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Comment by jalk | Hacker News Reader

Can't the operators just sell unlocked phones with monthly installments instead? The installment plan will then include free service for some amount of data/minutes. If the user chooses to switch operator, they are still bound by the installment contract to pay off the phone.

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That’s how it should work. My understanding is that the carriers (probably correctly) assume that there are more people who will buy a cool phone if they don’t think about it as a short term loan – and then keep paying the same price after the phone is paid off. If they had to say “$900 in 24 payments of $50” more people would decide they don’t need the “Pro” model and the carriers would be forced to compete with the banks on financing terms.

I’ve even seen ones where the loan is “backwards”, and they’re getting more common - you pay full price up front and they give you statement credits each month!

How did we live like animals in the dark era before such innovative financial products?

Do you know that CEOs once had to settle for only a single summer home?

I'm not sure about other carriers, but for the past few years now that's how it's been on Verizon. The only lock in part is they waive interest as long as you stay a Verizon customer until it's paid off.

There's a growing segment of the American public who thinks contracts are fake so they would probably sign up for a "free" phone, unlock it, sell it, and then insist on breaking the contract with no penalty because they "didn't understand it and it was unfair anyway". It would be the new "Chase ATM glitch".

The point is to lock the user into a contract with the carrier. By binding the phone to there service they make it unlikely that a user will switch providers as that would need a new phone while still paying off the old phone.

That's why they'll offer these phones at low or no interest plans, so they can pull in the $50/month subscription for the years that the phone is being paid off.

What's the difference between giving away a $1200 phone in exchange for a 2-year contract which costs $50 extra per month,

compared to a plan which costs $50 less per month, and a BNPL plan attached to the carrier which costs $50 per month?

> What's the difference between giving away a $1200 phone in exchange for a 2-year contract which costs $50 extra per month

That phone is generally not given away - the only phones "given away" are generally low end. $1200 flagship phones come at the cost of a contract on the line AND a monthly payment for the device that pays for it in full.

The last 3 phones I purchased, it was a choice between

- plan + buying new phone + no contract

- plan + phone "free with plan" + increase in plan cost because of phone + 2 year contract

For one pone, the first was a clear winner. For another, it was slightly cheaper to get it with the plan (2nd option). For the last (iphone) it was the second option, but there was no increase in plan because of it.

So, the "cost" of the phone can vary a lot, and taking the time to figure it out is well worth it.

If the monthly payment pays for the device in full, what's the problem with a customer ending the service contract while continuing the monthly payments?

If the monthly payment doesn't pay for it in full, why not just make the monthly device payments $n more, and the cellular service payments $n less? That way you don't need to worry if the service plan is cancelled, because the device payments would still be due (or a lump sum payment would be due).

Because they don't make much on the device payments, as opposed to the bloated plan fees.

You’re thinking about it from a consumer point of view. From the carrier point of view, they don’t want it to be easy for you to decide to switch to another carrier (They want their service to have a high switching cost). So they have various roadblocks like this, to make it a bit more frustrating to switch carriers. Of course they can’t make it too difficult where they would face legal pushback, so there’s a lot of stuff like this that feels random or suboptimal from a technical point of view but helps their bottom line in aggregate.

Remember back when text messages or phone calls were free as long as you messaged/called someone on the same carrier? That wasn’t about passing on savings of actual interchange fees, it was about incentivizing you to be loyal to your carrier and get your friends on board as well.

That's how it works i EU (or at least the majority of it).

Also, it as it is far easier to buy a phone with an installment plan than to get a cash loan, it's very common to see brand new, unboxed phones sold on the second-hand market. People sell the phone for cash and use the installment plan as an interest-free loan payment.

Yes, but let’s just say you got a 1200 device and only made the first two payments… jump to another carrier and abandon the one with the finance plan. What’s the recourse for the carrier?

Small claims court? Inability for the debtor to get a loan for even another phone (or a used car or whatever) for a period of time?

It's messy and expensive, but perhaps it should be messy and expensive.

The same recourse any other lender has for a borrower that defaults.

I bought a car, but then decided to not make the repayments.

What's the recourse for the lender?

