It’s not really a subsidy, of course. It’s more of a payment plan without calling it a payment plan even though you make payments by the month that pay for the phone and the service plan. According to the news and a few new plans, that’s all changing. Or, is it?
You Still Pay
The reason cell phone companies sell iPhones for $99 or $199, even though the cost far more, is the need to lower the barrier to entry.
Many people can’t afford to cough up the minimum $650 needed to buy a new iPhone, so the cell phone company builds the phone’s price into the two-year contract to use their network and services.
Some folks I know bought a three-year-old iPhone because all it cost the get one was 99-cents. And two years of monthly payments that, when added up, are almost equal to the price tag of a brand new iPhone.
T-Mobile, Verizon, AT&am;T, and Sprint have new plans that make it just as easy to get a new iPhone, and some of those plans can get you a new one for free. All you have to do is trade in your old iPhone.
Then, every two years you trade it back in to get another new iPhone. This is a shell game. The names are changed to protect the innocent, but the buyer still has to pay for the new phone over the life of a cell phone company contract.
Despite the new programs and new promotion names, absolutely nothing has changed. You can still get a new iPhone for very little upfront money (lowered barrier to entry), and you still pay by the month for a couple of years or so– while using the iPhone, and paying for it in what amount to installments.
Customers have become renters with these new plans. Easy entry, pay by the month, leave at the end of the contract, or trade in the phone, and re-enlist for another contract.
How does that compare to buying a new iPhone? You’ll have to pay upfront. Let’s say the purchase price for that new, unlocked iPhone is $650. That’s what you pay, but you still need to hook the phone up to a cell phone company and pay by the month (Walmart’s StraightTalk does iPhone 5s with data, calls, texting for $45 a month).
Not much has changed but you have the option to sell an iPhone you purchased (which you don’t under a rental plan; unless it’s ‘rent to own’). Two-year-old iPhone 5 models still command $200, which means you could sell your old phone to help defray the purchase price of a new iPhone.
No matter how the shell game is played, and regardless of how easy it is to get a new iPhone, the cell phone company doesn’t lose money on a package deal (new phone, plus contract). They lower the barrier to entry, yes, but you pay for the phone by the month, one way or another.