Sprint Drops Two-Year Contracts

An anonymous reader writes: Following the recent news that Verizon has ended smartphone subsidies, now Sprint has announced it is ending two-year contracts as well. This leaves AT&T as the last of the major carriers to offer such a plan. Most consumers will now have to get used to paying full price for their phones, though Sprint is also running a phone-leasing plan that lets people pay an additional $22/month for an 16GB iPhone, with yearly upgrades.

Comments

Why do this?

[Harlequin80]

I must be missing something, but why do this? Offer monthly BYO plans and offer 2 year subsidised phone plans. These are two different market segments and I would have thought locking someone in on a 2 year contract would have been a good thing.

Re:Why do this?

[TsuruchiBrian]

The free market. Even in a market with only 4 vendors, it still kind of albeit vary slowly.

Once one carrier (T-mobile) caved and did it as a way to attract customers, the others eventually felt enough market pressure to follow. It was enough to get me to switch to T-mobile and become a loyal enough customer to convince about 12 other people to switch. I do still feel loyalty to T-mobile, but I am certainly now more willing to switch to anyone but AT&T if the deal is good enough.

Re:Why do this?

[jellomizer]

There has been too many competitors offering to pay out the contract in order to switch to their plan.
So what happened is that they lose customers in the long run. As people switch plans to adjust to what they want.

Getting rid of the contract will allow people to change their plans in the same company, vs losing a customer.

It's a price rise

[tkrotchko]

This effectively raises prices. Before, you could get your $700 iPhone for $200, and over the course of 2 years, you'd pay the subsidy off.

So without considering the cost of money, and to keep this simple, it's effectively $500 subsidy/ 24 months or about $21/month.

But here's where people stop thinking. You weren't actually paying for the phone, the phone company was. Because at the end of 24 months, you're still paying the same monthly rate, and you now own the phone. In the case of an iPhone, the value has historically worked about to be about $150-200 which you can sell yourself and get a new phone for $200.

Now think of this way. Now you get no subsidy on the phone, and they didn't lower their monthly bill by $21. So what Verizon, Spring, and T-Mobile did was effectively raise their monthly rates because you get no more subsidy, and the monthly cost of the plan is the same as it was before.