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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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LOL!!!!
By NellyFromMA on 1/7/2013 4:47:36 PM , Rating: 2
BIG SURPRISE! The CEO of Verizon, the absolute WORST carrier to be a consumer on if you care about using your VZ phone anywhere else, thinks consumers buying there phones is a bad policy?!

Here's the truth: Verizon is the single carrier who benefits THE MOST from carrier lock in. No other independant carrier operates with their techonology other than Sprint, and each company has an agreement no tto use phones from each others networks on the other network.

Basically, if you have a sprint or VZ phone, you are effed globally. So, VZ wants you to be stuck phone wise as well as contrac twise, therein nullifying ANY leverage a consumer may have in any conversation or dispute billing or service wise.

Cleverly, this absolutely nerfed sprint as being relevant in any way as a carrier while solidifying VZ's first place position. Next to no defectors is great for them.

This guy only gives a crap about his own monopoly, not consumers. As for his remark about the pricin gmodel being 'intriguing', thats the nice way of saying 'stfu don't ruin my situation'.

I'm so happy I switched from VZ to Straight Talk. Had to buy an S3 full price to do it (ok, didn't have to, but did so to spite VZ since our dispute was billing related) but since my bill is literally half and I do everything I did with VZ, I really couldn't be happier.

Bottom line: VZ doesn't want its consumers to feel like they CAN leave without paying huge subsidies. That's how their business model works. Uninformed and unable consumers are the cream of the crop for them.




RE: LOL!!!!
By retrospooty on 1/7/2013 5:49:40 PM , Rating: 1
Not that I am defending the crap Verizon does, but they do what they can do. They can, because is the US, they have the best service. Not in every single area, but overall, they are the best by far for coverage. They cost more and have more users, not becasue people are stupid, its because ATT, Spint nad T-Mo's service sucks.


RE: LOL!!!!
By Rukkian on 1/8/2013 10:16:05 AM , Rating: 2
I have actually been debating the same move as you, but have an issue with their contract saying no streaming allowed. Is it actually blocked, or do they just prefer you not do it?


RE: LOL!!!!
By erple2 on 2/3/2013 8:27:53 AM , Rating: 2
They discourage you from doing it. Basically, if you use too much data in too little a time frame, you will get a warning text or two about it. If you curtail usage then, no issues. Also, that's true if you go the att sim route. I don't know if that also is true for the T-Mobile route...


RE: LOL!!!!
By MZperX on 1/8/2013 12:09:51 PM , Rating: 2
I'm on StraightTalk since April of 2012 with a Samsung GS2, which I bought off contract brand new, and I'm saving about $1,500 over the two-year timeframe that the normal contract would be. I will never go back to the old model of signing away my life and being tied to the carrier. I even sold my old phone after I got the S2 and this way my total cost was around $280 ($430 - $150). Did I mention I get to keep an extra $750 dollars in my pocket each year? Yeah, it's awesome...


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