Carriers

Verizon CEO intrigued by T-Mobile’s move to end smartphone subsidies

January 8, 2013 | by Natesh Sood

AT&T, Carriers, T-Mobile, Verizon

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T-Mobile is the only carrier in the United States that offers two main types of post-paid cell phone plans.  The first is the Classic Plan, which is the traditional plan that offers subsidized costs on devices, but requires a higher monthly fee for service.  The second is the Value Plan, which is the progressive plan that lacks subsidized devices, but offers lower monthly fees for services.

T-Mobile plans on removing all subsidies on phones in 2013 in order to convince customers to switch to a Value Plan, which will save them money in the long-term.  CEO of Verizon, Lowell McAdam, believes T-Mobile’s move to phones without subsidies is “a great thing.”  He believes Verizon can adopt a similar model should it prove appealing to its customers.  The only reservation McAdam has about T-Mobile’s switch, which is a sentiment shared by AT&T’s CEO, is the customers will likely not be quick to embrace the change.

Current Americans are brainwashed by the idea of paying less for a phone upfront, but more per month in services.  The higher fee per month is used to cover the initial low cost of a device.  The benefit of T-Mobile’s value plan comes when you decide to keep your phone for longer than two years; the savings benefit will be enormous.

It will be interesting to see if AT&T and Verizon decide to pursue the subsidy-less model, and whether T-Mobile proves successful in their endeavor.

[WSJ]