re:The carriers won't buy in (3, Insightful)

Anonymous Coward | more than 2 years ago | (#39311897)

A discount?? I think you give carriers more credit than they deserve. They will continue their current practices. 2-year contracts, $60+/month plans, little add-ons for text, night/weekends, "premium" data, etc. They are a cartel. What one does, all do. They don't compete; they collude.

Re:The carriers won't buy in (1)

NFN_NLN (633283) | more than 2 years ago | (#39311813)

Part of the problem is businesses that reimburse you for cell phone bills

I have two choices. Either lock into an expensive cell phone plan which effectively pays for my phone. Or buy a phone and have a cheaper monthly bill and no lock-in contract.

Unfortunately with the later the company won't pay or even help pay for a phone even though that is what they are doing in the first option. So I would be a sucker not to get the more expensive plan.

Re:The carriers won't buy in (4, Insightful)

Anthony Mouse (1927662) | more than 2 years ago | (#39312045)

There is a pretty obvious way for the phone companies to solve this. You offer a series of plans, some of which include no subsidy and are correspondingly much cheaper, others of which provide a fixed subsidy (e.g. $400) that you can apply toward any phone once every two years, and have correspondingly higher monthly fees. Those who get reimbursement can choose the latter plans (which will be much less distortionary because the subsidy is a fixed amount rather than varying based on device type), and everyone else can choose the cheaper plans and then choose a phone based on a combination of features and price.

I'm not even seeing any particular reason why a single phone company couldn't do this unilaterally -- the fixed-amount subsidy should still be competitive with other carriers' subsidized plans. You can even just come right out and say it: We have new unsubsidized plans, they're much cheaper because it's BYOD. It's not like the customer is going to be angry that you've giving them a chance to take a less expensive phone and get a discount for it.

I mean they've got marketing departments. If you actually want customers to realize that they're better off paying $55/month but paying $500 up front for a phone (or, once you have that choice, maybe $400 or $350) than they would be paying $80/month for two years to subsidize a $500 phone, you can make that clear to them.

Re:The carriers won't buy in (1)

ceoyoyo (59147) | more than 2 years ago | (#39312077)

Um, no, if you actually get a cheaper monthly bill, it might well be worth your while to buy a phone outright.

My choice was to get locked into a contract and get a discounted phone or buy my own phone and get a MORE EXPENSIVE monthly contract.

There needs to be a way to avoid the subsidy. (5, Interesting)

ZorinLynx (31751) | more than 2 years ago | (#39311655)

One problem with subsidies in the US is that if you pay full price for your phone, your monthly bill isn't reduced to compensate for not having the subsidy.

In other countries when you buy a phone subsidy-free you pay less per month. This is common sense, yet the US providers don't do it. I'd rather pay full price for my phone and pay less per month. Basically if you keep your phone for longer than 2-3 years, you are now losing financially because you're monthly cost includes a subsidy you're not taking advantage of.

Re:There needs to be a way to avoid the subsidy. (0)

Anonymous Coward | more than 2 years ago | (#39311669)

T-Mobile did this a few years ago when I got my Nexus One; not sure if they still do; if not I've been grandfathered.

Re:There needs to be a way to avoid the subsidy. (5, Informative)

Anonymous Coward | more than 2 years ago | (#39311703)

On T-mobile it is. I paid $400 for my phone and am saving $200 over the life of the contract. And yes, I did factor the up-front cost of the phone into the calculation.

Re:There needs to be a way to avoid the subsidy. (1)

Monoman (8745) | more than 2 years ago | (#39311729)

Exactly. You should pay less per month once you are at the end of your contract or buy the phone out right. They probably won't ever actually call it a subsidy but everyone knows that is what it is. Eventually some lawyers will probably put together a class action lawsuit and we will all get some free SMS messages as a settlement.

Re:There needs to be a way to avoid the subsidy. (1)

thaiceman (2564009) | more than 2 years ago | (#39312165)

The lawyers can get together all they want but thanks to the death star... sorry I mean ATT & the supreme court ruling last year we can no longer file class action suits against them because our lovely contracts have mandatory binding arbitration clauses cooked right into them..

Re:There needs to be a way to avoid the subsidy. (1)

Monoman (8745) | more than 2 years ago | (#39312205)

Hey in the US you can file a lawsuit no matter what. There always seems to be a lawyer willing to work an angle. Perhaps the mandatory binding arbitration will be contested at some point. Not much surprises me with the laws and the lawyers.

