Droid Xyboard 8.2 Unboxing and First Impressions

Verizon has sent me a second device as a part of its ambassadors program: a Droid Xyboard 8.2. I was particularly excited to get it, more than the Droid RAZR, because I've not had any real experience with tablet devices. I've had Blackberry phones for work and have extensively used an iPod Touch, but I've not owned an iPad or any other tablet.

The unboxing process was simple and straightforward as there wasn't much in the box. The tablet was on top with a wall charger, USB cable, and some booklets underneath. That's about all that anything comes with these days.

As the "8.2" part of the device's name would suggest, it's an 8-inch tablet. The smaller dimension is just a hair wider than a CD, if that gives you an indication of size.

I have almost nothing but good things to say about the hardware so far. The screen is bright and clear. It's just the right weight: not as heavy as you might guess for its size, but not so light that it feels cheap. The backing is aluminum with a rubber ring around it, and the rubber feels good for gripping in your hand. The only bad part is that the sleep/wake button and volume controls are on the back. You can kind of feel for them once you know where they're at, but you can't know on the first try which button you're about to push. If you don't want to turn the thing over to look, you have to slide your fingers up and down to be sure you're doing the right thing.

The software is where things go off the rails a bit.

In many ways, Android Honeycomb is most comfortable in landscape orientation. The initial setup screens are in landscape, one of the built-in keyboards offers a split configuration for landscape, and sometimes apps that can do both portrait and landscape launch in landscape despite me holding it in portrait orientation. That's another problem with where the hardware buttons are at: they're in the perfect spot for accessing with the fingers on your right hand when holding it portrait. When holding it in landscape, you have to move your hand to access them.

Honeycomb itself is not so great coming from Gingerbread on the RAZR because many of the interface elements are in completely different positions. The home and back buttons are on the left side instead of the middle, and the search button and app drawer launcher are now at the top instead of the bottom. The status bar was moved from the top to the bottom right, and everything in it is unreadable at a glance thanks to dark colors on top of a black background. I've run into issues here and there where it's not obvious how to dismiss some kind of info box and have done unintended things trying to get rid of them. The menu button for Honeycomb-ready apps is in the top right, while the menu button for non-Honeycomb ready apps is in the bottom left. Who in the world thought that was a good idea?

Not that you'll run into that last problem too often, as there are almost no tablet-optimized apps. I've heard for a while that there aren't many Honeycomb-ready apps, but it's worse than I thought. Even in the app market section titled "Staff Picks for Tablet", most of the apps I've tried from it are just phone apps that scale nicely.

On top of the rarity problem, many of the Honeycomb-ready apps I've tried just aren't great. Twitter client TweetCaster has potential, but it doesn't support conversations. Pulse seems to be a nice newsy app that takes RSS feeds and makes a grid layout of the stories, but it crashed when I tried to view a YouTube video. The Engadget app is a design nightmare, as its use of the extra screen real estate is puzzling at best. It's a bad, bad situation.

I've found that the device is very nice for browsing the Internet and playing some games, but I'm not sure yet what else I'm going to do with it. As I said, the hardware (buttons aside) is really nice. The software completely lets it down though, and the third party app situation is dire. If you've got any recommendations for good tablet apps, I'm all ears.

Apple Being Singled Out Over Foxconn Isn't Fair, but That's Fine

The Nightline special on Foxconn and Apple was an interesting look inside the world of electronics manufacturing in China. It's interesting to me to see how the issue has exploded of late, as it seems to come and go as various issues crop up. I'm not sure what the catalyst was this time, but here we all are looking at it.

It's a weird thing for most Americans, I expect. Despite the very real issues with things like too much overtime and underage workers, most reports say that Foxconn's factories really are among the best in China. I've likened factories with dormitories to the phenomenon of company towns in America. It's not a perfect analogy, but having company towns is a phase that this country went through during its industrial development. They weren't great for workers, but they're better than subsistence farming. The same goes for Foxconn in China.

It's not that dissimilar from the sweatshop scandals that plagued Nike in the '90s. The Nightline piece had someone bring that up, though the reference was about a different point. A number of economists have argued that sweatshops are a good thing in comparison to subsistence farming, which does make them a net positive. That's certainly not to say that industrial development should get to the sweatshop stage and stop. The existence of sweatshops and cramped factories could overall be a good thing for a country, provided things continue to progress from there.

