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T-Mobile CMO: US cell industry needs to end subsidies

updated 12:10 am EST, Fri March 9, 2012

T-Mobile says subsidy model unsustainable

T-Mobile's chief marketer Cole Brodman called for an end to carrier subsidies in a panel chat (video below) on Thursday. The heavy discounting on phones created unfair competition on for everyone involved, he said at a GeekWire event. Aside from being tied to a contract, customers were also being led to "devalue completely" their hardware, replacing devices that actually cost several hundred dollars in less than two years.

When pressured by Swype's Mike McSherry to take the first step and drop subsidies, Brodman answered that the other three major carriers were hesitant to follow suit. T-Mobile had already tested the subsidy-free model, but in many cases people often saw only the superficial device price, not the long-term cost of the plan. "It becomes difficult because consumers vote with their pocketbooks, and they will almost always pick a low device price oftentimes over a low rate plan price or a bundled rate plan price," the CMO said.

The observations underscore the differences between the US and other countries. Many Southeast Asians and Europeans often buy a device contract-free. The decision hikes the immediate price, but sometimes leads to lower rate plans and always the freedom to switch carriers without a penalty.

Brodman went on to reiterate T-Mobile's view that it doesn't need the iPhone to survive. Despite losing customers without Apple's help, T-Mobile had "fantastic alternate choices," he argued. Others could sometimes do things better than the iPhone.

This didn't necessarily mean handing the market to Android, he implied. It wasn't "healthy" to let one OS dominate, and thus it was important to see if Windows Phone would grow to become a third major competitor.





By Electronista Staff
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Comments

  1. Jubeikiwagami

    Fresh-Faced Recruit

    Joined: Dec 2011

    +10

    comment title

    Suddenly it's all wrong eh? Apple plays within their rules and now it's all wrong?

  1. Le Flaneur

    Senior User

    Joined: Oct 1999

    +5

    right on the money

    He's absolutely right, but will change occur? The subisdy system is pernicious, and people really are convinced that they're getting a good deal by "only" paying $199 for an iPhone.

  1. nowwhatareyoulookingat

    Fresh-Faced Recruit

    Joined: Jul 2009

    +27

    how about

    ...if you buy/bring your own device, you pay less for your monthly plan?

    Maybe then they just might get more people who will go with the non-subsidized route...

  1. Bobfozz

    Fresh-Faced Recruit

    Joined: Jul 2008

    +13

    Wait a minute...

    It's hard to trust the carriers on anything. First they will have a low cost data plan, then a different data plan, then they are likely to change the rules, minimums, capping, etc. Who in their right mind would trust the carriers to do anything fairly? This is ONE reason people vote with their pocketbooks and short term because they don't believe companies such as AT&T and Century Link (Qwest). Many actually HATE Comcast!

  1. global.philosopher

    Fresh-Faced Recruit

    Joined: Sep 2010

    +13

    I may be cynical but....

    Getting rid of subsidies will benefit the only major carrier that doesn't have the iPhone.

  1. aardman

    Fresh-Faced Recruit

    Joined: Nov 2009

    +19

    What a load of c***

    If the monthly subscription cost fell to a subsidy-free level after the subsidy has been recouped, then people would be in no hurry to replace their cell phones. But the problem is all the carriers, including T-Mobile continue to charge the high rate even after the subsidy has been recouped. People are not stupid. Of course if the carrier gives me no choice except to keep paying the monthly high rate, then I might as well get a nice new subsidized phone out of it.

    If you are concerned that we are building a huge garbage pile of used cell phones, and yet worried that your business will suffer if the cell phones are priced too expensive, then by all means, give your customers a subsidy. But drop your monthly rates once the subsidy has been recouped.

  1. SierraDragon

    Mac Elite

    Joined: Mar 2004

    +7

    Duh...

    Of course the thieving carriers will lobby to end subsidies.

    Key word "thieving." You may quote me. :)

    Thieving was the _nicest_ adjective I could think of that might apply.

  1. chefpastry

    Mac Enthusiast

    Joined: Nov 2005

    +8

    Self inflicted

    They did it to themselves. Now, they want to undo their foolish decision.

  1. mkral

    Mac Enthusiast

    Joined: Nov 2000

    +4

    subsidies serve a purpose

    People like new phones. How often would you actually buy a new $600 phone? Certainly not as frequently as you would buy a $200 phone. We'd all hang onto our phones longer, and that wouldn't necessarily benefit the carriers. As technology changes, they are looking to push people to new technologies. If you had to buy a $600 phone to use 4G, most people would stick with their 3g device, which is 'fast enough' for those that aren't power users. And there are some real efficiencies to be gained by the carriers by getting people to use 4G. AT&T is shutting down their 2g network slowly & is pushing people to 3g. If you're a low-volume user, you may not want to pay money to buy a new phone to replace your 2G phone. Plus, thec support becomes easier when most people are using recent phones.

  1. boulder1259

    Fresh-Faced Recruit

    Joined: May 2002

    +5

    Give us the option...

    Offer both a lower monthly fee with no subsidies (or contract) or the current situation (high monthly fees with subsidies)

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