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3 On Your Side: Smartphone Prices Could Start Climbing

jim-donovan-web Jim Donovan
Jim Donovan is a 13-time Emmy Award-winning consumer reporter w...
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by Jim Donovan

PHILADELPHIA (CBS) – If you think the price of your $200 smartphone is hefty, think again.

3 On Your Side consumer reporter Jim Donovan is here to explain why your smartphone may get even more expensive.

Experts say cell phone carriers could gradually start charging more for smartphones, sometime over the next two to three years.

The expected price hikes would come as a result of eliminating what’s known as smartphones subsidies.

When customers sign a cell phone contract and are able to buy a phone at a lower price, it’s the carrier that helps subsidize the cost.

Here in the U.S., only T-Mobile has gotten rid of subsidies and now allows customers to buy a full-priced phone without getting locked into a contract.

That plan is generating interest.

AT&T, Verizon and Sprint have all said they’re watching to see how successful T-Mobile is.

Just last month Sprint’s c-e-o said carriers can’t keep discounting phones, especially since people upgrade so often.

And here’s why, those discounts cost the phone companies a lot of money.

Take the iPhone 5.  A 16 gigabyte version without a contract costs $649 dollars.  That’s a lot more expensive than the $199 you’d pay for a subsidized, contract phone.

That $450 difference is paid for by the phone company.

So when new phones come out, wireless carriers’ profit margins usually plunge.

But getting rid of the subsidy-model could be a tough sell because not everyone may be keen on paying $650 for a smartphone.  That’s why all eyes are on T-Mobile.

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