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.