Re:There needs to be a way to avoid the subsidy. (0)

Anonymous Coward | more than 2 years ago | (#39311783)

Actually, T-mobile does offer cheaper plans with no subsides. They call it their Value plans.

Re:There needs to be a way to avoid the subsidy. (1)

Bluecobra (906623) | more than 2 years ago | (#39311827)

T-Mobile does this:

http://www.t-mobile.com/shop/Packages/ValuePackages.aspx [t-mobile.com]

For $50/month you can get 500 voice minutes, unlimited text, and 2GB of data.

In comparison to AT&T, they offer a subsidized plan for $90/month and that includes 450 voice minutes, unlimited text, and 3GB of data. Let's say with T-Mobile you get the above plan for $50/month and a phone for $550. At the end of 24 months you will have paid $1,750. If you got AT&T and paid $200 for a subsidized phone, you will have paid $2,360 at the end of 24 months. This is pretty much the primary reason why I am a T-Mobile customer.

Re:There needs to be a way to avoid the subsidy. (5, Informative)

Olivier Galibert (774) | more than 2 years ago | (#39311913)

Wow, and here in France for $27/month we get unlimited voice, unlimited text and 3Gb of data. And you can stop whenever you want without cost. You guys are really getting fucked sideways.

    OG.

Re:There needs to be a way to avoid the subsidy. (1)

Professor_UNIX (867045) | more than 2 years ago | (#39312013)

We have MVNO providers that offer a pretty low price for similar. Simple Mobile has a $40/month plan that is unlimited voice, unlimited text, and unlimited 3G data. For $60/month you get the same, except unlimited 4G data (it's HSPA+ on T-Mobile). Straight Talk offers unlimited voice, unlimited text, and unlimited 3G data for $45/month on T-Mobile or AT&T and you can bring your own phone.

So, why do I still have Verizon and am paying $156/month for two Android phones with "unlimited" data, 700 minutes shared on a family plan, and 500 text messages on each line? I have no idea. I think it's the fear of losing my "unlimited" data plan on Verizon that I've been grandfathered into even though neither my wife or I use more than 500MB of data a month. I could easily be saving $70-$80/month switching to a prepaid provider. I'm actually looking forward to the day when Verizon pulls the same throttling thing AT&T did on their grandfathered data customers because I won't even think twice about switching providers at that point to save money.

Re:There needs to be a way to avoid the subsidy. (1)

lennier1 (264730) | more than 2 years ago | (#39311919)

I'll never understand the overpriced contracts you have on your side of the pond.

Over here I pay what translates into $40/month, get 200 minutes and 100 text messages for free, as well as 10GB of data and a fully subsidized (no extra cost) Samsung Galaxy S2. And that's including 19% VAT.

Re:There needs to be a way to avoid the subsidy. (1)

toadlife (301863) | more than 2 years ago | (#39312085)

The U.S. had plenty of competitive plans. On Sprint we have two lines (both high-end smartphones) virtually unlimited** minutes, unlimited text and unlimited data for $137.00 (that was my last bill) a month.

Piggyback carriers like Boost Mobile offer $40/mo plans with truly unlimited everything.

Other carriers that are not named Verizon have similarly priced plans to the Sprint plan we have.

**We have 1600 shared minutes, but Sprint offers unlimited calling to people on mobile phones in the U.S.. Given that everyone we talk to is on a mobile phone, we end up using around 50 of our 1600 minutes every month.

Re:There needs to be a way to avoid the subsidy. (0)

Anonymous Coward | more than 2 years ago | (#39311975)

This is pretty much why the mobile phone market is broken. It's hopelessly twisted - you are buying a phone not taking out a fucking mortgage.

T-Mobile always has (1)

pavon (30274) | more than 2 years ago | (#39311853)

T-Mobile has always had plans where you save money by not subsidizing the phone. It used to be called the Even More Plus plan (yeah horrible name), and is now Monthy4G no annual contract plan (which does have price tiers without data plans despite the name). If they want to push this transition, they ought to start listing phone subsidy as a separate line item on their with-contract bills, and then later eliminate the distinction between the two plans and just have a (contract requirement) phone payment plan as a line item on any of their no-contract plans.

