Are We Near the End of Mobile Device Subsidies from Carriers?

By Matt West

Director of Telecommunication Services, NPI

May 08, 2014

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The wireless carriers in the U.S. have subsidized the cost of mobile devices to both domestic consumers and enterprise customers since the inception of the market. You know the deal - sign a two-year agreement and get a new phone for free. T-Mobile was the first carrier to unbundle phones from plans in mid-2013, but AT&T and Verizon quickly followed with their own unbundled offerings.

Each of the carriers now have plans that are detached from the cost of the phone, and most can even be on a month-to-month basis. Instead of subsidizing the phone, the carriers are offering payment plans to finance the phone as a separate line item on your invoice. While this move has been primarily targeted towards the consumer customer, it’s also extending to the enterprise customer, particularly in cases where the carriers still offer "free" devices as a part of a two-year term, but the device is no longer the latest version of a premium phone. Instead, the device falls under a less robust product category.

So, what does this mean for enterprise customers? For some, fewer “free” or fewer “free premium” devices can pack a punch to the telecom budget. Equipment charges can account for 15 to 20 percent of the total annual cost of providing employees with mobile communications. Enterprise customers need to carefully review their carrier agreements to make sure that they include at least a minimally acceptable free device (depending on which kind of device best suits your enterprise IT ecosystem – e.g. Droid, iPhone, Blackberry). Additionally, a business’s carrier agreement should also clearly explain early termination fees or early upgrade waivers, so companies can manage these costs closely.

Corporate customers should also develop and enforce strong wireless communication policies that guide employees to responsible equipment usage. For example, some companies make it clear that they will pay for a device every two years, while others determine device compensation costs based on an employee’s job description or function.

Carriers are changing their mobile device strategies – and enterprise customers need to stay on top of how these changes are impacting both usage and budget.