The point about Nike from the show was that the industry leader will take the most heat for industry-wide problems. I'm sure that's a factor in Apple getting most of the negative publicity for Foxconn's abuses when plenty of electronics firms use its factories for assembling devices. Apple is also fantastically profitable, far more than the rest of the companies that have contracts with Foxconn. It has the best capacity to do something good for the workers there.

At one point, a Foxconn executive says he'd gladly double the pay of the workers on the lines assembling Apple products if the company asked for it. Using Horace Dediu's numbers, the iPhone has a 55% profit margin on an average selling price of $650. He estimates that the labor cost for each phone is somewhere between $12.50 to $30. If labor costs doubled (corresponding to a doubling of worker pay), the profit margin on each device would fall to somewhere in the 50% to 53% range. That's still an incredible margin, even for a company with typically high margins on all its products as Apple tends to have.

So while it's not completely fair for Apple to catch a lot of the heat for the issue of labor in Asia, I'm OK with it. Apple responded to getting singled out by Greenpeace by taking real actions to make its products better (or less bad, really) for the environment. Now, few companies talk about their green initiatives as much as Apple does. It's been a good thing.

Apple now seems to be doing something about the labor issue. It has publicly released factory audit results in the past couple of years and now has released a report detailing all of its suppliers. Last month, it became the first tech company to join the Fair Labor Association, and it has funded the biggest audit ever of Foxconn (currently underway).

If Apple is able to get real change for the better in Foxconn, it's even better than its green initiatives in one way. The latter only affect Apple products, but if Foxconn gets better, that affects people who make many other firms' products too. I'd like to see those other firms step up in the way Apple has, but we'll see if they do in the coming months. Pressure from multinationals that make things in China is the only way things are going to keep progressing there, as no real organized labor movement is allowed by law there.

It's not ideal if the only forward progress is due to American companies pushing the Chinese companies while themselves being pushed by media scrutiny and popular outcry, but it's at least some forward progress.

OS X Mountain Lion Might Have More Surprises

Apple announced a big shift in its Mac OS X strategy today. It's dropping the "Mac" from the name, releasing new versions of it on an annual basis, and it's making it closer to iOS than ever. It also announced Mountain Lion, OS X version 10.8 to ship this summer. John Gruber already cataloged the other big changes going on, so read about them on Daring Fireball.

It's obvious to everyone that Apple is now trying to get OS X and iOS in relative sync feature-wise with iCloud being the glue between them. What doesn't seem to be obvious is that what we see from Mountain Lion today is incomplete, quite possibly very incomplete.

A lot of the "operating system" changes announced today, Notification Center aside, are just application changes. There's a new notes app. iChat is now Messages. A lot of things now hook into iCloud APIs that belong to, well, iCloud and not OS X proper. There are a lot of major changes that deeply change parts of the experience, but none of them go that deep technologically that I can see.

I suspect that there will be more to this thing, possibly quite a bit more. The reason is because iOS 6 hasn't been announced yet. New versions of iOS have typically been shown off in the early spring*, and it's still February yet. Apple is not going to tip its hand months early as to what's in iOS 6 with this Mountain Lion reveal that didn't get its own big press event.

If I was a betting man, I'd put money on the idea that last year was a template for things going forward. The new iPad comes in March and the new iPhone comes six months later in September. The new iOS reveal will be at WWDC, with it and a new OS X version releasing soon thereafter.

That means there easily could be more goodies in Mountain Lion with iOS 6 analogues that we won't know about until the summer. Apple is trying to show that it does care deeply about the Mac, but the iOS ecosystem is clearly the company's top priority. Getting a look at Mountain Lion now is cool, but the real big reveal, which could include more features for OS X, isn't coming for months.

*The Apple Keynotes podcast provides and handy record of product announcements. iPhoneOS 2 was first shown off March 6, 2008. iPhoneOS 3 was first revealed 3/17/09. iOS 4 was first demoed April 8, 2010. In 2011 there was an early spring iOS announcement, but it was the iPhone-and-iPad-unifying version 4.3 along with the iPad 2 on March 2. Our first peek at iOS 5 came at WWDC on June 6, but the later date probably came from a combination of Lion getting ready to ship and the fact that the iPhone 4S launch was going to be later in the year than normal. And also to set up the new cycle, natch.

The Droid RAZR Has Undeniably Bad Battery Life

I've had some time now with the Droid RAZR that Verizon sent me for review. One thing stands out more than anything else: the battery life is terrible.

Early on, I decided to see if everything I had heard about the awful battery life on the 4G LTE network was true. So, I turned off WiFi for a Saturday morning to simulate being out and about (I'm a hermit) and used it for some consistent Twitter activity and podcast downloads.

