Prediction: the death of phone subsidies will be great for Windows Phone in the US

[Doohickie]

it makes total sense that the carrier's new pricing plans would drive people to cheaper phones.

I still disagree.with this premise. I think it's quite the opposite. Under the "subsidized" model, a person paid much more than their phone was worth over the 2-year contract.

For instance, on my new plan, I get a $25 discount for each phone that's not on a 2-yr contract. I fully financed my LG G4 (their current flagship) for $21 per month. So going from an older WP that was nothing special at the time (HTC 8X), to a flagship, results in a net savings per month for me. I think when the average person sees they can get more phone for the same or less money, they'll go with the better phone. They're already used to a payment of X per month, and can get a much better phone for the same monthly cost? Yes, please.

Had this happened, say, 6 or 7 years ago, I think more people would go with the cheaper option out of necessity. But the economy is not in freefall; it's much more stable now, and phones are one way people display status.

 

[rhapdog]

I don't think MS is doing much of that at all. I think that's why they bought Nokia smartphones, so they wouldn't have to mess with that. They have an in-house HW division, why do they care about other HW providers? (i.e., typical MS hubris)

They care very much about other hardware providers. Ever notice how Microsoft only puts out ONE line of tablets? The Surface? You've got the Surface and Surface Pro. Microsoft has set a standard for manufacturer's to look at for what Microsoft envisions a tablet should be. Then other vendors go and produce what they do for Windows tablets.

Recently, Microsoft announced they will be doing the same thing with phones. They will be only producing 3 models in the future. Consumer, Business, and Flagship. It will be up to other hardware vendors to populate the other niches with Windows Phones of their own design. Many hardware manufacturers are already designing new phones for Windows 10, and many of those are going to produce the same or similar phone for both Android and Windows 10. When you have the same phone available with both OSes, we might just see how Windows 10 will truly stack up against the competition. Of course, Nexus won't get a Windows 10 version, as it's produced by Google. Samsung is considering the Windows 10 versions, but have not yet committed. A number of hardware vendors have already committed.

 

[Doohickie]

That would be good for the OS then. But my sense is that MS makes it possible and pays lip-service, but... I don't know. And for the HW providers other than Nokia, the WP will probably be viewed as a minor player for some time to come. Who knows, I could be wrong.

I liked the OS when I first got my WP. Easy to learn, easy to make do what I want, etc. If they address the app gap and capabilities are similar at a given price point to Android, I'll probably take another look at WP when it's time for a new phone. My WP that I recently replaced was my first smartphone, and I somewhat deliberately chose an Android this time to see what else is out there. I don't plan on trying iOS simply because I've never really been an Apple fan. So when I replace my Android I'll compare Android against WP and make an informed decision. One thing that would favor WP in the future is if there is greater unity with the Windows I have on my home and workplace computing devices.

 

[HeyCori]

I still disagree.with this premise. I think it's quite the opposite. Under the "subsidized" model, a person paid much more than their phone was worth over the 2-year contract.

For instance, on my new plan, I get a $25 discount for each phone that's not on a 2-yr contract. I fully financed my LG G4 (their current flagship) for $21 per month. So going from an older WP that was nothing special at the time (HTC 8X), to a flagship, results in a net savings per month for me. I think when the average person sees they can get more phone for the same or less money, they'll go with the better phone. They're already used to a payment of X per month, and can get a much better phone for the same monthly cost? Yes, please.

Had this happened, say, 6 or 7 years ago, I think more people would go with the cheaper option out of necessity. But the economy is not in freefall; it's much more stable now, and phones are one way people display status.

If I'm doing my math wrong, then someone please call me out.

So I decided to bust out the old Excel spreadsheet and compare the price difference between a $740 Note 5 on Next and Subsidized. Images are from the checkout process.

Subsidized:
Due today: $268 ($249+plus sales tax)
Added to first bill: $45 (activation fee)
Due monthly x24: $1,680 ($70x24 months)
Total: $1,993

Next:
Due today: $52
Added to first bill: $15
Due monthly x30: $2,400 ($80x30 months)
Total: $2,467

So you might be thinking, well that's not fair because Next covers 30 months. That's an additional 6 months over the traditional 24-month contract. Okay, so let's factor the cost of taking a 24-month contract to 30-months.

$70x6: $420
$420+$1,993: $2,413

Adjusted:
Next: $2,467
Sub: $2,413
Diff: $54

So after 30 months you're still paying $54 MORE on Next when compared to a 2-year contract. Next looks good on paper because the upfront cost is much cheaper. In the end, you're still paying roughly the same.

