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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  • Damien Turner

    Subsidies help pay for an extremely large portion of my phones >.> only bought an iPhone 4 w/o subsidy….$640 16gb now I’ve moved on to 64gb no way I can buy it at full price now

    • Kimk69

      But you wouldn’t actually be paying full price at the getgo. They lower the bill but finance you the phone so with the lower bill and the monthly price of the phone it actually works out to be about the same. If I’m not mistaken and I read it right a while ago when the tmobile post came out. It could be better for people who keep the phone longer then 2 years because once the phone is payed off your bill will be cheap. But me, I can barely wait a year with the same phone.

      • Damien Turner

        Well you’ve got a point it could be done in that fashion and it’d still be cool I suppose it’s just more “simple,” to me anyways with just outright owning the phone, and paying its bill for two years, that and I don’t have my own contract, I just pay the bill lol, but eh I figure it’ll all work out for the best regardless of what they decide, not gonna sweat it yet lol

  • wolverinemarky

    i like paying the lower price up front them all at once that will be hard to move iphones most people cant afford full price. so hopefully they dont do this unless there gonna drop my bill 30 or so dollars a month then i would definitely be on board with full price

  • Abel Goddard

    I’m FOR subsidized+contract, because most phones are not carrier portable – I can’t use AT&T this month and Verizon next month and Sprint after that, or whatever combination. Think gas companies and cars: if there were a car that only ran on Exxon gas, Exxon would need to subsidize my use of that car.

  • Kraken

    It all depends on the price of the unsubsidized plan. T-mobile is $55 a month for unlimited* everything, and many prepaid carriers are $45/month. AT&T charges at least $90 for something comparable. If the iphone costs $600 and sells for $200 with contract, you make back the difference in under a year. Now if you get a cheaper phone, say a Nexus series ($350), the difference pays for the phone entirely in under a year. Subsidzed phones make massive profits for AT&T/Verizon. And, if you dislike your carrier, you can take your unlocked phone elsewhere at any time.

    Of course what AT&T/Verizon really want are high priced plans, long contracts, and unsubsidized phones, and they will be watching carefully to figure out how they can pull it off.

  • So abe

    I can tell you I would be at Straight Talk from AT&T like a shot when my contract is up and they didn’t offer a subsidy for the next phone. I bought the iPhone 5 on Black Friday for $99.99 on AT&Ts website… I will be able to sell it in 2 years for probably about $300. I have been buying my last 3 iPhones at $149.99 – $199.99 and reselling the same way. If I had to pay $500 or more for a phone upfront… I would make the iPhone 5 last longer on a different carrier and purchase a used or lower cost phone when I get sick of it or when Apple stops supporting it.

  • james

    Dropped subsidies would eventually mean cheaper phones. As it stands now I just buy unlocked older model Androids and use prepaid sim card, works out great. You don’t need the top of the line quad core whizbang hi def screen phone with crap battery life just to run apps.