Virgin Mobile CEO talks subsidies

Two topics we’ve long spoken of from the consumer standpoint are the practices of subsidizing and locking phones. There are various reasons given for each practice, but both come down to the carrier maintaining some amount of control over what is used on their network. Virgin Mobile CEO Dan Schulman recently spoke with Fierce Wireless, and this topic came up.

He talks about how purchasers of high-end phones “ought to have” the ability to take their phone from carrier to carrier. Of course, Virgin Mobile doesn’t offer high-end phones, so he’s pretty safe with that answer. But he does address the prepaid side:

However, on the prepaid side of the market, low and middle income households can’t afford these higher prices so subsidies [on handsets] are critical to allow penetration into these households. Also, if you force everyone to unlock all phones, and you can no longer subsidize them at the low end, then you are going to take out a chunk of the market that has yet to be penetrated.

That is one end of the argument, and surely Schulman has more of an insider view than I. However, it seems that the commitment-free nature of prepaid makes it conducive to unlocked handsets. It certainly would foster a greater level of competition. Don’t like the service? Walk away. Your phone will work on another network.

It would also make the phone a one-time investment. As it stands, now, you need to buy a new phone if you want to switch from Tracfone to Virgin.

Still, it’s good to see someone talking about it.

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