The Death of Unlimited Data and/or Subsidized Plans: Tell Us What You Think

[FoxKat]

EDGE isn't a subsidy though. It is essentially a 0% credit plan. In fact, that is how most people buy technology they can't afford: credit. Laptops, tablets, TVs, etc. Why shouldn't smartphones be the same?

Well, it may not be a subsidy in the pure sense of the word, but where else can you borrow money for 0 percent for 2 years and repay monthly? The truth of the matter is if they're giving you the money and letting you pay for it on time without interest it is in fact a subsidy in itself. That said though, my comment was that there may be an iteration to the edge program which would turn it into more of a subsidy than just a time purchase with no interest.

Furthermore, there are discounts to the data plan as well as the elimination of the activation fee when you go to edge to purchase your phone so again we could say that those are subsidies built into the edge program but technically speaking there subsidies that you're eligible for as a result of the edge program but they aren't on the phone, they're discounts on the Service Agreement.

 

[xeene]

I'll switch to tiered plan when vzw will offer 1tb for under $100 a month. Till then I will use and abuse every loop hole the company has, and they have quite a few, or they deny me service. In which case I can always switch to a half a dozen other providers of unlimited everything for under $50 a month using that same vzw network. I haven't had a month where we use less then 50gb of data, seems as though every year the usage doubles at least.

I've yet to buy a phone at full retail, there are so many alternatives that unlimited data is priceless.

 

[LoneWolfArcher]

Well, it may not be a subsidy in the pure sense of the word, but where else can you borrow money for 0 percent for 2 years and repay monthly? The truth of the matter is if they're giving you the money and letting you pay for it on time without interest it is in fact a subsidy in itself. That said though, my comment was that there may be an iteration to the edge program which would turn it into more of a subsidy than just a time purchase with no interest.

Furthermore, there are discounts to the data plan as well as the elimination of the activation fee when you go to edge to purchase your phone so again we could say that those are subsidies built into the edge program but technically speaking there subsidies that you're eligible for as a result of the edge program but they aren't on the phone, they're discounts on the Service Agreement.

FK, the pure sense of the word subsidy doesn't apply at all since there are no government monies in play. At 0 percent loans are common when the seller is also the lender. Furniture stores do that all of the time. Interest only came about when pure financial institutions got into the loan game. That is the only way a 3rd party lender can make a profit. If the lender is also the seller of an item or service then they already have profit built into their price, regardless of they get it over time or in one lump sum. In the old days it was called running a tab.

Regardless, your overall point is that discounts get people to buy and pay for service. And I am fine with that. But making people think they got a $700 smartphone for $200 is just bad in the sense that people then think they are entitled to cheap phones. Reminds me of when the Bells used to give customers a telephone for getting a landline. I remember hearing older people (grandparents and such) talk about how they can't believe you had to buy a telephone these days. Nevermind that the price of the phone calls had dropped to almost nothing. LOL Same concept.

 

[LoneWolfArcher]

I'll switch to tiered plan when vzw will offer 1tb for under $100 a month. Till then I will use and abuse every loop hole the company has, and they have quite a few, or they deny me service. In which case I can always switch to a half a dozen other providers of unlimited everything for under $50 a month using that same vzw network. I haven't had a month where we use less then 50gb of data, seems as though every year the usage doubles at least.

I've yet to buy a phone at full retail, there are so many alternatives that unlimited data is priceless.

Yes, but will you be among those that complain loudly when those loopholes are slowly closed? I am not saying this to be mean or confrontational, but people like you are the reason companies started dropping unlimited data. And it will be people like you and the family I mentioned earlier that get the unlimited data plans dropped even for those of us grandfathered in.

Overall I agree with your sentiment. Current capped plans have to low of a data cap and are too highly priced. If VZW wants to get us off of unlimited data then they need to fix that first.

 

[xeene]

Like I said, if they eliminate unlimited data, there are other providers who will gladly take me as their customer. And as for buying phones, there are way too many alternatives(ebay/craigslist/swappa/amazon) for me to complain about vzw closing loop holes. I will still get a new phone at a fraction of a cost. Main question is it worth it to vzw to lose my $140 a month to save them gigs of data. I don't think so.

 

[gadgetrants]

Reminds me of when the Bells used to give customers a telephone for getting a landline. I remember hearing older people (grandparents and such) talk about how they can't believe you had to buy a telephone these days. Nevermind that the price of the phone calls had dropped to almost nothing. LOL Same concept.

