When it comes time to pick a new cell phone, most folks wander into their carrier's store and sign up for a new two-year contract in order to pay a subsidized price for the handset that's quite a bit cheaper than its actual cost. T-Mobile CMO Cole Brodman recently voiced his displeasure with this subsidy system, saying that if he were "king for a day," he'd like to see device subsidies given the axe. Brodman explained that subsidies distort the actual cost of devices and cause consumers to devalue the handsets that they've already got. Here's a partial snippet of what Brodman had to say:
"I think it distorts the economic reality of what devices actually cost and it causes OEMs, carriers, everybody to compete on different playing fields. And I think it's really difficult, especially from a consumer perspective, because it causes consumers to devalue completely the hardware they're using, which is these days is amazing hardware but has become kind of throwaway. It's unfortunate you've got dual-core, multiprocessor devices with amazing HD screens that get thrown away in 18 months."
So will we soon we the end of subsidies at T-Mobile? Probably not, as Brodman says that despite the fact that T-Mobile is one of the top four carriers in the U.S., it's difficult to make such a radical change "when the other three don't want to play along." The exec went on to say that T-Mo has experimented with the idea more than most, but that consumers vote with their wallets and that they'll almost always opt for a lower device price rather than a cheaper rate plan.
Many other folks would also like to see more carriers offer consumers the option to pick up a handset at full price and get a lower-priced plan in exchange, but it seems unlikely that such a move will happen anytime soon. The majority of consumers are used to paying up to $200 (or $300 in some cases) for a high-end smartphone rather than the $500-$700 full retail price of the device, and with adoption of smartphones continuing to grow, the device subsidy is going to continue to increasingly become the norm. Considering how few consumers want the option of a full price device/cheaper plan combo, at least compared to the number of folks that are used to subsidies, it seems unlikely that carriers will feel the need to cater to such a small crowd.
If you'd like to watch Cole Brodman talk subsidies yourself, you can find the full clip at the GeekWire link below. Where do you all stand on device subsidies?
