OK, but that leads back to the same question: If I've paid full price for the smartphone, why is my monthly charge the same as if I got a subsidized smartphone? And why does the monthly subsidy-recouping fee not end when I've had the contract long enough to pay back the subsidy?
Verizon's lame response to the FCC
Well, we know the answer to those questions. Verizon keeps the extra charge because it can get away with it. The FCC asked the company to explain itself [PDF]. To be completely fair (and to avoid irritating e-mails from Verizon flacks), here's the company's statement (if you like, read the entire answer):
Verizon Wireless incurs additional [that is beyond the subsidy] costs to sign up customers, such as advertising costs, commissions for sales personnel, and store costs. These costs are higher for advanced devices: for example, it takes more time (and hence increases the cost to Verizon Wireless) for sales and customer care representatives to handle customer inquiries regarding the complex advanced features and functionalities of advanced devices.
Excuse me? It costs more to advertise a smartphone then a regular phone? And Verizon can't figure out a commission plan that pays sales reps and still recovers costs without an ETF? As to the question of "customer care," which means tech support, isn't that a normal operating expense that should be recovered by monthly charges?
Sorry, Verizon, this all a bunch of baloney. (I'd use a stronger word, but I'm supposed to watch my language.)
Let's talk business here. Smartphones have made a huge difference to the bottom lines of both Verizon and AT&T. The number of customers using data services is much, much higher now than in the past. Do you think those services are profitable? You betcha.
Sure, both companies have had to build out their networks. Hello, that's the cost of doing business. You spend money on infrastructure and make it back plus a profit by selling the service.
Google may change the game
It appears that Google will experiment with a business model that would decouple phone sales from service. Rather than a manufacturer selling a phone to a carrier that in turn sells it to the consumers, Google may sell an unlocked Nexus One phone directly to customers.
If that model strikes a responsive chord with consumers, it could well change the game. Meanwhile, the FCC is mulling a move to end exclusive deals between carriers and phone manufacturers.
Take that, Ivan Seidenberg, you bozo.
I welcome your comments, tips, and suggestions. Post them here so that all our readers can share them, or reach me at firstname.lastname@example.org.