Jack Schofield argues for an end to network subsidy

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Here’s an interesting one for a Friday afternoon, as Jack Schofield argues at Trusted Reviews for mobile phone subsidies to be stopped. If this were to happen he believes that the true value of both the phone and the usage of the network would be clear, and this would (through market forces) result in more value for customers. What do you think?

Schofield opens with:

The acquisition cost of a smartphone can range from free to £500, but the real price is usually hidden behind calculations based on contract charges, termination fees, and usage estimates.

…and his core argument follows:

These subsidies have now become anti-competitive, because they hide the real costs, and because they restrict user choice. In general, you are not allowed to choose the best phone, the best service, and the best price for the usage you want. Instead, you have to hunt for the “best package” from thousands of confusing options.

Today, there is no excuse for this sort of marketing, and governments should ban it.

It does make for an interesting argument, but a lot of it is based on the idea that the loss of all subsidies (probably in law, because no network would jump first to do so in my opinion) would result in all the costs being made visible to the customer – rather than just shifted to another area of the operations. That push in law would be resisted by the networks because they would lose a lot of flexibility in how they price their offerings.

Finally, it also presumes that end-users want to have these options visible for the cost of mobile phone ownership. I think the old saying that “nobody wants to see how sausages are made” applies here.

So while it’s a good argument, I think very much a thought experiment and would never be implemented because of the multitude of real world issues.

Schofield's editorial can be found here.

-- Ewan Spence, July 2010.