Studinprogress saidAnyone else find these things ridiculous? The price and terms are so expensive and binding. By the time you get your phone, you are paying multiple per month charges that add up fast (IE mandatory data plans charge additions for smart phones, sometimes text messaging charges, on top of phone service charge, etc)
Can someone explain to me the costs of a wireless provider? Maybe something that justifies the highly binding contract and ubiquitous fees. As an engineer and a consumer, I wish I knew more about the industry.
the justifications for the contract are because the carrier subsidizes the end user for the phone. the "free" phone or the $199 iphone aren't actually "free" or "$199." it actually costs the carrier a few hundred dollars for the "free" phone and several more for an iphone. by locking you in a contract, they can make back the amounts they subsidized by spreading it out over the two year period. that's also the reason why they have an early termination fee — to recuperate the initial costs. added to that, each of these carriers invest billions of dollars annually in maintaining and building their networks.
the contract more than makes up for whatever amount they subsidize; early termination fees are egregious in that the amount doesn't go down proportionally with time (e.g., 1 year into a 2 year contract, someone still owes over $100 in ETF that was only $175 if he cancelled on day 1); data plans (especially sms plans) are also ridiculously over priced - i think someone estimated based on .25/msg that 1 MB would exceed $1300.
luckily, you have all these lower cost carriers (note that these carriers either lease their networks from the main carriers or are subsidiaries of the main carriers) that are kind of revolutionizing the industry with the low-cost unlimited plans.
i'm actually thinking of dumping an iphone for an android with virgin mobile. $25/mo (inclusive of taxes) includes 300 min and unlimited data & text; $40 ups you to 1200 minutes.