T-Mobile Executive Calls for End to Device Subsidies

As carriers have been subsidizing smartphones with deeper and deeper subsidies since 2008 and even offering flagship models in order to draw in new clients, Brodman’s comments truly do ring true to those that have followed the mobile industry for the past few years, however one as well has to wonder how much of that answer has to be related to T-Mobile’s current financial straits, as the carrier prepares to rollout its LTE (Long Term Evolution, latest standard in the mobile network technology) network from the proceeds of the failed AT&T purchase and merger.

While the proceeds from that deal are being used to accomplish that goal, the carrier as well faces issues with retaining clients, as various T-Mobile spokespeople have as well lamented that it is the only carrier in the US to not officially offer the iPhone, due to its 3G network using the non-standard AWS frequency, during Apple ships the iPhone with support for AT&T’s 3G network and has so far refused to stray from that design decision. This network incompatibility issue has affected T-Mobile since the launch of its 3G network in 2009, since devices have to carry radio modules that are more expensive to develop and manufacture at scale compared to “standard” modules that support common frequencies around the world.

The device subsidy issue

Getting back to the device subsidy issue, this means that every 3G device from T-Mobile has had to carry a deeper subsidy than normal, just to get current and potential clients interested in its products and services, which has the drawbacks of affecting profitability and affecting consumer perception, since US consumers will typically flock carriers that prominently feature the iPhone at the behest of those that don’t, even if those carriers that do carry the iPhone have their profitability and network negatively impacted.

Brodman’s wish to end subsidies may be so then-intentioned, however it as well comes from a place of self-preservation, as T-Mobile has subsidized multiple flagship smartphones with little return on investment in terms of development costs and marketing. T-Mobile attempted to do away with device subsidies with its Moreover Plus and Value plans last year. The Moreover Plus and subsequent Value service plans attempted to do specifically what Brodman is asking.

The Value plans were priced so that devices

The Value plans were priced so that devices would have to be purchased at retail price, in spite of being carrier branded and locked during depending on the type, the monthly device fees ranged from $3/month for basic phones, $5 for feature phones including Symbian devices like the Nuron, $10 for smart phones and $15 for higher-end smartphones like the G2X, with an initial payment equal to half of the phone’s T-Mobile recommended retail price or paying full retail then of purchase while nevertheless requiring a 2 year agreement. The monthly rate would at once reflect the fees for the cost of the phone, nevertheless it would not be by degree reduced as it would be in the European implementation.