Telepocalypse

Backhanded business

Why do operators call the difference between the point-of-sale retail price of a handset and its wholesale cost a subsidy? After all, the users are clearly paying for the whole thing. Indeed, it looks more like a covert hire-purchase agreement that avoids all the relevant laws by pretending that all the payments are really for mobile service, not hardware. You can easily tell the difference now that SIM-only contracts are available.

Once you strip out the hidden hardware payments, ARPUs suddenly look a whole lot smaller. Comparisons of the mobile industry with that of the Internet also look less skewed, since you don't count PC hardware against ISP revenue.

Furthermore, a subsidy implies you get nothing in return. In reality, the operator gets considerable control over the handset design and distribution, enabling them to cut off escape routes round operator toll gates, such as Bluetooth transfer of pictures.

Perhaps many operators are really primarily retailers and finance companies, and the network is an unfortunate capital-draining side business? But then again, how would we ever know...