Phone Subsidies Hurting Consumers?

[Rocco Augusto]

<div class='os_post_top_link'><a href='http://www.businessweek.com/globalbiz/content/may2007/gb20070529_601522.htm?campaign_id=rss_daily' target='_blank'>http://www.businessweek.com/globalbiz/content/may2007/gb20070529_601522.htm?campaign_id=rss_daily</a><br /><br /></div><i>"The fight over customers is so fierce that, for new subscribers, operators will even offer their year-old models for as little as a penny. The tab for subsidies alone can set the operators back some $16 billion a year...Sounds like a bonus for the common man, right? Not necessarily. The operators recoup their spending by charging consumers steep prices for air time."</i><br /><br />Talk about hitting the nail on the head. During my time working for Cingular, and ever other major carrier in the United States, I was amazed to learn just how scandalous all of the carriers were with their hidden fees, incredible jacked up air-time charges, as well as cancellation penalties. My all time favorite story involves one of my customers that accumulated a $6,000USD phone bill all because her son went over their allocated minutes due to not having unlimited nights and weekends and used a couple thousand text messages. Sounds pretty crazy, huh? You know what is even crazier? If that same customer would have spent an extra $40USD to cover both unlimited SMS as well as bumping her plan up to the next available minutes package, which included unlimited nights and weekends, she would have been fine. Go figure! :(

[subzerohf]

... I was amazed to learn just how scandalous all of the carriers were with their hidden fees, incredible jacked up air-time charges, as well as cancellation penalties... :(

How could you sleep at night knowing your company is ripping us off? :wink:

Just kidding. I have been against subsidies all along, because there is no such thing as a free lunch. We all pay for it one way or another.

[Mark Larson]

I am all for phone subsidies. I believe that if we got rid of phone subsidies, then not only would we be paying through the nose for phones, but the same price for minutes and data.

I don't believe that if we got rid of phone subsidies tomorrow, the carriers would be so charitable as to reduce our plan prices in accordance. Let them compete for my money I say. Remember, there's only so much monthly cost the average consumer will bear for a cellphone. And the carriers don't want to charge a single cent less than that.

Not only did I get my MSRP $450 phone for -$100, but I also pay $30 a month for features that aren't even available in the UK and elsewhere, like unlimited texts, MMS and unlimited data.

[Rocco Augusto]

... I was amazed to learn just how scandalous all of the carriers were with their hidden fees, incredible jacked up air-time charges, as well as cancellation penalties... :(

How could you sleep at night knowing your company is ripping us off? :wink:

i haven't slept in years! ;)

[Stinger]

Phone subsidies in the UK are probably the highest in the world. Britons tend to pay more per month and get less minutes. However, all features are enabled by default on UK tariffs and coverage isn't typically an issue with any of the carriers.

To be honest, I'm happy with the high subsidies. Sure, I'm paying $65 inc. tax a month for 600 minutes (or SMS/MMS up to the same value) and 1GB of data but I got a $1000+ phone for free. My contract is also only 18 months long and a lot of contracts in the UK are only 12 months. If you're the kind of person who likes to swap phones regularly, then the UK carriers offer good value.

Not only did I get my MSRP $450 phone for -$100, but I also pay $30 a month for features that aren't even available in the UK and elsewhere, like unlimited texts, MMS and unlimited data.

Traditionally, these features haven't been available but they're slowly being released. Orange offer unlimited texts on certain tariffs and unlimited data (with the same fair use policies as the US) is available by T-Mobile and 3. However, the unlimited texts tariff is around $70 inc. tax and unlimited data is a $10-15 add-on to an existing $40+ tariff.

[chucky.egg]

Of course the subsidies get clawed back in airtime costs... where else did anyone think the money came from?

I love subsidies though. I get new devices every 6 months normally, and have a contract running on 2 networks so that I get the best choice of "free" phone. I look at it like an interest-free loan on the price of the handset.

And "No". None of us is dumb enough to think that prices would drop if the subsidies were dumped.

[srsabu]

For my last phone upgrade, I was happy with my plan, but my phone had gotten damaged. My contract was up, so they wanted me to move from my old AT&amp;T blue plan to a Cingular Orange one. To get the equivalent functionality on the new plan would have cost me more than the unsubsidized cost of the phone (SMT 5600) within 10 months. So I paid the full price for the phone and stayed on my blue plan for almost another two years.

[bshpmark]

If it were not for subsidies I think most folks would probably opt for pre-paid plans especially the kids (which might actually be good). However, occurances like a $6000.00 bill are ridiculous. The carriers should put a security feature in place so that if your bill reaches a certain point, your service is suspended until they contact the primary party on the contract and get the okay to proceed with service. In other words, do like the credit card companies do. If they see a sudden purchase that does not coincide with your spending patterns, they will not authorize a purchase until you actually call them and tell them that it is you making the purchase. Of course I realize that a parent could very easily just check and see how many minutes are bing used but most won't think to do it. And if they do, they won't do the math and see what their bill is likely to be.

The carriers in the states need to go back to advertising one year contracts. With the phone technology changing so rapidly those of us who like toys are going to want to upgrade our phones frequently. We should be able to do so without having to add an additional line for another two years.

And let's face it. If you can take a $499.99 MSRP phone and offer it for $99.00 or even free, the profit margin has to be pretty good somewhere along the line whether in the phone or in the bandwidth.

[damonb10]

If it were not for subsidies I think most folks would probably opt for pre-paid plans especially the kids (which might actually be good). However, occurances like a $6000.00 bill are ridiculous. The carriers should put a security feature in place so that if your bill reaches a certain point, your service is suspended until they contact the primary party on the contract and get the okay to proceed with service. In other words, do like the credit card companies do. If they see a sudden purchase that does not coincide with your spending patterns, they will not authorize a purchase until you actually call them and tell them that it is you making the purchase. Of course I realize that a parent could very easily just check and see how many minutes are bing used but most won't think to do it. And if they do, they won't do the math and see what their bill is likely to be.

The carriers in the states need to go back to advertising one year contracts. With the phone technology changing so rapidly those of us who like toys are going to want to upgrade our phones frequently. We should be able to do so without having to add an additional line for another two years.

And let's face it. If you can take a $499.99 MSRP phone and offer it for $99.00 or even free, the profit margin has to be pretty good somewhere along the line whether in the phone or in the bandwidth.

Yeah, that is a good idea. It seems almost criminal to not offer the ability to put a ceiling on your bill or something.

[modgnik]

The capping of your contract bill is an option with one of the networks in the country I live in. If you should hit your elected limit you are unable to call out but can receive calls. (no charge for incoming calls) You can, in the interim before your next monthly recharge, top up your airtime with prepaid vouchers similar to PAYG.
This 24 month contract cap can be as low as $7. This includes a free Motorola V360 (retailing here at $140) This is ideal for your kids or low paid employees.

Another network here offers, apart from the standard PAYG service, a novel option to elect to have your bank ac debited with say $15 or more on a monthly basis. This is credited as airtime to your sim. If you should overrun this, the excess is charged next month together with another $15. The calls per minute are about 30% less than the competition and charged per sec. All unused airtime is carried over ad infinitum. The larger the amount you elect to be debited monthly the cheaper the cost per min your calls are. This arrangement can be cancelled or amended every 30 days.
They do not offer free phones but instead offer a wide variety of phones, including WM like the Vox on interest free credit over 6 to 24 months at competitive retail prices.

The first network, which has been in operation for 6 yrs, is yet to make a profit. The second one is battling also. I hope they survive.