This idea came to me via Al Chang. I’m shopping for a new smartphone, and I have been dismayed at how hard it is to get just what I want and not pay a huge fee for it. Right now I’m leaning towards the new HTC Mogul, in part because the Sprint SERO offer is just too good to pass up.
However, in the GSM world, one thing that’s frustrating is that carriers only provide a limited number of phones, and in some cases, such as the Nokia E62, they actually rip useful features out of the phones before offering them. (The E61 has Wifi, the E62 removes it!) But the subsidy, which can be $200 to $300 is also too rich to pass up if you’re signing up for new service. If they are going to force you into a 2 year contract — which they do for anything, even just a change of plan — you are foolish not to take this subsidy.
So here’s Al’s plan. Go out and buy the phone you want, unlocked (or locked to the carrier you plan to use) from whatever source you like, including cell dealers, Amazon, Dell or eBay.
Next go to your carrier’s web site and find the most subsidized phone they sell which works with the plan you intend to use. Find the most subsidized phone by looking at the subsidy price, and comparing it to the typical “completed auction” price on eBay for a no-contract (locked or unlocked) phone. It is often the case, by the way, that there are eBay sellers who will sell you phones that cost $200 after subsidy in the carrier’s store for $1 because they kick back to you the kickback they get from the carrier for selling you a fancy phone on a fancy plan. (I have not tried these sellers but they generally have top reputations and lots of happy comments from phone buyers so I presume it works. It does not, however, work with SERO.)
Anyway, find the biggest difference. And sign up for new service, buying that subsidized phone. When you get the phone, pull out the SIM card and put it in the phone you actually wanted. So long as the plan you got is compatible with your phone of true desire, all should be happy. And now you have a no-SIM (locked) expensive phone you got with a subsidy.
Sell that phone on eBay or Craigslist. Price it nicely if you want quick sale or just let people bid. You may want to consider unlocking it first to get slightly higher dollar for it. There are many ways to unlock, including getting unlock software, or going to the unlock shops that are found around any town, or in some cases calling your carrier and telling them you are about to go overseas with the phone and want to put in your foreign SIM. But you don’t have to unlock, it just opens your market up a bit and will get you a higher price.
In any event, you will sell the phone for a bit below its real price. But you only paid the subsidized price, so you pocket the difference. In effect, it has reduced your price on the phone you wanted. If the phone you wanted is cheap, you may get more of a subsidy than it actually cost you.
Why will people buy it for that price? There seems to be a large enough group of people who want or need to get no-contract phones. They include people who are stuck in a contract but want or need to replace their phone and can’t get a subsidy. There are people who just refuse to take a contract because they know they will be switching to something else soon. For whatever reasons, they buy them.
I have been told the following slightly different variant works, though I can’t guarantee it. Go to AT&T and buy a fancy Treo 750 for $200 after rebates with 2 year contract. I can pretty much promise you will get $400 for that on eBay and I have seen them go to $500, unlocked. Then go back to AT&T and get an iPhone (though you may want to wait for a myPhone,) and transfer your treo service to your iPhone. Sell the Treo and pocket $200, so you really only paid $400 for the iPhone. (This requires that you be able to convert your Treo’s plan to the better priced iPhone plan, but I think that is possible though it may require a plan at the same level, in which case only do this if that is what you want.)
This variant only works when buying a phone that is unsubsidized, because the carrier will let you come in and buy a new unsubsidized phone from them and transfer your contract to it. If they subsidize your true desire, you should just buy that and be done with it.
Of course if everybody does this, it won’t work as well, but as long as there is demand for no-contract-required phones, it will work. It’s hard to see anything particularly unethical here. The network gives a subsidy to the person who takes a 2-year contract (which will get them typically $1500 over those 2 years) and not to a user who takes a phone with no contractual requirements. It just change s which phone. At worst things go slightly differently than the carrier’s marketing plans expected. I’ve lamented before why the networks won’t give you a subsidy if you bring in your own phone, but they seem to be stubborn about this. The only thing I can think of is it provides kickbacks to the retailers who push both phones and plans on customers. I’m not bothered by disrupting that and I don’t think it’s that valuable anyway.