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Top message:  at&t vs. VZW by badsky2k   Jan 12, 2011, 12:49 PM

Replying to:  Re: Free speech doesn't exist online by mkl4466   Jan 17, 2011, 11:09 PM

Answer: Look at the retail tags

by Menno    Jan 23, 2011, 11:26 AM

Take a look at the retail tags on devices. They're expensive. The average cost of a high end smartphone is between 550-600.

Before you say it, I know there's markup, but it's nowhere near what most people think. Typically Verizon marks up the devices only 20-30 dollars, with most retailers doing around 50-60. This might sound like a alot, but let's look at the Galaxy S, which sells for around 600 retail. even if they do the maximum markup, that's JUST over 10%, where most things in retail are marked up 50% or more.

The reason I bring this up is to show that phones are expensive. Verizon's not buying them for $50 and then selling them on a contract for $199. They're actually taking a loss when they sell them to you on contract, which is why that price requires a contract. (If you're familiar with the term, think of the phone as a Loss Leader for verizon)

Now when the NE2 came out, the maximum amount a phone would be discounted was a paltry $120. This means if a phone Verizon had cost them $500, they would give it to you for $380 on contract. They were making a killing on contracts back them (comparitively) since most people who had phones only really used them for emergencies, and expensive things like data didn't really exist.

Now that phone that cost Verizon $500 is suddently being sold for $150 (or less) on contract, meaning that you're getting a higher discount as an average customer than someone with the best NE2 could get years ago. The profit made on these plans (specifically family plans) is now a lot slimmer than it used to be, which is why Verizon's dropping those additional discounts.

I can tell you as an indirect, that there are some phones that if a customer had that NE2 it meant that we would LOSE money on that sale, even when you include the comission from the highest tier plans. The discounts were on their way out anyway, and with how expensive iphone's are (700-900) it made sense to drop it now, but if they didn't drop it this year, they would soon.

Side note: Verizon will most likely move to a less subsidized method with LTE. Since it is forced to be open, you'll pay retail for the devices (it won't be 600, that's another story) but if you still sign a contract, you'll get some sort of monthly discount.

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