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

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?

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