The carriers used to control the entire USA phone market. Until a certain phone launched in 2007 (and really 2008 was the real year that everything changed in the USA.
iPhone
Apple first wanted a cut of ATT's monthly bill per customer in 2007. That didn't work out well.
So in 2008 they convinced att to give what amounted to a $400 subsidy per phone per line.
Because carriers in the USA were promoting family lines as a back door way to brag about number of subscribers growing. But the public got smart. They added lines 2-5 each with $400/line subsidy.
So apple forced the carriers hands by 2008. Remember palms and blackberry were isually sold for $299-399 on contract.
All the other carriers had to sell for $199 on contract. Whether it be blackberry or android.
So a combination of huge subsidy plus huge growth of family lines caused carriers profit margins to erode.
So finally they have decided to try creative ways to raise prices (sharing plans, and now adding another 4 months to wait till contract ends).
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we all know what verizon will do if they ever eliminate phone subsidies. do you really think they will lower the cost of their plans??? come on, that's a joke.
phone subsidies keep the machine churning - people are more likely to buy new phones and thus sign up for more 2 year contracts. if you have no intention of switching carriers, buying unlocked doesn't make any sense. we as consumers have realized this and it's why keep keep buying into the subsidized + contract system. carriers just go along with it, and while they scream and cry about how phone subsidies are hurting their profits, contracts allow them to better predict what those profits will be. by purchasing the phone from verizon, they also have the opportunity to load you up with accessories which many clueless customers fall for in the store. they'll buy $30 car chargers, $50 cases, $20 extra charging cables...the list goes on. by the time the average clueless customer walks out of the store with their new subsidized smartphone, the carrier has recouped a HUGE amount of the cost of the subsidy. then there is sustaining support as well - customer comes back in to buy another charge or buy a replacement case.
i hardly feel bad for carriers when they whine about the cost of the subsidy. after all, we all know if it was truly better for their profits to offer unlocked contract free phones, they would all be doing it right now.
so verizon is doing the right thing for their company, despite their doom and gloom whining about subsidy costs. heck, my holding in VZ has gone from the mid $20's per share to just over $50/share.
I own both verizon and att stock. Been great with the 5% dividend and 30% gain in stock price the past year.
Eventually prices will reach a boiling point. With cable/Internet prices . It reached about $150/month in early 2000 in many households. At that point consumers got fed up. And many cut the cord. So cable companies had no choice but to essentially freeze prices the past 5-7 years.
I've had essentially the same triple play package the past 8 years for $110-140.
Same thing is about to hit the wireless industry in the USA. The key number is when the average per line price hits $60/line.
Carriers know they are fast approaching that point. Once ur 5 line Verizon bill hit $300 consumers will take note. At that point alternatives like smaller tmobile or even prepaid make sense.
