A flurry of alternative cellphone providers have hit the streets in the past year, offering consumers smartphones that aren't bound by the traditional two-year contract.
But even though new pricing structures from Republic Wireless, Aio, Ting, T-Mobile and Virgin Mobile challenge the traditional payment model, two-thirds of smartphone owners still sign contracts that often include subsidized phones, and the choices available to American subscribers remain limited.
In most European and Asian countries, the mobile market is different, with a host of midrange, affordable phones available to buy outright. So why are Americans still so limited in their phone choices?
It's largely an issue of transparency. In the U.S., traditional plans offer tempting, subsidized upfront prices on must-have phones like the iPhone 5s and Samsung Galaxy S4 by getting you to sign a two-year contract. Customers pay off the rest of the phones' cost each month of their contract.
However, when your contract is up, your bill doesn't go down -- even though the phone is more than paid off. Consumers are expected to rinse and repeat, paying an upgrade fee for a new phone and locking in for another two years. By contrast, carriers in Europe and Asia frequently offer plans that only charge for a handset until it's paid off.
Subsidized or not, U.S. consumers still have fewer smartphones to choose from compared with their European and Asian counterparts. That's largely due to stunted competition: When providers hide the upfront cost of phones, there's less competition to put out quality devices that you can buy outright.
Such smartphones exist elsewhere. For example, at last month's International CES in Las Vegas, we saw Meizu's gorgeous MX3. It is slim, fast and performs on par with the $699 Samsung Galaxy S4, but costs only around $410 overseas. Lenovo's Vibe X costs around $415 overseas and features a slim profile and HD screen. But neither the Vibe X nor MX3 is currently sold by U.S. providers.
In the United States, carriers undergo a complex dance with phone manufacturers to decide which handsets to carry. Price, features, size and brand awareness are but some of the factors that go into choosing which handsets make it to store shelves. In a crowded marketplace dominated by major players, some phones just don't make the cut.
"I sense that right now carriers are less willing to take on any (new manufacturer) given the enormous cost associated with bringing these devices to market," said Will Stofega, a mobile analyst for research firm IDC. "They're more willing to stay the course in terms of the usual suspects." (continued...)
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Posted: 2014-02-24 @ 8:28am PT
Republic Wireless offers a no contract phone for $299 and a plan for $10/month with unlimited talk and text or $25/month for unlimited talk, text, and data.