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Comment by listic | Hacker News Reader

I wonder, do phone users in the USA really fall for this trick of hiding most of the price of handset into recurring payments? (so that an iPhone is perceived to be a $199 phone instead of a $1000 phone which it really is)

When the carriers tried this scheme in Russia upon the introduction of iPhone, it was a failure. Carriers developed different tiered plans, specifically for the iPhone, but I guess this simple trickery just couldn't hide the fact that it is a $1000 handset, and there just isn't that large market here for that. (Mind you, I think the 6-figure sales were good, just not up to Apple's expectations of selling millions of devices)

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I wonder, do phone users in the USA really fall for this trick of hiding most of the price of handset into recurring payments?

Yes. The best example was when Apple announced the iPhone 3G, and everyone was thrilled with the price "cut" from $400 to $200. A few people tried to point out that AT&T's rates had simultaneously gone up thereby making it more expensive over the 2 year contract, but they were largely ignored.

The US would be in far better shape if students were required to explain net present value before receiving a high school diploma.

It seems like users in USA thinks of phones as something they rent, not something they buy.

In Denmark the carriers must show the "minimum total price": the sum of the upfront price and the monthly payments until you can cancel the contract (incl. termination fee). This law was introduced in 2005 to provide greater transparency of the real price for consumers.

See "min. pris" on http://www.3.dk/Privat/mobil/Mobiler/Wildfire/

upfront = 200 DKK (1 + 199); 399 DKK pr month; so total price = 2594 DKK ~ $453.

What difference does it make if they see it as something they rent vs something they buy? In the end, there is a total sum that will come out of their pockets.

What is your price for - the N1?

The difference is: 1) how much they expect to pay monthly after the initial months where you are bound to the contract (6 in Denmark, 24 in USA), 2) you can bring your own phone and start out with the lower monthly price, 3) you can buy a new phone without any changes to your contract, 4) and it is much more visible what it will cost you if you loose your phone, and how much you will save if you keep it more than 6 (24) months.

Google did not officially sell Nexus One in Denmark, the only price I can find online is ~$420 excl VAT. (BTW the $453 price above for Wildfire is incl VAT and is $362 without).

Yes they do, because they don't have a choice.

If I pay $570 for an unlocked Nexus One to use on AT&T's network, I still pay the same monthly service price as my friend who bought a $99 subsidized iPhone.

I get no advantage for my nice unlocked unsubsidized phone when the current pricing model is based exclusively around subsidized handsets.

T-Mobile has significantly reduced prices for their "Even More Plus" plans which do not include subsidized phones. This is saving me about $20/mo on my Nexus One, which I purchased for the heart-palpitatingly low price of $529. If I keep it for 18 months, I'll get back around $350. Unlike my G1, which was slow and had poor battery life from the beginning, the N1 is a fantastic phone from the start. I can definitely see myself keeping it for more than 18 months.

I'm in the same boat. Not to mention that the plan that you get with the subsidized N1 on Tmo is not only more expensive but it's (of course) also the gold-plated "unlimited everything" that most people probably don't need.

It's because in the USA, there's no benefit to buying a phone without a contract; you're still going to pay the same monthly rate. There may be deals for employee plans, discounts, or bargaining with the clerk, but for 90%, we just might as well get the $199 iPhone with the outrageous phone plan because we were already going to get an outrageous phone plan no matter what phone you get.

T-Mobile now offers a lower monthly rate without a contract. As far as I know it's the only carrier to do so.

> I wonder, do phone users in the USA really fall for this trick of hiding most of the price of handset into recurring payments?

But that's not what happens here. There's no hiding of fees when I will pay the same base price regardless of phone (smartphone or otherwise) and will pay the same data charges regardless of which smartphone or whether I brought the phone with me or got it subsidized.

You are just throwing money away if you don't take the subsidy. Early termination fees decrease over the contract and are less than the subsidy to begin with. Most people will stay with their provider and you're better off paying the termination fees even if you think you might not.

