T-Mobile USA had made a controversial announcement in the U.S. wireless industry by saying that at some point in the future, it would stop subsidizing phones in exchange for a two-year service agreement. However, it seems that T-Mobile‘s decision isn’t just controversial, but may be industry-leading as rival carrier Verizon Wireless has announced that if T-Mobile’s plan succeeds, it may also follow in its smaller challenger’s footsteps.
Speaking in an interview to The Wall Street Journal, Verizon Communications head Lowell McAdam said at the Consumer Electronics Show, “That is a great thing.” when asked about T-Mobile’s decision.
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It looks like Verizon will be monitoring the market closely and the carrier noted that it “could move to that very quickly” should consumers warm up to the idea.
However, McAdam did acknowledge that the U.S. market is much different from Asian and European markets where phones aren’t as heavily subsidized as they are in the U.S. Currently, carriers often subsidize phones to attract customers with the lure of seemingly more affordable devices in exchange for a two-year service agreement. T-Mobile’s actions would radically be a change on consumer mindsets where quality smartphones at cheap prices are the norm and full retail price is typically rarely paid for except by geeks or those in a bind because they had lost their phones or damaged their phones beyond repair and are still in the middle of their contract.
However, T-Mobile says that new customers often choose to pay full retail pricing for their phones, which could start at $500 for high-end devices, and opt for plans that don’t require a contract. In this regard, perhaps the high cost of entry–the full retail cost–may be enough of a commitment for customers to hang around with the same carrier as they’ve ‘bought’ into the carrier’s service ecosystem.
By not having to subsidize phones, the hope is that carriers can begin to offer more affordable wireless voice and data plans to customers.
Most recently, however, Verizon had been more stringent with its subsidies structure. In order for grandfathered customers with unlimited data plans to get subsidies on their next smartphone contract upgrade, they are required to switch to a new shared and metered data plan, else they would have to pay full price on the hardware to retain the privilege of maintaining an unlimited data plan.
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