Verizon Communications Chief Financial Officer Fran Shammo talked during a a Deutsche Bank conference about phone subsidies and the mobile phone industry in the United States. According to CNET, Shammo claims the carrier subsidy model, which allows customers to pay less for a phone in exchange for a two-year customer agreement, is not likely to change anytime soon.
Shammo is in favor of the subsidy contract model, claiming most customers prefer this option. There are, however, a growing number of subscribers who prefer to pay for their phone over time without a long contract.
“We believe that the subsidy model is an extremely good model. It has done wonders for us in this industry,” Shammo said. “So I think to abandon that I think is a mistake. But I do think that there are customers out there that want that installment sale.”
Rather than ditch the subsidy, Verizon is meeting customers half way by offering their Edge plans, which provide subscribers with a way to pay off the full price of a device in installments. With these Edge plans, subscribers can pay for a phone over 24 months rather than paying for it all upfront and have the flexibility of being able to upgrade early.
These installments are an easy way to bank roll a phone for customers who plan to stay with Verizon Wireless. Customers who are on the fence about staying with Verizon pose a problem for the carrier as they will be faced with a large bill for their phone when they go to close out their plan. The carrier is then faced with the task of getting the customer to pay for the phone, which can be especially difficult when the customer is not happy with the cellular service.
What do think about the subsidy model? Would you rather ditch the contract and pay full price for the phone? Or would you prefer to pay less for a phone and agree to a two-year contract? Let us know in the comments.
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