What does it mean to buy a phone on "contract"

Hello !
Was wondering how you people in US,UK,Canada do with phones on contract
Buying a device $200 on 2 year contract does it mean for 2 years you cant change your phone if you feel like ?
And is it cheaper to be on contract paying $200 and getting it vs buying off contract full retail
For $200 phones how much do they recoup on the phones per month ? is it something like $30 on a month for the month for 2 years till the carrier recoup their money on the phone
And iv seen $50 phones for 2 years and $200 for 2 years whoa the people selling the phones for $50 case in point the 9810 dont they make a loss compared to those selling the same phone elsewhere to $200
The Xoom was said to be cheaper to buy full retail price for $800 than going on contract which would cost over $1000
, why do you go on contract ? just why is there something else different or special about it because most people are on contract ..

As for me, in my country phones on contract doesnt exist , we but everything full retial and we change phones when we decide to plus we are not being tied to one carrier, if we dont like our current carrier we buy the SIM card of another carrier and use it instead, Job done, in US you cant phones are locked,
Also, theres no garbage like $30 for unlimited bla bla we use Pay As you GO so you top your phone up, and use it for calls, if you exhaust your phones call credit you simply buy another one and top up !! but in us,uk,ca i keep seeing unlimited sms, 300 minutes talk time for $40 but its like the carriers are increasing the fees now, giving some extra bucks to the carriers
nowadays :p

Buying on Contract means that you sign a contract with the Carrier to pay for service for an extended period of time.

They Discount the phone to make it more attractive to sign a contract in the hopes to keep you from jumping to a new carrier.


Pay as you go vs Contract depends on your usage, pay as you go would cost me a fortune, as I blast through a $100 calling card in a week if I was using pay as you go rates.
Also contract rates give you a consistent budgetable value that can be put against taxes or business expenses easier with less paperwork.

as for changing phones, I sign 3 year contracts, but change my phones atleast once a year.

most carriers subsidize their phones. you have two options.

1.) sign a new contract (1,2,3 or however many years) with the carrier, the longer you sign for the cheaper the phone gets.

2.) buy a phone for its full retail price and you wont have to sign a contract.

carriers buy the devices from the manufacturers. they have to pay a certain price for the phone. instead of selling the phone to you at that price, or for a premimum price above that, they make you sign a contract for service. they make their money back for the cost of the phone plus some with your service contract instead of with the phone.

example.... phone costs the carrier $400, it will retail for $500. if they sell you the phone for $500 without a contract, they make only $100 off of you.

lets say on the other hand, they offer the phone for $200 with a 2 year contract. you save $300, they lose $300. your cell phone bill is lets say, $100 a month. that times 24 months is $2400. so now they made $2400 off of you, and some of that money is used to offset the cost of the $300 loss they had selling you the phone at a discount. the tradeoff is you are locked into a 2 year contract and cant easily leave them. they are guaranteed the service.

Yeah...the whole contract business model in Canada [and the US, I presume] is kind of a snakepit. It's very hard to comparison shop for the best deal for useage, because there are so many plans offering different levels of service. In the past I went to a 3-year contract to get a discounted phone [my old BB Pearl cost me $10!], but since the phone itself is unlikely to last 3 years, it's often a losing game. When my Pearl crapped out after 18 months, I opted to pay the full shot for a 9700. If the Pearl had lasted a little longer I would have gotten a discount on a new phone...this is another way carriers here can 'encourage' customers to stay with them.

I suppose I could simply buy a phone straight up and use it on a pay-as-you-go basis...it might even save me money, since I don't use a lot of calling minutes or data. But having a budgetable figure to work with every month, and saving significant money up front with a discounted phone _feels_ like a better deal. I guess it just depends on what you want to do...

Having customers binded contractually gets the carrier more money over time so they offer discounted prices if you essentially promise to pay every month for however long your contract is. It works well for them and has convinced us users that it works well for us too by offering us a cheap new phone every couple years.

Carriers - 1
Consumers - 0

Okayy thanks guys

Posted from my CrackBerry at wapforums.crackberry.com

Originally Posted by dalton4L

Having customers binded contractually gets the carrier more money over time so they offer discounted prices if you essentially promise to pay every month for however long your contract is. It works well for them and has convinced us users that it works well for us too by offering us a cheap new phone every couple years.

Carriers - 1
Consumers - 0

It only gets them MORE money if the customer was going to leave before the 24 months is up and the contract kept them from switching companies. Other than T-Mo, they all charge the same price whether they subsidize your phone or not and I think they are ending that plan. In the US, the ONLY benefit of buying a phone at retail would be the ability to switch carriers at will. The problem with that is that ATT and T-Mo's devices use different freqs and VZW and Sprint basically won't activate the others devices, so its not much of a benefit to be out of contract.

If you don't mind 2G service, you can use a VZW BlackBerry Storm on VZW, TMO, and AT&T. So there's that.

I don't plan on upgrading. I just started my service with a contract so I wouldn't have to throw down $500 all at once to get into the cell phone gig. I've been OOC since May, and now I can buy anything I feel like at retail price. No incentive to upgrade.

i think it is some loyalty thing. they sign you up for 1, 2 or more years, and if you 'break contract' during that period, you pay a lot of money for 'cancellation' and other fees. they get you in contract to get cheaper initial prices on a phone or phone plan or both. after so long you get eligible for an 'upgrade' at a rather discounted price, almost half of the new purchase price.

I got a job recently and I plan on getting a blackberry from Virgin Mobile USA. They are a pay-as-you-go company. My future employment is uncertain and I maybe getting evicted soon so signing a multi-year contract wouldn't make sense for me. The down side is that most pay-as-you-go plans don't allow you to use the newest phones. This isn't a problem in my case because I'm too poor to afford the more expensive phones anyway.

Here's an example of a pay as you go carrier plan vs a contract carrier plan. This is for smartphone plans.

Virgin Mobile USA - pay as you go
$35 for 300 minutes and unlimited internet - cheapest
$55 for unlimited minutes and internet - most expensive
Downside is that the newest blackberry available is the Curve 8530. No mobile hotspot. Must pay full retail price for phones.
Upside is the price. No contract.

Verizon Wireless - contract carrier and also has prepaid. But the prepaid is even more expensive.
$40 for 450 minutes + $30 for 2GB = $70 - cheapest
$70 for unlimited minutes + $100 for 12GB with mobile hotspot = $170 - most expensive
Downside is the price. Cancellation fee for breaking the contract.
Upside is you can use the newest devices. Mobile hotspot available. Can get a discount on new phones.

Originally Posted by TheScionicMan

It only gets them MORE money if the customer was going to leave before the 24 months is up and the contract kept them from switching companies. Other than T-Mo, they all charge the same price whether they subsidize your phone or not and I think they are ending that plan. In the US, the ONLY benefit of buying a phone at retail would be the ability to switch carriers at will. The problem with that is that ATT and T-Mo's devices use different freqs and VZW and Sprint basically won't activate the others devices, so its not much of a benefit to be out of contract.

Nah I know how it works. But the only way to essentially assure that you have a customer for years on end is if they're in a contract. Sure you can break your contract and pay a pretty hefty fee, but from a business standpoint it's almost always more beneficial to have customers on contract.