I woke up that morning at 8:40 am. I checked in again on the battery at 12:40 pm. In that time, it probably had about three hours of consistent use and one hour of idling. It was down to 50% already. I turned WiFi back on, and the battery drained a bit slower. Yes, you read that right: this is a phone that can actually save battery life by turning WiFi on.

I tweeted about that experience, and someone recommended an app called Juice Defender. It turns the radios on and off automatically based on whether the phone is in use, and it allows connections every 15 minutes (by default; that's configurable) for things like email checking. I installed it and kept the defaults, and it did help when not in heavy use. It wouldn't do a thing in the usage case above though because the 4G data usage is what was draining the battery so much.

The second thing I tested in relation to battery life is turn-by-turn navigation. I used it this past weekend on a short trip my wife and I took to north Georgia.

The particular drive I used it on was for about an hour, and it wasn't in perfect conditions. It was in an area with only 3G data, so the 4G was not a factor. It also was an area with signal coming and going (but never lost entirely). The GPS was on the whole time, obviously.

The app Battery Indicator said it had 97% battery when we left, and it was at 64% when we arrived. One hour sucked down a full third of the battery's capacity. I don't have a car charger because Verizon didn't supply one, but I have a feeling that having it plugged in would only slow the battery drain rather than halt it or even recharge it while navigating.

The phone comes with a Smart Actions app (which automates settings changes), and the first one it suggested to me was a battery saver action. It comes with a Guided Tours app from Verizon, and under "Basic Setup and Usage Videos" is "Battery Conservation Tips and Tricks". The rest in that section are basic orientation videos that are nowhere near as technical. On top of that, Motorola and Verizon released the Droid RAZR Maxx a mere three months after the RAZR, and it actually does have acceptable battery life. Someone knew this thing had poor battery life prospects.

The bottom line: unless you always have a charger nearby or are almost always in WiFi range, you will have to constantly worry about battery life with a Droid RAZR.

Romney Does Indeed Have a Rick Santorum Problem

Having largely vanquished Newt Gingrich, Mitt Romney is probably going to be the Republican nominee for president. It looks like Rick Santorum is going to make things as interesting as possible until the end though.

This Reuters op-ed says that Romney has a Santorum problem, and Googlebomb jokes aside, I agree. Gingrich was an easy target. He made a lot of enemies within the party back in the '90s, and he's abrasive and pompous to boot.

Santorum is and has been the most earnest strong conservative of the field. Aside from his endorsement of Arlen Specter in 2004, there's not a whole lot Romney can pin on the guy from a negative campaigning standpoint. That was the weapon that Romney used to slay Gingrich, but it'll be much harder to use it against Santorum.

Here's the thing: Santorum has no chance at winning the general election. None. He even lost his Senate seat by the largest margin ever for a Republican incumbent. Many of his views lie far outside the American mainstream, such as the idea that all contraceptives are bad. He's simply too conservative to win a national election.

Romney's problem is that Santorum isn't completely out of line with his party's mainstream in the way that Ron Paul is. Paul might be the most conservative guy in the race depending on how you define "conservative", but his appeal is largely limited to the libertarian fringe of the G.O.P. Romney can't call Santorum unelectable (which he is) without telling large swaths of his party that agreeing with some of their most important issues makes a person unelectable. Besides, Americans don't tend to like to see favorites hammer on likable underdogs.

Of course Romney still has a huge money advantage, and none of the recent victories for Santorum actually won him any delegates. Romney didn't really even try to win those votes. When he has put forth full effort in states, Romney has been able to do quite well. Of course, not trying in those states could have been a big blunder rather than a smart use of money (remember, no delegates were awarded), as now the not-Romney focus has shifted to the guy he can't beat on like a punching bag.

Romney did win the CPAC straw poll, and he's still the odds-on favorite. His primary rival is no longer an easy primary-time target though, which means he's going to have to win ugly.

Consumer Credit Jumped in December

Consumer credit was up—way up—in December:

Consumer credit expanded by $19 billion in December. That's far more than the $7 billion that was expected by economists.

Revolving consumer credit (credit cards) grew by $4.1 billion sequentially, and is basically flat from last year again (up barely).

This is very good news as we work towards ending the balance sheet recession. Nonrevolving credit was the big driver, as revolving credit (mostly credit cards) was flat as mentioned above.

If this larger-than-expected expansion was driven by revolving credit, it'd be easy to hand-wave it away as holiday gift spending. It wasn't. People generally don't play Santa by first taking out a personal loan from the bank.