As I was saying before, it makes sense that a financially savvy shopper would choose a cheaper device and save some money. But when the AT&T rep starts preaching about how you can get a Note 5 for $52 down and it's only a measly $10 extra a month, savvy goes right out the window.

 

[tgp]

If I'm doing my math wrong, then someone please call me out.

So I decided to bust out the old Excel spreadsheet and compare the price difference between a $740 Note 5 on Next and Subsidized. Images are from the checkout process.

Subsidized:
Due today: $268 ($249+plus sales tax)
Added to first bill: $45 (activation fee)
Due monthly x24: $1,680 ($70x24 months)
Total: $1,993

Next:
Due today: $52
Added to first bill: $15
Due monthly x30: $2,400 ($80x30 months)
Total: $2,467

So you might be thinking, well that's not fair because Next covers 30 months. That's an additional 6 months over the traditional 24-month contract. Okay, so let's factor the cost of taking a 24-month contract to 30-months.

$70x6: $420
$420+$1,993: $2,413

Adjusted:
Next: $2,467
Sub: $2,413
Diff: $54

So after 30 months you're still paying $54 MORE on Next when compared to a 2-year contract. Next looks good on paper because the upfront cost is much cheaper. In the end, you're still paying roughly the same.

As I was saying before, it makes sense that a financially savvy shopper would choose a cheaper device and save some money. But when the AT&T rep starts preaching about how you can get a Note 5 for $52 down and it's only a measly $10 extra a month, savvy goes right out the window.

That's pretty much what I was saying; the new model isn't really cheaper. In fact, in your example here, the contract is quite a bit cheaper. But in general the cost difference is not significant.

I do not believe the carriers will make a move that will hurt their bottom line. Like I said in an earlier post, in some cases it was cheaper to buy a subsidized phone on contract and then cancel the contract than to buy the phone outright. The end result was the same: you own the phone free and clear, but the subsidized method was cheaper.

Where this new model could save is that customers might be more apt to buy cheaper phones. On contract, the price difference between low cost phones and flagships was often much less than the real world cost. Even then, I don't see that happening much, as the overall price will remain more or less the same.

What I would like to see is that the phone manufacturers sell factory unlocked phones with financing available, much like Google and Motorola already do. Provide a phone that works on all carriers, and finance it. That to me is the ideal solution to the current convoluted cell phone/carrier system.

However, I'm not sure how well this would be received if the carriers still sell phones. It is by far simpler to walk in to the carrier store, choose a phone (or have one chosen for you :eck, and walk out with it fully functional. The vast majority of customers couldn't care less about their phone being carrier branded and locked, and neither do they care about updates. In fact, a lot of customers ignore available OS and app updates.

 

[tgp]

Maybe the new MS flagship will have 'all the bands' and can work with GSM and CDMA?

I'm sure Microsoft could do it. Apple and Google have both done it with phones released about a year ago. One device, any SIM!

 

[Doohickie]

I can't follow your numbers at all, but when I did the numbers for myself, I came out with a considerable savings of about $100 per month for four phone lines in my family by ditching the 2-year "subsidized" rate on AT&T. Even with me getting a flagship phone, I'm still saving about $80 per month over what I used to pay.

 

[lparsons21]

That would be great, especially the 'all carriers' part. Now that would be good for competition! Maybe the new MS flagship will have 'all the bands' and can work with GSM and CDMA? Not likely, but hey, I can dream!

Since we know it can be done, this is what I would like to see. I love the idea that my iPhone 6+ can be used on any carrier since I bought it as an unlocked Verizon phone. There is no technical reason that it cannot be done on any phone. Of course the carriers like to speak out of both sides of their mouths claiming the low profits (or no profits) on the actual hardware. If that is the case, if they quit selling them it shouldn't be a burden on them.

Of course that is a pipe dream and Verizon doesn't sell unlocked all band iPhones out of the goodness of their hearts, they did it to get the additional spectrum they needed.

 

[tgp]

I love the idea that my iPhone 6+ can be used on any carrier since I bought it as an unlocked Verizon phone.

It's not just Verizon's iPhone 6/6+. All of the US versions, even AT&T's and T-Mobile's, can be used on Verizon once they're SIM unlocked.The Nexus 6 is the same way. The factory unlocked iPhone 6/6+ and Nexus 6 work on Verizon as well.

Basically, all of the US devices are the same, except AT&T SIM locks theirs (both iPhone & Nexus). I'm not sure about T-Mobile's and Sprint's iPhones, but their Nexus devices are the same as you get straight from the factory.