To be fair, car sellers have also started things like being able to brick your car if you're behind on payments. Or, for the up and coming ones, have the car just drive itself back to the dealer (Ford).

can you share a link to this for story happening?

https://stateline.org/2018/11/27/late-payment-a-kill-switch-...

https://www.newscientist.com/article/2361657-ford-patents-ca...

Ford got a patent for the idea.

a patent is VASTLY different than it actually taking place. The number of patents that get filed but never actually implemented could fill the grand canyon.

Cars are repoed when payments aren't made.

> jump to another carrier and abandon the one with the finance plan. What’s the recourse for the carrier?

Subprime auto lenders use “electronic devices to remotely shut down vehicles” [1].

Carriers could install remote management profiles on phones financed for subprime borrowers. If a borrower defaults, the loan is sold to a collector and phone erased and put in lost mode.

It isn’t pleasant. But neither is being locked into a phone plan you don’t want.

[1] https://www.bostonglobe.com/business/2017/03/14/car-lenders-...

The GSMA has a blacklist system. Participating carriers can blacklist a stolen / fraud / nonpayment phone IMEI and all the other blacklist members will agree to also ban that phone from their network. The problem is that people won't make payments, sell the phone for cash, and eventually the phone ends up in places (China, UAE, Nigeria, Russia, ...) that don't participate in the blacklist.

The right compromise should be that they have to unlock it when you've paid off the phone in full.

Currently the carrier will publish the phone's IMEI to a central blacklist, so the phone can't be used with any carrier that subscribes to the blacklist. Also iPhones can be activation blocked via Apple, which is entirely independent of the IMEI block done by carriers.

Credit reporting and collections.

There's a reason carriers pull credit reports for post paid accounts and 'free' phone promos right?

Although, personally, I prefer to be on the prepaid side of the carrier. I'm not getting a promotional phone, and I'm not paying for it in my monthly rate, so if my phone works for more than two years, I'm saving money. And I don't really need to use secret handshake financing... I'd rather pay $17/month for my plan and pay for a phone when I need it.

That said, T-Mobile tried being the 'uncarrier' and charging fairer prices for service and financing phones directly, and it must not have worked as well as carrier norms because they reverted to secret handshake financing.

> Credit reporting and collections.

This has a loss rate of around 70-80% across the collections industry, which is an extremely strong disincentive to go this route since it's just highly inefficient. The high cost of the collections process is a deadweight loss upon all society.

There is no credit check with T-Mobile. In fact, even if you have bad credit, and you have had service with them for a year, you can get a phone on contract.

T-Mobile still finances phones directly and equipment payment plans are clearly separated out from service charges

A year ago they ran a credit check even just for home internet, anecdata of 1.

People made the same argument in Canada but they changed the rules so you either get an unlocked phone or they have to unlock it upon request. Yet there has not been widespread issues of this happening. They can still ding your credit & there is only a small number of carriers so you can only do that so many times before you are going to have serious issues if you don't care about your credit or collections.

Also you can still get the phone unlocked without the carrier anyways if you really want to so it would not deter anyone who really wants to run off with the phone anyways.

So make the device unlocked with the ability to lock it back if you fail to make the payments.

That wouldn't qualify as truly unlocked, though

There is a reason US cell rates are so high. That reason is because of lock-in.

If they did what you want, rates would fall, as would their profitability.

I expect them to fight this tooth and nail.

People have been able to buy unlocked phones and use them without a service contract for over a decade in the US. In recent years, you can even change mobile networks from your couch with a few taps via eSIM.

The US has 3 mobile networks, and it’s a massive country with massive infrastructure needs. I imagine costs must be at least a little bit higher to offset the need for more infrastructure per customer.

Yes, but not everyone knows how this all works, and the barriers that are still in place do still effectively limit many from shopping around. Many people shopping for phones in the US will visit a wireless retailer and will be funneled to locked phones on contract.

They really aren't expensive anymore in the US if you shop around. You can get unlimited data, talk, text for $18/mo per month from US mobile, and you can even choose which network to use Verizon, tmobile, or ATT. US mobile has a new feature that lets you switch the carrier network for $2 per switch.

I wonder how much those cheap MVNO prices are subsidized by everyone who has a contract directly with the carrier though. Going directly with Verizon or AT&T is super expensive compared to Europe. At the end of the day, someone needs to build & maintain the physical infrastructure. I don't know if the carriers could keep operating if everyone switched to MVNOs, they might not have enough revenue to maintain the infrastructure. North America is pretty large and not densely populated.