Re:T-Mobile always has (0)

Anonymous Coward | more than 2 years ago | (#39312041)

I renewed my T-Mobile contract the other day. The store attendant was very clear about how much I would be paying for the phone vs. the actual line, and that the non-subsidized plan would work out better for me in the end. I don't even have to pay for the entire phone upfront, they give me a 0% interest credit and let me pay it off over 20 months. So it seems they are trying to be as open and up-front about this as possible in the current market.

The store attendant also told me that many of his customers don't like paying for the phone separately. They'd rather get a plan that gives them a "free phone", even if that actually costs them more. So T-Mobile seems to be fighting a weird uphill battle, where their plans are better for customers but customers don't like them.

Re:There needs to be a way to avoid the subsidy. (-1)

Anonymous Coward | more than 2 years ago | (#39311859)

shut up you uninformed fucking idiot.

Re:There needs to be a way to avoid the subsidy. (4, Informative)

oakgrove (845019) | more than 2 years ago | (#39311901)

T-Mobile gives a 10 dollar discount on you plan if you bring your own device. There is also a carrier you don't usually hear about called MetroPCS that only does unsubsidized phones and their plans are much cheaper than the other carriers.

Re:There needs to be a way to avoid the subsidy. (0)

Anonymous Coward | more than 2 years ago | (#39312003)

Well if you are interested in gsm phones you can. I have a european galaxy nexus on t mobile using a prepaid plan for $30 per month. 5gb data and 100 minutes per month. It is possible, but far from easy.

Re:There needs to be a way to avoid the subsidy. (2)

pianophile (181111) | more than 2 years ago | (#39312127)

I bought a factory unlocked iPhone, at full price, and now can use whatever GSM prepaid "plan" I want (I use a six-year-old T-Mo To Go account), no contract, no BS. There's also no access to phone network data, but I find WiFi to be more than adequate for me. I now have a phone that costs me as much as I want to spend on phone minutes (and no more) that is also a handheld WiFi computer.

Except what will really happen (1)

koan (80826) | more than 2 years ago | (#39311659)

Is they will get us to pay the full price for the phone and then raise the charges right back to where they are or charge for some other made up service, none of these corporations are interested in giving consumers a deal, they are interested in their bottom line which translate to crap networks, slower speeds than the rest of the World and high prices.

Get rid of contracts or at least offer a 3 month window for consumers to bail out of their plans, stop the growing monopoly and then when they have to compete with each other the consumers will benefit.

Re:Except what will really happen (3, Informative)

dustman81 (1134599) | more than 2 years ago | (#39311755)

Buy a prepaid phone. The up front cost of the phone is more expensive, but the service plans are cheaper. Also, no contract. There are even decent Android phone available on prepaid providers, for example, the Motorola Triumph on Virgin Mobile or LG Optimus Q on Straight Talk.

Re:Except what will really happen (1)

koan (80826) | more than 2 years ago | (#39311803)

I have considered that but the problem is the majority of my phone use is data not calls, and talking over a phone for more than a minute or so is odd behavior to me.
Data on the other makes sense.

Re:Except what will really happen (1)

Bengie (1121981) | more than 2 years ago | (#39312065)

I would cut back on minutes if my wife didn't need to constantly be keeping in contact with bill collectors. About 400-600min/month. It's expensive to be poor.

Re:Except what will really happen (1)

TheRaven64 (641858) | more than 2 years ago | (#39312219)

I'm not sure about your side of the pond, but in the UK most pre-pay plans let you buy a block of data that's valid for a month. They're very good value if most of what you want is data, because you only pay for the calls you make, rather than for the large number of bundled minutes that seem to go with plans with a decent data allowance.

Re:Except what will really happen (1)

russotto (537200) | more than 2 years ago | (#39312179)

Buy a prepaid phone. The up front cost of the phone is more expensive, but the service plans are cheaper.

Except T-mobile dropped pay-as-you-go data, so if you want talk and data, you're stuck with a monthly plan.

Why isn't this whining for not having the iPhone? (2)

david.emery (127135) | more than 2 years ago | (#39311663)

That's how it comes across to me. Furthermore, wouldn't this come too close to being an illegal restraint of trade?

What's interesting is that we have 2 classes of subsidies, one from the TELCOS, and the other from the handset (including handset software) makers. Does Mr Brodman include both classes of subsidies in his proposal? How far would this go, would this also preclude 'limited time offers' or 'for the first year' discounts?

