Now that new phones like the Droid RAZR and Nexus Prime are creeping up to the $249/$299 price points, are the Telcos under any obligation to adjust their ETFs? Are these new phones really that much more expensive to manufacture that the consumer has to pay $50-$100 more while still being handcuffed with a $350 ETF?
Not to mention new policies like Tmobile's automatic contract extension if you want to change your calling plan. To me, a policy like this clearly contradicts the Telco's claims that ETFs are needed to offset lost revenue due to phone subsidies. There are no plan changes a customer could make that would result in enough lost revenue to justify an automatic 1-2 year contract extension--an extension that has absolutely no benefit to the customer.
Am I completely overlooking something?
Question about
Are the Telco's stealing money with their ETFs?
top answers
kts2005's pick
Keep in mind that this $250 - $300 price point is still for subsidized phones. The carriers are technically buying them from the manufacturer for the full / unsubsidized price (which can range anywhere from $600 - $850).
So, one could make the argument that a $350 ETF is actually reasonable for them to charge, especially since it you buy a phone, sign up for a contract, and then immediately cancel it, they're still technically losing money on you ($300 + $350 ETF = $650. This might not cover the cost depending on the phone)
That said, its still sucks and it feels super dirty that carriers are doing this. But it has to happen. You can either buy a subsidize phone and agree to basically defer the payment over the course of your two-year contract, or you can buy a non-contract phone for full price.
So, one could make the argument that a $350 ETF is actually reasonable for them to charge, especially since it you buy a phone, sign up for a contract, and then immediately cancel it, they're still technically losing money on you ($300 + $350 ETF = $650. This might not cover the cost depending on the phone)
That said, its still sucks and it feels super dirty that carriers are doing this. But it has to happen. You can either buy a subsidize phone and agree to basically defer the payment over the course of your two-year contract, or you can buy a non-contract phone for full price.
mark as good answer
8 people like this answer
Clicking the mark as good answer button helps us highlight the best answers.
kts2005's pick
Of course they're stealing! If they weren't, then the termination fee would be directly related to the subsidized part of the device price, and it would be decrease proportionally over time.
Instead, all the US carriers have entangled the subsidy with service contract terms, in an attempt to trap their customers for as long as possible.
Additionally, the carriers make it difficult to unlock the devices once the contracts are completed (either with time, or after paying the ETF). If they weren't cheating their customers, they wouldn't lock the devices in the first place, and they would acknowledge that the devices were really the property of the people that bought them and let the customers use the devices as they see fit.
In addition to all this, the carriers have been wasteful with their customers money by allowing the government to "double tax" the devices. When you purchase a subsidized device in the US, you pay sales tax on the FULL unsubsidized price. Additionally, you pay taxes on your monthly bill as well, which amounts to double charging of the sales tax on the device, since a portion of your month bill is repaying the subsidy. The carriers just past the loss onto their customers rather than fight the government to correct this.
So to sum it up, YES, the Telco's are stealing in every way they can get away with, and additionally they're enabling the government to steal from you too, by enabling double sales taxes.
Instead, all the US carriers have entangled the subsidy with service contract terms, in an attempt to trap their customers for as long as possible.
Additionally, the carriers make it difficult to unlock the devices once the contracts are completed (either with time, or after paying the ETF). If they weren't cheating their customers, they wouldn't lock the devices in the first place, and they would acknowledge that the devices were really the property of the people that bought them and let the customers use the devices as they see fit.
In addition to all this, the carriers have been wasteful with their customers money by allowing the government to "double tax" the devices. When you purchase a subsidized device in the US, you pay sales tax on the FULL unsubsidized price. Additionally, you pay taxes on your monthly bill as well, which amounts to double charging of the sales tax on the device, since a portion of your month bill is repaying the subsidy. The carriers just past the loss onto their customers rather than fight the government to correct this.