Excellent analogy (and in the same industry! +10 bonus points!). On the flip side, now we know you get the monthly copy of AARP magazine (I think I'm there in 2 more years!).

How odd (ironic?) to think in 20 or 30 years, the average 10-year-old will have to look up (or google or information-seek or whatever they call it then) what a "land-line" is.

-Matt

 

[mountainbikermark]

Excellent analogy (and in the same industry! +10 bonus points!). On the flip side, now we know you get the monthly copy of AARP magazine (I think I'm there in 2 more years!).

How odd (ironic?) to think in 20 or 30 years, the average 10-year-old will have to look up (or google or information-seek or whatever they call it then) what a "land-line" is.

-Matt

My 7 year old saw a pay phone the other day, asked me what it was and was blown away by the concept and couldn't fathom paying per phone call. She literally asked why pay phone users don't use their cellphone instead.

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[Mustang02]

When unlimited goes away so does my smartphone. It's an expense I've been looking to get rid of for a while. $107 a month is stupid when you can get much cheaper plans.

 

[FoxKat]

FK, the pure sense of the word subsidy doesn't apply at all since there are no government monies in play. At 0 percent loans are common when the seller is also the lender. Furniture stores do that all of the time. Interest only came about when pure financial institutions got into the loan game. That is the only way a 3rd party lender can make a profit. If the lender is also the seller of an item or service then they already have profit built into their price, regardless of they get it over time or in one lump sum. In the old days it was called running a tab.

Regardless, your overall point is that discounts get people to buy and pay for service. And I am fine with that. But making people think they got a $700 smartphone for $200 is just bad in the sense that people then think they are entitled to cheap phones. Reminds me of when the Bells used to give customers a telephone for getting a landline. I remember hearing older people (grandparents and such) talk about how they can't believe you had to buy a telephone these days. Nevermind that the price of the phone calls had dropped to almost nothing. LOL Same concept.

LWA, I hear what you're saying and I am not in disagreement in principle. Still, subsidy, even in the pure sense of the word does not apply exclusively to government, although I agree that government is one of the largest players in the economy regarding subsidy. The definition of subsidy is below in several sources. In one definition, it says "pay part of the cost of producing (something) to reduce prices for the buyer." Producing encompasses everything from conceptualizing and initial R & D, all the way to financing, distribution and implementation.

Merriam-Webster says "to help someone or something pay for the costs of (something)". If I don't have all the funds to pay up front, and so the manufacturer or retailer helps me to pay by allowing me to pay over time, they are financing or bankrolling my purchase and by multiple definition sources are subsidizing my purchase. Coupons, store specials, "buy one get one free", any assistance provided to me as the consumer which makes it easier to purchase and take ownership of a product or service is a subsidy. It may be a hard concept for some consumers to grasp since they are looking at the lost profit by the corporation as something that wasn't there to begin with had they not made the purchase so it's not a cost in their minds. They also look at zero percent financing as having no cost to the provider, simply because the provider has the money already and isn't earning additional profits by lending it for free.

Money as it pertains to Time Value of Money, has a cost. A dollar in my hands today has greater value than a dollar in my hands 2 years from now. There are many reasons from inflation to opportunity cost (the cost of the lost opportunity to investv that dollar and receive a return on that investment otherwise). So if I have to put out a dollar today, it's more expensive to me than if I have to only put out one 24th of that dollar each month over the next 24 months. That reduced cost to me is a subsidy.

So likewise a dollar received today by the manufacturer or retailer for the purchase of a product has greater value than that same dollar sliced into 24 equal payments and received over two years. That manufacturer or retailer has to bankroll the purchase, and that means financing it - even if at zero percent interest. Just because they have profit built in doesn't mean it isn't less profitable to receive that payment in 24 installments versus one lump sum. There are a gamut of costs involved for the manufacturer or retailer in order to bankroll those purchases from administrative, to accounting, to billing, to postage , to insurance, etc., not to mention opportunity cost as those delayed dollars are not there in the corporate coffers to fund new products or services, purchase additional inventory, fund the operating expenses or advertise to increase sales, thereby reducing the potential for additional profits.

Wikipedia says (with references);

"Subsidies come in various forms including: direct (cash grants, interest-free loans) and indirect (tax breaks, insurance, low-interest loans, depreciation write-offs, rent rebates)."

Thefreedictionary.com says;

"subsidize

verb

To supply capital to or for:

back, capitalize, finance, fund, grubstake, stake.

Informal: bankroll.

Idiom: put up money for."

