T-Mobile Trashes Device Subsidies

3:05 PM Carrier's CMO wants customers to pay in full for devices, a nice idea but not one its bigger competitors are likely to get on board with

Sarah Thomas, Director, Women in Comms

March 13, 2012

2 Min Read
T-Mobile Trashes Device Subsidies

3:05 PM -- An ideal wireless world for T-Mobile US Inc. CMO Cole Brodman is one in which device subsidies don't exist.

That's what the Magenta chief said in a panel discussion at last week's Geekwire Summit, a statement he backed up in a blog post on Monday.

His logic is that the deep discounts carriers are required to give to subsidize a phone devalue the device, distorting the cost and creating an uneven playing field for the handset makers, retailers and carriers. "We’ve also unwittingly created a disposal marketplace for some pretty amazing products," he wrote.

T-Mobile offers Value plans in which customers pay full price for a device, but they can set up low, monthly payments to pay it off. It's essentially the same as paying off a contract, but there's no commitment and no pressure to upgrade your phone every two years. Brodman wants the entire industry to follow suit. (See T-Mobile: How Low Can It Go?)

He writes:

  1. Not only would this help level the playing field and foster competition, it would also help consumers by keeping rate plans affordable, providing more transparency in how they purchase wireless and it could encourage a robust, consumer-driven market for affordable (yet still amazing) used smartphones and tablets.

Many, probably most, Americans don't realize the actual cost of the phones they're purchasing. That's why Nokia Corp. (NYSE: NOK) has always struggled here with its unlocked $800 handsets. Suddenly doing away with contracts would cause consumer backlash. But, the rising costs of data -- not to mention tiers and caps -- might make it worthwhile over the long run. (See Do Big Subsidies Have Big Staying Power?)

The key would be for all the wireless operators to make the move. Sprint Corp. (NYSE: S) is one carrier that probably agrees as it pays out the wazoo for each iPhone it sells, but it'd be hard to get the bigger guys with the deeper pockets -- AT&T Inc. (NYSE: T) and Verizon Wireless -- on board. (See Sprint Sees iPhone Subsidies as Necessary Evil and Sprint Talks iPhone Subsidies, LTE Devices .)

It is something to think about though. Cheaper Androids are already winning out over the iPhone in markets without carrier subsidies, and around 1 million people have forked over $629 for the new iPad before it's even out. It might be the right time to at least consider a business model change in the U.S.

— Sarah Reedy, Senior Reporter, Light Reading Mobile

About the Author(s)

Sarah Thomas

Director, Women in Comms

Sarah Thomas's love affair with communications began in 2003 when she bought her first cellphone, a pink RAZR, which she duly "bedazzled" with the help of superglue and her dad.

She joined the editorial staff at Light Reading in 2010 and has been covering mobile technologies ever since. Sarah got her start covering telecom in 2007 at Telephony, later Connected Planet, may it rest in peace. Her non-telecom work experience includes a brief foray into public relations at Fleishman-Hillard (her cussin' upset the clients) and a hodge-podge of internships, including spells at Ingram's (Kansas City's business magazine), American Spa magazine (where she was Chief Hot-Tub Correspondent), and the tweens' quiz bible, QuizFest, in NYC.

As Editorial Operations Director, a role she took on in January 2015, Sarah is responsible for the day-to-day management of the non-news content elements on Light Reading.

Sarah received her Bachelor's in Journalism from the University of Missouri-Columbia. She lives in Chicago with her 3DTV, her iPad and a drawer full of smartphone cords.

Away from the world of telecom journalism, Sarah likes to dabble in monster truck racing, becoming part of Team Bigfoot in 2009.

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