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Verizon CEO says customers aren't ready to pay $700 for an iPhone

T-Mobile announced a surprising move back in early December to end carrier subsidies for smartphone customers. Instead of getting a discount on the phone upfront, customers would instead pay full price for the smartphone in exchange for lower pricing on voice/data plans each month.
However, Lowell McAdam, CEO of Verizon Communications, doesn't think that the model will work for its customer base (Verizon is the largest wireless subscriber in the United States). "It's very intriguing. Every carrier has thought about doing away with subsidies," said McAdam. But "I don't think U.S. consumers are ready to buy an iPhone for $700."

Verizon Communications CEO Lowell McAdam [Image Source: Bloomberg]
McAdam may indeed be right -- unlocked, contract-free 16GB, 32GB, and 64GB iPhone 5 smartphones sell for $649, $749, and $849 respectively. Those that choose the subsidized option (two-year contract) can get the phones for $199, $299, and $399 respectively. The psychological pain of paying so much upfront for a smartphone may be worse to many consumers than the slow and steady bleed that comes from paying the costs over the course of a two-year contract.
Customers may end up winning in the long run if they purchase a device full price upfront, go with discounted service plans AND decide to keep their phones for longer than the usual 2-year contract window. Those that stick to strict two-year upgrade cycles may not see much of an incentive in paying upfront.
The biggest losers, however, would likely be those that purchase a subsidized device with a two-year contract, and keep the phone well past two years while still paying the higher "subsidized contract" price for voice/data services.

Source: Reuters

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Why not do both?
By Labotomizer on 1/7/2013 3:58:25 PM , Rating: 2
If Verizon finds this intriguing, offer both please! I don't mind paying full price up front (just bought my phone full price anyway) and I would LOVE exchanging that for a reduced monthly bill. I know that's not for everyone, and it may not be for the majority of users. But let me have the option. Give me a good monthly price off contract, or a really good price on a 2 year contract.

RE: Why not do both?
By vXv on 1/7/2013 5:20:04 PM , Rating: 2
That's how it works on the other side of the Atlantic i.e in Europe.
You can chose whether you want to get a phone from the carrier for a reduced price and pay higher rates or you buy the phone elsewhere and get lower rates (and the ability to cancel the contract at the end of every month if you wish).

RE: Why not do both?
By MadMan007 on 1/7/2013 6:45:08 PM , Rating: 4
Bunch of socialists with their customer-friendly ways of doing business!

RE: Why not do both?
By Dorkyman on 1/7/2013 8:21:02 PM , Rating: 2
AND if you're willing to go with a slightly-older generation phone you can get amazing deals on eBay or Craigslist. My Sprint Evo 4G goes for about $50-100 on eBay these days. I've bought a spare for parts in case I trash mine. Easy to disassemble.

RE: Why not do both?
By GotThumbs on 1/8/2013 10:18:07 AM , Rating: 2
They actually do.

If you already have a phone that was used on Verizon's CDMA network, you can use it contract free through Page-Plus. It's a pre-paid approach with no contract. Using Kitty Wireless, they will do the monthly renewal for me and simply bill my CC, so it's really just the same as when Verizon would charge my CC'd each month. Only no contract required. Just notify KW if you want to change plans or cancel service. I pay 30.00 Mo for 1200 minutes/3000 Txts/250MB data. I don't live on my phone, so this plan is more than enough for my needs.

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