Blog Post

Subsidized Mobile Internet Devices a Not-so-Nuts Proposition for Carriers?

[qi:101] Subsidies for high-end smartphones can be a Faustian bargain for mobile operators, but there are riches in the coming wave of connected devices, according to figures released today from In-Stat. More than 60 percent of all netbooks and other Internet-enabled mobile devices will be sold through operators and their partners by 2013 as more services are bundled for multiple gadgets, the market research firm predicts.

Those devices are increasingly likely to be sold with 3G and 4G data contracts, In-Stat said, resulting in recurring monthly revenues for carriers. The percentage of netbooks and smartbooks sold with a mobile contract will increase to 49.5 percent in 2013 from 31.5 percent this year. And while subsidies for superphones like the iPhone can exceed $300, the business model for subsidized mobile Internet devices can be a very attractive one for carriers, according to In-Stat analyst Jim McGregor:

“In the U.S., carriers are charging up to $60 per month for a two-year contract with the subsidized purchase of a netbook,” McGregor said in a statement. “While the subsidy costs the carrier $50–$100, it generates $1,440 or more in service fees over the life of the contract.”

Success with netbooks is encouraging U.S. carriers to venture into the notebook space, In-Stat said, following the lead of some Asian operators. Providing connectivity to all those gadgets is likely to be a crucial way to shore up the bottom line as voice revenues continue to decline.

4 Responses to “Subsidized Mobile Internet Devices a Not-so-Nuts Proposition for Carriers?”

  1. “In the U.S., carriers are charging up to $60 per month for a two-year contract with the subsidized purchase of a netbook,” McGregor said in a statement. “While the subsidy costs the carrier $50–$100, it generates $1,440 or more in service fees over the life of the contract.”

    I’ve said it before and I will repeat it again for those who don’t get it. This trend is going to continue on and on in the US unless forced to change via legislation. American wireless “service” contracts actually consist of two parts shmushed together. There is the bandwidth/connectivity portion that might actually consist of $20 of the amount paid and the rest is a finance contract. US wireless contracts are actually a lending arrangement, that is why there is a credit check, and the majority portion of the monthly balance goes to servicing that phone or device subsidy. It is insanely lucrative because annualized the “interest” comes to high double digits, 6-8% a month. Not quite as harsh as the mafia or even those payday-type loans, but probably a bit more profitable than a Rent-A-Center agreement. Americans will be hard pressed to stop this arrangement, given, in the end, they willingly sign up for such plans, so that the majority of wireless service is in the form of these type of contracts. No kidding, would anyone find it hard to believe that wireless ISPs would like to move this arrangement to cover other mobile device, semi-mobile devices and even mostly stationary devices? The future they want is one in which consumers forget wires and forget uncapped service and get all their bandwidth mobile or otherwise, wirelessly. Like the MPAA which learned some things from the RIAA debacle, wireless companies have learned from the legacy hard place that wired ISPs are in and they will get lots more money from far less service. The future will be well managed.

  2. i really hope this does not to turn out to be the case. the reality is that subsidies dramatically increases the real cost to consumers. would an ipod touch for $179.00 and an iphone $599.00 if there were no subsidies. NO WAY!! the iphone wold only cost half what it does. while this would line the pockets of the phone carriers and the device manufactures it would rip off consumers big time. we need a mobile equivalent of the carterphone rulings. devices and services aggrements need to be separated. even if the government need to intervene to make it happen.