In Spain, top 2 wireless carriers stop phone subsidy: US carriers watching closely

Discussion in 'iPhone' started by EbookReader, May 7, 2012.

  1. EbookReader, May 7, 2012
    Last edited: May 7, 2012

    macrumors 65816

    Joined:
    Apr 3, 2012
    #1
    http://online.wsj.com/article/SB10001424052702304020104577384562576617618.html
    Wireless Carriers Chip Away at Phone Subsidies

    What would be the effect if AT&T and Verizon stop iphone subsidy?



    Heck, the carriers just need to do 1 thing. Separate the wireless service and the "hardware" contract.

    Rough example:

    $40 a month for Iphone hardware
    $70 a month for wireless service

    Total: $110 a month


    $25 a month for Samsung Galaxy
    $70 a month for wireless service

    Total: $95 a month

    $10 a month for LG Smartphone (mid-tier one)
    $70 a month for wireless service

    Total: $80 a month


    So the consumers will have to choose.

    Maybe some will choose to "stick with their old phones."


    $0 for hardware
    $70 a month for wireless service

    Total: $70 a month
     
  2. macrumors 6502a

    djrod

    Joined:
    Sep 16, 2008
    Location:
    Madrid - Spain
    #2
    Here the wireless companies are a little crazy..

    I can buy an iPhone 4S unlocked directly from Apple for 599€ or from Movistar (my country top carrier) for 609€ locked, nonsense.

    Edit : or paying 33,83€/mo throug 18 months.
     
  3. macrumors regular

    trife

    Joined:
    Apr 16, 2012
    #3
    I'd have no issue paying full price for a handset if no contract was involved. But the way that T-Mobile has done things recently with no subsidy AND a 2-year contract? Pssssht....you can keep that nonsense.

    As times goes on, pre-paid is looking better and better.
     
  4. macrumors 6502a

    quietstormSD

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    #4
    I don't think US carriers would do it. They really make bank on the 2-year contracts and over-charging consumers on there monthly voice/text/data plans (not to mention any other add ons) in order to re-coup the cost of the subsidy and make a handsome profit along the way.

    I would like to see them do it, similar to carriers do outside the US (and some of the discount carriers in the US). Pay full for the phone, and provide voice/text/data plans that are reasonably priced.
     
  5. macrumors 603

    nuckinfutz

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    #5
    Phone subsidies are the only reason why consumers stick with expensive carriers like AT&T and Verizon. Both carriers are under the illusion that their network is important and to a large extent it is but that is diminishing.

    With texting becoming commonplace and Wifi being more available and important. The US carriers getting rid of subsidies means their revenue/profits drop.

    I'd have no problem running an iPhone prepaid for cheap. There's a reason why AT&T made dataplan mandatory. People are happy enough with local wifi.
     
  6. macrumors 6502

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    #6
    To be fair, Spains economy is in the toilet. Watch dumbphones all of a sudden becme very popular there.
     
  7. macrumors 6502a

    djrod

    Joined:
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    Location:
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    #7
    The thing is...the spanish carriers didn't lower the prices! They charge the same now than a few months ago when they were still subsidizing phones
     
  8. macrumors 68020

    LSUtigers03

    Joined:
    Apr 9, 2008
    #8
    I buy most of my phones from ebay or forums like this or xda anyway so I wouldn't really care too much about this. Although it would be funny to see how some people would react when they don't know that their phone is subsidized.
     
  9. macrumors 601

    Joined:
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    Location:
    Bristol, UK
    #9
    I would take this with a pinch of salt.

    Ignoring the Spanish economy (I don't think it's relevant) Telefónica (a company) isn't doing all that well.

    Their brands around the world (including Movistar and O2) are seeing high churn and falling profit margins.
     
  10. macrumors demi-god

    kdarling

    Joined:
    Jun 9, 2007
    Location:
    Device engineer 30+ yrs, touchscreens 24+.
    #10
    This was predicted back in February:

    Apple's iPhone Is Getting Clobbered By Android In Countries With No Carrier Subsidies

    Yes, the economy plays a big part in this.

    The stats I've seen say that $300 out-of-pocket is the breaking point for the majority of buyers around the world. Above that, subsidies help a lot.
     
  11. macrumors 68040

    Joined:
    Jul 28, 2007
    #11
    People need to get some perspective on the "subsidies" Carriers in the USA offers vs. European/Asian countries.

