The End of Phone Subsidies?

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We’ve all known it was coming. The writing has been on the wall for some time. The days of purchasing a mobile phone on a subsidy is quickly coming to an end, and today Verizon put one of the final nails in to the coffin.

Verizon announced that as of August 13th they would no longer be selling devices under contract at subsidized rates, and introduced new plans. Now for a new customer, or a customer wishing to upgrade, will need to pay full price for their device, either through an installment plan or all at once, pay a connection fee, then choose their data plan.

Fees for connecting devices are as follows;

•Smartphone, $20/month
•Tablet and Jetpack Lines, $10/month
•Connected devices i.e. smartwatches, $5/month

Data plans are as follows:

•Small: $30/month for 1GB of shareable data
•Medium: $45/month for 3GB of shareable data
•Large: $60/month for 6GB of shareable data
•X-Large: $80/month for 12GB of shareable data

All plans include unlimited talk and text, and overage fees will come in at $15/GB. Larger plans will be available for those that need them, and these plans allow up to 10 devices to be connected.

Verizon isn’t the first to drop the subsidized plans here in the US. The Magenta Madman had already done this at T-Mobile, and AT&T is pushing their customers to do the same. When I purchased my AT&T BlackBerry Passport, it was a hard sale and very tricky math with discounts I apparently already had and didn’t know about but would lose if I purchased a phone on contract, that led me to choose the Next plan. Now that Verizon has dropped the hammer, I imagine AT&T shall be quick to follow.

Many are speaking about what this will do to iPhone sales. Of course, we’re more concerned about BlackBerry sales. And of course, we can’t talk about those without Android sales. And Windows is still around right?

As we have been predicting the end of subsidies for a while, a common theme has occurred in many’s thoughts. That Apple is screwed. And we all cheer. It’s a valid initial thought, as the iPhone is the most expensive phone on the block. Pound for pound, or I should say, feature for feature, the iPhone costs a disproportionate amount more than other more capable phones. If consumers are having to pay the whole amount, there’s no way they would spend this much on such a limited device right?

Sadly, they will.

Through the magic of installment plans, consumers don’t have to consider the fact that they are paying $700 dollars for this bit of aluminum and glass. I’ve watched it many times at my local AT&T store. The big number on the sign, is the monthly cost, with the full cost tucked nicely away in small numbers, hopeful to be missed. And I watched one gullible consumer after another walk out with their new iPhone.

Do I think this will make a difference in what people are choosing? Sadly no. People looking for cheap phones will grab an android. People looking for BlackBerry will grab a BlackBerry. People looking for handicapped devices that have less functionality than a feature phone? They’ll continue to buy iPhones.

And I believe the frugal consumers shall hold on to their phones longer, hoping to pay off the cost of the phone and not have that bill any longer. And the tech geeks will move on more often, as they’re not under contract and can, until their monthly bill has so many phones payments attached to it they can’t afford it any longer. And they shall cancel each other out.

Subsidy, you were a great friend for many years, but it appears your time has passed. Although I’ve purchased many phones through you, it appears my Torch 9810 was my last. And even though my BB10 phones were purchased without you, my bill stayed the same. I guess this means you won’t be missed.

Brad

BlackBerry Elite Founder & Owner of UTB Blogs and UTB Geek. When I'm not talking or writing about BlackBerry, you'll find me using my BlackBerry.

  • jrohland

    Good riddance. I always hated signing up for indentured servitude for two or three years to a company I despised. What impact will this have on the phone market? Not much that I can see. Using a credit card, people could self finance their phone purchase, albeit at ridiculous interest rates, for a while now. People will likely choose mobile services like they choose petrol (gasoline) price and convenience. Verizon and Sprint are the oddballs because their phones generally won’t work well in the rest of the world. However, few people consider that when buying mobile services, and phones.

  • bambinoitaliano

    I think this will hurt Apple and branded androids. People are less likely to renew their phone prematurely. Both of those platform relies on fast turn over. That’s why they are regularly churning out “new” phones. However, those phones unlike BlackBerry are not build to last either. Perhaps a minority will switch to BlackBerry. Most will ended up going to dollarama and buy those made in China cheap androids. Apple will resist from climbing down from it’s high horse to lower it’s price, the company will just have to expect a continuing shrinkage in sales and profit.

  • RobcThbay

    Wow, as a Canadian we’re always being told how badly we’re getting gouged on wireless pricing and that things are so much cheaper everywhere else.

    I bought my Passport outright and the plan I have includes 6GB/month, free roaming in Ontario (probably all across Canada, but I haven’t been to other provinces to find out), unlimited talk & text, voice mail and more. My LTE speeds are insanely fast, 75Mb bandwidth (generally 50Mb down and 25Mb up). It’s seem odd but my phone has a faster internet connection than my house.

    All this for $50/month plus 6.50 in taxes.

    • bartron

      That’s really good. Who are you with ? Wind was giving me HSPA+ service with unlimited everything for $35/month.

  • bartron

    I’m interested in seeing if the carriers will stop offering contracts, or find some other way to entice users to sign contracts.

    I’d be willing to sign a contract if it gave me lower monthly rates. Otherwise, I’ll stick with month-to-month service, as I’ve been doing since 2004.

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