Ending the Phone Subsidy Con

When you buy a cellphone — an iPhone or Android phone, let’s say — you pay $200. Now, the real price for that sophisticated piece of electronics is around $600. But Verizon, AT&T and Sprint are very thoughtful. They subsidize the phone. Your $200 is a down payment. You pay off the remaining $400 over the course of your two-year contract.

It’s just like buying a house or a car: you put some cash down and pay the rest in installments. Right?

Wrong. Here’s the difference: Once you’ve finished paying off your handset, your monthly bill doesn’t go down. You keep reimbursing the cellphone company as though you still owed it. Forever.

David Pogue explains how the Great Cellphone Subsidy Con usually works, and why T-Mobile is deciding not to participate in the con anymore (because it is currently far behind the other cellphone carriers and can afford to take the risk to do things differently/better).

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