You know that when you sign up for wireless service and get a free phone, it’s not really free, right? Or when you choose a fancier device, like an Android or an iPhone, and pay a couple hundred bucks, you’re getting a big discount right? All phone cost money, and the newer, more complex phones cost a lot more than customers pay for them. The reason consumers are able to get these deals is that wireless carriers subsidize the devices to make them more attractive to people, and gain more customers. In other words, they’re paying for part of the phone you buy in order to earn your business. Now an independent technology and research firm is saying those subsidies could end next year.
Wireless carriers have subsidized the purchases of mobile phones up to now to attract customers, yes. But no company gives anything away for free, or even at such large discounts, without getting something in return. Mobile companies were able to do this because they made back what they spent when the customer chose extra features, or simply with a two-year contract for basic service. This is part of the reason why standard contracts went from one year to two. Devices have become more complex and more expensive over the years, and wireless carriers needed to get back what they spent up front on the phones.
Times are tough, and even the big four wireless companies are feeling the effects. They’ve been trying to come up with new and better ways to gain customers, expand networks to keep up with quickly evolving technology, and still turn a profit. One obvious way for them to save money is to stop kicking in for smartphones that cost hundreds of dollars, or stop offering free phones altogether.
What will this mean for wireless customers? Well, if you already have a good smartphone, take good care of it. It may have to last you a little longer than it used to. And if you were planning on upgrading from your old flip phone to a new smartphone, now is the time to do it. Right now, this is just a prediction from a tech watch company, but with the economy being they way it is, and more and more companies losing money or outright failing, it’s not a far fetched prediction.
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{ 2 comments… read them below or add one }
Times are not tight for mobile providers…except maybe Sprint. They are making more money than ever and network investment has been flat.
The only tightness in the industry is in the land lines…even still in the midst of the great recession AT&T and Verizon are doing just fine.
If subsidies end they will be replaced with cheap financing and lowered contracts. It will just make it more clear exactly what you owe.
It will also bring on tough times for the manufactures….
I agree with you to a certain extent. I have a hard time feeling sorry for any of these companies that are claiming tough times right now while still paying their executives millions of dollars in salaries and bonuses. But as far as business expectations go, profits are down from what they’re supposed to be based on projections made from previous years’ data. Just one example.