Friday, August 7, 2015

Could a New Business Model for Mobile Phones Change What we Pay?

I came across an interesting article on the Time website recently that deals with mobile phones and their relatively low cost (or high cost after you read the article).

For years, mobile phone carriers have subsidized the cost of our phones.  Basically you get a very expensive phone for a very low cost because the carrier uses a two year contract to maintain profitability.

By that I mean the carrier actually pays the phone maker for the phone at a high price, then sells it to you at a low price.  However, because you are locked into a two year contract, they make that money back and more over the life of the two year deal.

That's why if you break the two year commitment, there are all kinds of charges you have to pay.  That ensures the carrier doesn't lose money.

However, now it looks like wireless carriers may be letting customers buy a phone at the full cost and not lock them into contracts.  Of course this means that a customer can leave if they find a better deal elsewhere, but it also means the carrier is not subsidizing the customer.

The Time article does a great job of explaining this is pretty good detail, if you are interested check out the article here.

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