Which is why I buy subsidy free.... (0)

Anonymous Coward | more than 2 years ago | (#39311683)

Virgin Mobile or Walmart Mobile. 30-35/month for 2.5GB data, can't remember the texts (like 300), and 650 talk time. Yes I can't get the latest and greatest (nor Apple) and the best phones they have require upfront cash the difference in cost (versus similar speced phones from traditional carriers) is made up in 6 months tops and I have no contract either. No way I pay 70+ for a cel/data plan when I can get that price.... No top tier iDevice or Android phone (plan) is worth it.

Re:Which is why I buy subsidy free.... (1)

Anonymous Coward | more than 2 years ago | (#39311825)

T-Mo has a better offer. Unlimited data (up to 5GB at 4G) for $30/mo no contract. You don't need voice or SMS if you've got unlimited data. :-) I'm anxiously waiting for quad core ICS phones now that I have permission to buy one from the wifey. When those roll out, I'm buying one no subsidy and dropping AT&T's pathetic prepaid phone/service for T-Mo.

Re:Which is why I buy subsidy free.... (2)

FrankieBaby1986 (1035596) | more than 2 years ago | (#39312031)

Unlimited data (up to 5GB at 4G)

Run that by me again?

Re:Which is why I buy subsidy free.... (1)

Sensible Clod (771142) | more than 2 years ago | (#39312249)

They don't cut you off or give you overages, but they throttle you down to EDGE speeds after the cap. So, yeah, it's "unlimited" with scare quotes.

And will this benefit the customers? (1)

NiteShaed (315799) | more than 2 years ago | (#39311689)

Carriers have built a market structure in which consumers gladly accept a new bauble every 18 months in exchange for paying for text messaging (which literally costs carriers nothing) and overage charges in which 300MB of data for $20 is a fair market value."

Why do I suspect that under this interesting new vision, the above would all still be true with the addition of a hefty cost for the bauble. The carriers will give up their long term lock-ins and overpriced data/text when you pry them from their cold, dead hands.

How it works in Finland (5, Informative)

Anssi55 (729722) | more than 2 years ago | (#39311691)

Here's how it works here in Finland:
You either
a) buy the phone yourself (HTC Titan is ~590 EUR ~= 773 USD), and then have a plan without a phone. Example plans:
0.66e / month, 0.066e / min, 0.066e / sms
3.90e / month, includes 3000min in-network calls, others 0.069e/min, 0.069e/sms
38.90e / month, 3000 min to all networks, 3000 sms messages.
Unlimited non-NATted incoming-ports-open mobile broadband (HSPA+, max 15Mbps) is 13.90e / month (other speed classes exist), or 20.85e / month total for an extra SIM card ("MultiSIM") + USB modem (i.e. you get unlimited broadband in both your phone and computer for that price).
These contract are normally non-fixed-term, so you can cancel/switch operators anytime. Note that in Finland only outgoing calls are paid by the mobile user, incoming calls are paid by the caller (mobile numbers have a separate number block).

or b) buy a plan with a phone. This is a bit different from the US subsidies in that you pay *nothing* up-front, and the plans are actually the same as in (a) above, but there is an additional separate monthly cost for the phone. However, the "subsidy" is very small, only a few percents (e.g. HTC Titan total additional cost is 576 EUR, just 2.5% below normal market price). These are generally 2 year contracts. AFAIK these kind of bundling contracts are generally not allowed, but a special time-limited law was enacted in 2006 allowing such contracts to be made for 3G phones only, and it has been extended at least once since.

The prices above are for Saunalahti, but other carriers have very similar pricing and plans.

At least my impression from all this is that we seem to pay more for the phones, but our plans are otherwise way cheaper (when compared to the US)...

No-plan phone purchases? (1)

Anonymous Coward | more than 2 years ago | (#39311697)

Here in Canada there are plenty of mobile carriers that give you the option to buy the phone outright. But most people don't do this, as the usage cost is the same (but there is no contract).

So would prices seriously come down in the new situation? Errrr didn't we just read that all mobile networks are heavily congested and that is why there are no more unlimited data plans? So how are we going to see drastic price decreases on scarce goods?

It would also be interesting to see how the financing works; what does a carrier get now cash-in-hand per handset vs. what will they be getting in the new situation (incl. discounts they get vs. what they charge the end consumer).

Re:No-plan phone purchases? (1)

Barbara, not Barbie (721478) | more than 2 years ago | (#39312049)

Here in Canada there are plenty of mobile carriers that give you the option to buy the phone outright. But most people don't do this, as the usage cost is the same (but there is no contract).

