Verizon and AT&T Mulling Ending Phone Subsidies?


Deutsche Telekom/T-Mobile is already on record that when the iPhone comes to the network it will be offered without a subsidy, which has both pluses and minuses for consumers. Plus, lower cell phone bills. Minus, higher up front cost. T-Mobile isn’t the first to do this, but watch out, they might not be the last either.

Executives at both AT&T and Verizon are going to be watching how consumers react to T-Mobile offering new iPhones, but at full price (with financing):

Last month Deutsche Telekom AG’s T-Mobile USA said it would completely stop subsidizing phones in 2013, instead offering plans that essentially allow for interest-free financing.

“That is a great thing,” Verizon Communications Inc. Chief Executive Lowell McAdam said in an interview at the Consumer Electronics Show in Las Vegas. He joked that Verizon would support U.S. regulators in banning phone subsidies.

Although he likes the idea of ending subsidies, he questioned whether U.S. customers are ready for that type of shift because they have been conditioned to getting lower-cost phones for so long.

Verizon “could move to that very quickly” if people wanted it, he said.

AT&T Mobility Chief Executive Ralph de la Vega said Monday the company is watching the T-Mobile strategy, and AT&T could make a similar move if it becomes popular, but the company isn’t focused on the issue.

“Our research says that they [customers] don’t like paying upfront for the phone,” he said. “There didn’t seem to be the appetite for that kind of plan.”
From: WSJ

This kind of change might throw a lot of phone and gadget makers back to the drawing board. Without subsidies, even with being locked into contracts, consumers are able to afford expensive devices more easily than if we had to pay outright (even on a plan).

Could be a rough transition for device makers, carriers, and consumers alike.

Photo from Flickr by Blatant World.

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