Monday Note writes about shameless carriers.
In response to Randall Stephenson, AT&T’s CEO, predicting the end of subsidies because “wireless operators can no longer afford to suck up the costs of customers’ devices”:
I don’t know if Stephenson is speaking out of cultural deafness or cynicism, but he’s obscuring the point: There is no subsidy. Carriers extend a loan that users pay back as part of the monthly service payment. Like any loan shark, the carrier likes its subscriber to stay indefinitely in debt, to always come back for more, for a new phone and its ever-revolving payments stream.
Meanwhile, some carriers are offering a cheaper contract if you choose to pay for the phone in full.
In the meantime, AT&T has finally followed T-Mobile’s initiative and has unbundled the service cost from the handset. If you pay full price for your smartphone, an AT&T contract will cost you $15 less than with a subsidized phone on a 2-year agreement.
Mobile carriers know that they are overcharging customers. It has taken an “un-carrier” like T-Mobile to make drastic changes to get other carriers switching from existing practices. Carriers believe they can get away with it because customers are tied to contracts.
Just yesterday, my telco called to offer me a S$4 discount per month because I have not renewed my contract. It sounded like a nice gesture until the lady went on the explain that should I cancel my line, I would have to pay the company back. So if I enjoyed the discount for five months and then cancel my line, I would have to pay them $20. They might call it a discount but it sure doesn‘t sound like one.
This is just another way for them to deter subscribers from terminating their lines, just like how they use a phone contract to tie down customers for two years.