That being said, the major carriers here absolutely suck and utilize very scummy business practices that aren't that far off of a payday loan place. Financing an iPhone with Verizon really isn't that far off of payday loan rates, it's a horrible deal.

MVNOs do not guarantee the same level of service as the main flagship carriers who actually own and build the infra. I'm a customer of a MVNO that uses Verizon network. If I go into a crowded area, I can definitely see some traffic deprioritization happening to my traffic but I'm willing to make that tradeoff for saving a ton of money (majority of the time I use my phone on Wifi anyway).

But since I switched, I have convinced several other family members to also switch to a MVNO to save money. It will be interesting to see what happens if a lot more people make the same tradeoff. I wonder will they just intentionally make the MVNO experience so horrible by throttling to get everyone to upgrade, or they will just increase the rates on the MVNO plans so there is not a substantial difference anymore?

That is how it works in Canada now. If you cancel your contract, you have to pay the remaining balance immediately. No fees, just the remainder.

Well, kinda. Carriers can work around that by marking up the retail price so e.g. you have a $480 phone that the carrier sells for $700, or lets you buy for $20/m over a 24-month term with a promise to clear the $220 balance if you make it to the end of the term, so it's effectively a penalty if you cancel early.

Yeah, or you spread the regular retail price over X months with no interest and the carrier takes the manufacturer subsidy.

The real catch is that they typically require you to be on a high end non-BYOD plan, which keeps going up every year. I prefer to buy the device outright and minimize the plan cost.

Yes, but the reason they don't do this is because "free phone" sounds more enticing than "$22.95/mo installment plan for 2 years".

I think the manufacturers should do the payment plans. Then carriers can be selected on basis of quality for customer over lock in effect

You can with Apple.

Or literally any phone in EU.

About a year ago there was a change to that. If you want to buy direct from Apple and make monthly payments instead of paying all at once they require you to choose one of AT&T, T-Mobile, Verizon, or Boost.

For some models of phone you are then required to enter a valid phone number for that carrier, and proof that it is your number, in order to be allowed to add the phone to your order.

For other models they don't ask you to enter a number and you can go ahead and complete your order.

Note: the phone will arrive unlocked, so you are not stuck with the carrier that you specified when ordering. From what I've read the phone will arrive configured to use that carrier, but during setup when it asks to setup your number just tell it you want to set it up later. It may ask more than once. Just keep saying you will do it later. When setup is finally done, you can then initiate setting up any carrier you want.

Here's how it currently works for each phone model.

• 16 Pro: not required to enter number, except if you choose Boost as your carrier.

• 16: required to enter number.

• 14 and 15: required to enter number for all carriers except AT&T.

• SE: required to enter number if you choose Verizon or Boost, not required if you choose AT&T or T-Mobile.

Before the 16 came out the pattern was similar. The 15 Pro did not require giving your number. The non-pro 15 required giving you number no matter which carrier you selected. The 14 and SE required it with some and not with others.

An alternative approach that I've seen several people on Reddit claim worked for them was to select to pay in full using their Apple Card when the ordered, which allows ordering without selecting a carrier. Then they call Apple Card customer support and say they would like to switch that charge to Apple Card Monthly Installments.

In summary, if you want to buy from Apple on a monthly payment plan:

• If you use AT&T, Verizon, T-Mobile, or Boost no problem. Go ahead and give your account information.

• If you use some other carrier and are buying a phone other than a non-pro 16, choose AT&T as your carrier, and then decline to activate AT&T during initial setup. After that you can initiate activation with your carrier.

• If you use some other carrier and are buying a non-pro 16 the only option seems to be to select to pay in full, put it on your Apple Card, and then get Apple Card customer support to switch it to installments.

I just got an idea for the opposite. Buy a phone with three years worth of service together with the phone. Extra features are extra money. 36 months x 40$ per month plus the cost of phone ($600) = $2040. Add discount for loyalty (-$800). Free phone and more.

It’s impractical to “repossess” phones so in practice the carriers wouldn’t be able to stop people from deliberately defaulting on the contract with no repercussions (they can bring it to a different carrier who is indifferent)

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