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Will High Carrier Subsidies Put An End To $0 Phones?

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Carriers throughout Canada and the United States are known for having a selection of paid and free phones for consumers to choose from. The iPhone 3GS for example; when the iPhone 4S was released, the price dropped to free. Our carriers can do this courtesy of long-term two-to-three year contracts.

When the iPhone is announced Wednesday, Apple will likely have the phone priced as high as $850 without a contract. With a contract, they can offer that exact phone for $399 or less. Carriers such as Bell and Telus actually absorb the costs in-return for your service for the next few years.

With smartphones rising in price these days, carriers may not be capable of providing such low price points any longer. The $0 phone for example, although they are old model phones, they still cost money to produce while the newer smartphones are becoming even more expensive.

MontrealGazette explains:

The problem, however, is that phones have become significantly more expensive over the years, and competition has demanded that companies continue to offer phones at prices customers are used to paying. The result is that whenever a new highly anticipated phone is released, like the iPhone, providers take a revenue hit to subsidize all the upgrades. Even companies that don’t provide the iPhone, however, are susceptible, explains Troy Crandall, an equity analyst at MacDougall, MacDougall & MacTier.

As a result, free phones may take a huge hit in the future. Instead holding that glorious $0 tag, you may have to pay a slight fee of $29.95 for the phone.  But I wouldn’t worry about discounted phones going anywhere, carriers will still continue to pay subsidies for contract signings:

“It makes technology more affordable, and allows a lot more people to access that technology,” said Dan Golberg, Telus’ vice-president of customer loyalty and relationship management.

Do you purchase your phone with a contract, or do you prefer not to be locked into contract?

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  • DjDATZ

    Unlocked 64GB iPhone 4S here, with the 3 year extended warranty on it.

    Cost a fortune, but it’ll still sell for a solid price when the 5 comes out. 😀

  • Ron Miller

    > Do you purchase your phone with a contract, or do you prefer not to be locked into contract?

    I would love to not have a contract, although being able to switch carriers is not a big deal, and so for me it would be silly not to take advantage of a subsidy. Personally, I can handle the full price of a phone and would much prefer to buy it that way.

    However, the reality is that the cost of the subsidy is baked into the monthly fees in the US & Canada, so if a subsidized phone is available, buying an unlocked phone is basically throwing money away.

    The carriers would probably love to stop subsidies as well. At this point, it is only the high end device manufacturers like Apple & Samsung that benefit. Originally, the carriers introduced subsidies to get people locked into wireless contracts, and later to get people locked into data plans. Now, most people would sign up for them anyway, but the subsidies allow / encourage people to buy new phones every year or two.

  • K3

    When 5 hits it will be interesting to see how much 4 & 4s go for on the secondary market. I dont know how many models were made but if there are a billion up for sale on Craigslist & Ebay you would think prices would have to be more competitive.

    Regarding contracts- is the ability to have the phone unlocked on end of contract not offered by all three carriers here now?

  • RyanStOnge

    True, that’s how I roll too, except I go cheap at 16 GB.

  • RyanStOnge

    Makes sense. Being locked in a plan really isn’t a huge deal, especially if you don’t plan to change carriers. I’m going to be buying minutes,texting, and data anyways.

  • RyanStOnge

    I’m not actually sure on that last question, maybe Gary will know. I haven’t locked myself into a contract for a few years now.

  • I agree. I don’t mind being locked into a contract too much because I don’t plan on switching, so grabbing the phone for a subsidized price is a no-brainer.

    I also can’t afford to pay full-price for an iPhone, although I’m guessing that’s priority-based; if iPhones weren’t subsidized, I’d sacrifice somewhere and figure out a way. 🙂

  • Flash

    Just take the subsidies the carriers are offering. They may as well help you with the high cost of these phones. And since they all offer plans that are carbon copies of one another one has to ask themselves what’s the point of switching carriers anyways??

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