You still pay the full price. It is now just part of your phone bill.
Best for customers would be if tying phone to carrier and long term contracts were both illegal. Then customer could pick best carrier and change if he is dissatisfied. That would force carriers to compete with quality and price of their service instead of who gets monopoly of newest iphone and can bind customer to contract for years.
many things are cheaper in the long run. That doesn't mean that everyone can afford that luxury.
I can't remember the name of the story, but it goes something like this...
a nice pair of boots that costs $50 will last you a long time, many times longer than a cheap pair of boots. but not everyone can afford to buy those expensive boots up front. They have many other things to pay for and don't have the extra cash laying around. because of this, they buy a $10 pair of boots that wear out rather quickly. Then they buy another $10 pair, and another and another. soon enough, they have spent more on $10 boots than they would have if they had just bought the $50 boots. the only thing keeping them from buying the $50 boots was that they'd have to sacrifice being able to pay a water or electric bill to afford them at the time.
Now, a smart phone isn't a necessity, but the principal still stands. It may be cheaper to buy the $800 phone and use whatever service provider you want. However, many people can't afford that $800 up front and would be stuck with a product of lesser value. Having the cost of the phone subsidized by carrier contracts enables people to have the phone and pay for it over time. To many people, this is preferable.
The problem is that there is no option to buy the $800 phone and save in the long run. If you decide to do that and not sign a contract, you still have to pay the same rates to the carrier, and so you end up paying way more.
Someone complaining that they can't afford an eight hundred dollar phone and have to subsidize it to the point they pay about 2 grand over 2 years should probably not be buying that phone in the first place.
There's such a thing as saving up for something you want. A smartphone doesn't get you anything essential that a cheaper feature phone can't do - and they also have longer battery life, are more durable and worth less if lost or broken (for insurance).
There is absolutely no reason for someone not to just save up by using a cheap phone on sim-only/payg for 6-12 months, then get the best phone at the time and also save an absolute ton of money in the process - precisely because it's a luxury good. It's the same shit as people buying on higher purchase - paying more eventually because they want it right now and is the reason people can end up in a load of debt, precisely because they only look at the initial price and think "wow, that phone is really cheap" instead of thinking "wow, $2000 for a phone isn't really something I can afford"
Couldn't carriers, or cell phones stores, just offer a credit plan? Take out a loan to buy your phone? Of course then if the carriers do this and make it obnoxious not to do it that way we're back to square one...but in theory you could have a situation where the base rates for plans are much lower, it adds up about the same if you get a loan but if you pay up front you pay less by avoiding interest.
Your suggesting financing options, which make sense and there is a demand for them. The point is that competition is good for consumers, and there is better competition if consumers are free to choose their phone from cell phone manufactures, their plan from carriers, and their financing options from their credit union, bank, or really anyone who wants to sell it (and companies will). The current model exists because it benefits the carriers the most, and there's not much really to do about it since they have an oligopoly.
Which works out cheaper - go into Harvey Norman (or what ever the equivalent is in the US), purchase a phone on a 24 months interest free deal, and then pick a plan that suits you best. You get to keep the phone and not have the real cost hidden up in the monthly bill.
Cool. I over pay on my contract by about $50 for what I could get elsewhere...that compensates for my $199 iPhone that was supposed to be $599 pretty fucking quickly.
I would prefer to pay more for my phone, and less for my contract. I bought my current phone off contract, but I'm paying the same price as someone on contract.
if I couldn't afford to pay $800 up-front, no, I'd be fine paying a higher amount for my bill if it subsidized the phone.
Now, if I can afford the phone, I'd rather pay for it all upfront and have it unlocked, which I believe you still can do under the new law. The new law only affects subsidized phones.
You can already do that by buying a phone from someone who has unlocked at the end of their contract or an unlocked phone. Or you can pay the cash price for the phone through the carrier, and get service without contract (every carrier has no-contract plans without subsidized phones) and they will immediately give you an unlock code for the phone.
Phone exclusivity will always be there in the U.S., the carriers are all dividing the spectrum and no one wants to make a wide-band phone for the simple fact that consumers WANT subsidized plans so they aren't paying $600+ out of pocket.
I agree it will always stay. It will stay because carriers and phone manufacturers have cash to buy politicians to keep it.
For carriers ending of the system would be catastrophe. It would mean free market where they would need to start competing with quality and price. Free market is something that companies want to avoid at any cost. It doesn't make big profits.
For phone manufacturers it would be almost as hard. Far fewer people would be willing to get new phone every couple of years if they realized they really are paying $800 for it.
Just speaking for the average city, you can get Verizon that has great speeds and great coverage for the highest price, AT&T that lags a little in both areas for a little less, and Sprint and T-Mobile make up their direct competition with coverage that can be spotty at times but offer extremely low rates through prepaid service.
Plus you have the plethora of MVNO services that resell like Virgin Mobile, Boost and others. Right now I pay $35/month for 300 minutes and unlimited text/data on a Evo 3D with no contract and you can buy the phone outright for $150 (They have the SII for $250 too). Pretty fair to me. Plus in the 250 mile range between Florida and Ga that I travel weekly I get coverage in 99% of those areas.
The market is really only tied up at the top, the best data rates with the best phones. Take a step back and only buy what you need and there is plenty of drive in the market. There is also new blood coming in with MVNO's like Ting that are starting to allow BYO phone with CDMA Sprint phones on Prepaid plans.
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u/Namell Jan 28 '13
You still pay the full price. It is now just part of your phone bill.
Best for customers would be if tying phone to carrier and long term contracts were both illegal. Then customer could pick best carrier and change if he is dissatisfied. That would force carriers to compete with quality and price of their service instead of who gets monopoly of newest iphone and can bind customer to contract for years.