Are Mobile Device Subsidies from Carriers on the Way Out?

Spend Matters welcomes another guest post from Matt West of NPI, a spend management consultancy focused on eliminating overspending on IT, telecom, and shipping.

Are we nearing the end of mobile device subsidies bundled into wireless carrier offerings? Possibly. While carriers in the U.S. have subsidized the cost of mobile devices to both domestic consumers and enterprise customers for years, things are changing. The era of a free phone with a two-year contract may soon be over. AT&T, Verizon, and T-Mobile now have plans that are detached from the cost of the phone and most can even be on a month-to-month basis. Instead of subsidizing the phone, the carriers are offering payment plans to finance the phone as a separate line item on your invoice.

So, how will this affect the enterprise customer? While these moves have been primarily targeted at the consumer customer, there are enterprise implications. In some instances, the carriers may still offer "free" devices as a part of a two-year term, but the device is no longer the latest version of a premium phone. Instead, the device falls under a less sophisticated product category.

If you think fewer “free” or fewer “free premium” devices won’t have a big effect on telecom budgets, think again. Even in the age of BYOD, equipment charges can account for 15 to 20 percent of the total annual cost of providing employees with mobile communications. To mitigate the impact of changing mobile device subsidies, enterprise customers need to do two things:

Establish terms for a minimally acceptable free device. Enterprise customers need to carefully review their carrier agreements to make sure that they include at least a minimally acceptable free device (depending on which kind of device best suits your enterprise IT ecosystem – e.g. Droid, iPhone, Blackberry). In addition, the carrier agreement should clearly explain early termination fees or early upgrade waivers, so companies can manage these costs closely.

Revisit wireless communication policies. Corporate customers should also develop and enforce strong wireless communication policies that guide employees to responsible equipment usage. For example, some companies make it clear that they will pay for a device every two years, while others determine device compensation costs based on an employee’s job description or function.

Carriers are changing their mobile device strategies – and enterprise customers need to stay on top of how these changes are affecting both usage and budget. Time will tell if carriers will take the same approach with enterprises as they have with customers. Until then, clarity is key – both with carrier contract terms and internal wireless communication policies.

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