By Stephen Schenck | March 10, 2012 1:03 AM
Subsidized on-contract prices for smartphones certainly help keep out-of-pocket costs down, but is that one benefit – appearing to have a low initial cost – proper justification for the whole scheme? T-Mobile’s CMO Cole Brodman doesn’t think so, and if he had his way, we’d do away with phone subsidies altogether.
Brodman’s comments, made at the GeekWire Summit in Seattle, really strike home for those of us who spend as much time thinking about smartphones as we do. He ends up making a couple really strong points about what’s flawed with subsidized prices as we have them now. For instance, this artificial push to keep prices down to a certain level results in wildly distorted prices that have little reflection on what hardware actually costs. A carrier might offer half-a-dozen phone for $100 on-contract, despite huge fluctuations between their individual off-contract prices.
Another big problem Brodman sees is that by shifting the cost of phones onto monthly bills in order to give them lower sticker prices, the industry is making customers believe their phone are less valuable than they are. This leads us to treat our phones as disposable gadgets; we might take special care of a $700 laptop, but throw around phones that would cost just as much off-contract with hardly more than a cheap plastic shell to protect them.
The awful thing about this is that people in the industry are well aware of this sorry state of affairs, but are by-and-large impotent to do anything about it. Brodman admits that, unless there’s a concerted effort with all the major US carriers getting honest with phone prices all at the same time, no one’s going to want to take the first step alone and see customers abandon them for the appearance of cheaper alternatives; according to the data T-Mobile’s compiled, customers almost always choose cheaper phones over cheaper service plans. Maybe we’re the ones to blame, after all.
