The mobile service provider Verizon recently announced the end of contracts for their customers. In a move akin to T-Mobile, the carrier is eliminating contracts and taking with it phone subsidies; thereby causing the price of their mobile phones to increase substantially.
In the past you may have paid $199 for an iPhone 6 by signing a two-year contract, now you can expect to pay the full price of the phone—about $649 dollars. So although there appears to be savings on the surface, there may not be for several reasons.
Here are a few implications of what this policy change could mean for corporate accounts:
- A lower monthly plan may not actually be lower in the long-term. In other words, what appears to be savings from the lower monthly rate plan might actually just be transferred to the cost of the phone.
- Most corporate enterprise servers are geared toward iPhone compatibility, and the upfront expense of a device, especially iPhones—which cost more than an average laptop—will only offer marginal savings for the average consumer.
- The average consumer cannot afford to purchase an iPhone outright or upfront so most people will opt to pay for the phone over time, which could still lock them into a long term commitment.
- Opting to pay for the phone over time simply rolls the costs plus associated finance rates and additional taxes into the monthly rate plan.
- Enterprises that buy phones for employees may have to fork over more money or decide to discontinue or modify the policy. For example, a company that now pays for a portion of the phone’s cost has the opportunity to revisit the policy. Will they feel more compelled to increase the amount, keep it the same, or discontinue underwriting the employee phone expense altogether?
- If enterprises do subsidize, then they should anticipate the addition of monthly insurance charges, since it will be in a company’s best interest to make sure devices (that are already paid in full) are covered.
- The length of the lifecycle—how long each user will keep the device or when the device is eligible for an upgrade—is also an issue. Since mobile devices upgrade every year, and servers are upgraded as well, will device-server compatibility become an issue with upgrades?
- People holding onto their devices longer trying to avoid the cost of a new device — this could have the effect of slowing down the market along with the evolution of advanced features typically offered in new phone releases. The consumer market may not be as quick to trade in their phones with the requirement to purchase outright or opt into long-term financing of the phone.
With this changing tide—other large carriers like Sprint and AT&T may continue the trend—whether or not companies adjust sail, or decide it is time to jump ship, with regards to cell phone expense subsidies, the BYOD crowd must take notice. In the end, someone is going to have to foot the bill; it’s just a question of whom.
Have you or your company been affected by these carrier policy changes? What have you had to do differently, if so? Let us know by leaving a comment.