Smartphone Prices Vary Widely Depending on How They Are Purchased

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If you think you’ve been noticing a wide range of prices out there for smartphones, please don’t pinch yourself. You’re absolutely correct, confirms a new report from ABI Research.

Users can choose from among several different approaches to buying a phone, each with its own pricing levels, the ABI analysts observed. You pay the most for a phone if you buy an unlocked device “untethered” to any particular operator or plan. As of April of this year, smartphones in this category cost an average of $431.49.

You pay much less — for the smartphone itself, anyway — if you buy a subsidized phone along with a service plan from either a mobile operator or a retailer. Also for April, ABI found the average price of a subsidized phone from seven U.S. wireless operators — the big “top four” carriers, along with three Tier Two operators — to amount to $117.08, with a price differential of only 18% among the four largest operators.

On the other hand, a paltry $43.64 was the average selling price for a phone bought from consumer electronics retailers such as Best Buy or Amazon.com — “not mobile operators but nonetheless offering [phones] with service plans,” according to report summary from ABI.

Other retailers, such as Wal-Mart, would “actually have given you money to take a phone off their hands (though they’d have taken back [your money] via the service plan they’d sell you.)”

Other Factors in Play
The researchers came up with some other theories about smartphone pricing, too. “One of the most important factors determining average prices is the number of handset models of a particular type on the market at any given time,” according to Michael Morgan, a senior analyst at ABI.

“In April, we saw the introduction of some high-end devices that lifted the average price,” added Morgan. Indeed, the average price of an unlocked, “untethered” device jumped well over $40 from $387.22 in March of this year to its level of $431.49 in April.

With that last point in mind, it will be interesting to see what happens to smartphone industry pricing in June, for instance. On June 4, Sprint officially released the HTC EVO 4G, with stipulations that you ink a two-year contract and mail in a $100 rebate form. On June 7, Apple is expected to launch the next-generation iPhone, although pricing and availability for the next generation iPhone still remain unknown this week.

Purchase Price Is Just the Beginning
When making a smartphone purchase, consumers should be aware that in many cases the cost of the hardware is only a small part of the total cost.

Devices bought through wireless carriers are less expensive because they require consumers to buy voice and data service for up to two years. The company recoups the discount it gives for the phone in each monthly payment.

Unlocked phones have the highest up-front cost, but do not require the customer to sign any kind of wireless contract. This frees the user to find the best deal on service.

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