Carriers Looking to Lower Phone Subsidies

[will888]

I think this is good for everyone in the long term. Eventually when subsidies reach zero, there will no longer be bait for 3 year contracts. Regardless of which carrier we use, we can buy hardware from a phone store. There will not longer be crap like exclusivity to a carrier for a period of time, no more locked devices. I think dedicated phone stores would be more efficient for distribution than having carriers do it. All in all, there will be savings for the consumer.

[z24gta]

Knowing Rogers reduced subsidy but charge the same. Or more to get a subsidy per month. This will actually hurt them. Too bad nadir has his head in the clouds.

[SharpieFiend]

I think this is good for everyone in the long term. Eventually when subsidies reach zero, there will no longer be bait for 3 year contracts. Regardless of which carrier we use, we can buy hardware from a phone store. There will not longer be crap like exclusivity to a carrier for a period of time, no more locked devices. I think dedicated phone stores would be more efficient for distribution than having carriers do it. All in all, there will be savings for the consumer.

Carriers will always sell phones because people like the convenience, and the carriers like the money they can make from selling phones. It does open the market to more outlets selling phones, which potentially could lower prices and increase variety due to competition. I'm not sure if it rules out exclusivity, because the carriers or a large chain would have the buying power to arrange it. Getting rid of exclusivity would require a law to prohibit that practise, which wouldn't be easy because you would have to do it to all products, not just mobile phones.

[migo]

Knowing Rogers reduced subsidy but charge the same. Or more to get a subsidy per month. This will actually hurt them. Too bad nadir has his head in the clouds.

Yeah, they'll leave the monthly plans the same, say they'll charge $10 extra or whatever per month so that it's more fair. So then you're paying the price that was normally for a subsidy, plus the extra subsidy charge.

[keyzink]

Did you even bother to read the article? Carriers want to eliminate subsidies because they can't afford them.

The article takes the particular case of the iphone, because Apple dictates the purchase price to the carriers and the subsidy they must offer to the consumer. Carriers have been taking it in the a** because it's the iphone. On most other devices, the cost to carriers is probably a lot lower than the iphone, which means even after subsidies the carriers stand to earn filthy profits over a typical 3 yr term.

This is why this subsidy model has been a favorite for north american providers over the years. But the iphone seems to have skewed the statistics.

[will888]

Carriers will always sell phones because people like the convenience, and the carriers like the money they can make from selling phones. It does open the market to more outlets selling phones, which potentially could lower prices and increase variety due to competition. I'm not sure if it rules out exclusivity, because the carriers or a large chain would have the buying power to arrange it. Getting rid of exclusivity would require a law to prohibit that practise, which wouldn't be easy because you would have to do it to all products, not just mobile phones.

In a free market, anyone should be able to sell anything they want. If robellus wants to continue to sell hardware, all the power to them. As long as usage plans and hardware are completely unbundled, it will be easier for customers to figure out the best deal. There is already a fairly lengthy discussion of expansys selling the GN for $399. None of the carrier come even close to that. Clearly, there is room for efficiencies.

The only thing that some customers may not be so used to is having to buy hardware up front. I am willing to bet many who buy iPhones are oblivious to how much hardware subsidy is involved. After getting over the sticker shock, the monthly saving will more than pay for the hardware over the typical 2-3 year time frame.

[SharpieFiend]

The article takes the particular case of the iphone, because Apple dictates the purchase price to the carriers and the subsidy they must offer to the consumer. Carriers have been taking it in the a** because it's the iphone. On most other devices, the cost to carriers is probably a lot lower than the iphone, which means even after subsidies the carriers stand to earn filthy profits over a typical 3 yr term.

This is why this subsidy model has been a favorite for north american providers over the years. But the iphone seems to have skewed the statistics.

Are you aware that the carriers also pay a monthly fee per subscriber to Apple for iPhone users? This is the tipping point - they have to pay to subsidize the hardware and the user fee as well. Many carriers charge extra for BIS access for BlackBerry users, but Apple's fee is completely hidden and is absorbed by the carrier.

[SharpieFiend]

In a free market, anyone should be able to sell anything they want. If robellus wants to continue to sell hardware, all the power to them. As long as usage plans and hardware are completely unbundled, it will be easier for customers to figure out the best deal. There is already a fairly lengthy discussion of expansys selling the GN for $399. None of the carrier come even close to that. Clearly, there is room for efficiencies.

The only thing that some customers may not be so used to is having to buy hardware up front. I am willing to bet many who buy iPhones are oblivious to how much hardware subsidy is involved. After getting over the sticker shock, the monthly saving will more than pay for the hardware over the typical 2-3 year time frame.

As far as the GN goes, this is a fairly new development and the carriers have excess inventory. Unless Samsung is willing to refund the difference to the carrier, which is unlikely, then the carrier cannot afford to take the loss. By the time the carriers burn through their inventory the Galaxy S3 will be out and the GN will be forgotten as a high-end consumer device.

