Would You Pay Full Freight to Avoid a Carrier Contract?

Thinking about the Nexus One (and the Nexus Two rumor) and Google’s attempt to disrupt the carrier retail model, I wonder how fed up people are with carrier contracts.

The hardware subsidy model lowers the sticker price by giving you a discount on the hardware price in exchange for an extended contract with the carrier. This makes that fancy new smartphone more palatable to your inner accountant.

Obviously, it locks you in paying the carrier for the length of the contract. If you want out, you pay through the nose, a.k.a. early termination fees. If you want the newest shiny object, your carrier will happily oblige by reupping your contract.

Photo by Klearchos Kapoutsis used under Creative Commons

One unfortunate problem for we Americans is that GSM is not the standard here, and which hampers hardware portability, unless you want to hop between AT&T and T-Mobile. This makes the carriers even stronger because there’s very little you can do with hardware once you “own” it.

Does this bother you? Do you view it as a necessary evil? Do you pay extra to avoid the contract?

I suppose if the Verizon iPhone unicorn actually arrives in January (and this time they mean it), we’ll see if people are willing to buy their way out of contracts with AT&T. I’m guessing the answer will be no because those early termination fees are really steep, and so is the hardware.

Imagine you’d bought an iPhone 3GS last year. You’d be nearing the end of your two-year contract with AT&T, and if you jumped to Verizon, you’d have to pony up (again) for a new iPhone 4 and get into a new contract with Verizon.

There’s simply no way that happens unless you have a money tree.

The really interesting part comes in June 2011, when it’s easy to assume that Apple will unveil a new iPhone (as they have in June for the last three years). June 2011 coincides with the end point for all those June 2009 iPhone 3GS contracts.

Assuming they have a CDNA option by then, will Apple level the playing field and offer the new iPhone to both carriers? Or will they only offer it to AT&T to soften the exclusivity blow? Or maybe the new iPhone will be underwhelming like the 3GS was?

Anyway, imagine how much different life would be if there weren’t contracts involved? How well would the iPhone have sold for $500 unlocked?

Yet another reason I’m hoping Google is planning to reboot its efforts to disrupt the carrier model with the N2.



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