Cell Phone Service Competition

I just read an article about prepaid cellphone service competition.
http://finance.yahoo.com/family-home/article/109153/how-low-can-low-cost-wireless-carriers-go
Without going into detail on the article, one point raised is that because prepaid customers are free to switch at any time, this spurs intense competition to retain customers as they cannot rely on contracts to retain customers. So how about extending this principle to post-paid plans to spur competition in that market. But first we need to look at some of the principles of postpaid plans. One of the principles of post-paid plans is that the plan subsidizes the cost of the handset. A purchaser of a post-paid plan buys a handset at a reduced price subsidized by the carrier. The carrier recoups this cost from the monthly plan price. The contract exists, from a pricing model perspective, because the carrier wants to ensure that they recoup the cost of the handset that they basically fronted. Now we could say that they are not allowed to subsidize the cost of the phone, but the carriers would rightly claim that this creates a burden to the customer to front the money for the full handset cost.

So here's the solution. The carrier can continue to subsidize the upfront cost of the handset, but this is essentially billed as a "loan". That is, the repayment of the subsidized handset cost shows up as a line item on the bill, and there is no plan contract as the only contract is the repayment of the phone cost. Several things then happen. Once the phone is paid off, your monthly rate goes to the actual service plan cost - you no longer continue to subsidize the phone that has already been paid off by continuing to pay the same plan price indefinitely. You can better plan your cell phone costs as you now have better information as to what you are really paying for in terms of hardware vs service. You know what your handset really costs and can make better informed choices of handsets, plans, and carriers and on things such as how much of the handset is subsidized. You can control how the handset is paid for. You are no longer forced into accepting the carrier's subsidizing the cost. And most importantly, you are free to change carriers at any time and you know the true costs of doing so - the only "penalty" cost is to pay off any remaining balance on the handset cost. This means the carriers now have to compete more ardently on all fronts of handsets, service plans, and payment plans. They can no longer obfuscate real costs and the information the consumer should be entitled to as a mechanism to retain customers.