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If AT&T and Verizon removed the subsidy option...what
- Thread starter DBZmusicboy01
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The current situation is irrelevant. Right now, people who buy full price (as well as people who don't bother to upgrade immediately when eligible for the subsidized price) are subsidizing those who buy subsidized religiously. Once the subsidy option is gone, carriers would have a huge boost in profit as they're no longer making up for partially covering the device upfront (as they'll keep the same monthly payments), but competition among carriers will likely intensify and there'll be too many people who want but can't afford full price so there might be some downward pressure on the monthly payments in one form or another.
I think a lot of people are assuming that their monthly bill will go down if the phones are no longer subsidized.
The OP said the carriers don't want to lose money any longer by subsidizing. They aren't going to recoup that money just to give it back in the form of monthly discounts. They just want subsidies gone to save money, period. I highly doubt monthly bills will go down.
The only thing that will change are a larger range of financing options for the device.
If AT&T and Verizon drop subsidies AND don't offer a discounted rate plan similar to T-Mobile, you'll see a huge migration to MVNOs.
It's more realistic and accurate to say they want the subsidies gone because they're getting too expensive for them due to the increasing number of users buying expensive smartphones. Years ago we were perfectly content buying dumbphones at $0 down and upgrading every couple years (or longer). Now everyone and their mothers and daughters have expensive smartphones and we're trying every trick in the book to be able to upgrade yearly at the subsidized price (>$100 primary account holder, device swapping with the extra line, etc.). It's costing the industry and they're trying to protect their bottom line.
It's highly likely that the major carriers are going to stop subsidizing phones. What do you think these NEXT and JUMP plans are doing. Just giving the customers a taste of what's to come.
Consumers will of course see a decrease in monthly bills but that's why wireless companies are offering more and more products.
ATT for example can now provide cell service for some Chevy model cars, home monitoring and automation, and wireless home phone to name a few. That's aside from the ever increasing tablet data services they are seeing.
AT&T is already doing what T-Mobile is doing, to a certain extent.
http://www.att.com/shop/wireless/data-plans.html?tab4#fbid=WnJWQFce3P5
Bring your own device or be out of your term, your bill drop by $15.
http://www.att.com/shop/wireless/data-plans.html?tab4#fbid=WnJWQFce3P5
Bring your own device or be out of your term, your bill drop by $15.
You do realize when done properly you actually SAVE money right?
Loom at t-mobile and how they did it.
Before you would pay 200 plus 89.99 a month (which magically turned into almost 100) for unlimited everything. Fulfil your contract and you're still paying 90 a month.
Then they switched to the new plans without the subsidy (or should I say with the subsidy made clear, more see through) and prices of service all dropped. Now that unlimited everything plan is 70 and the phone payment is 20 which is the exact same 90 you were paying, but the only differences are you'll pay LESS UPFRONT for this plan and when you pay off the phone (you can always do it early) you only pay 70, 20 bucks off and you can pay it off early as well.
So yeah, you do save money and it's actually a better option for "broke college students"
And who owns the networks that the MVNO's operate on? You think that the big boys will bend over and take it if any of the MVNO's begin to threaten their cash cows??
Pay up front. If you really think about it, it's pretty lame financing something that cost 600 or 700 bucks. Just buy it and move on. If you can't afford 600 bucks for a phone, at the end of the day you shouldn't have a $600 phone.
If subsidies ended, then we just start paying for the phone's real price eh?
I'd imagine that the full price of phones would come down a bit. Right now that $199 for a 16GB iPhone 5S is the sweet spot for supply/demand. I'd imagine with people paying full price, the supply/demand sweet spot would probably be roughly $399 or so...on the bright side, with subsidies gone, that means phones are UNLOCKED!
And cell phone carriers can do away with contracts and finally accept the fact of life that they really are just a big dumb pipe and they should focus on that and stay out of our way. Cell phone contracts made life so complicated for the customer, and those locked subsidized phones made the entire cell phone experience more complicated than it had to be. Not to mention those insane international roaming fees because your phone was locked (each time a salesman tries to quote me those rates, I ask them if they can say that with a straight face......that's when they concede).
All I want from AT&T is to give me a sim card, and I'll pay $X for Y amount of Data and then AT&T stays the heck out of my way.