Not true. Go to Rogers discount brand (chatr [chatrwireless.com]) and buy a phone- unsubsidized - for between $30 (basic feature phone) and $160 (low-end android) or use any unlocked phone, and pay between $25 (unlimited voice only), $35 (unlimited talk and text to anywhere in Canada, + voicemail), $45 ($0 more a month) gives you a crappy 100 megs of data, but instead of that, just connect through wifi and take the $25/month or $35/month plan. It's the same network.

False Economy (2)

catchblue22 (1004569) | more than 2 years ago | (#39311711)

I bought my Nexus S unsubsidized for a reasonable price. It is unlocked and portable. I even bought from a different mobile provider, and dropped in the chip from my current provider. My plan is minimalist but very cheap ($20/month). My provider does sell phones on what amounts to a payment plan...you are charged the full price, and then every month you pay a certain amount off your tab...there is no contract tying you to the provider, except that if you leave you must pay off your tab. It is a much more honest way of showing the true price of the phone.

The summary asserts that changing the way the market functions is unworkable. If consumers knew that their paltry $500 discount on their smartphone actually cost them $1500 in extra billing over three years, I would expect that would be a little less willing to fall for the tricks. What it will take is one company to take the plunge, possibly on the model I described above. Allow customers to get their "free" phone, but make it clear they are actually making payments on it.

Re:False Economy (0)

Anonymous Coward | more than 2 years ago | (#39311757)

Koodo?

Re:False Economy (1)

CrackedButter (646746) | more than 2 years ago | (#39312033)

Here in the UK people understand this, but are quite happy to pay less now, it's that simple.

I bought my new 4S on PAYG and have put only a tenner on it since 6 weeks ago (tenner got me 500 free texts and 500MB [500MB only lasts a month though, the upshot of this I have turned off the 3G chip, saving battery power, I'm surrounded by Wifi anyway]). I'll come out ahead on TCO in no time and easily sell it on.

More importantly... (2)

Roogna (9643) | more than 2 years ago | (#39311725)

The subsidies are a contractual agreement. They're not really the issue. The bigger issue is that the majority of carriers no longer provide any real discount for bringing a already paid for device to their network. The iPhone being the perfect example, I can buy it unlocked for full price. AT&T doesn't lower the bill one bit for this. T-Mobile will (from what I've heard) but can't support the device in most cases as a actual 3G device (This is changing slowly in some areas).

What we need isn't about the subsidies, it's that this country needs to require phones being sold now to support all the frequencies (the chips certainly can now) and to go -unlocked- at the end of the subsidy period, or to be unlocked if full price was paid. No exceptions. If people could take their phone and move to another provider, we might actually have some competition.

I bet T-Mobile is following Free Mobile in France (5, Interesting)

Anonymous Coward | more than 2 years ago | (#39311743)

A fourth operator just entered the market two months ago in France and has caused a hell of an uproar. The French market has been traditionally dominated by Orange (of France Telecom, former monopoly), SFR, and Bouygues. Two months ago Free finally launched their offer after years of the government and the other telecoms trying to stop them. Their offer: 20€ a month for unlimited calls and texts (even internationally to many countries), with 3GB of data for whatever you want to do (meaning tethering, etc.), and 16€ if you have their internet package as Free is traditionally an ISP. They also have a plan for 60 minutes and 60 texts for 2€ a month. This is a huge change from the 85€+ a plan like this would traditionally cost. And they don't offer a subsidized phone with it, so you either buy the phone separately in full (but at good prices), or pay for it monthly in your choice of months (12 or 24). Or, you just use the phone you already have.

To be frank, the other telecoms have flipped their shit over this and have lost about 2 million subscribers in 2 months. They've brought out their attacks on Free and said that people have become violent in their stores because of Free saying that people have been screwed by the Big 3 for years (they were actually fined half a billion dollars in 2005 or 2006). It's caused a huge stir in the mobile market and the traditional operators have followed suit and (in anticipation) launched their so-called low cost offers online without a subsidized phone. I think it would be very interesting to see someone do the same thing in the US, especially someone established like T-Mobile and force telecoms to compete on services and plans (unlimited texts, "we'll give you more data than the competition", etc.).

Ask a silly question... (2)

szquirrel (140575) | more than 2 years ago | (#39311763)

But how is a $548.99 subsidy not illegal dumping?

