Mobile carriers in the United States have mobile phone pricing all wrong. While users can enjoy a locked iPhone 5 for just $199.99 they end up paying for their phones discount with a two-year inflated pricing structure.

Mobile Phone Subsidized Pricing

Let me explain the subsidized dilemma currently facing American consumers, in many countries such as the UK carriers offer full priced phones to customers at which point the customer receives discounts on their cellular plans. In the United States however an unlocked phone customer who purchases their device elsewhere still pays full price for their contract.

The idea behind subsidized pricing seems great, a cellular provider purchases a high end smartphone from Apple for $400+ dollars and then eats the initial cost for its customer. The cellular provider then makes its money back with higher monthly costs that are demanded from their client base.

In many other countries customers are asked to pay full device costs in order to avoid higher mobile rates. For example in Europe many carriers offer free incoming calls, free off-peak hours and free incoming text messages among other free features. Carriers can afford to charge lower prices because they are not eating hundreds of dollars on the cost of their mobile devices.

The other issue is that American carriers don’t make customers wait two years to receive a discounted upgrade. For example, AT&T Wireless allows customers to receive free full-discount pricing after only 18-months into their contract. If a phone is discounted by $300 that means over an 18 month period AT&T must recuperate $16.66 per month to recover their loss leader phone sale.

Ditching subsidized phones would not only help customers, it would force mobile manufacturers to cut phone prices in order to attract new customers. As device competition heats up and mobile carriers are forced to fight for business the cost of devices lessen and carriers are able to keep customers happy.

[Image via Hongkiat]