I'd imagine that the full price of phones would come down a bit. Right now that $199 for a 16GB iPhone 5S is the sweet spot for supply/demand. I'd imagine with people paying full price, the supply/demand sweet spot would probably be roughly $399 or so...on the bright side, with subsidies gone, that means phones are UNLOCKED!
And cell phone carriers can do away with contracts and finally accept the fact of life that they really are just a big dumb pipe and they should focus on that and stay out of our way. Cell phone contracts made life so complicated for the customer, and those locked subsidized phones made the entire cell phone experience more complicated than it had to be. Not to mention those insane international roaming fees because your phone was locked (each time a salesman tries to quote me those rates, I ask them if they can say that with a straight face......that's when they concede).
All I want from AT&T is to give me a sim card, and I'll pay $X for Y amount of Data and then AT&T stays the heck out of my way.
There are multi year contracts in place for the MVNOs, it would probably be very expensive for the major carriers to just shut them down. Additionally, I'm not 100% sure about the US, but in other countries there are legal and regulatory reasons that MVNOs exist.
If Verizon and AT&T decide they're going to drop subsidies and continue with the same pricing structure, we'll probably see the MVNOs start to disappear as their contracts expire.
And even if that DID happen, there is T-Mobile(and probably Sprint). Honestly I think their coverage sucks, but it's not too far from where AT&T was 10 years ago. If they had a huge influx of subscribers they'd have more cash to spend on expanding and upgrading their network. It's be similar to the situation AT&T was in about 5-7 years ago when the iPhone, iPhone 3G and then the iPhone 3Gs were released exclusively on their network. It took some time, but eventually AT&T put a lot of that money back into their own network.
Well, it is pricey for the carriers. They spend billions each year paying phone manufacturers upfront for phones, which then take almost two years before the carrier gets paid back.
It can heavily affect the carriers' revenue and stock value, while the phone makers rake in immediate profits.
So if I were a carrier, I'd tell high-subsidy, high-profit manufacturers like Apple that they have to subsidize their own darned phone sales. Let them carry the debts for a while, and see if they lower their prices.
I agree that the major carriers won't be able to hit back immediately. However the MVNO contracts do have to come up for re-negotiation and the carriers can make their terms more onerous - hold back newer technologies, restrict coverage or access to good frequencies - who knows.
The cable/ wire industry has already found ways to strangle to services that they had to provide access to through regulation - cable cards? DSL dry loop internet.. etc.
As for T-Mobile, they are all scrappy today because they know they can't compete on their coverage. However, what's to prevent them from normalizing with the other carriers once they reach some kind of parity - the cartel will gladly accept one more member.
That's what 95% of this planet's smartphone users do already.
Subsidized cellular service is mostly restricted to the USA. The rest of the world pays retail and has unsubsidized service plans.
Subsidized cellular service has been a boon to US carriers because much of their customer base are a bunch of math-challenged morons, but partly because there have been differing cellular technologies that made switching rather confusing.
It may take close to a generation to educate the American public about the ridiculousness of subsidized cellular service. Oh well.
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I'm confused why half the people in this thread are saying your monthly bill won't drop if you pay full price for a phone? There is already a $15/month savings on an unsubsidized non-contract plan. It's arguable if $15 is worth it, but still it's there. It's not bad IMO at all and if you ignore taxes/fees for a second it's almost the same exact price as a goPhone plan, which I've always found to be a great value.
Personally I find the big issue to be data, it just seems so grossly overpriced. If they would price data more realistically, coupled with some seriously incredible "cheap" phones we are seeing (like the Nexus 5, Moto X, Lumia, etc) I don't see why paying $300 for a phone and $50/month for unlim minutes/text/data couldn't be a reality.
I think the drop $15 drop is if you're on a mobile share plan. Perhaps those people are using the older plans. Not sure. But I agree, it's not that bad. I think you pay $27 a month for an iPhone on T-Mobile through EIP. So, it's not quite as large as T-Mobile's, but it's better than nothing and I'm glad it's there.
With features like iMessage and FaceTime audio, I feel like that's why data is so expensive. I'm sure $50/mo for unlimited everything is feasible.
Tried the T-Mobil rout, but the coverage was so bad in my particular area that I went back to Verizon. If all the carriers cancel subsidized smartphones, and the monthly amount remains the same >>> I will seriously consider going back to a Flip Phone for phone calls only...Period 
In my opinion, dropping subsidies is the quickest way for the wireless telecoms to transition into becoming "dumb pipes". In the US, the carriers had two ways to prevent becoming a utility company.