See my message to keyzink, it's not just the subsidy to Apple, but the monthly fee the carrier has to pay.

If the carriers were to stop offering subsidies then consumers would adjust. They would have to replace it with financing instead, which I believe consumers would grudgingly accept. After all, there would be no choice in the matter...

[dcorreia]

Are you aware that the carriers also pay a monthly fee per subscriber to Apple for iPhone users? This is the tipping point - they have to pay to subsidize the hardware and the user fee as well. Many carriers charge extra for BIS access for BlackBerry users, but Apple's fee is completely hidden and is absorbed by the carrier.

I'm just curious if you have any ideas how that works? In the RIM world it's pretty easy since the device MUST have BIS/BES data plan or it does't work. With Apple what happens when people are using iPhones on other providers, T-Mobile etc.

[popk]

I'm just curious if you have any ideas how that works? In the RIM world it's pretty easy since the device MUST have BIS/BES data plan or it does't work. With Apple what happens when people are using iPhones on other providers, T-Mobile etc.

No I don't think that's how it works with iPhones anymore. That's what Apple tried to do with the earlier iPhones but AFAIK Apple gave up on it and no longer gets the cut of the monthly fees. This means Canadian carriers subsidize $490 to get the guaranteed income of $1800 (50 x 12 x 3) over 3 years minimum, which doesn't sound too bad.
They are basically complaining their salesman(iPhone and Apple) is getting too much cut of the whole pie; they want to decrease Apple's share and boost theirs.

At first this might sound like a good idea. I'm willing to pay $650 for an iPhone if we get freedom of no contract and Wind-like pricing for data and voice. However I have a feeling it might pay out differently.

My (looney) suspicion/conspiracy theory is that telcos are trying to play off their oligopoly. Since there are only 3 large carriers with similar price plans, that customers eventually will be stuck with the same big three, paying roughly the same prices they are paying now but without getting the subsidy. At first customers might balk and threaten, but since they have no where to go, they'll be forced to pay more for the phones AND pay the same high monthly fees. I hope I'm wrong on this

[SharpieFiend]

I'm just curious if you have any ideas how that works? In the RIM world it's pretty easy since the device MUST have BIS/BES data plan or it does't work. With Apple what happens when people are using iPhones on other providers, T-Mobile etc.

In that case Apple doesn't get paid. The monthly fee is a requirement in order to sell the iPhone, which T-Mobile doesn't do.

[SharpieFiend]

No I don't think that's how it works with iPhones anymore. That's what Apple tried to do with the earlier iPhones but AFAIK Apple gave up on it and no longer gets the cut of the monthly fees. This means Canadian carriers subsidize $490 to get the guaranteed income of $1800 (50 x 12 x 3) over 3 years minimum, which doesn't sound too bad.
They are basically complaining their salesman(iPhone and Apple) is getting too much cut of the whole pie; they want to decrease Apple's share and boost theirs.

At first this might sound like a good idea. I'm willing to pay $650 for an iPhone if we get freedom of no contract and Wind-like pricing for data and voice. However I have a feeling it might pay out differently.

My (looney) suspicion/conspiracy theory is that telcos are trying to play off their oligopoly. Since there are only 3 large carriers with similar price plans, that customers eventually will be stuck with the same big three, paying roughly the same prices they are paying now but without getting the subsidy. At first customers might balk and threaten, but since they have no where to go, they'll be forced to pay more for the phones AND pay the same high monthly fees. I hope I'm wrong on this

Yeah, it is a looney conspiracy theory because the American carriers are talking the same way.

[canadiancow]

No I don't think that's how it works with iPhones anymore. That's what Apple tried to do with the earlier iPhones but AFAIK Apple gave up on it and no longer gets the cut of the monthly fees.

That is how it worked with the first iPhone. And it was never sold subsidized for this reason.

This has not been true since the iPhone 3G, where Apple decided they could make enough money from app, music, etc. sales.

[Deafmented]

As far as the GN goes, this is a fairly new development and the carriers have excess inventory. Unless Samsung is willing to refund the difference to the carrier, which is unlikely, then the carrier cannot afford to take the loss. By the time the carriers burn through their inventory the Galaxy S3 will be out and the GN will be forgotten as a high-end consumer device.

Carriers do not typically pay manufacturers for devices until the units are sold. The carrier acts as an agent and sells the device on consignment. Unsold inventory is returned to the manufacturer. If the price comes down on a device, the lower wholesale price would be given to the carrier on their remaining inventory.

[SharpieFiend]

Carriers do not typically pay manufacturers for devices until the units are sold. The carrier acts as an agent and sells the device on consignment. Unsold inventory is returned to the manufacturer. If the price comes down on a device, the lower wholesale price would be given to the carrier on their remaining inventory.

LOL, this is not the case at all - I'm sure the carriers would love terms other than net 30.