T-Mobile’s Chief Marketing Officer: Subsidized hardware is ruining the American wireless industry

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Do you honestly think that the iPhone you’re buying for $199 is actually $199? No, you’re simply paying the real $650+ price tag over the course of the next two years that you’re locked to your operator. That’s the American wireless industry for you. Now to be fair, many countries also work this way, but in those countries people are aware of the actual value of their smartphone. Cole Brodman, T-Mobile’s Chief Marketing Officer, was recently in a panel at GeekWire Summit in Seattle. This is what he had to say about the hardware subsidy model:

“It actually distorts what devices actually cost and it causes OEMs, carriers — everybody to compete on different playing fields. And I think it is really difficult, especially from a consumer perspective, because it causes consumers to devalue completely the hardware they are using. It is amazing hardware, but it has become kind of throw away. So, it is unfortunate, you’ve got dual-core, multiprocessor devices with amazing HD screens that get thrown away at 18 months.”

Someone in the panel, Mike McSherry of Swype, asked Cole why T-Mobile hasn’t tried this crazy idea of offering full cost devices? His response:

“It’s hard when the other three [operators] don’t want to play along. 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. We’ve experimented with that model more than anyone in the country.”

He nailed it. Consumers see the initial price of a device and don’t even think about what their monthly bill will be. That sort of thinking has to be abolished. We’d go so far as to say that the FCC should ban subsidies all together. People don’t flinch when buying a $499 tablet or $799 computer, so why don’t they know the real price of their $650 superphone?

Also, don’t you think it’s a bit suspicious that the only people who subsidize the cost of your smartphone are the same people who provide you your service? Imagine having to get a loan to purchase your new home from the same guy who built it. You can’t go through anyone else, you have to go through him. Don’t you think he’s going to jack his prices to try and screw you over?

Most Americans put everything on their credit card anyways, so why not put that next Android device or Apple iPhone on your Visa or Mastercard and pay it off like you’d pay off anything else you use credit to purchase?

  • http://twitter.com/00tony tony swales

    Totally agree. I have to laugh when an American thinks their $150 is 50% more expensive than a  $100 one when actually the real cost is $650 and $600, less than 10% difference.

  • http://www.facebook.com/people/Gregory-Newman/100001803717276 Gregory Newman

    It truly is best to buy the smart phone of yours dreams right out and maybe pay a month to month pay as you go NON COTRACT PHONE USAGE BILL so if you have a high bill month you can skip using your smartphone until times are better. Those fees for breech of contract will hurt you and give you a bad credit rating.  I’m saving up to buy a Windows 8 smartphone but the Nokia Lumia 900 is so damn good it’s hard not to buy it outright now and forget the Super windows smart phones that are comimg

  • http://twitter.com/Alishsayd Alisher

    Well, why doesn’t T-Mobile offer a $30, all you can eat plan if I bring my own phone? I save ~$25/month, which over 2 years comes down to almost exactly the cost of the iPhone 4s. As it stands today, there’s no incentive to buy unlocked phones, because there’s no preferential monthly rate plan for those who do.

    • http://www.intomobile.com/ Stefan Constantinescu

      Simple Mobile is an MVNO that pushes the SIM only model and uses T-Mobile’s network. H2O Wireless is the same thing, but uses AT&T’s network. That being said, I agree with you fully that the unlimited $50/month plans should be offered by T-Mobile themselves and not via one of their partners.

  • Chirantan

    if he is so fond of bring your phone model as he says, show that by giving us option of plans way cheaper but having the same features as the plans where you offer subsidized hardware, simple as that and then people with understand that they are the ones paying for their phones but just over a period of time instead of paying everything upfront…

  • http://levynewsnetwork.wordpress.com TheDanLevy

    The problem is the same in Canada.
    I have heard of places where you can decide the length of your contract and how much you pay for your phone outright based on how much you initially want to pay for the phone and then the rest of its cost gets divided up and added to your monthly bill for the term of your “contract.”

    As an example: When you get that $650 iPhone if you want to pay $200 outright and have an 18 month contract you pay an extra $25/month on top of your plan for those 18 months to pay the other $450. Want out of the “contract” early? No problem, just pay what you owe towards the phone and you’re done.

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