    The key "savings" many USA subscribers receive is throught "family plans"
    Familes plans are making up close to 60% of all plans in the USA and that number is growing enomously with the uptake of smartphone customers looking to save money.

    http://ipcarrier.blogspot.com/2012/...012/03/family-plans-drive-mobile-service.html

    Why is this important? Because family plans offers the same subsidy for lines 1 vs. lines 2-5 for all subscibers. Verizon/ATT/Sprint all subsidize the iPhone by as much as $400 per line. It's really the single individual plans in the USA that are a complete rip off. Once you get to line 3 in a family plan is when you start seeing the real savings.

    I have 4 lines with ATT along with a 24% FAN discount. My total bill including taxes is $175 (about $44/line) that includes the $400 subsidy discount. 700 minutes with rollover (have 3000 plus minutes rollover), unlimited text and 3 $30 iphone unlimited lines.

    You will be hard press to see any European plans average $44 per line along with the $400 plus iPhone subsidy ATT gives me.

    For those on 1 line or 2 lines, prepaid with Straight Talk and paying full price ($650) for an iPhone has a significant savings over post-paid plans.

    Now let's get to the European style of paying for cell phone contracts. From what I have read, there really are not "family talk" plans.

    So it's individual plans. And if you pay full price for phones, the month to month plans are much cheaper than the contract that involves subsidies. Europeans and Asians are use to paying $400-700 for full price smartphones. That's the European/Asian way.

    But Americans in the USA are dumb. They can't do math very well. Everything revolves around what's "the lowest price" initially I can get for a product without calculating the total 24 month contract.

    Carriers like Verizon and ATT and Sprint have fed into this model for so long it will take both Verizon and ATT together to change the subsidy game. Who blinks first? Considering iPhones made up 50% of Verizon contract smartphone sells and close to 70% of ATT iPhone contract sales. Neither carrier will blink on raising subsidies because they are afraid to lose customers.

    So we are stuck with the system we have in the USA. Both ATT and Verizon will need to go into decreasing the subsidy game together. Than again, if both are seen doing this together the FCC will hammer them with acting like a Duopoly which is what ATT and Verizon really are anyways. This could cause a breakout of both companies. And that's why they can't change their model to increase prices at this point.
     
  12. macrumors 68020

    cyks

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    Location:
    Westchester County, NY
    #12
    Unless they were to lower their monthly rates (which isn't about to happen), it'd be no different than what's already going on with certain phones being free and others costing upwards of $200 at purchase.

    The end result, if AT&T or Verizon were to follow suit, would be that they'd lose money.

    If they didn't lower their monthly rate to balance it out, customers would be VERY quick to jump ship and go elsewhere. If they did lower their monthly charges, too many of their customers would take advantage of it by using old phones to lower their costs.


    Not to mention, you simply can't look at one country in Europe and assume what works there would work in the US. The size (in both population and area) is far too big to make any comparisons.
     
  13. macrumors 6502

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    Mar 1, 2012
    #13
  14. macrumors 68020

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    Nov 15, 2011
    #14
    This would never work. Think of the pressure that would be put on carriers from the Android handset manufacturers that come out with a new handset about once every 3 weeks. So if they implemented this, people would stop buying phones every 2 years (hell, I'd hang onto my iPhone 4S until it stopped working entirely) or would buy used. The manufacturers of android devices (I'm not picking on them per-se, but they *are* the ones who turn out devices every time they take a lengthy BM). would have a cow. Suddenly, nobody is buying their new devices every 3-6 weeks.
     
  15. macrumors demi-god

    kdarling

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    #15
    Nope, not coincidence. As I said, their economies are why they're among the first to back out of subsidies.

    Not the first, though. That was Danish telecom Telenor ASA, who stopped subsidies last year. Is their economy bad, too? I haven't checked. Thanks!
     
  16. macrumors 6502a

    quietstormSD

    Joined:
    Mar 2, 2010
    Location:
    San Diego, CA
    #16
    Ouch, that does suck. They should have some sort of "pre-paid" type plan for all smartphone users that's a lower price, if you have a phone and are not on contract.
     
  17. macrumors 65816

    Joined:
    Jan 9, 2007
    #17
    Exactly.

    Even if subsidies for the hardware went away, the carriers aren't going to suddenly lower their monthly charges.
     
