Subsidies on major carriers

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Mthoroughbred

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Dec 16, 2008
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#1
I have a pretty good idea how subsidies work. But what I have no idea is why after you complete your 2 year agreement on your subsidized phone your bill remains the same? This is something that has intrigue me for a while and haven't seen anyone address this.


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Europa

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Dec 12, 2008
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#2
It's not really an issue since few people continue to use the same smartphone for more than two years. But yeah, the bill should go down after two years for those who do. T-Mobile addressed it.
 

chris

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Jun 10, 2006
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#3
If you are a wireless customer who is out of contract, you should either leave or re-up and take advantage of your upgrade. Should wireless companies give you a break on your bill? Sure, but that might cause confusion among their customers. Bills/rates and plans are already confusing. Let's say a customer is off contract and starts receiving a bill that is $100 vs $120. Now that customer goes in and buys a new iPhone 5. Their next bill has the activation fee and goes back to $120. Now they see a bill of $155 and the carrier has to explain not only the activation charge, but the change in billing.

My in-laws are well out of contract. They are using the iPhone 3G/ iPhone 3GS. By the time they upgrade (and I'm not sure if/when they are planning to), they'll have burned a minimum of 1 year that they could have been using towards a contract agreement on a new phone.
 

Mthoroughbred

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Dec 16, 2008
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#4
If you are a wireless customer who is out of contract, you should either leave or re-up and take advantage of your upgrade. Should wireless companies give you a break on your bill? Sure, but that might cause confusion among their customers. Bills/rates and plans are already confusing. Let's say a customer is off contract and starts receiving a bill that is $100 vs $120. Now that customer goes in and buys a new iPhone 5. Their next bill has the activation fee and goes back to $120. Now they see a bill of $155 and the carrier has to explain not only the activation charge, but the change in billing.

My in-laws are well out of contract. They are using the iPhone 3G/ iPhone 3GS. By the time they upgrade (and I'm not sure if/when they are planning to), they'll have burned a minimum of 1 year that they could have been using towards a contract agreement on a new phone.
That would not be the case if the wireless networks would be open about those policies. I just feel like they are double dipping and still charging you for a device when you already finished your 2 year agreement.


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Europa

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#5
That would not be the case if the wireless networks would be open about those policies. I just feel like they are double dipping and still charging you for a device you when you already finished your 2 year agreement.
It's not a secret. It's foolish not to take advantage of the subsidy they offer. Like I said, most people do.
 

Mthoroughbred

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Dec 16, 2008
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#7
Europa said:
Should the bill decrease after two years? Yes. Does it affect most people? No. Workaround? Upgrade every two years. The old phone will be obsolete anyway.
I get what your saying. Since your bill will remain the same just go ahead and upgrade. I guess that's there way of them having you stay with them by upgrading.


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Europa

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#8
Yeah, locking people into contracts is their main goal. They make up for the subsidy in less than two years. It's a bonus for them if you don't upgrade after two years.
 

Nrevezzo

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Apr 15, 2009
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#9
I don't think the amount of your service has anything to do with the subsidy on the device. The subsidy on the device is to keep you as a paying customer for the length of the contract. This is how they recoup the difference between the cost of the device and what you pay for the device. Some phones are free with a 2 year contract but the service cost is the same.
 

Rafagon

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Dec 7, 2011
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#10
How much time would you guys estimate it takes a carrier to recoup their cost of an iPhone 5 16GB model ($649 retail) subsidy? Five months, maybe? How much did AT&T pay for that iPhone, considering that they probably got a nice volume discount?
 

Mthoroughbred

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Dec 16, 2008
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#11
Your bill isn't gonna be cheaper if you buy it outright then if you get it through subsidy? The only benefit is that the phone that you purchase at full price is unlocked? Your bill will be the same as someone that has locked themselves to a 2 year contract?


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Europa

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#12
Your bill isn't gonna be cheaper if you buy it outright then if you get it through subsidy? The only benefit is that the phone that you purchase at full price is unlocked? Your bill will be the same as someone that has locked themselves to a 2 year contract?
If you're referring to AT&T, then yes, the bill is exactly the same regardless if you buy it at full cost or subsidized. You just get a discount on the hardware if it's subsidized. The benefits to buying at cost are that you aren't locked into a 2-year, pro-rated contract with an ETF that starts at $325 and it's unlocked.