It’s been an interesting week for announcements in the mobile universe. First T-Mobile announced it would drop two-year contracts and phone subsidies, shifting instead to a fee structure where customers pay a discounted upfront charge for new phones, followed by small monthly payments until the entire cost is paid off.
Then Verizon CEO Lowell McAdam reacted to the challenge, saying they were also open to the idea of a “no contracts future” if the market responds positively to the new offering. “I’m happy when I see something different tried,” McAdam told reporters at a recent Verizon event . “We can react quickly to consumers’ shifting needs.”
Consumers have so far shown mixed reviews on the proposed changes. The idea of having to pay for the full cost of the phone may just be seen as a new form of carrier bondage. And those types of plans already exist, though they aren’t heavily promoted. Most carriers will allow a “no contract” relationship, providing the customer buy the phone at full retail cost up front. However, since those costs are often staggeringly high, Apple prices it’s unlocked contract-free iPhone 5 at $649 to $849 depending on Gb size chosen, it is understandably not a popular option.
And the carriers are likely not thrilled with paying those sky-high phone charges either, even if it does mean they can lock down a mobile customer for two years. So a chance to shift those costs to the consumer may be seen as a win-win, limiting the amount of subsidy the carriers have to offer. It will also be interesting to see if, in a new consumer-paid universe, those phone prices will have to come down to maintain the “new every two” mentality that drives technology adoption. Whatever happens, it bears watching….