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The Phone You're Paying For But Not Getting

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Faulty Assumption

T Bone

Mar 20, 2013, 11:04 AM
Service plan costs are what they are...the prices cover only the cost of providing the service plus a mark up to ensure profit, there is absolutely no part of the price that goes towards paying off the subsidy. Service plan costs would be exactly the same as they are today even if subsidies were abolished.
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cellphoneexpert

Mar 20, 2013, 11:08 AM
If that is true, then why does prepaid service cost so little, and uses the same exact towers, but also having the trade-off of more expensive phones. I must say that I agree with the article.
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vikes0115

Mar 20, 2013, 11:24 AM
I think the prepaid providers are how the issue of the lack of competition in the market, and the issue of pricing collusion, is going to end up being addressed.

Short of denying all new mergers and force the break up of the large national carriers, there are very few ways to increase the level of competition in the market. In fact these methods would likely result in relatively little additional competition due to the limited number of competitors that would exist head to head in each local market.

Rather the better answer may be to regulate the large national carriers in their dealings with third party resellers (the MVNO's). Restricting the amount charged to truly be some level of reasonable profit over their costs would produce t...
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Rich Brome

Mar 20, 2013, 11:26 AM
What do MVNOs have to do with the main point? MetroPCS and Cricket are not MVNOs. They own their own network. Virgin and Boost aren't MVNOs, either, they are simply brands of Sprint.
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Charles Bigelow

Mar 20, 2013, 3:27 PM
With an MVNO, there is choice.
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dwillopp

Mar 20, 2013, 2:42 PM
This is where some misinformation happens as well. Prepay does not in fact get access to the same towers. First off the service is typically 3G on the major carriers, secondly no prepay options allow access to the carriers roaming agreement.
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cellphoneexpert

Mar 20, 2013, 8:57 PM
I agree with you on that, but I am going to also counter that and say that is the roaming capability worth the paying of so much extra money per month of a contract? If you are roaming the whole time that you are using a phone, maybe a change in providers should be in order, most of us users only use a tiny bit of roaming. And as far as the 3G is concerned, most prepay providers sell 4G LTE phones as well, such as Boost Mobile, Virgin Mobile, and Verizon Wireless prepaid. Such phones aren't as cheap upfront, but come out to be much less over the 2 year lifespan of the phone.
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Globhead

Mar 20, 2013, 11:13 AM
Your whole paragraph is incompatible with the fact that the carriers are selling phones below wholesale cost.
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vikes0115

Mar 20, 2013, 11:18 AM
There is not a faulty assumption on the author's part. The subsidy is part of the carrier's costs and thus part of the cost of providing the service, so it does in fact go into the service plan costs.

I do, however, agree with you that the plans would cost exactly the same even if subsidies were abolished. That is because we have allowed an oligopoly to form in the US cellular market.
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Globhead

Mar 20, 2013, 11:37 AM
No, the prices wouldn't be the same. We already have different prices now, with T-Mobile dropping $10 for a no-subsidy plan even when they are their only competition.
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togcpa

Mar 20, 2013, 11:41 AM
The author is completely correct. It's amazing how we in the US think that the world is only how we know it to be. Overseas phones are sold at face value, yes that would be $700+ for a 16GB iPhone. Plans are dirt cheap because actually running the network once it is built is cheap. Most people use a prepaid plan in the form of re-charge cards bought in cell phone shops or convenience stores. A post-paid plan is available but it is a little more expensive.

Having T-Mobile start doing business this way in the US is the first step to all carriers doing it this way. In the future phones will be able to access all the networks based on the SIM card inserted, and phones will never be locked to a carier. In fact you will be able to buy a ...
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dwillopp

Mar 20, 2013, 2:46 PM
The problem with this logic is that each carrier is utilizing different frequencies for their LTE deployment, it would be extremely expensive for a phone manufacturer to include chipsets that would support all carrier frequencies in the U.S. They would need a separate LTE chip for each frequency available in the U.S., a CDMA chip, and a GSM chip that covers all the frequencies. Hard to put all that in the phone and not make it cost $900.
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WiWavelength

Mar 20, 2013, 4:01 PM
dwillopp said:
They would need a separate LTE chip for each frequency available in the U.S., a CDMA chip, and a GSM chip that covers all the frequencies. Hard to put all that in the phone and not make it cost $900.


No, that is wrong.