Instead, longer-term credit fueled the rise. That reality, combined with the fact that it continues a trend, means that people more and more think they are able to take on bigger, more serious loans. Add on top of it the good jobs number from December (and even better jobs number from January), and it's looking like we just might be in the beginning of a real recovery.

It's certainly a fragile recovery, as bad policy from Washington or large shocks from Europe could torpedo it, but it's probably a recovery nonetheless. This is very good news.

The Ambiguity of Hope

Last week's January job report was largely good news on nearly every level. It wasn't unequivocally good news, but we're not going to get any just yet in this economy.

It surprises me that Republicans were so dour in response to it. Granted an improving economy hurts their ability to defeat President Obama in November, so you've got that backdrop to all the grousing.

However, Americans tend to be an optimistic bunch even in the bad times. Listening to morose politicians sound unhappy after a great jobs report is not what they like to hear, generally. I'm sure the part of the G.O.P. base that is dead-set against the president nodded right along, but they're not going to vote to reelect the incumbent anyway.

It's especially surprising to me given that the current conditions allow for a really easy positive spin for the Republicans. The reason is because they have successfully blocked a lot of the president's agenda for the past year or so.

The Obama administration will no doubt claim that the president should be reelected because, despite the opposition, he's led the country towards more job growth. The converse could be easily argued, though. They could argue that the economic improvements stem directly from that opposition by Republicans. In other words, we'd be worse off if they let the president have his way. I don't think any actual numbers would bear that out, but politics has never been known for a strict adherence to the facts.

The Democrats tried to damage the G.O.P. by branding it "the party of no", but that's something Republicans have embraced to a degree by continuing to denounce the president and stall his agenda. It worked for them leading up to the 2010 election for sure.

What they're in danger of becoming, however, is the party of Debbie Downer, the buzzkills who greet even good news with furrowed brows. Regular people probably aren't looking closely at these numbers just yet, nor have they made their final choices on the November election. The Republicans can keep doing this now.

However if the economy keeps improving and they don't change their tunes to capture some of the growing optimism, they'll really find reason to be unhappy on Election Day.

Facebook IPO Stock Is Basically a Gambling Bet

There are only three reasons to buy a company's stock. One is to get an income in the form of dividends. The next is if you plan to have a say in the company's governance as a part owner. The third is if you believe the stock will go up in value, allowing you to make a profit on the sale of the stock.

Facebook's IPO is coming up, meaning people will have to weigh those options when deciding if they want to buy it or not. However, one of those three reasons is entirely negated by the way the stock ownership has been structured:

The shares of Facebook will be divided into two classes. The Class A shares you will get if you buy shares in the market have one vote per share. The Class B Shares, which are almost all of the shares that have previously been issued and all of the shares owned by [founder and CEO Mark] Zuckerberg, get 10 votes per share.


Zuckerberg only owns about 28% of those super-voting Class B shares, so where does his control come from? He has voting agreements with many of his fellow shareholders that give him a proxy to vote enough additional shares to give him voting rights to a total of around 57% of the super-voting stock, the S1 shows. More than enough to give him control over the company.

Mark Zuckerberg has complete control of the company. Read the article to find out all the ways that he can stay in power if people try to change that fact. He personally can do whatever he wants because he holds over half of the stock voting power. He can even hire and fire the board of directors, who are supposed to be his bosses. You literally will have no power to change anything as a part-owner of the business unless Zuckerberg also goes along with it.

Of course, the first reason is likely to be moot as well. Growth companies don't tend to pay dividends, and that's what Facebook is. Apple is another tech growth company that famously doesn't pay a dividend, but it at least isn't controlled by a single person having the majority of the voting power.

For the foreseeable future, Facebook stock will be good for only one thing: trying to buy low and sell high. You're gambling on Zuckerberg's ability to guide the company and the hope that the collective hive mind of all stock investors will drive the stock price higher.

You're placing a bet, basically. Good luck with that.

Why Don't Carriers Push Unsubsidized Phones?

Once upon a time it was possible to find a cheaper data plan if you brought your own phone to a carrier in the United States, but those days are over. Whether you buy your phone subsidized or not, you pay the same rate for data.

That fact got me thinking: why don't carriers push unsubsidized phones more?

Costs of an Unsubsidized Phone

Of course, it is a considerable expense for the customer to purchase an unsubsidized phone, especially for smartphones in particular. Verizon is the one carrier that makes it easy to see what it costs to purchase a no-contract phone on its website, so for all of the examples here, I'm going to use Big Red.