Re:Ask a silly question... (0)

Anonymous Coward | more than 2 years ago | (#39311865)

Its not a silly question, its just lazy and stupid. Please look it up first.

Kaboom.

Re:Ask a silly question... (1)

tukang (1209392) | more than 2 years ago | (#39311889)

because there is no subsidy. instead of adding a line item on your monthly bill that says "phone unit payment $20" they jack up the cost of your minutes by $20. so you're actually paying for the phone on a monthly payment plan. @tmobile 500 minutes with "subsidized" phone costs more than 500 minutes with an unsubsidized phone, so the "subsidy" is nothing more than a marketing gimmick.

Re:Ask a silly question... (1)

Anonymous Coward | more than 2 years ago | (#39311927)

it's the cell phone service company that pays for your discount, not the phone manufacturer company. Basically, you are getting money back up front in the form of a discount when you sign up because they know they will get it back quickly anyways. This is not illegal as the manufacturers are not dumping (they are still getting the full cost) and phone services companies still make a shit load of money by ensuring more people have phones and having overpriced plans to cover the discount.

Pay as you go (1)

bigsexyjoe (581721) | more than 2 years ago | (#39311767)

I have an interesting to save money... pay as you go.

I assumed they used the phone subsidies to keep me on a contract. I'll definitely be pay as you go when they stop giving me phones. No malice or anything, but the free phone is the only thing keeping me on contracts.

HTC Status (0)

Anonymous Coward | more than 2 years ago | (#39311771)

The cheapest smartphone AT&T offers without a subsidy is the thoroughly mediocre HTC Status, for $349. To add insult to injury, it's only available in mauve.

But, but but..... you mean it doesn't actually have more RAM? [dilbert.com]

Rather than subsidies... (1)

bhtooefr (649901) | more than 2 years ago | (#39311807)

...have a down payment on the phone, and a $20/mo charge, administered by the cellular carrier (because they can disconnect service for not paying your phone purchase bill).

There, it functions just like subsidies, but reflects the true purchase price of the phone better.

I also think that phone manufacturers should try that approach themselves, if they're selling a phone that a carrier doesn't want to sell themselves - rather than sell it for $600, sell it for $150 plus $20/mo for 24 months.

Literally (3, Funny)

whisper_jeff (680366) | more than 2 years ago | (#39311815)

(emphasis in the quote is mine)

...paying for text messaging (which literally costs carriers nothing)...

You are using that word and I literally do not think you know what it means.

Re:Literally (4, Informative)

Anonymous Coward | more than 2 years ago | (#39312189)

I literally think you don't know how texting works.

Very simplified,
It utilises a frequency that the phone uses communicates with the tower, telling it that it is there. If no text messages are sent, the phone would still send out 140 characters of gibberish.

No extra cost.

IE, Nothing.

Re:Literally (0)

Anonymous Coward | more than 2 years ago | (#39312223)

What is up with the word police today? This appears to be valid according to merriam webster: "in a literal sense or manner : actually."

Not quite correct (0)

Anonymous Coward | more than 2 years ago | (#39311823)

I do plan to buy my next phone outright. Although it is galling that most of the carriers in the US charge the same for their monthly "plan" regardless of whether you are on a subsidized or "bring your own" phone. However, I think they miss the boat pretty badly when they say that ending subsidies would make the manufacturers issue updates. Either way, the manufacturer has sold a phone. Generally, to the carrier - and the customer buys it from the carrier. Yes, with non-subsidized phones there are other places to buy, but usually not direct from the manufacturer. Since either way the manufacturer has sold a phone and is now working on the next one - tell me again how this will make them update more often? Right, it won't. In general, I'm averse to more regulation. However, what we have here is a pretty messed up market that was created by spectrum "sales" and is not competitive at all. I'd actually, grudgingly accept some regulation here. Perhaps:

1) You can sell subsidized phones if you want but the subsidy must be part of the monthly billing. As a corollary, said subsidy cannot be part of the billing for a non-subsidized phone: the monthly plan must be cheaper for these. If you chose to offer subsidized phones, you must offer the same phones on both subsidized and non-subsidized plans and the two plans must be given equal billing on advertisements, price sheets, etc. Over the life of the subsidized contract, the cost of the subsidized plan will be at minimum equal to the non-subsidized plan plus the retail price of the phone. The subsidized plan can be higher than this to reflect interest.

