Though the end result is the same -- a buyer is paying less for some product or service -- the subsidy mechanism is very different from a discount. "The basic characteristic of all subsidies is to reduce the market price of an item below its cost of production," according to the Business Dictionary. In the case of Apple and the carriers that offer the iPhone, the carriers pay Apple a substantial portion of the full price of each iPhone that is sold with a two-year contract, and then in turn sell the iPhone to subscribers for the difference.
AT&T lists the "regular price" of the new 16GB iPhone 5 as $650. But it offers "instant savings with contract" of $450. The price paid by a subscriber: $200.
One AT&T data plan is Mobile Share, which offers one bucket of data, ranging from 1GB to 20GB, which can be shared by multiple devices. A tablet can be added to a Mobile Share account for $10 per month. AT&T's DataConnect plans start at $15 per month for 250MB, $30 for 3GB and $50 for 5GB.
John Cox covers wireless networking and mobile computing for Network World. Twitter: http://twitter.com/johnwcoxnwwEmail: john_cox@nww.com
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