T-Mobile Exec Calls For End To Cell Phone Subsidies

MojoKid writes "T-Mobile's Chief Marketing Officer Cole Brodman has an interesting idea for revamping the mobile industry, and it involves killing the subsidy plans that have driven smartphone adoption over the past five years. Asked what one thing he'd change if he had the power to do so, Brodman pointed to subsidy programs. 'It [device subsidies] actually distorts what devices actually cost and it causes OEMs, carriers — everybody to compete on different playing fields ...' Brodman isn't kidding about an irregular playing field. The HTC Titan is the most subsidized device in the chart seen here (unsubsidized at $549, $0.01 on contract). Microsoft is obviously desperate to gain market share in mobile but both the iPhone 4S and the Galaxy Note carry $400+ discounts too. The cheapest smartphone AT&T offers without a subsidy is the thoroughly mediocre HTC Status, for $349. To add insult to injury, it's only available in mauve. It's an interesting idea, but practically unworkable as far as the mass market is concerned. Carriers have built a market structure in which consumers gladly accept a new bauble every 18 months in exchange for paying for text messaging (which literally costs carriers nothing) and overage charges in which 300MB of data for $20 is a fair market value."

Comments

Re:I bet T-Mobile is following Free Mobile in Fran

[Strange Ranger]

A close family member of mine worked for AT&T Wireless since it was called Cingular. He would tell you that that business model would fail spectacularly here in the US. People here don't shop for plans, they shop for phones. They especially shop for phones they can't actually afford. Worse, they don't shop with money they've saved up. They shop with whatever flexibility they have in their monthly expenses. "What?! You don't offer a phone with that? See ya!!"
 
We are a month to month culture. Buying something for 500 bucks is a huge decision for most people. Adding 40 bucks a month (or whatever) is just another bill.
 
Pay 500 dollars now to save 40 or 60 bucks per month doesn't work for you if you ***don't have 500 dollars***. But your phone is dead and you need a new one. So what do you do? You could buy a super cheap one and get a low end phone plan. If you want that get a disposable or pre-paid phone. Otherwise you're going for the fancy smartphone without the 500 bucks. This is what most people want.
 
So say you did the math and you have the 500 bucks... Offering you an unsubsidized smart phone is a losing option. They make too much money subsidizing your phone and most of their customers like it that way, so why should they make less while giving away the option for you to change carriers at the drop of a hat? Easier to collude with the other carriers and make sure you can't do that.
 
    It doesn't help the carriers until it helps them compete. There's not enough real demand to give up the lock-ins in favor of attracting a few new customers. It'll take critical mass and a lot more people demanding the unsubsidized option before it makes business sense to offer it. It's a cart and horse thing. So It'll never happen unless it's regulated to happen. Cole Brodman is correct that such regulation would vastly improve the market for consumers.