Subsidy Cuts Might Drive iPhone 5 Sales Before iPhone 5S Release

**Editor’s Note:

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First it was T-Mobile. Now Verizon is mulling the elimination of those pesky two-year contracts, and if that happens, AT&T and Sprint will likely follow.

iPhone 5But while the end of contracts tends to lead to a reduction in monthly charges, it also means the end of smartphone subsidies that have generally kept smartphone prices between $100 and $300. Those prices are now more than double that at T-Mobile and would certainly jump at the other carriers as well.

The carriers are also introducing new device-upgrade plans that don’t require you to sign pricey new contracts.

You could make the argument that the customer is benefiting financially, or that the operator is securing more customer loyalty, but it’s the manufacturer that might be getting the best deal.

“As customers see the writing on the wall, I think that a lot of them are going to run out and upgrade right now, which will drive sales of the iPhone 5 before even the release of the iPhone 5S, which is expected to be released later this fall,” said Motley Fool contributor Doug Ehrman.

Ehrman believes Apple will likely see the most benefit in the short run since its device cycle is long (usually once a year), but other vendors like Samsung will also reap benefits. Upgrade plans might also be the catalyst for Apple to start releasing phones more than once a year, he added.

Follow senior online managing editor @Craig_Galbraith on Twitter.

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