2) You cannot prevent or restrict phones from being on your network when there is no hard technical reason that they cannot be (for example you can prevent them if the radios are not the right frequency). So you cannot be in the business of "this phone has tethering and I don't like it so it can't be on my network" or "this doesn't have the absolute shit software I foist on people so it can't be on my network".

I'm sure there are some other regulations that may make sense in this decidedly jacked up market.

GameTheory (1)

ElitistWhiner (79961) | more than 2 years ago | (#39311871)

...US telecom is one X-normous pinball machine. Consumers, balls-in-play are holding traps, channel surfers, network managed nodes and billing bungled dupes all for a pitance EntryFee guaranteeing a couple years of fun for all

No Subsidies - Yeah! (0)

Anonymous Coward | more than 2 years ago | (#39311915)

I've been an (Omni-Point, Voice-Stream, now) T-Mo customer for over a decade, the last subsidized phone I bought was in 2005. A couple years ago T-Mo plans with subsidized phones were $10/month more than w/o. I've bought my last few phones grey-market - they were an N8, an N900, N85, N73, the latter couple 'SmartPhones' which pre-date the iPhone, most of them having decent OS software, equal music, and cameras far superior to the pedestrian Apple competitors. Best part is, I've got an ancient T-Mo 'Unlimited' Data Plan for $20/month and the difference to their current more expensive 'SmartPhone' data plans readily pays for the unsubsidized phones!!!

"literally ... nothing" (0)

Anonymous Coward | more than 2 years ago | (#39311929)

I agree that text messaging is a huge cash cow for carriers, but it's not fair to say they don't pay a dime to provide it. There is some cost associated with it. Developers had to write the code several years ago and someone still has to maintain it. The carriers had to license that software from their equipment vendors. There's processing cycles and temporary storage (between the time the message is received from the source and delivered to the destination) either on the phone switch directly or some computer that's closely tied into the phone switch for every text message that's sent. In the end, their costs to provide the service are quite small compared to the gigantic pile of cash the service generates.

Charging $7.99 a month for calling number identification is a similar situation.

A restaurant charing $2.50 for a glass of Coke or tea isn't quite as bad, but it's close. :(

Re:"literally ... nothing" (0)

Anonymous Coward | more than 2 years ago | (#39312095)

The idea it costs them nothing is just stupid. If it costs nothing to provide that service, then why don't those who claim it does set up and provide it?

What they mean is that if you invest millions in infrastructure, power etc. then the service costs nothing beyond that, but that's the same with intra network voice calls as well, it's only bits of data floating around. I somehow doubt that we'll see providers saying, hey we paid all the upfront costs now, it's all free after this.

Perhaps ... (1)

PPH (736903) | more than 2 years ago | (#39311961)

... carriers will offer cheaper rates on locked in plans to attract users to them. At least we'll be able to see what those longer contract terms are worth without all the noise of a new shiny toy messing up the numbers.

Prices of non-contract devices unreasonable (1)

rwade (131726) | more than 2 years ago | (#39311969)

On the Apple Website, a contract-free (although not carrier- unlocked) 8GB iPhone 3GS is priced at $375. [apple.com]

A 8GB iPod Touch 4G is priced at $199 [apple.com].

The entire iPhone 3GS carries a Bill of Materials and manufacturing costestimated at $178.96. [isuppli.com]

The iPod touch 4g has a better screen (960x640 px at 326 PPI vs 480x320 at 163 ppi) and and a faster processor (1GHz A8 vs 600MHz A8) than the iPhone 3GS. There is research online [emsnow.com] indicating that Apple generally prices its iDevices at double the cost of the BOM and manufacturing cost. That seems fair to me. They have an ungodly amount of R&D costs for that great iOS software, hundred of millions in marketing, the cost of the iStores with the 50 blue-shirted employees -- it's expensive. But...is it realistic to suggest that the iPod Touch 4G that has a better screen, faster processor, and more RAM than the 3GS has a BOM and assembly cost of $78.96 less?

I find it hard to believe that the cost of a cellular modem, ear piece, microphone, and larger battery accounts for that $78.96? I don't think so...

Oops...the $375 3GS is unlocked... (1)

rwade (131726) | more than 2 years ago | (#39312001)

On the Apple Website, a contract-free (although not carrier- unlocked) 8GB iPhone 3GS is priced at $375. [apple.com]

Indeed, it is carrier-unlocked [apple.com]. My mistake!

