[CrazyCDN]

My wife and I are in the market for new cell phones and I've been researching switching providers, data plans, types of phones, the whole kit. One sticking point that I've come across is the value of contracts. They certainly seem to save you the price of the phone but really make you commit. While I don't want to debate contracts I'm wondering about contract length. It appears that with any of the smart phones we'd be interested in its either buy it out-right or lock in for 3yrs, nothing in between. What gives?

There was a time when they would have one, two or three year contract lengths at various prices. Even in the US they don't have 3yr plans any longer they only have 2yr ones. One would think that with the increased ease in being able to switch providers and the number of new phones all the time that providers would want to generate some churn from their competitors.

 

[jvincent]

Smartphones are much more expensive so the carriers are generally requiring 3 year contracts for the fully subsidized phone. If I were them I would do the same thing.

 

[profets]

Thats the usual issue... 3 year term gets you the best price. 1 or 2 year will get just a very small discount.

It sucks. only country in the world in the world with 3 year terms.

Also, smartphones are not just so much more expensive. Their prices are artificially inflated to help create these great looking subsidies. Look when the BB 9700 came out on all carriers for example. Bell/Telus/Rogers no-term price was $650, yet their cost to acquire the phone from RIM was close to $400. Only since Wind has been selling it close to cost ($450) has the big 3 been slowly bringing down the price.

 

[cfraser]

It's time to find a better and more accurate word than "subsidized". Do you really think your provider is partly paying for your service, or your phone? Do you honestly think they're selling you the phone at less than the most the market will bear, no matter how you pay for it? In Canada? "Financed" would be a more accurate word for describing that "free" phone over 3 years (and at a low interest rate I'm sure...), but there's surely some better words too.

 

[jvincent]

Discounted, loss-leader, whatever you want to call it.

The point is that if you are willing to lock into a plan, they will sell/give you a phone at a much lower price than what it costs you to buy it. Just ask my co-worker who lost his iPhone after only two months. Ouch!

 

[cfraser]

You used that word "give" re the phone... It's a mindset, your words indicate the way the mind is going, even if subconsciously...

Actually, I posted this in the wrong thread LOL...but it still sort of fits. (meant for the iPhone 4 one)

Yes, the lock-ins are too long. To me, it indicates mostly that the provider is not confident of the level of service they'll provide, in comparison to "competitors". If we pretend there's real competition in Canada.

 

[dabell]

I am not sure that $400 discount price is really anywhere near the real price either - for that price I can buy a laptop with a 15" screen. I would love to know what the real "cost" is for these phones.

 

[Deckster]

Try making that laptop small enough to put in your pocket and add a radio transceiver and GPS to it, let me know if the cost of $400 is still inflated

 

[willise]

IF you wait until the fall, you may be able to buy a phone unlocked. That way you can purchase the phone and it is yours (the way it should be) and you can shop around for the best deal - no contracts involved.

I think the new IPhone 4 will be sold unlocked in Canada as well.

Here is the link to the legislation proposal:

http://www.theglobeandmail.com/report-on-business/wireless-carriers-could-be-forced-to-unlock-phones/article1607337/

 

[hugh]

Try making that laptop small enough to put in your pocket and add a radio transceiver and GPS to it, let me know if the cost of $400 is still inflated

Got a chuckle on that.

Smartphones are amazing devices with a tremendous amount of electronics packed into them. The fact that they only cost $400 to $600 is pretty amazing.

The mark-up on phones is ridiculous, however, and is possible because they are locked.

I'd like to see a law (yes a law) that outlaws the practice as I believe its a restraint of trade but it'll never happen because people want "free" or "cheap" phones and are too stupid to realize that "leasing" a phone will always be more expensive than buying one.

 

[cooper83]

Fido has 2-year contracts, but it appears their smartphones are 3-year.

 

[theninjasquad]

The providers don't even give people an incentive to buy the phone outright without contract. If anything, they could at least offer the monthly plans cheaper, or adjust the cost of the phone purchase based on the price of the monthly plan. This is why I went with Wind, love that I'm not committed.

 

[99semaj]

It should be like any other financing option....total cost of borrowing should be clearly pointed out to the consumer, and the cost structure should be transparent. Today, it's certainly not.

 

[CrazyCDN]

It should be like any other financing option....total cost of borrowing should be clearly pointed out to the consumer, and the cost structure should be transparent. Today, it's certainly not.

that's an excellent point. They should break down how I'm paying for the phone across the length of the contract. If they don't provide that information how I can honestly see what kind of a "deal" I'm really getting.

 

[Yads]

The providers don't even give people an incentive to buy the phone outright without contract. If anything, they could at least offer the monthly plans cheaper, or adjust the cost of the phone purchase based on the price of the monthly plan. This is why I went with Wind, love that I'm not committed.

This is how it seems to me. What is the benefit to purchasing a phone outright? It's not like any of the carriers offer anything different. Look at Bell, Telus, and Rogers plans. They're all the same. Can someone give me a good reason to purchase a phone outright? What is the downside to being locked into a contract?

 

[BGY11]

Downsides to being locked in a contract:

- Given how quickly smartphones are advancing, you'd be paying full price each time for a new handset. I can't see many people sticking with the same smartphone for a full 3 years. Look at iPhone users (especially those who picked up a 3G/3GS from Bell or Telus when they launched the HSPA network). Many of them will want the iPhone 4, but will be ineligible for a discount on one.

- Midway through your contract, what happens if you move to an area that has poor/no reception? More often than not you're still stuck paying the cancellation fee. Combined with the data fees of smartphones (that some carriers are now extending up to 3 years as well), it can be very costly to break your contract.

- Similar thing if another carrier offers a better value (though if it's one of the big three, they just copy/paste from each other).

 

[CrazyCDN]

- agreed; smart phones are changing very quickly. So one would like that providers would want have their customers switch phones faster. Ex. someone that just got on the Bell/Telus network in Aug '09 would be on the dying CDMA network for the next three years. But if they had more reasonable 2 yr contracts a person should be able to switch technology quicker.

- to your other points; those are some interesting 'ifs' but I'm not sure they really play into most people's consideration when signing a contract.

- also cancellation fees are (or should be) pro-rated so cancelling with a couple of months left shouldn't impact one's bottom line too badly if you change carriers.

 

[Yads]

Downsides to being locked in a contract:

- Given how quickly smartphones are advancing, you'd be paying full price each time for a new handset. I can't see many people sticking with the same smartphone for a full 3 years. Look at iPhone users (especially those who picked up a 3G/3GS from Bell or Telus when they launched the HSPA network). Many of them will want the iPhone 4, but will be ineligible for a discount on one.

But that's the same downside to buying the phone outright no?

 

[North_of_Calgary]

If the phone you're buying outright is also unlocked then it might be worth it if you plan to travel and use foreign carrier SIMs'

 

[TorontoColin]

Signing a three year contract assumes you know your usage habits for the next 3 years. A plan that works for you today may not two and a half years from now, and many people get stuck paying too much for a plan because they're under contract. It also restricts you from leaving a carrier and taking your business elsewhere should you have a conflict with your carrier, effectively eliminating any leverage you might have had in potentially re-negotiating rate plans.