Someone please explain "subsidized" phones to me

[Jmoore1701]

I don't really get the whole concept of a "subsidized" phone. For instance, let's say that I and my twin brother Victor go to the Verizon store. I buy the Galaxy S4 for $200 with a 2 year contract because I know I'm going to be with Verizon, for better or worse, for a long time. Victor, however, decides he doesn't want to be locked into a contract, and pays the full retail price of $650. We both sign up for the exact same plan and service and features...
So now we're both paying the same amount each month. How is my phone "subsidized"? If--IF--we both stay with Verizon for 2 years, Victor is screwed out of $450.
Sure, Victor can switch phones any time he wants with no penalties. But he paid $450 for that priviledge!
And what if we both decide to go to AT&T at the same time? I would have to pay, at most, a $350 early termination fee...that still puts me $100 ahead of Victor, right? What calculation am I missing here?

So here are my real questions in all this:
1) Shouldn't they either charge me more per month, or charge Victor less?
2) Is locking me into a 2 year contract really worth $450 to Verizon?
3) Isn't Victor really paying a $450 penalty for NOT having a contract?
4) Why do we drive on a parkway, but park in a driveway?

(Sorry, I got carried away on that last one)

 

[TatDroid]

So here are my real questions in all this:
1) Shouldn't they either charge me more per month, or charge Victor less?
2) Is locking me into a 2 year contract really worth $450 to Verizon?
3) Isn't Victor really paying a $450 penalty for NOT having a contract?
4) Why do we drive on a parkway, but park in a driveway?

(Sorry, I got carried away on that last one)

1) Verizon SHOULD charge Victor less for his monthly contract, but they don't. You are both paying the subsidy. Some companies (T Mobile is one, I believe) do charge less if you BYOD (bring your own device)
2) They're not paying $450. They are charging it back to you monthly (the subsidy)
3) Yes. The ONLY time this makes sense is if you are already on a Verizon unlimited data plan. If you want to remain on unlimited data you must BYOD. If you buy a subsidised phone from Verizon you will lose your unlimited data.

 

[Jmoore1701]

Thanks, TatDroid, that makes sense now. Victor's the one being screwed for the first two years, since we're both paying a subsidy, AND he's also paying a $450 penalty. But AFTER the two years, I'm being screwed too because my subsidy doesn't go away, I'm still paying the same amount per month.

Um... you didn't answer Number 4 LOL

 

[TatDroid]

Um... you didn't answer Number 4 LOL

4) You're free to drive down your driveway to go park on the parkway, but then the parkway would become a driveway.

 

[NOVICE]

Check with Verizon next week. New plan which will allow upgrades to a new phone every 12 months (or 6 months with a penalty).

New twist on the subsiding game because of new plans coming from Sprint and smaller carriers.

 

[Jmoore1701]

Check with Verizon next week. New plan which will allow upgrades to a new phone every 12 months (or 6 months with a penalty).

New twist on the subsiding game because of new plans coming from Sprint and smaller carriers.

I don't know, Novice... I can't read the description of Verizon's Edge plan in any way that does NOT make it sound like a huge ripoff. You have to turn in a phone you've been paying a subsidy AND an Edge payment on. They're charging you an enormous premium for wanting to upgrade often. I could understand that if if upgrading was a complex, cumbersome, expensive process for Verizon, but it ain't.
I think I'm going to stay with my "strategy" of buying subsidized phones and keeping them as long as I can, only upgrading after my two years is up and ONLY if there is a truly compelling new device out at the time.