FCC investigating verizon's ETF increase

[jav6454]

No matter how you word it, the pricing model must take subsidies into account.

Carriers can't just give away phones. They have to build in enough monthly profit to guarantee that they can pay themselves back for loaning out the money in the first place.

For example, AT&T's stock took a drop last year when they revealed that they had paid out something like a half billion dollars in iPhone subsidies, and that it would take about 18 months from the start of each customer's contract, to pay their share back.

Yes there was a report on this. The subsidy price of the iPhone was so high, profits per share were diluted by $0.20/share.

 

[bakarisagna3]

No matter how you word it, the pricing model must take subsidies into account.

Carriers can't just give away phones. They have to build in enough monthly profit to guarantee that they can pay themselves back for loaning out the money in the first place.

For example, AT&T's stock took a drop last year when they revealed that they had paid out something like a half billion dollars in iPhone subsidies, and that it would take about 18 months from the start of each customer's contract, to pay their share back.

So explain why on the verizon plan if you cancel your contract witha month left you will still have to pay $125.

 

[kdarling]

But if there is no correlation, why did a federal judge rule that cell phone companies must prorate the ETF over the term of the contract?

Just a note: No federal judge was involved. Nor the FCC.

Back in 2005-6 there were State class action lawsuits about ETFs breaking California consumer protection laws.

Even though they were not settled (out of court) until 2008, Verizon saw the writing on the wall, and implemented the first pro-rated ETFs in late 2006.

One year later (2007), ATT followed. And one more year after that (2008), Sprint had to also, when they lost a class action.

 

[thetexan]

Why are so many people against companies making profits?

-You don't HAVE to get a subsidized phone. Pay full price, never worry about ETF.

-You don't HAVE to get a smartphone. You can buy some dumbphones without a subsidy for the same price as some smartphones with a subsidy.

-You don't HAVE to sign with Verizon. There are several other big carriers and a few more regional ones to pick from.

-You don't HAVE to get postpaid. Buy a prepaid phone. No subsidy, no contract.

If it were up to me, politically speaking, there'd be no government limits on any pricing in the cell phone industry. Free markets work best when they're free. If you think we have it bad, see how some other countries work with their cellphones. We have it pretty darn good in the US.

 

[bstpierre]

where did you get the idea that your monthly service bill has anything to do with recouping money? there isn't anything extra built into that. the monthly bill is just that, a monthly bill for the service you pay for. signing a contract is meant to ensure you stay with a company long enough so that the profit from those monthly payments can offset the subsidy, but it isn't something setup specifically to recoup money.



you aren't required to sign a contract if you buy a phone at full price, so i'm not sure where you are getting this contract price stuff. if you still sign a contract after not taking a subsidy or bringing in your own phone, then that is your fault, has nothing to do with the carrier. you are automatically month to month

To your first point, what exactly is the difference between "offset the subsidy" and "recoup money" in this context?

To your second point, typically you are signing a contract for the service. Often there is a benefit of signing a two year contract versus the month to month price. When we left Sprint (leaving my son behind) they renewed his contract so he was locked in for another two years (we eventually paid the ETF to get him back on our family plan). They renewed the contract because of the drop in our service level. Perhaps it is worth mentioning that there can be a difference between the contract expiration date and the subsidy eligibility date.

 

[tritonj]

To your first point, what exactly is the difference between "offset the subsidy" and "recoup money" in this context?

To your second point, typically you are signing a contract for the service. Often there is a benefit of signing a two year contract versus the month to month price. When we left Sprint (leaving my son behind) they renewed his contract so he was locked in for another two years (we eventually paid the ETF to get him back on our family plan). They renewed the contract because of the drop in our service level. Perhaps it is worth mentioning that there can be a difference between the contract expiration date and the subsidy eligibility date.

there is no difference between offsetting and recouping, at the end of the day it is profit. my point is that the the monthly bill and contract are not there to get this money back. it is there to make money on the service. the subsidy is just there to entice you to buy service from a carrier

as to your second point, i'm not sure what you are trying to say, the monthly service pricing is always the same for everyone, unless you are getting some sort of a corporate discount not available to the public.

as for the situation with your son, if you were on a family plan and only your son was left, they probably moved him over to a regular plan. but he should have continued on that plan month to month, unless he took another subsidy, if he didn't t hen it sounds like you got screwed.

and yes a contract date can be different from upgrade eligible dates