Cheaper mobile is coming -- at a price

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(MoneyWatch) AT&T (T) has just joined T-Mobile. Not in a merger like the one blocked a couple of years ago, but in the new practice, at least in the U.S., of offering lower-priced service without a contract. The catch? You buy the phone without a subsidy.

The total is still likely to be less than under a traditional contract and likely to interest many. But the real payoff for carriers is to reduce the importance of such device manufacturers as Apple (AAPL) and Samsung.

AT&T today announced its "Next" service. Customers pay 12 monthly interest-free installments of $15 to $50, depending on the device, for a phone (assuming they don't have one already). At the end of the year, they can upgrade. If not, they continue paying another eight installments to own the device outright. There is no penalty for paying off the device early.

The savings should come in the explicit unbundling of the device price from service. Carriers in the U.S. have folded the costs into device plans. That meant even when the phone was totally yours, you still kept paying the monthly hardware fee. Furthermore, carriers generally had to pay additional subsidies to the hardware vendor, particularly for such popular lines as Apple's iPhone. That left the carriers in bad bargaining positions and made them secondary in the business.

Since then, carriers like AT&T and T-Mobile have sought to reverse the trends and make the business more independent of the hardware vendors. That is why T-Mobile announced the end of subsidies in its business.

Chances are that the carriers will still make some money on hardware sales. They buy in bulk and would get discounts. Reselling for list price will possibly let them make more money than they used to. Consumers will likely look for cheaper phone retailers and just get the service without the need for new hardware.

If this practice becomes broadly accepted by consumers, the result could actually hurt companies like Apple and Samsung. Instead of getting additional payment for all purchases coming through the carriers, they will see a drop in revenue.

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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.

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