  18. Giuly, May 7, 2012
    Last edited: May 7, 2012

    macrumors 68040

    Giuly

    #18
    You're talking ********. The spaniards are trying to do what has been done in Italy for a long time: The iPhone 4S at TIM.it.

    The iPhone 4S 16GB costs you 20€/mo for 30 month (still subsidized, but only by 59€), plus 10€/mo for unlimited internet (well, probably has a 5GB cap) with texts and all calls for 9¢(/min).

    30€ are $39.16. And that is, except for the 20€ of the phone, PREPAID. Don't charge your phone, don't have the internetz. :rolleyes:

    If you pick options like 1500 free minutes on a fixed contract, you can reach AT&T prices, though. Yes, a fixed contract is a lot more costly than prepaid.

    If you would try that in the USA, some smug starts whining about shareholder value and not being able to buy a west-african country from his boni this year.
     
  19. macrumors 65816

    Joined:
    Aug 27, 2011
    #19
    Wether the US carriers want to follow suit or not they will have to make this move sooner rather then later. The manufacturing costs of Smartphones is increasing while the subsidized price has remained unchanged. This works for now as the carriers are still making a profit with this plan, but the margins are shrinking as there is a limited two year frame to make back their money and strike a profit.
     
  20. macrumors 603

    Joined:
    Nov 25, 2009
    #20
    As a first step, wireless carriers in USA may start paying equal/prorated subsidies for all phones. This way, phone price would better reflect the cost of the phone to carrier and they could save money. It could also mean more expensive iPhones but it is unlikely. Apple would have to live with lower profit margins (or become irrelevant which they obviously do not want to).
     
  21. thread starter macrumors 65816

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    Apr 3, 2012
    #21
    good luck with prorated subsidies...

    It's all about bargaining position. Most Androids have none. Apple has plenty.
     
  22. macrumors 68020

    smithrh

    Joined:
    Feb 28, 2009
    #22
    It occurs to me that if subsidies stop or are reduced to a large extent, then you'll actually see greater marginalization of the carriers.

    That is, device providers will be even less beholden to the carriers. The number of features that Apple had to can or cripple to satisfy the carriers (especially AT&T) is probably larger than we'll ever know.

    "No subsidy? Fine. We'll sell the iPhone independently, and we'll determine the feature set. Let's see here, let's make WiFI tethering standard..." Apple could also the electronic SIM route and enable people to switch carriers at the drop of a hat - because why would anyone sign up for a contract if their handset wasn't subsidized?

    Does any sane person think that once a carrier sells the iPhone that they'd stop allowing it on their network? That's the only leverage they'd have, and that would basically be a dead end for them.

    Android manufacturers might not all find themselves with the same leverage that Apple has with the iPhone if subsidies go away.
     
  23. juanm, May 8, 2012
    Last edited: May 11, 2012

    macrumors 65816

    juanm

    Joined:
    May 1, 2006
    #23
    They will see a lot of people leave them for Simyo/Pepephone/whatever and buying unlocked iPhones upfront. Instead of reversing course, to make up for their losses, they will raise their prices. That's their twisted logic.
     
  24. macrumors 68030

    rjohnstone

    Joined:
    Dec 28, 2007
    Location:
    PHX, AZ.
    #24
    Actually it's the opposite. iPhone's have a very high subsidy cost the carrier has to absorb.
    Carriers make more money off of an Android contract than an iPhone contract.
    CNN/Money had a great article on this a few months ago.
    http://money.cnn.com/2012/02/08/technology/iphone_carrier_subsidy/index.htm

     
  25. macrumors 601

    Joined:
    Jan 16, 2008
    Location:
    Bristol, UK
    #25
    Why do you think they (Apple) can't do that now? There's nothing stopping them doing these things (including tethering as mentioned below) - Android does it.

    Apple seems to prefer pandering to carriers to gain their money (not just through subsidies). They are the only phone manufacturer that lets carriers have such deep control over the user experience of the device.

    People can change carriers at the drop of the hat already.

    I can change to one of 6 "official" carriers or dozens of smaller MVNOs just by swapping SIM. If I want to keep my number, it takes no more than 24 hours.

    The risk of an "electronic SIM" system is that the carriers have TOO much control over the process. I can swap SIMs all day on my iPhone and none of the carriers involved can stop me.
     

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