Re:Prices of non-contract devices unreasonable (1)

ceoyoyo (59147) | more than 2 years ago | (#39312147)

$80 for the radio, microphones bigger battery and all the licensing fees is actually not that far out. Yes, licensing fees - the technology is heavily patented. I believe Apple currently doesn't pay some of those fees because of negotiation problems, but they're surely saving for the future when they have to, retroactively.

Subsidies sound so good (2)

Kjella (173770) | more than 2 years ago | (#39311989)

Subsidies sound so good, like there was somebody else actually paying for it. Except it's not, you're paying it all back it's just a "hidden" loan payable over your contract. If this drives smartphone sales it's only because people are stupid, not because it actually gives people better value for money. In fact, quite probably worse as credit risk and premiums tend to be much higher for consumption loans than your mortgage.

There's a REALLY simple solution to the dilemma. (1)

radiumsoup (741987) | more than 2 years ago | (#39311991)

Offer both subsidized plans and unsubsidized plans, and let the consumer decide which is best. Some people wil bring their own phones and pay less for service, and others will keep their free phones and pay a lot more for service. Win-win. There would need to be a restriction that would only allow NEW users to take advantage of the unsubsidized plan to prevent someone from getting a free phone and immediately switching to the unsubsidized plan, but it would cause a flood of new customers to jump from the other carriers.

two separate items (0)

Anonymous Coward | more than 2 years ago | (#39312029)

I think devices and plans should be two separated items. Otherwise, a user with an unlocked phone will be subsidizing the last iphone / nexus / whatever for the spoiled children.

And of course, to increase competition, devices shouldn't be sold locked. That would be the best scenario for consumers....not for companies.

In this scenario, would be perfectly fine to buy a phone from company A, and then, while still paying for it, use company B for voice/data/etc.

2600 model phones (4, Interesting)

vlm (69642) | more than 2 years ago | (#39312035)

In ye olden days, ma bell would rent you a phone for $5/month. Why would you pay $20 for a phone at walmart if ma bell would give you one "for free"? This had two effects:

1) Ma Bell ancient telephones were indestructible and reliable because any problems meant the manufacturer faught with one of the worlds largest corporations, not some individual peon. Thats why a 1960s phone worked great and lasted forever, and you can only buy garbage now. The days of a mobile phone lasting more than a couple months are going to go away if cell phone subsidies go away... why shouldn't they?

2) Ma Bell made fat stacks of cash on the ghetto rent to own model. You'd laugh at a guy in the lowly socioeconomic circumstance of paying rent-to-own for a couch or TV, but supposedly that biz model is what the cool kids use when they get phones... You can't seriously think the telco is acting as an intermediary out of the goodness of their heart, can you? Basically, they're in the loanshark / payday loan biz, if you're too ghetto to front a couple hundred, they'll do it for you, at a long term cost of thousands. They have shareholders to support... this is a profitable operation, if competently run (which might be asking too much).

Unlocked, contract-free, is the way to go (1)

mrsam (12205) | more than 2 years ago | (#39312183)

I don't think I'll ever use a subsidized phone again. The last contract phone I got was some shitty Motorola that, believe it or not, was completely incapable of reliably ringing the alarm clock every day, on its preset time. And I could easily crash that worthless garbage simply by adding a recurring calendar entry for several years in advance (the dumb thing apparently creates an individual calendar entry for each date, and runs out of its pitifully small internal memory very quickly). Googling around, I was not the only one, but it was too late to return that POS. That was the last time I allowed myself to be locked into a contract in exchange for some piece of crap.

My current Nokia, bought at retail, is the best phone I ever had. I just popped in T-mobile's SIM, and that was the end of it. Although it's a smart phone, I don't need, and I don't pay for, an overpriced data plan, I just use it with Wi-fi. Works fine, and without any hassles from either the phone, or T-mobile. Too bad that looks like this will be the last good phone that Nokia will ever make, now that they've sold their soul to Microsoft.

T-mobile used to have some pretty sweet discounted plans, on a contract-free, bring-your-own-GSM-phone basis They still do, but just as not as good as they used to be.

Stop calling it a "Subsidy" (2)

kervin (64171) | more than 2 years ago | (#39312245)

It's a high-interest loan. You pay it back within 6-12 months. Check it yourself by attributing the monthly Post-Paid Plan cost premium over equivalent pre-paid plans on the same provider.

All major cell phone providers offer no-contract, Pre-Paid plans. Buy your phone outright and use one of those.

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