T-Mobile dropped a bomb on Thursday, and I’m not just talking about the iPhone. T-Mobile have been waiting five years for Apple’s(s aapl) iconic smartphone, but its decision to end phone subsidies will have a far bigger impact on its business and potentially change the U.S. mobile industry at large.
Put simply, T-Mobile is upending the established business and device distribution models of the U.S. wireless industry, separating the handset from the service. It’s a model that’s thrived in Europe and other countries, but it’s one that’s failed to gain traction in the U.S. except in the prepaid market, namely because U.S. consumers like getting even the most sophisticated high-end phones on the cheap.
Traditionally a U.S. operator sells a device at a steep discount in an effort to lure customers. It doesn’t just write off that subsidy. It makes that money back and then some by charging higher…
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