Are Verizon Android (News - Alert) users subsidizing the carrier’s iPhone costs? It’s seems so, but what drives the higher prices on the iPhones competition? With the high initial costs of the iPhone, Verizon (News - Alert) is taking the chance that customers will spend more for the newest Android phones to make up for the high costs of adding the iPhone to its list of devices.  

However the iPhone (News - Alert), being arguably the most popular mobile device on the market, comes with its own risks to every carrier that may give it no choice but to drive up costs of other phones, even for one as profitable as Verizon.

After paying subsidies, cellular companies must then mark up prices and add additional charges to contracts to make up for the high costs of providing the devices at affordable prices. With iPhones, it seem like these costs are significantly more than Android devices.

Verizon is set to take a sizeable financial hit in 2012 of up to 5 billion dollars because of the added iPhone subsidies. For example, it takes AT&T about six months to make up for back costs for the iPhone and Verizon will be looking at similar results, as Verizon will be paying between $350-400 just to carry Apple’s (News - Alert) flagship device.

As telecom-industry subscriber reports came out Thursday, AT&T’s numbers had improved but were still down drastically compared to Verizon in the final quarter of 2011. One main detail described in the report caught my eye: “AT&T has been lagging Verizon in this important measure for more than a year. The results also show that AT&T is still the home of the iPhone.”

With high subsidy costs it isn’t a surprise AT&T has been lagging when trying to keep up the Verizon’s subscriber rate and profits, the exclusivity of the iPhone and its steep carrying costs could definitely be to blame.

Another report on AT&T’s Q4 may be a good precursor to what Verizon subscribers can expect for their devices and contracts over the next year. “AT&T’s iPhone dependency comes at a heavy cost. The phone is more expensive than many other smartphones, and AT&T needs to subsidize each iPhone with hundreds of dollars to put it in customers’ hands…” Overall, Verizon won’t have a “dependency” on the iPhone like AT&T, but it will need to make up for its heavy costs.

According to Apple though, it is Android that has failed to meet industry changes and has left carriers like Verizon with no choice but to drive up costs. “Apple has negotiated generous subsidies from mobile carriers to sell iPhones at lower upfront prices, but Google (News - Alert) and its Android licenses haven’t, leaving carriers (like Verizon) to drive up the price of higher end Android phones.”

Overall Apple claims it’s compromised and is finding ways to drive down the costs and subsidies of its devices. Leaving Verizon with seemingly no choice but to increase price demands for its Android devices, whether or not it’s ethical is an entirely different question altogether.

Do you agree with high subsidy costs or should all cellular phones be created and sold equally?

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