The reality here really is $199. Basically this translates into not being able to get a really cheap plan for minimal usage short of going the pre-paid route. While not much to be happy about as a consumer, at least rates to mobile phones are reasonable here; look at VoIP rates to mobiles around the world (usually 5-10x higher).

The problem is you don't [usually] get a discount for bringing your own hardware to the party. All you get out of it is the ability to switch, but the subsidy runs about the same cost as the early termination fee, so that benefit isn't all that huge. If you don't switch during the contract period it ends up being a great deal.

I both understand and don't understand your sentiment. I had two options.

Buy my phone outright for $600. Pay $10 + $30 a month for the line and data. OR. Buy my phone for $200 and sell my soul to Verizon for 24 months. Pay $10 + $30 a month for the line and data. I plan on being with Verizon for the foreseeable future. Why would I not choose the subsidized phone?

The only major US carrier that I know of that gives a discount on monthly plans when you bring your own phone is T-Mobile.

At least in Germany it is very different. You can get cheaper rates if you bring your own hardware (in fact, my base rate is 0€ and I can also quit at any time). That seems the way it should be. I can see how from US perspective the calculations don't make sense. But then that seems as if mobile operators would be conspiring to make iPhones the only attractive devices?

Right, but if you just get a plan with a German carrier w/o your own hardware, do you buy it outright or do you get it free and it's added into each monthly bill.

If it's the latter, it makes complete sense. Plenty of people can't afford to go throw down $500 at a time. It's the same as any other subsidized or installed-payments model...

You can buy phones without signing up with a mobile provider. If you want to buy the phone from the provider, they'll usually offer you the subsidies. The big providers don't make it very open that you can actually get a plan without buying hardware.

If people want to go the subsidization route, whatever (I personally happen to think that if you can't afford 500$, maybe you shouldn't buy the hardware - get a 50$ feature phone instead). It just irks me if people think they are getting something for free. I hear "phone x costs 0€ at provider x" all the time, so people definitely don't understand this.

My personal take is to avoid the maze of operator prizing completely (50 free minutes between 9am and 11am, but double prize on weekends, except for SMS which are free on a full moon), so I only sign up for plans that I can quit at any time, and with the lowest recurring fee possible.

>Why would I not choose the subsidized phone?

Because there is an implicit cost to being in a contract. It restricts your choices. I know you plan on being with Verizon for the forseeable future, but things change quickly in the world of mobile devices. Also, people move for jobs, school, family reasons, etc, and service quality isn't consistent even on Verizon.

For some people it's worth $400 to avoid having their decisions restricted by a contract.

But that's $400 of guaranteed cost vs. an early termination fee (usually around $300, I think?) that you very likely won't have to pay.

A termination fee that decreases with time. It makes no sense to pay full-price for a phone in the USA.

> Because there is an implicit cost to being in a contract. It restricts your choices.

Given the balkanization of cell phone hardware in the US (i.e., most phones only work on one carrier) is this really a factor?

I was thinking that you end up paying more for the service when you buy subsidized phone. I was implying that you can choose between paying-as-you-go when buying phone without contract and paying flat rate when you get contract and subsidized phone. So you spend extra money because (a) you end up paying more for the service you receive (voice talk minutes, SMS, data) and (b) flat rate plan includes more service than you would use paying-as-you-go. At least, that's how things are here in Russia.

Now I see the options in the US are not what I thought. While you get bound by contract, at least the subsidies are real.

As I understand, you normally use flat rate data plans regardless of when you are on contract or not. Are there options for paying for what you use? Are they widely used? Though I understand the reason to have unlimited data on a modern smartphone, paying-as-you-go (and prepaid) is what they normally use here, and I suspect most people will spend less than $40/month using a smartphone. If they make you pay for what you won't otherwise use, you can still count it as a tax for your "subsidy"

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