The carriers sell the phones for less and make money back through the service plan. That's the basic model for carriers offering phone subsidies.
Strong competition has a similar effect. If the SIM free contracts are good enough, people are not going to get into lengthy, expensive contracts. This doesn't happen in places like the US because there's a very strong cartel/oligopoly there that affords them the right to simply deny you a terminal if it's not under the carrier's conditions.
If Apple is selling for cheaper than the carriers can afford to sell, then they will simply do what they are doing: stop selling it.
What? There are scores of industries that use loss-leaders to get customers to commit to long-term contracts. Razors, satellite/cable TV, etc.
> This doesn't happen in places like the US because there's a very strong cartel/oligopoly there that affords them the right to simply deny you a terminal if it's not under the carrier's conditions.
This isn't true at all, and I don't know why you would think it was. Here's a counterexample: https://ting.com/
For razors: you are allowed to manufacture and market blades that are compatible with competitors; so people are (both legally and practically) allowed to buy a loss-leader razor from company A, and cheaper razorblades from company B.
For satellite/cable TV: in places with decent consumer rights laws there are practical, massively used ways to get out of long-term lock-ins; so such deals work only as long as consumers like the deal. If customer walks away, there may be a contract-breaking fee involved, but as soon as you want to change the contract the slightest bit not to customer's favor (increase price by a dollar or drop a TV channel, which you may need to do) - bam; the customer can walk away with no fees.
This makes it blatantly obvious to the consumer that the unsubsidized phones are cheaper.
If they are "selling you the phone on credit", then it would be obvious to require (a) in bill, separate items for the telecommunications and for the phone payment; (b) in advertising, note the full price of the phone, including the all monthly payments+interest; (c) when the phone is paid in full (24 months?), then stop charging for it... rather than continuing the same bill forever.
If there is no legal/monopolistic lock-in like in USA (where the phone is locked to a certain operator), but instead operator B can jailbreak&unlock your phone for you when you switch, then you can't extract huge monthly prices just because you sold a phone 9 months ago.
The point of a market is to allow sufficient flexibility so that lots of individual actors can by trial and error find an efficient solution to a hard problem without requiring a benevolent genius at the center. How much flexibility is enough? How much is too much? I don't think there's a one-size fits all solution here, and the size discrepancy between the cellular provider and the individual user only makes it harder.
Personally, I think that in most markets, but particular these kind of highly asymmetric ones, we'd see more innovation and progress if the market were more fluid; which suggests to me that the carrier (and handset provider) lock-in is not a good thing.
The "zero point" of regulation would mean that any and all device restrictions can be freely legally broken and removed, which currently isn't the case in USA; in unregulated markets there are thriving legal businesses that do, for example, jailbreaks of phones that people bring in from USA, and which were subsidised there.
I pay 25/mo for my iPhone plus an 8/mo data plan. I don't do much calls but they're 8/c minute IIRC. I can move from a plan to another or cancel the data but the 25/mo will stay there until the phone it's paid.
It was 50€ cheaper to buy it this way than to pay full retail price.
What's the reasoning behind that for the phone vendor? That seems odd.
2) There are economies of scale (order size) and synergies (sell phones at the same office you already have for contract sales) that can mean that $RANDOM_TELECOMPANY has significantly lower costs than $RANDOM_PHONE_RETAILER and can simply outcompete them on price.
Yes. Carriers in the US lose, literally, billions of dollars on the iPhone because they've calculated the cost of acquiring a customer is a few hundred bucks, on average, so if subsidizing a phone buys you customers it's worth it.
Personally, I think they've gone overboard, but then again I'm not in the front office.
http://www.latimes.com/business/money/la-fi-tn-verizon-on-ho...