According to VZW's website right now, the unsubsidized price for the Galaxy Nexus is $649.99. That's also what a 16GB iPhone 4S costs, and the price goes up in $100 increments as you add storage to 32GB and 64GB. An unsubsidized Droid RAZR goes for that same $649.99, a Droid Bionic sets you back $589.99, and the new Blackberry Torch 9850 goes for $459.99.

Subsidized smartphones all require data plans, so it follows that the carriers probably make up for the subsidies with those data plans. When you subtract the subsidized price from the unsubsidized price, you find out how much each phone is subsidized. Divide that subsidy by 24, and you find out how much each month the carrier charges you per month to make up for the lower up-front price. Here are the subsidies for those phones:

• iPhone (all varieties): $450 subsidy; $18.75 per month
• Droid Bionic: $390 subsidy; $16.25 per month
• Galaxy Nexus, Droid RAZR: $350 subsidy; 14.58 per month
• Blackberry Torch: $280 subsidy; $11.67 per month

In all of these cases, the amount of revenue Verizon effectively brings in for the data plan falls by more than $10 per month thanks to the subsidies. The two lowest (and therefore likely the most popular) data plans Verizon offers are $20 per month for 300MB and $30 per month for either 2GB or 4GB of data (depending on its promotions). That means Verizon is collecting at most $8.33/month purely for data at the lower level and $18.33/month for data at the higher level on the subsidized Torch. It is collecting at the lowest $1.25/month for the lower level and $11.25 for the higher level with the iPhones.

Verizon's Profitable Zones

Verizon's early termination fee (ETF) for smartphones is $350 minus $10 per month of paid service. So, if you cancel after one complete month, your fee is $340. If you cancel after one complete year, your fee is $230.

ETFs basically exist to recoup the subsidies on phones. This must be the case because they are comically small compared to the lifetime value of the contract.

The least expensive smartphone plan on Verizon for an individual is $40 for voice and $20 for data for a total of $60 per month. That works out to $1,440 over the lifetime of the contract. The only point at which Verizon's ETF entirely covers the lost money of the plan is in the final three months, but that doesn't include any subsidy that is still being paid off. Include that factor, and it's likely to only completely cover the losses in the final one or two months.

Therefore, it's safe to say that lost value from the monthly payments on service is not a factor in the ETF. The question then becomes: when are subsidized phones more profitable than unsubsidized phones for Verizon?

The ETF plays heavily in here because someone without a two-year contract can walk without paying that fee. For the unsubsidized phone to be more profitable, the extra amount the company would have made on data versus a subsidized phone at the time must be greater than the ETF at the time minus the amount of the subsidy the customer wouldn't have paid back at the time they terminate. In formula form:

Extra data money to date > ETF - (subsidy - subsidy payments to date)

Here is a chart showing the amount by which Verizon benefits from having an unsubsidized phone at the various subsidy levels I described above. The values charted are for if a customer leaves after the number of months on the x-axis.

As it turns out, it's a very simple relationship. The amount of extra money Verizon makes per month in data with an unsubsidized phone is exactly the same as the amount of the subsidy that gets paid down every month. Therefore for any given month, it's just a matter of taking the value of the initial subsidy and subtracting the ETF for that month.

The only time Verizon doesn't come out ahead when a customer with an unsubsidized phone leaves is for the first few months with a model that normally has a subsidy less than the initial $350 ETF like with the Blackberry Torch. On all the rest of the phones, Verizon would have made more money with an unsubsidized phone no matter when the customer decides to leave.

And of course if the customer with an unsubsidized phone stays through the entire two-year contract, the amount Verizon ends up ahead on the deal is the value of the subsidy it would have offered on that model.

The Customer's Perspective

Before talking more about the carrier, let's talk about the customer.

Buying an unsubsidized phone is much more expensive than buying a subsidized one. The primary value proposition for the customer in foregoing the initial discount is the ability to take that phone to another carrier without having to pay a penalty. Well, sort of.

Thanks to the dueling GSM and CDMA standards, you can only take a standard 3G phone to one other major carrier in the US. Even world phones with both GSM and CDMA capabilities might not be transferable from one to the other thanks to carrier and device restrictions. For instance, the unlocked and unsubsidized iPhone 4S cannot be used on Verizon or Sprint.

