Subsidy vs. Installment Models-Companies

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Subsidy vs. Installment Models-Companies

Information has been included for the type of installment models that the wireless phone companies Rogers, Telus, Freedom, Bell, AT&T, and Sprint use. AT&T and Sprint were chosen as the largest and smallest of the top four major U.S. wireless phone companies by annual revenue. The attached spreadsheet shows the installment model information for each carrier.









To begin, we had to select the wireless phone companies that we would collect information on for either their subsidy or finance/installment models. The Canadian wireless phone companies that were included were Rogers, Telus, Freedom, and Bell, as required by the research criteria. AT&T and Sprint were selected as the American wireless phone companies as the largest and smallest of the top four American wireless phone companies by revenue.

The research team then created a spreadsheet with data on each wireless phone company's installment models. The spreadsheet contains the following information to answer the client's question about installment models: Data per month, total monthly cost, cost per plan, cost per phone if financed, revenue per phone if financed, and brands supported by each carrier. In order to standardize the information about the installment models, the research team used 10GB of data monthly as the standard for Canadian carriers and unlimited data as the standard for U.S. carriers. It should be noted that U.S. plans also offered access to some streaming services such HULU and Prime in addition to data. The information we gathered in the spreadsheet was then used provide summaries of each wireless phone company's installment plans and an overview of the six wireless companies.

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Subsidy vs. Installment Models-Economic Impacts

As of January 2016, there were no longer any subsidy plans offered by the top four carriers in the US. In Canada, while subsidy plans are still possible under Canadian regulations, all the major carriers have moved to installment plans.


  • In an installment plan, users pay for their smartphones in equal monthly payments added to their monthly service fee invoice. They often have the flexibility to trade in or upgrade to a new smartphone before the phone is paid off. When it is paid off, the payment amount disappears from their monthly bill. The users pay the full price of the phone plus interest. In effect, the carrier made a profit on the transaction.
  • In the traditional subsidy plan, a customer entered into a two-year contract with the wireless carrier. The carrier subsidized the cost of the phone expecting to make up the cost through service fees. The carrier assumed the risk that the subsidized amount would be covered for that customer, or for the average of all customers.
  • In 2014, the idea of installment plans was covered in technology and market watch magazines. Recommendations to consumers was to move to the installment plan as it allowed more freedom for ultimately lower cost over the long term.

Subsidy Plans

  • As of January 2016, there were no longer any subsidy plans offered by the top four carriers in the US.
  • While subsidy plans are still possible in Canada, the majority of the carriers have moved to installment plans. Once a customer reaches the end of a two-year contract, the phone is considered to be owned by the customer. Telus policy is to move them to a BYOD plan if they request it.

Financing Plans

  • A financing plan is implemented at the time the customer signs up for a new service plan, unless the customer brings their own device. The hardware required to set up a new service, such as the SIM card needs, to be compatible with the phone.
  • Installment plans dominate offerings in the US and Canada.

Economic Impact — Canadian Carriers

The financial reports from the Canadian carriers do not show the revenue from services versus the revenue for cell phone. The Canadian government collects statistics for wireless carriers under the umbrella of the CRTC (Canadian Radio-Television and Telephone Commission.) We have therefore provided revenue information for the industry as a whole, as provided by the CRTC. The most recent year this data is available is for 2017.

The ARPU (average revenue per user) was:

A complete set of the data released by the CRTC is available on this spreadsheet.

Economic Impact — US Carriers

The FCC (Federal Communication Commission) also does not collect the revenue from cell phone hardware transactions. We have therefore provided revenue information for the industry as a whole. The latest year FCC data is available is 2016.

The ARPU (average revenue per user) was for 2016 was

For the industry, the average ARPU in 2016 was $15.93.


From roughly 2007 until 2013, the smartphone market posted double-digit growth year after year. However, growth began to slow starting in 2013 or 2014. "In 2016, it was suddenly in the single digits, and in 2017 global smartphone shipments, for the first time, actually declined." Industry analysts project that the plateau has been reached and the sales figures will continue to decline.

