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Comment by u801e | Hacker News Reader

I've never understood why people buy phones from the carriers rather than from a retail store or online and insert the SIM (for GSM carriers).

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Because the carrier's don't/didn't offer any discount for bringing your own device. If they're effectively offering you a 0% loan over two years to pay off a phone it's not the craziest thing to take them up on that offer. Plus, if it breaks you can just take it to your nearest store. A lot more convenient than mailing it somewhere.

I haven't seen a "free phone" in a _long_ time (two years or so).

Now it's "pay X dollars a month 24 months".

Right. Which, if it adds up correctly, is basically a 0% loan for the price of the phone.

Unless you pick up a $100/$200/$300 rebate for buying through your carrier.

My ATT plan has BYOD so I save $15 per line over 2 years (=$360) to not have to worry about arguing with a carrier over whether I can unlock MY device. Surprise, it's about the cost of the 'subsidy'. Back when they had subsidies, that is, I think now you just lease to own. All I know is, I'm not getting anything for free with their garbage so I'll just by my own. If my phone costs $1000, I damn well want to know what it's costing me and consciously make that decision, not have it hidden in a payment.

> I've never understood why people buy phones from the carriers rather than from a retail store or online and insert the SIM (for GSM carriers).

Cultural momentum. In the US, phones used to be heavily subsidized by carriers via contracts. Even if you brought your own phone, and don't think the carriers gave you a big enough discount to make it economically justifiable, so the practice of buying "unlocked" phones never took off and was more of a niche thing.

That's all changed recently, with the death of long-term contracts, but old habits die hard.

Verizon also used to not allow unlocked phones on their network. If the phone was not Verizon branded you were forbidden from using it. I'm not sure if that's still the case.

That was also complicated by Verizon using a CDMA network - most third party phones are GSM and wouldn't work on their network.

Luckily LTE means we're seeing the back of all this, though I think you still need a CDMA phone for areas that do not yet have LTE.

No longer the case. However, they only allow devices that are certified to work on their network, and that means support for legacy CDMA. But if your phone is unlocked and it has the necessary bits, you can certainly bring it in. Also, all smartphones they currently sell are unlocked, as part of a deal with the FCC when they won the rights to some 700Mhz band

In my case, it's an economic reason.

The monthly discount that Canadian carriers offer for bringing your own phone is generally lower than the value of the phone. So why would I pay upfront if the model I want is available from the carrier?

All the Canadian carriers are such assholes I can't bring myself to sign a long term contract with them.

It's also nice to have an unlocked retail phone. Much cheaper to get a SIM from a vending machine at the airport anywhere outside North America than to suffer Canadian carriers' insane roaming charges.

Since December 1, 2017, they can't be sold locked and phone bought before that can be unlocked for free.

That's good news!

Cost. Many people can't afford hundreds of dollars all at once for a phone, but can afford to subsidize it through a contract.

The subsidy days are (mostly) gone. Now they pay the full MSRP, but financed at 0% interest for 2 years.

In fact, they pay more than MSRP if you consider the fact you're forced to attach a phone plan which costs more than the equivalent plan from an MVNO using the same network.

The time value of money is still a subsidy. The average American consumer has stacks of debt (credit card, student loan, etc) which makes fronting $1k for a phone more difficult.

If you can’t afford 1k for a phone you shouldn’t finance it.

We’re not talking about a house or a car, it’s a 1,000$ phone that can have 90% of it's features replicated by a phone that cost as much as the down payment on the 1k phone that someone with maxed out credit will have to pay.

The people buying the phones usually already know this.

Consumers gonna consume.

Yes, but this seems to be unique to the US market. In countries where people don't earn as much, getting a subsidized phone via the carrier doesn't seem to be the case.

You don't understand why people would pick a small monthly fee over a four figure purchase price for a phone? Because very few people have the savings or extra money to do so.

4 figures? What phones are people buying? I bought my Huawei honor 8 for 300 and I pay 50 a month for a plan.

> four figure purchase price for a phone?

There are phones that are quite a bit cheaper than that.

Same reason people buy a house with a mortgage and not straight cash.

Most people will get a mortgage to buy a house. Most people aren't going to get a loan to make a $300 to $500 purchase.

> Most people aren't going to get a loan to make a $300 to $500 purchase.

At 0% interest, why wouldn't you?

Depending on what credit card one uses for the purchase, one could get anywhere from 1.5% to 5% cash back (assuming they pay the balance in full before the credit card statement due date).

I pay my cell phone bill with a credit card anyway, so I still get the points, independent of how I bought the device. (I also use Ting and have bought the phones outright, but even previously on Sprint and AT&T with subsidized phones, I still got the points every month in addition to the device subsidy.)

A 2 year loan for $500 is 24 chances for me to forget to make a payment, for a glitch to cause my bank / cc to not pay them on time, for them to somehow not notice that I have paid them when I actually did, etc etc etc, any of which will either result in me eating some costs (completely eliminating the benefit of the 0% loan) or burning 1-10 hours on the phone with some clowns.

What am I losing, whatever I would have made by investing that $500 over the same time period ? We're talking less than $50. I'm very lucky to be at a point in my life where I'd gladly give away "$50, 2 years from now" in exchange for "don't have to think about it, ever again".

> A 2 year loan for $500 is 24 chances for me to forget to make a payment

Are the payments for those "loans" included in the buyers cell phone bill? So no extra payment to remember.

True. For a variety of reasons, cell phones in the US don't follow typical economic patterns of similarly priced items. Most people still lease and/or finance them, and insure them. Concerning insurance, using a shared risk pool to insure against an easily coverable expense (replacement cost) and fairly common event(damage/loss) is a bit of an anomoly. A combination of convienience and unfamiliarity with the technology have created(or allowed carriers to create/promote) this phenomenon

> Most people aren't going to get a loan to make a $300 to $500 purchase.

To be pedantic, that's wrong. Most people make $300 to $500 purchases with a credit card, which is a type of loan.

That is true, but at least using a right type of credit card will actually result in you paying less than the principal amount of the loan (which can't be matched by a 0% loan in terms of the amount you end up paying).

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