If you want to see a microcosm of this, look at the Canadian cellular market. Most of the budget players are now on a 'tab', where they effective lend you $200-400 which is prorated. The funny thing is the math they use:
On WIND, for example, they give you 10% credit for the value of your bill every month. On a $50 plan (which is high for them), you get a $5 a month subsidy for your phone. If you stay for three years, they let you off the hook.
Meanwhile, the 'Big Three' (who own most of the budget players as well) offer a prorated subsidy: you get 1/36 of the value of your subsidy monthly, over three years. So, on an iPhone, you can get up to $20 a month in subsidy. Clearly this more than outweighs the extra cost of the plans.
What's funny is, people are afraid of 'contracts', even contracts with prorated termination fees. I once got the scary contract talk from a WIND salesperson, so I drew a little diagram on their chalkboard of the value over time of each contract. He saw the sharp drop at the end when they released the remaining $200 of debt, and his jaw dropped a little. People don't really think about this stuff rationally. Bell has even started giving a 10% discount monthly if you buy a phone outright, which makes absolutely no sense unless someone handed you a phone for free.
My point being, if experience in Canada proves anything, people will flock to this as long as you market it properly.
On WIND, for example, they give you 10% credit for the value of your bill every month. On a $50 plan (which is high for them), you get a $5 a month subsidy for your phone. If you stay for three years, they let you off the hook.
Meanwhile, the 'Big Three' (who own most of the budget players as well) offer a prorated subsidy: you get 1/36 of the value of your subsidy monthly, over three years. So, on an iPhone, you can get up to $20 a month in subsidy. Clearly this more than outweighs the extra cost of the plans.
What's funny is, people are afraid of 'contracts', even contracts with prorated termination fees. I once got the scary contract talk from a WIND salesperson, so I drew a little diagram on their chalkboard of the value over time of each contract. He saw the sharp drop at the end when they released the remaining $200 of debt, and his jaw dropped a little. People don't really think about this stuff rationally. Bell has even started giving a 10% discount monthly if you buy a phone outright, which makes absolutely no sense unless someone handed you a phone for free.
My point being, if experience in Canada proves anything, people will flock to this as long as you market it properly.