lets get back to reality.
I dunno, i have to take this as someone who as worked in the wireless industry for over a decade.
I've seen the market saturate over time. It used to be I personally could activate 20-25 new lines in a day. Now its upgrade central. "where's my FREE phone!?" is bellowed constantly. People have no idea what these phones actually cost. Its the handset makers that make the money on phones and devices, not the carriers. Let me take a few moments to address a few things:
1) Profits are greedy: Lets look at this. If you have a 401k, pension, HSA, etc, chances are it has a holding in AT&T. In that you get a stake in those profits that help build your future. Fact is we live in a capitalist, free market economy. To say profits should be controlled might as well start grow their beard and start waiving around their little red book. AT&T has nearly 265,000 employees in the US and around the globe. As other companies were cutting their hiring and capital spending during the "Great Recession" AT&T was dumping boatloads of cash into Project Velocity IP or VIP. The complete transformation of the entire nationwide network from TDM based services to an all IP environment. This will put the US on the forefront of telecomm innovation. Not to mention hiring at that point continued to put money into the economy. Per SEC filings profits derived from the higher usage based data plans are funneled back into the wireless LTE network to build more capacity in the system to allow for more data usage, thus allowing them to do what they just did, offer more data for less on the Mobile Share Value plans.
2) Subsidies distort the market place: They do, fact is the same can even be said for gov't subsidies. A comment was made that the prices for mobile operators are lower. they are, the build outs of the wireless networks are subsidies by gov'ts. the money from the gov't means less control over your company but you don't have to shell out the investment to build a network. driving costs down. however in our system that would not work without major questions of gov't power. In terms of the discount on smart phones; if you look at the retail price of most smart phones, not iPhones, the avg subsidy is $350-450. iPhone and GS4 getting the higher discounts. if you look at the pricing plans, you subsidize a phone you pay $40 for your line, if you use next or bring your own device, or once your 2yr contract is up you pay $25.
Lets look at AT&T next pricing:
as per their website:
iPhone 5s 16GB
No Commitment:$650
AT&T Next 18: 650/26 payments = $25/mth. after 18 payments you turn your phone back in, in good condition, and the zero interest loan is forgiven and you can get a new device. Upgrade and activation fees waived
AT&T Next 12: 650/20 payments = $32.50/mth, after 12 payments you turn your phone bad in, in good condition, and the zero interest loan is forgiven and you can get a new device. Upgrade and activation fees waived
2yr contract: $199 plus tax, you must new complete your 2yr contract or pay a $250 early upgrade fee to upgrade early and renew your contract. There is a $36 upgrade or activation fee, your line cost is $40 instead of $25.
realize that with a subsidy the carrier pays the brunt of the cost of the device. When they subsidize the phone, under current GAAP rules for accounting the discount must be written as an expense on the company's income statement.
by allowing the phone to be financed you can translate that loan into an accounts receivable and move it to the balance sheet as an asset which is balanced by the phone held as collateral as a liability. point is that it doesn't distort earnings.
Ive been waiting on this to hit the industry for years, people just don't value the piece of advanced technology in their pocket as much as they should. if you have to pay for it you treat it better, hands down.
3) Follow the leader: The carriers are all scared to take the first step. There is a concept in economics called price elasticity. if you lower your price and others don't your demand should increase all things being equal. If it goes up it should decrease. Since you are dealing with networks, spectrum (a scarce resource), and manpower. Things are not equal. Verizon and AT&T are both top tier because they have a legacy to keep up. They have invested billions in their talent and networks. T-Mobile, is a much smaller company that needs unlimited data to attract subscribers to a network that has much smaller coverage. As that coverage increases and costs go up and network resources become scarce unl data will go away, prices will increase, its how supply and demand work. Same goes for sprint. Sprint this is playing catch up to everyone else due to bad decisions.
Aio: remember its a division of AT&T, it operates on its own without overly direct influence from anyone but the AT&T board of directors. if the purchase of Cricket goes through it will be absorbed into Cricket following the transaction closing. Data may be unlimited, you pay more for more high speed but that high speed is capped at 4mbps. then slows to edge speeds after your plan is used up.
$55 - 2 GB high speed
$70 - 7 GB high speed
Apple: where to start, i applaud apple on its innovations, its attention to design and the consumer. they are a successful company. what will be good for the consumer is once people start to feel the "real" cost of their technology it will force all handset makers to not just compete on price but further innovation to differentiate their product from the competition's. I've tried android, blackberry, windows phone. I can't leave my iPhone for the simplicity, if i could buy my handset then take it where every i want i would. To have any carrier in the nation fighting for my business will bring down prices or push innovation