Different chipsets are not required for different airlinks. Qualcomm has offered multimode 3GPP/3GPP2 (GSM/W-CDMA/CDMA1X/EV-DO/LTE) chipsets for over a year now.

And different chipsets are not required for different frequencies. That is a function of antenna design, which can be a challenge.

AJ
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Zpike

Mar 21, 2013, 8:42 PM
We have an oligopoly in every market in the USA, because the ignorant, incompetent, and greedy Federal Government prefers price fixing schemes and big business money as opposed to busting up monopolies and enforcing competition.

Someone earlier in the thread suggested that we could get some healthy competition by enforcing just such a ridiculous price fixing scheme and forcing big companies to give better prices to MVNO's. Every time the government has ever tried something like that, prices have gone up. Despite what the author of the earlier post thought, such ridiculous notions do not produce competition- they stifle it.

The way to produce competition is to bust up these conglomerates. Then take a hard look at the copyright and pate...
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Rich Brome

Mar 20, 2013, 11:24 AM
If that were true, how do you explain the price difference between T-Mobile's Classic and Value plans? The only difference is the subsidy. That should be obvious, and any T-Mobile rep will tell you that, but I've heard it in person directly from T-Mobile's CEO himself.

The same is true for any major carrier. Compare the monthly price of their pre-paid vs. their post-paid plans. Compare Sprint plans vs. Virgin or Boost plans (all the same company.) How do you explain that?
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PhoneGeek101

Mar 20, 2013, 12:54 PM
I'll use VZW as an example here.

VZW Prepaid does not allow:

-Access to 4G network
-Domestic roaming (free roaming is a misnomer, you pay for it. you just don't pay extra when you use it)
-The ability to share multiple lines. In fact 3 4G smartphones on a 6GB Share Everything plan is cheaper than 3 3G prepaid smartphones with 2GB each.

There's a lot to suggest that the markup in price plans has more to do than just the phone subsidy and it's easier to be cheaper on monthly service than prepaid service with multiple lines.
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Rich Brome

Mar 20, 2013, 1:24 PM
Of course. Verizon has policies that encourage you to use their more profitable post-paid plans. They're more profitable because of the scam detailed in the article.

But the markup in post-paid plans is the subsidy. How do you think you get a $600 phone for $200? It's not free. Verizon isn't that bad at making money. It's simple math.
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Versed

Mar 20, 2013, 7:47 PM
Who says the carriers pay $565 for a SGS3? I'm sure they pay wholesale, I know there is issues do to cdma vs gsm because the former locks out non-branded phones (and please don't tell me about the odd guy who manages to get Sprint or VZW to allow others brands on their network, or does it through illegal means). As someone else mentioned, if we just went to a big box retailer to buy a device it would be a bit cheaper, then deal with a carrier.

In europe and elsewhere, for the vast majority, they all use the same technolgy, which makes it easier to shop around. With GSM its easier, TMO is realigning their network to use the same hspa+ as AT&T. One can find phones unlocked, unbranded that work quite fine. i.e. Nexus 4 on a TMO Value ...
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mobilemadness

Mar 20, 2013, 9:38 PM
You're right. Europe and the rest of the world have open networks, meaning you can switch phones between carriers, because of the open GSM standard. The US set up this CDMA island where phones are locked down to a particular carrier through firmware. Heck even in red China CDMA phones use SIM cards (called R-UIM) so you can swap devices without carrier intervention. But in the good old land of the free (USA) these greedy mobile corporations stuck a deal with Qualcomm not to use SIM cards like the rest of the world. The US is very backwards in that regard. I blame Sprint, who in 1995 switched their GSM network over to CDMA in Washington DC. Then Verizon followed suit and the rest is history. Had the US been on GSM this whole time, may...
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mupi

Mar 21, 2013, 7:26 PM
Yeah, small problem with your post, in that VZW and Sprint never had GSM networks. CDMA was a natural progression of analog cell networks into the digital world. GSM is arguably superior, but mostly that's because the European networks didn't care as much about backwards compatibility with analog equipment. I may still have an old dual band Verizon analog+digital phone.

Also AT&T and T-Mo are both GSM, but phones from one don't work on the other without jumping though all sorts of hoops. So much for the theory that competition would help matters.

As to those posting that Boost, Virgin, Cricket, etc, don't have the same level of service.... hate to break it to you, but in any given geographical area, there's only 4 allowed carriers: 2 C...
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