Research Strategy

We were unable to find specific information on the impact of the installment model as no wireless companies report that revenue separately. We started by searching news sites and magazines that review cellular hardware and plans. We found descriptions on how the industry and consumers were moving away from the subsidy plans to installment, but no mention of specific impacts on the industry. We did find one article that explains the difference in the financial impact between the two, which we included in the findings.

Still looking to find specific metrics on profitability, average revenue per user and subscriber growth as it related to the financing of phones, we looked through the financial reports of the major retailers that were reported on in the previous assignment. None of the financial reports contained any specific information about the sales of cell phones. All related sales and expenses were reported as wireless services. Knowing that both the CRTC and the FCC collected and reported on detailed data for the wireless industry, we then went to Canada's Open Data site for the CRTC. We have provided a spreadsheet of the data available from that site. Again there was no mention in any of the many reports of cell phone sales.

We then turned to the FCC and searched their latest annual report for information on the economic impact of selling phones on the installment plan. Nothing was available. Their report did identify the data we were looking for as a specific exclusion from their data as seen below. "Prices do not include any additional charges such as for equipment installment plans, insurance, international use, or mobile hotspots. If a service provider includes any such feature as part of its unlimited data plan without extra charge, the above price would include this feature. Further, the above prices do not include any onetime charges paid, such as activation fees and termination fees. Prices and the specifics of the plans are subject to change."

Therefore, we provided the requested information — profitability, average revenue per user, and subscriber growth for the industry as a whole in each country.

From Part 02
  • "If you have received a subsidy on your device, the Wireless Code states: "The early cancellation fee must not exceed the value of the device subsidy. The early cancellation fee must be reduced by an equal amount each month, for the lesser of 24 months or the total number of months in the contract term, such that the early cancellation fee is reduced to $0 by the end of the period.""
  • "If you did not receive a subsidy on your device, the Wireless Code states: "a. for fixed-term contracts: The early cancellation fee must not exceed the lesser of $50 or 10 percent of the minimum monthly charge for the remaining months of the contract, up to a maximum of 24 months. The early cancellation fee must be reduced to $0 by the end of the period. b. for indeterminate contracts: A service provider must not charge an early cancellation fee.""
  • "One significant trend that has developed recently is the return of “unlimited” data plans. In January 2016, AT&T introduced the AT&T Unlimited Plan for DIRECTV (or U-Verse). While that plan was made available only to DIRECTV subscribers, it signalled a shift towards service providers again offering unlimited data plans. In August 2016, T-Mobile launched the T-Mobile ONE Plan offering unlimited voice, text and high-speed 4G LTE smartphone data. The next day, Sprint introduced its Unlimited Freedom plan, which offered two lines of unlimited talk, text and data for $100 a month. In February 2017, Verizon launched its Unlimited Data Plan offering unlimited data on smartphones and tablets for $80 a month. AT&T then introduced the Unlimited Choice plan, which offered unlimited data for $60 per month for a single line ($155 for four lines). In late February 2017, U.S. Cellular introduced its own unlimited data offering."
  • "Examples of mobile providers trying to differentiate their offerings include AT&T’s instalment plan device charges of $5 per month for an LG K10 device and $32 per month for an iPhone 7 Plus with 256 GB of storage capacity and U.S. Cellular’s offering of a low-cost LG smartphone for $19.99. In addition, MVNOs may use specialized customer care and content to differentiate their service plan offerings. The percentage of NTCA survey respondents indicating that handset availability remained a major barrier to their ability to provide wireless service to their customers declined from 42 percent in 2015 to 33 percent in 2016."
  • "“I think we’re well over the plateau,” says Ben Stanton, senior analyst at Canalys. “We’ll see little pockets of growth in the global market, but on the whole it’s a declining picture.”"