In any event, if you buy an unsubsidized phone, you're going to want to know how big a discount you'll need to get at each month over the next 24 months to come out ahead versus a subsidized phone. You need to know when the ETF plus the amount you would have paid back towards the subsidy is greater than the extra money you put up by not getting a subsidy plus any savings per month. In formula form:

ETF + amt. of subsidy paid back > subsidy + savings from new plan

Here are a few charts of the change in the total amount you pay over the course of 24 months by choosing an unsubsidized phone over a subsidized phone and by switching to a lower cost plan in a particular month. If a number for a month is negative, that means you save money by buying having bought an unsubsidized phone and switching that month. If a number for a month is positive, that means you save money by having bought a subsidized phone and switching that month.

This is the chart for switching to a plan that costs $10 less per month:

If you and your unsubsidized phone switch to a plan that costs $10 less per month, you must do it no later than 14 months after buying that phone to make it worth it if the subsidy would have been $280. As the subsidy goes up, you have more time to wait and still come out ahead. Of course if your new carrier charges an activation fee (or more accurately, doesn't waive it), you will have to switch a month or two sooner depending on the phone.

This is the chart for switching to a plan that costs $20 less per month:

You have much longer to wait if you can swing a $20 discount, which makes sense.

The trick is that you won't be able to pull this kind of money saving switch too many times. The other way you can come out ahead with an unsubsidized phone is if you use it on a carrier that doesn't require a data plan for all smartphones regardless like Verizon does. It will take you anywhere from going 14 months without data (for an otherwise $280 subsidized phone like the Torch) up to 23 months without data (for an otherwise $450 subsidized phone like the iPhone).

Why Don't Carriers Push Unsubsidized Phones?

Subsidies are tremendously useful for the carriers. Many people who are unable or unwilling to pay the higher up front price of an unsubsidized smartphone will go for the reduced initial cost of a subsidized one. That then puts them in data plans that more than make up for that initial subsidy. Plus, advertising fancy phones for low prices, or even "free", gets people's attention.

There's no reason why carriers should get rid of subsidies. However, they can have material effect on a carrier's margins if a big selling new phone has a large subsidy. Unsubsidized phones are more profitable for them, so why doesn't every carrier do as Verizon does and make it easy to browse them as options?

Primarily, it's probably because the main advantage for the customer of getting an unsubsidized phone is being able to walk away from the carrier without paying a fee. "If you buy this, you can leave whenever you want with no penalty!" is an awkward pitch for an industry that has been built around the two-year contract. Early termination fees probably also create a mental block in people's minds that prevents them from thinking about leaving even if they can come out ahead after paying it. Plus, a customer leaving early is most often costlier than the subsidy is.

The example of a plan that costs $60 per month is possible but probably not common. Let's imagine a smartphone user who opts for a plan of $90 per month with Verizon. Let's also imagine this person bought an unsubsidized Android phone (that normally has a $350 subsidy) that can be taken to Sprint to take advantage of one of its $80 per month plans.

Let's say this person is considering switching after 12 months. Based on the math from the previous section, this will allow the person to save either $30 total or $65 if Sprint waives the activation fee. It would be worth it financially to switch.

Verizon will have collected $1,080 total from this customer at the time of this decision. If the person stays for another 12 months, Verizon will have collected $2,160 in total. If the person had bought a subsidized phone and stayed the entirety of the two-year contract, Verizon would have collected $1,810 in total (net of the subsidy). In this particular scenario, by giving the option of the unsubsidized phone the carrier is looking at an upside of $350 and a downside of $730. It had better hope its network is much better in the customer's region than Sprint's is.

As the numbers and considerations change, the upsides and downsides do too. However for almost all of the subsidies I looked at here, the carrier takes in more revenue from a full term contract than it does from an unsubsidized, no-contract customer at the points where it makes financial sense for that customer to switch carriers. Only with the iPhone's $450 subsidy versus an unsubsidized customer who switches after 19 months does the carrier no longer care (it brings in $1,710 either way).

Verizon must worry less about bleeding customers than the others because it makes it the easiest of all to shop for unsubsidized phones. I find that interesting because Verizon itself is not the low cost carrier. Big Red should be more vulnerable to being undercut on price and therefore to seeing unsubsidized customers walk away early, but it must feel confident that its network quality, amenities, and packaging deals will insulate it from mere price sensitivity.

Sprint and T-Mobile, as the low cost carriers, would seem to benefit from a proliferation of unsubsidized phones. However, they are having issues with customer loss. Pushing options that let customers leave without having to think about a termination fee might be a bad idea.

As for AT&T, your guess is as good as mine.