So to sum it up, YES, the Telco's are stealing in every way they can get away with, and additionally they're enabling the government to steal from you too, by enabling double sales taxes.
mark as good answer
2 people like this answer
Big companies can do great things, like make it easy to connect to the internet in places you never could before. With 3G in the mainstream and 4G kind of in roll out process things are getting better in that aspect. Being able to call someone in the middle of nowhere is pretty amazing if you think back a decade as well.
Unfortunately, big companies need stable customer bases. Since creating loyal customers is very hard, (ie Apple, Nintendo, Chevy), especially with quick moving product lines and supplies they depend on the monthly payment. Similar to the cable company in that they had to pay a lot to put the cable lines in the ground, so they are going to charge more than they need each month to continue to see their ROI grow and continue to reinvest in the business.
I would advise you, the same was I have advised everyone else on cell phone plans: GET ON A FAMILY PLAN! Without a family plan I would easily be paying over $100 for minutes I don't use, 3G and unlimited messaging. With a family plan it works out to close to $50/person my family of four and we share a bigger pool of minutes, the unlimited messaging and can switch around upgrades if someone breaks/loses their phone.
I have never been a victim of ETFs so I can't sympathize if you've had experience with that. You signed a contract, so not honoring it is pretty simple in the comany's eyes. It's like how it's a pain in the butt to leave a gym membership. They have a lot of overhead and the only way they can justify what they're offering is to try to stabilize their customer base. It sucks when you want to change, but fewer of these companies would exist if people were always allowed to change willy nilly. Look how far Netflix's stock price has dropped because of customers simply getting mad about the price hike/Qwikster split and leaving, though they offer the best service in their market.
As a general rule: services only get more expensive and products get cheaper. The original Motorola Razor was $300 so this new smartphone version being expensive is actually a much better deal. On the flip side, the service and ETF are rising because they can. An ETF will not go down with a more expensive phone, I think you may be overthinking this man.
Unfortunately, big companies need stable customer bases. Since creating loyal customers is very hard, (ie Apple, Nintendo, Chevy), especially with quick moving product lines and supplies they depend on the monthly payment. Similar to the cable company in that they had to pay a lot to put the cable lines in the ground, so they are going to charge more than they need each month to continue to see their ROI grow and continue to reinvest in the business.
I would advise you, the same was I have advised everyone else on cell phone plans: GET ON A FAMILY PLAN! Without a family plan I would easily be paying over $100 for minutes I don't use, 3G and unlimited messaging. With a family plan it works out to close to $50/person my family of four and we share a bigger pool of minutes, the unlimited messaging and can switch around upgrades if someone breaks/loses their phone.
I have never been a victim of ETFs so I can't sympathize if you've had experience with that. You signed a contract, so not honoring it is pretty simple in the comany's eyes. It's like how it's a pain in the butt to leave a gym membership. They have a lot of overhead and the only way they can justify what they're offering is to try to stabilize their customer base. It sucks when you want to change, but fewer of these companies would exist if people were always allowed to change willy nilly. Look how far Netflix's stock price has dropped because of customers simply getting mad about the price hike/Qwikster split and leaving, though they offer the best service in their market.
As a general rule: services only get more expensive and products get cheaper. The original Motorola Razor was $300 so this new smartphone version being expensive is actually a much better deal. On the flip side, the service and ETF are rising because they can. An ETF will not go down with a more expensive phone, I think you may be overthinking this man.
mark as good answer
0 people like this answer
A lot of it is because carriers are factoring in all the marketing costs into the ETF, but at the same time you wont get charged the full $350 depending on when you bail out of the contract. However considering you can buy the device directly from Motorola for $599...
mark as good answer
0 people like this answer
follow this question
share:
Related questions
5 users following this question:
This question has been viewed 1026 times.
Last activity .
Tips for giving the best answers
Sometimes it's just little details that separates a great and not so great answer! Here are a few simple tips to keep in mind:
- 1
- Be complete and thorough. Don't skimp on the details!
- 2
- Try not to answer with a question. Because that's not really an answer, right?
- 3
- A little research goes a long way. Back up your claims and assumptions!
- 4
- Try to be patient, tech questions can be complicated.
- 5
- You are awesome for both reading this and answering questions.