So in this debate, either as the manufacturer or as the retailer financing or bankrolling the purchase of a product by installments over time, even if at full retail price and even if at 0 prevent interest OR at an agreed upon interest rate is by definition subsidizing.

References; I.word.com, thefreedictionary.com, Merriam-Webster, Wikipedia

 

[Mustang02]

Whoa bringing out the dictionary....it's getting serious..

 

[cr6]

S5 tap'n

 

[FoxKat]

I'm only trying to drive home the point that we often overlook the fact that retailers often provide incentives to make it both easier, more convenient and less expensive to buy their products or services and we may tend to become desensitized to that over time. Once it becomes commonplace, it losses value in our minds and we then tend to take it for granted. Once it is then removed we are up in arms about having had something taken from us, and if one provider is giving it but another isn't the later is often accused of overpricing or taking advantage of the consumer.

Life would be far less comfortable and more expensive if all the subsidies we've grown to expect were removed. The possibility is that everything from roads and bridges, to gasoline, to food, to water; from health insurance to education, to housing, to products and services we buy and use every day may potentially be subsidized at one point or another in the process from raw materials to end product.

To the topic, if the carriers didn't subsidize the manufacturer and/or purchase of our phones, if we either chose to or were forced to pay in full lump sum up front all the time the price would likely be higher.

@LoneWolfArcher's second paragraph speaks to this sense of entitlement to cheap phones it creates and that is my main point.

 

[LoneWolfArcher]

I'm only trying to drive home the point that we often overlook the fact that retailers often provide incentives to make it both easier, more convenient and less expensive to buy their products or services and we may tend to become desensitized to that over time. Once it becomes commonplace, it losses value in our minds and we then tend to take it for granted. Once it is then removed we are up in arms about having had something taken from us, and if one provider is giving it but another isn't the later is often accused of overpricing or taking advantage of the consumer.

Life would be far less comfortable and more expensive if all the subsidies we've grown to expect were removed. The possibility is that everything from roads and bridges, to gasoline, to food, to water; from health insurance to education, to housing, to products and services we buy and use every day may potentially be subsidized at one point or another in the process from raw materials to end product.

To the topic, if the carriers didn't subsidize the manufacturer and/or purchase of our phones even the actual full retail price we pay, if we either chose to or were forced to pay in full lump sum up front so the time would likely be higher.

I agreed with the principle you state here. Again, I have no problem with marketing and credit and discounts and "subsidies". I just think it is dangerous to make people think they are getting something at a reduced cost when they really aren't. Ask most people how much their smartphone costs and they'll quote the contract price. That is not a good model for this market. Someone mentioned buying used phones on CL, ebay etc. Again, those phones are that price because people are selling them based on the contract price they paid, not the actual value of the item.

If you like the contract price and it works for you great. I just think it should be acknowledged that most products are not priced this way and it does feed an entitlement mentality. Comfort aside, people. whether they realize it or not, would be so much better off buying their smartphone and then buying the service for it. In fact, that most people buy their phone from the carrier is a problem! They could get a better price if we cut out the middle man and went right to the OEM.

 

[FoxKat]

I agreed with the principle you state here. Again, I have no problem with marketing and credit and discounts and "subsidies". I just think it is dangerous to make people think they are getting something at a reduced cost when they really aren't. Ask most people how much their smartphone costs and they'll quote the contract price. That is not a good model for this market. Someone mentioned buying used phones on CL, ebay etc. Again, those phones are that price because people are selling them based on the contract price they paid, not the actual value of the item.

If you like the contract price and it works for you great. I just think it should be acknowledged that most products are not priced this way and it does feed an entitlement mentality. Comfort aside, people. whether they realize it or not, would be so much better off buying their smartphone and then buying the service for it. In fact, that most people buy their phone from the carrier is a problem! They could get a better price if we cut out the middle man and went right to the OEM.

I believe you and I have come back to the same understanding and I agree with you 100%.

 

[kodiak799]

When unlimited goes away so does my smartphone. It's an expense I've been looking to get rid of for a while. $107 a month is stupid when you can get much cheaper plans.

Truthfully, I'd have little trouble adjusting, provided tablets and smartphones have ample storage. I could easily get by with 1gig for emails and texts, I just won't get live updates to my news away from wifi (which, 90% of my time at home, work or even the gym there's wifi) or stream music.

But I keep my unlimited because when I'm traveling, often the hotel wants to charge for wifi (or it's super slow) and same with the airport...so I tether.

If I could, I'd probably put a tablet on my unlimited plan, cancel voice, and get a 1-gig plan for my cell ($45 on Edge).