Are phones becoming more expensive due to 4G access?

Taylor Martin
 from Concord, NC
Published: September 26, 2011

Cell phones have undergone rather substantial changes over the past few years, both in design and function. They're getting bigger, faster and more powerful with each passing moment, and being adopted for applications we never imagined possible just four or five years ago. As you would expect, along with increased demand for smartphones with added functionality, price has also experienced a nice bump.

Just two or three years ago, $199.99 with a two-year agreement would land you one of the best phones on the market. The larger capacity iPhone, priced at $299.99 with a contract, was easily the most expensive contracted phone around by quite a margin.

Now, however, $199.99 will land you in the middle of the pack. Using Verizon's current crop of smartphones as an example, the LG Revolution, HTC DROID Incredible 2 and Motorola DROID 3 are all priced at $199.99. It's not that they're bad devices or anything, but they're hardly the best. If you want to buy into the best Big Red has to offer, you will be looking to pay between $250 and $300 with a two-year agreement for your next phone.

It's worth noting that both Sprint and AT&T have been pretty good about keeping their devices below the $200 mark, but Verizon isn't the only carrier worth mentioning. T-Mobile also has high-end devices that are priced well over $200 with a contract. The newly announced HTC Amaze 4G and T-Mobile's Smasung Galaxy S II variant are priced at $259.99 and $229.99 with a two-year agreement (after a $50 mail-in rebate), respectively. And lest we forget about the latest T-Mobile BlackBerry, the Bold 9900, which touts a questionable $299.99 subsidized price.

At first, it's easy to assume that this price increase is due to more powerful phones – better, more expensive internals. Dual-core processors, large, capacitive displays, better cameras and more memory have driven the manufacturing costs up, right? Actually, not so much. In fact, a lot of phones are actually cheaper than or the same price as comparable phones from last year. Take the HTC Sensation 4G for example. It currently sells for $499.99 without a contract from T-Mobile, which is the same unsubsidized price as the myTouch 4G from late last year. The Sensation has a larger and higher resolution display, a dual-core Snapdragon processor (versus the myTouch 4G's single-core Snapdragon), more memory, etc. Even the DROID Bionic is below the $600 mark unsubsidized, which is also around the same price as its DROID counterparts from last year.

Since the average contracted high-end smartphone price on T-Mo and Verizon is approaching $300, and unsubsidized prices are staying relatively the same, it means that said carriers are simply discounting phones less. But why? Are they just getting greedy? I would like to think so, but I'm not so sure.

Notice that all of the phones that are selling for $200+ are 4G capable devices (save for the LG Revolution and 9930 on Verizon, which I still do not quite understand). Since carriers have decided not to charge extra for 4G access (... yet), they're making a few extra bucks off of the initial price of a contracted phone. You are buying into a device with access to a much faster, premium network that has cost the carriers billions of dollars to create and expand.

Those of you who thought you were getting 4G at "no extra charge," have only been fooled by clever pricing and wording. The way I see it, though, paying $50 or $100 extra initially is a great way to help the cause and is a heck of a lot better than paying an extra $10-20 per month for 4G access for 24 months.

What do you think, ladies and gents? Is paying a little more for a 4G-enabled device better than paying for 4G access each month? You must also consider that without sufficient funds, carriers will have to slow the progress of their 4G expansion. That said, not everyone buying into one of these devices is covered by 4G yet. So is this the best way for Big Red and Magenta to approach this? Let us know how you feel below!