1. Incompatible phones between wireless carriers.
2. Subsidies with 2-year contracts.
In the US, with the 4 major carriers each offering plans at similar rates, competition boiled down to whether your network was any good or whether you had cool phones. They charged whatever they liked, because you had nowhere else to go ... at least if you wanted to keep your phone.
So by using subsidies, consumers were locked in for 2 years and had little incentive to switch. Everyone was happy (unless you knew what users in other countries were paying) You'd get a brand new phone every 2 years. Carriers had you locked in for 2 years, plus if you chose not to upgrade, the extra payments each month was gravy. Phone manufacuturers were happy because they got to sell new phones to the same customer every 2 years.
Well, VZ and AT&T got so dominant, and Tmo and Sprint became also-rans. Tmo got desparate and went with the "Euro" model. Now that's freaking out AT&T. VZ may follow suit if they start losing subscribers.
In the end, it'll go one of two ways.
1. The 4 US carriers will go with the Euro-model and the cost of the phone will be separate from the cost of the plan.
2. Folks will opt for financing the phone because they don't want to pay $650 up front. They'll pay off the $450 over the course of 2 years. The carriers will drop your monthly bill by $15 after two years. Of course the math works in their favor.
Ultimately, I'd prefer it if the carriers were relegated to dumb pipes, but we still have a little ways to go. The FCC needs to mandate a single standard for the tech and frequencies. Just use what Europe has standardized on and be done with it.
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1. Incompatible phones between wireless carriers.
2. Subsidies with 2-year contracts.
In the US, with the 4 major carriers each offering plans at similar rates, competition boiled down to whether your network was any good or whether you had cool phones. They charged whatever they liked, because you had nowhere else to go ... at least if you wanted to keep your phone.
So by using subsidies, consumers were locked in for 2 years and had little incentive to switch. Everyone was happy (unless you knew what users in other countries were paying) You'd get a brand new phone every 2 years. Carriers had you locked in for 2 years, plus if you chose not to upgrade, the extra payments each month was gravy. Phone manufacuturers were happy because they got to sell new phones to the same customer every 2 years.
Well, VZ and AT&T got so dominant, and Tmo and Sprint became also-rans. Tmo got desparate and went with the "Euro" model. Now that's freaking out AT&T. VZ may follow suit if they start losing subscribers.
In the end, it'll go one of two ways.
1. The 4 US carriers will go with the Euro-model and the cost of the phone will be separate from the cost of the plan.
2. Folks will opt for financing the phone because they don't want to pay $650 up front. They'll pay off the $450 over the course of 2 years. The carriers will drop your monthly bill by $15 after two years. Of course the math works in their favor.
Ultimately, I'd prefer it if the carriers were relegated to dumb pipes, but we still have a little ways to go. The FCC needs to mandate a single standard for the tech and frequencies. Just use what Europe has standardized on and be done with it.
ft
The funny thing is the subsidy is, effectively, put into the monthly bill anyway. It's just not explicit.
What would happen is they'd move to a T-Mo type arrangement where you "finance" a phone and, coincidentally, they'd offer 24 month financing. Then, the arrangement would be that you can't upgrade your phone until the old one is paid off. Surprise surprise, most consumers stay on the 24 month plan.
What would happen is they'd move to a T-Mo type arrangement where you "finance" a phone and, coincidentally, they'd offer 24 month financing. Then, the arrangement would be that you can't upgrade your phone until the old one is paid off. Surprise surprise, most consumers stay on the 24 month plan.
Remember that carriers are here to make money. While decoupling the subsidy from monthly plans may be good to the consumer (depending on who you talk to), you are still paying extra elsewhere. Case and point, you are paying for unlimited voice and text by default. So those that do not use as much voice/text are subsidizing those that do. Carriers call it simplifying the options, I call it giving you things you don't need (sounds a lot like cable bundling).
Tried the T-Mobil rout, but the coverage was so bad in my particular area that I went back to Verizon. If all the carriers cancel subsidized smartphones, and the monthly amount remains the same >>> I will seriously consider going back to a Flip Phone for phone calls only...Period
Yeah T-Mobile coverage is very lacking. I'd expect Verizon and AT&T to offer some sort of discount on the rate plan if they decide to end subsidies and do financing.
Isn't AT&T dropping your phone bill by $15 if you either buy your phone outright or use the Next program?