The End of Wireless Carrier Subsidies
The End of Wireless Carrier Subsidies
The End of Wireless Carrier Subsidies and the Impact on Your Enterprise
While earlier this year Google rolled out their version of Mobilegeddon with the search algorithm change that favors responsive design websites over websites that are not mobile friendly, there was another Mobilegeddon that took place in March of 2014. T-Mobile initiated the move to eliminate wireless carrier subsidies for mobile devices in lieu of device financing options. The move, which addresses one of the biggest line item expenses on the carriers P&L, the cost per gross add, comes at a time when the CTIA is stating that wireless penetration in the U.S. has exceeded 104%. AT&T and Sprint quickly followed T-Mobile’s lead and Verizon just recently joined the fray and in the process created a Mobilegeddon that has had a significant impact on the TCO of the mobile enterprise.
Although T-Mobile, claiming to be the œuncarrier and lashing out at the others for €œcopying€ its strategy of eliminating contracts and subsidies, is attempting to cling to a short-lived competitive advantage in pricing strategy, is being forced to compete on something other than its pricing plans.
But are these pricing plans really a benefit to customers? In all reality, most of these plans have approximately the same cost basis as their previous contracted counterparts. Under the contracts, customers paid an average of $20 more per month in service charges resulting in an additional $480 over the course of a two year agreement and covering the cost of the subsidy for that $600 iPhone. The new plans decrease service costs by approximately $20 a month and provide a financing option for the Smartphones that is typically in the $20 per month range.
The same management issues still exist when it comes to overages. With newer, larger devices, data consumption will continue to grow and you will need to manage wireless data and make sure that your employees are aligned with the best plans in order to prevent paying a significant premium.
Also, it is now more important than ever to develop a smart procurement strategy and pick the best devices that maintain their value through end-of-life so you can monetize those devices and help off-set the capital expense of device refreshes. We go into additional detail below on how to develop your device procurement strategy.
With demand for Smartphones at an all-time high, the wireless carriers no longer have to subsidize Smartphones. As a result, here are some issues you will likely be dealing with from the wireless carriers shift to Smartphone finance plans over subsidies.
BYOD and Wireless Device Finance Plans
Depending on your BYOD policy, you could be experiencing escalating reimbursement requests because of the shift in carrier practices. The iPhone 6 costs between $21 and $29 per month depending on the carrier. You need to make sure that your BYOD policy addresses the cost of the device in accordance with the value that the employee delivers to the enterprise. Simply allowing all employees to expense the cost of their Smartphone finance charges could have a huge impact on the total cost of ownership of your mobile enterprise. The majority of departments and IT organizations have not budgeted for the additional costs and will need to account for the increasing capital expense. Departments could easily see these costs start trickling in as employees renew their carrier agreements. Suddenly, that trickle could become steady flow of increased expense each month.
Never before has the procurement process for Smartphones played such an important part in managing the TCO of the mobile enterprise. There are two procurement options for IT organizations that are looking to contain the increasing costs of mobile devices. First, most wireless carriers are offering low cost Smartphones from Nokia, HTC, LG and Motorola. For the most frugal enterprises, these can be alternatives for employees that simply need voice and email access. However, the value of these devices after 18 to 24 months of use is virtually nil. Savvy mobile procurement professionals have turned to the secondary market as a source to recoup some of the capital expense of Smartphones. Depending on the device, you can capture up to 50% of the original cost by selling the device to third party companies. Factoring end-of-life device value into the procurement strategy can make it affordable to deploy the latest iPhone and Android devices.
Here are the steps to determine the right approach for your company:
- Assess the quality of the Smartphones at the end of their life. If your field staff is exceptionally hard on these devices and they come back with a lot of cosmetic and structural damage then their value in the secondary market will be greatly diminished.
- The wireless carrier also has a significant impact on the end-of-life value of a Smartphone. Devices that have been activated on AT&T and Verizon are worth more than devices from T-Mobile and Sprint.
- For all corporate owned devices you should engage third party buy-back companies because most of them pay significantly more than the wireless carriers for your used devices.
- Setup a process that wipes corporate data from the devices prior to selling. For iPhones you will need to back them up with iCloud and then sign-out and erase all your data. This process can take some time and you should account for this in your cost assessment. Some third party companies can help with this process.
- Develop your business model based on employee profiles. It is pretty easy to put together a spreadsheet that shows the type of mobile employee, their device(s), the costs and the end of life value of the devices. If the employee delivers significant value and needs access to corporate systems and data on their Smartphone, then equipping them with a more expensive device and recouping the value at the end of its life is typically the best option; as opposed to equipping them with a very low cost Smartphone.
Regardless of the path that you take, the mobile ecosystem has forever changed and while low cost Smartphone options are available, there will always be demand for the latest high-end iPhone and Android devices and constant pressure on IT to try and accommodate employees while managing the expense.
About OVATION Wireless Management:
OVATION helps reduce the TCO of the mobile enterprise at all stages of the lifecycle. If you need assistance with procuring Smartphones or assessing the value of your end-of-life devices, we can help. Thousands of organizations and hundreds of thousands of mobile connected employees rely on OVATION Wireless Management for managed mobility solutions. Contact us today for an assessment of your total cost of ownership of your mobile enterprise. http://www.ovationwireless.com/contactus
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