As T-Mobile Moves to End Smartphone Subsidies, Verizon CEO Says "Not so Fast"
January 7, 2013 3:36 PM
comment(s) - last by
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
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.
This article is over a month old, voting and posting comments is disabled
RE: what subsidy
1/7/2013 9:15:58 PM
Except you forgot that after two years, my rate doesn't go down if I want to keep using the same phone; meanwhile, those that do choose to upgrade at that point pay $400+ less than retail to do so. That means I am subsidizing their purchase.
RE: what subsidy
1/8/2013 8:32:41 AM
oh you definitely are
I guess you're right then. It's a subsidized phone. But it's the consumer that's subsidizing the wireless company :)
"There is a single light of science, and to brighten it anywhere is to brighten it everywhere." -- Isaac Asimov
T-Mobile to End Smartphone Subsidies, Offer Cheaper Value Plans
December 7, 2012, 8:40 AM
LG Showcases 5" Flexible OLED Technology at SID 2013
May 20, 2013, 8:18 AM
Air Force Expects to Save Over $50 Million in 10 Years by Using iPads
May 17, 2013, 12:26 PM
Former Intel CEO Regrets Passing Up on iPhone Gravy Train
May 17, 2013, 11:46 AM
Intel-Based Lenovo Yoga 11 Lands, is $240 USD More Expensive Than ARM Version
May 17, 2013, 11:02 AM
Galaxy S IV Looks to Hit 10 Million Sales in Just Four Weeks
May 17, 2013, 10:12 AM
Nintendo Wii U: No EA Games for You!
May 17, 2013, 8:35 AM
Most Popular Articles
Report: Microsoft Eyes Return to "Dying" Windows 7 Path After Windows 8 Flop
May 13, 2013, 9:50 AM
Bill Gates Gets Teary-Eyed While Discussing Steve Jobs, Shows Off Life-Saving Tech on 60 Minutes
May 13, 2013, 12:30 PM
Windows 8.1 Will Be Free; Microsoft Holds Onto Struggling ARM Variant
May 14, 2013, 2:57 PM
Google Announces "Pure" Galaxy Nexus S4 for $649, Android Updates
May 15, 2013, 1:42 PM
U.S. Federal Traffic Board Wants to Make Drunk Driving Threshold Far Harsher
May 15, 2013, 11:32 AM
Latest Blog Posts
Nokia Introduces Instagram-Like App of Its Own to Help Lumia Sales
May 20, 2013, 7:10 AM
Parents of Pre-Teen Drivers Commonly Practice Distracted Driving Says Study
May 9, 2013, 7:16 AM
Apple's iOS 7 Running Into Internal Delays Due to Massive Overhaul
May 1, 2013, 4:26 PM
Elon Musk Willing to Spend More Money on Widening of 405 Freeway
Apr 26, 2013, 7:28 PM
New $100 Bill Due in October
Apr 24, 2013, 11:52 PM
More Blog Posts
Copyright 2013 DailyTech LLC. -
Terms, Conditions & Privacy Information