Since 2013, when T-Mobile became the first of the Big Boys to end subsidies, wireless carriers have been following suit. Some of them have taken a harder line than others, demanding that devices be bought over 24 months. Ultimately, it’s important to understand what the end of wireless carrier subsidies mean to your business.
Earlier this year, Verizon ended subsidies. That iPhone, which would have cost you $199 with subsidies is now offered at $650 – per phone.
With fixed term contracts rapidly becoming a distant memory, carriers appear to be anxious to offload the fiscal exposure represented by “fronting” enterprise consumers the cost of devices. In the place of subsidies, the large carriers are now offering plans which effectively purchase the phone for about $27 per month, over that two-year period.
So where does that leave you?
Smoke and mirrors.
The truth is that the cost of wireless carrier subsidies was already written into your contract. It was hidden by the smoke and mirrors and allure of having your purchase “subsidized”.
But the proof of the end of wireless carrier subsidies is in the pudding. Revenues for both Verizon and T-Mobile have dropped dramatically, with per customer revenue now just below $48 – a decrease of almost $10, in some cases.
Overall, monthly service bills for consumers have dropped and the customer has been given greater autonomy. Also, with cheaper devices like Huawei’s entering the market, there’s more price point flexibility. Consumer are backing away from upgrade madness, choosing to stick with the devices they have in hand for longer.
And that means less revenue for carriers, so how are they making up for it?
When carriers see decreased revenues, they find ways to recuperate the shortfall. That means new fees and other means of upping their growth game.
For example, AT & T and Verizon have chosen a multi-pronged approach to revenue recuperation. In some instances, they’re raising fees, or adding new ones. Verizon has raised it to upgrade charge $10, for example, from $20 to $30.
Verizon has also dropped unlimited plans entirely, with AT & T offering unlimited data plans only to those customers who opt to add DirectTV.
In response, Sprint and T-Mobile are offering unlimited plans at a higher price than limited plans, but at a lower cost than former unlimited options. Sprint is also encouraging grandfathered clients on the old plans to upgrade to the new, unlimited model. This move has analysts projecting increased revenue for the company.
These are some of the basic changes associated with the end of wireless carrier subsidies. But here’s the thing – carriers are now tweaking the plans on offer and developing hybrids. What that means is that the subsidy hasn’t really ended. It means it will be innovatively re-incarnated in concert with the resurrection of the two-year plan.
That leaves the question – what has really changed, apart from pricing structures?
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