Smartphone subsidies will end

Carriers will start pulling back from offering generous subsidies for mobile devices on their networks next year, predicts a new report from Yankee Group.

10 top iPhone apps for IT prosIn its list of 10 key predictions for technology in 2010, the Yankee Group says that the shift away from smartphone subsidies began earlier this year when T-Mobile introduced its "Even More Plus" plans that contained no devices subsidies and no contracts. The reason that T-Mobile introduced these plans, the group says, is that they provide a way for the carrier to pick up new customers inepensively and without the high costs associated with subsidizing pricey devices. This way, customers can simply come and go from their network as they please on whatever GSM device will run on T-Mobile's network.

"In 2008 we saw a wave of unlimited $99 plans for voice and data crop up and the rest of the industry soon followed suit," says Yankee Group analyst Christopher Collins. We think the T-Mobile plan is the first major plan that will start an industry trend of no-subsidy, no-contract plans."

Although carriers take big initial hits by offering consumers devices such as the Apple iPhone and the BlackBerry Storm for $200 or less, they are typically making up for it with growth in their wireless data revenues. But the Yankee Group thinks that as the market for wireless data matures and has wireless data services become more heavily saturated, carriers won't have to rely upon inexpensive mobile devices to lure customers.

The Yankee Group predicted last year that carriers would start feeling the pain of smartphone subsidies during the current recession and would begin looking for ways to grow their user base without offering inexpensive devices. At the time, the Yankee Group said that the current subsidy model would not stand in the long term, because it mostly will benefit device makers, such as Apple, Nokia and Research In Motion, at the expense of the major telecom companies.

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