Survey: Carrier subsidies should help Apple shift a lot more iPads

Complete your iPad experience with ZAGGmate!“A new report from global research and technology firm Vision Critical reveals that subsidised iPad offers, such as those recently announced by three of the four UK mobile operators, are likely to ‘significantly accelerate adoption,'” Steve O’Hear reports for TechCrunch.

“Specifically, Vision Critical’s research found that 13% of people surveyed would be likely or very likely to get a ‘free’ iPad on a £45 monthly contract deal, whereas at the current purchase price of £529, only 4.5% are likely to buy,'” O’Hear reports. “Of note, the likelihood to take-up the offer of a ‘free’ iPad on a £45 monthly contract rises significantly among 18-34 year olds to 21%.”

Full article here.

[Thanks to MacDailyNews Readers “Fred Mertz” and “Dan K.” for the heads up.]

16 Comments

  1. I wouldn’t be surprised if the results would be same or similar in the US. I am constantly amazed at how little math people do when they accept these deals.

    In vast majority of cases, the value of the iPad (or a subsidised phone) is recovered by the carrier subsidy within 18 months, often sooner. That means that beginning from your 19th month of your contract, you are giving free money to your carrier, unless you immediately ask for a new free (or subsidised) device. Obviously, very small percentage do that. In fact, most people allow their two-year contract to expire without ever getting a new subsidised phone, yet they continue to pay full monthly plan rate, which includes a hefty subsidy. This is free money to the carriers, and majority of cellphone users are apparently happy to donate it to their carrier.

    The most obscure carriers in the US are the pre-paid ones (Boost, MetroPCS, TracFone, Virgin Mobile, Net10 and similar). These carriers in fact offer by far the best mobile rates; yet people will happily pay Verizon, AT&T, T-Mobile or even Sprint their exorbitant monthly rates (complete with subsidies) long after those subsidies are paid of.

    Go figure…

  2. @Predrag:

    While Boost, etc. may offer the best overall rates, they don’t carry products like an iPhone. Since that’s what I want, they won’t work for me. Also, I can add lines for my kids for $9.99 per month, a rate I can’t get on those oher carriers.

    That said, I’m sure you’re right that many more people would take a “free” iPad for $50/month. However, it probably costs them the same or less than if they put it on a credit card and paid it off over 12 months or more.

  3. What a surprise – youngsters without financial means who have been conditioned by all the marketeers to “buy now, pay a lot more later” will sign up for anything.

    In other news, 99% of all males aged 15-55 would agree to sign a £45 monthly contract for one hour of service from Angelina Jolie.

  4. Bizlaw,

    The problem in the US is that all those cheap prepaid carriers (Virgin Mobile, Boost, etc) are CDMA. There is simply no way to bring an iPhone over, even if it is an unlocked one from the gray market.

    If someone is paying off a credit card bill for an iPad purchase over 12 months or more, that indicates to me that perhaps that iPad wasn’t really within their budget to begin with. Regardless of that point, eventually, that balance will be paid off (with loan-shark level of interest, of course), while the subsidy plan continues in perpetuity (or until we get a new subsidised device).

    As for lines for kids, I had been doing some math and found out that a family of five will still pay much less (or receive much more) on a comparable plan with, say, Virgin Mobile, than with AT&T (or T-Mobile, or Verizon, or Sprint). The extra $10 per month only adds the line, but that line shares the voice minutes with the main line, and no text or data are included. If you are giving a phone to your kids, you will pay through the nose for individual texts, unless you buy an unlimited text plan. Virgin Mobile gives you unlimited text and data, plus 300 minutes of voice, all that for $25 per month (and taxes are included). Family of five will pay $125 for such a plan. To get unlimited text and data on AT&T for a family of five, you’ll have to spend $60 (first two lines) + $30 (unlimited text for family plans) + $30 (three kids) + $125 (the 2GB data plan at $25 each for each line) = $245 per month (almost double).

    There are very few situations in which a family on prepaid phones would end up paying more than a family on a subsidised two-year plan. These are usually voice-only plans, with no data or text, and even there, it only happens for families of 7 or more, where the $10 monthly shared voice line eventually catches up with the cheapest $20 prepaid voice-only plan.

  5. @ Predrag

    The lack of math skills in the US is no surprise given that the College of Ed finds it more important that students learn how to make “5 point lesson plans” than to competently understand content. It’s unfortunate the UK seems to be following the trend.

  6. Not every carrier offers a non-subsidized cell phone plan. T-Mobile just started to offer one for $20 per month less (family plan – two phones). I am now month-month and no subsidized upgrade path. Besides, the phone I like is no longer sold by T-Mobile so the extra $20/mo was a real waste.

    However, a lot of people have the extra $20 each month and not the $600 for a purchase. Sorry, times are tough and plans like this make sense to some, obviously, to many.

  7. @Predrag:

    Your math works until your kids blow past the 300 minutes of talk time.

    While the pure math of the situation may show a better monthly deal for someone, they still can’t get an iPhone or the latest smartphones. Thus it makes more sense for me and my family to stay on ATT and have our iPhones and other phones.

  8. @Predrag:

    Regarding credit cards, do you really think most people do the math when deciding to make such a purchase? You obviously do (and you’re smart to do so), which puts you squarely in the minority of consumers. Get a 20-something with a decent job and some room on the credit card in a Best Buy or Apple Store handling an iPad, and BOOM, it’s a sale, interest be damned.

  9. That’s true, no doubt. There is nothing more attractive than the magic of the word ‘Free!’. Free phone (with plan) will trump any other option ($35 per month with no commitment, but you spend $250 for an Android device).

    I am also annoyed that there is no way to have an iPhone on any of these prepaid carriers. I don’t have one now simply because I cannot afford $65 for minimal voice+decent data. While I’m still on the cheapest voice-only AT&T plan right now, I will soon have to dump it and switch to something like Virgin Mobile. The phones are rather crappy, but I have to shrink my cellphone plan, since I’ll be adding a kid, and they text like maniacs (not much voice use, though, apparently). I might put her on the $40 1300-minute plan, to prevent “blowing” through the monthly minutes.

    I must admit, though, the ‘Free phone!’ catch isn’t the only allure of the two-year plans; the simplicity of automated monthly billing makes the prospect of having to buy cards, top off each phone individually and keep track of balances a bit of an annoyance. No such thing as free lunch…

  10. In the UK contracts usually do not last more than 18 months, more like 1 year. The buyer has a cooling period I believe in which they can return the product and have the contract null & void. This is because some people succumb to sales pressure easily, so in the comfort of their own home they can work out what they have got themselves into, they can nullify the deal if they decide that it is in their best interest to do so.

    Anyone know any better?

  11. When I looked the the Three 2 year deal it worked out that you’d only be paying just over £11 per month for 15GB once you’d subtracted the retail cost of the iPad. Not a bad deal if you are after a 3G iPad.

  12. @Mike – 15-55? More like 11-110…

    My parents grew up with very little (by modern standards), and instilled a strong tendency to seek value, save, do without, and pay as you go. The Depression had a long-lasting and powerful impact on behavior.

    However, the U.S. economy has become increasingly dependent on consumer spending. The current crisis was the direct result of stimulating consumer spending with very low interest rates, lax standards, and a tax cut-and spend, deficit be damned strategy. People have been taught to live beyond their means, borrow to obtain immediate gratification, and look to others to bail them out when the going gets tough. Nice lessons for the next generation…

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