AT&T CEO: Carriers Can't Afford Big Subsidies for Devices Any Longer

westrock2000 · Dec 10, 2013

I don't see how this new "model" is better from the old model from the carriers point of view.

The old model was charge $80-$100 a month for service plus free phone. That rate stayed the same regardless of how long the user had the same device.

That comes out to $1920-$2400 for the 2 years, and continues after the 2 years regardless if the customer upgrades the phone or not. The customer is locked into that 2 year contract with a hefty $250-$350 fee if they break.

This new model is pay $40-$50 a month for the service plan, an upfront cost of $100-$150 for the device and then "finance" the remaining amount over a period of 2 years, which comes out to about $20-$30 a month. The carrier is doing the financing so they are getting all that money. And the customer can pay off the phone at any point.

That brings a 2 year duration to $960 to $1200 for the service, plus another $500-$800 for the device. And the customer can leave at any time, only having to fully pay off the device.

How is scenario 2 better for the carrier?????

TsMkLg068426 · Dec 10, 2013

Well if AT&T offered unlimited data plans it would be a no problem another better idea is having more hotspots so we do not hear the bitching of AT&T acting like they are poor.

akron0488 · Dec 10, 2013

AppleScruff1 said:
I would venture to guess that sales would go down if all subsidies are taken away, especially without carrier financing.

Yup! Not just Apple but all manufacturer's.

I'll rent an apartment, and I'll lease a car. I'll never rent/lease/lease to own a phone.

Bistroengine · Dec 10, 2013

Translation...We ran out of ideas to rape our customers of every last nickel, but then Bob from accounting had a brief moment of brilliance. Bob has just been promoted to Chief Rape Officer or CRO of AT&T. Congratulations Bob.

load97 · Dec 10, 2013

chodges said:
Yeah well charge me less for your service if I buy my own device outright and then we can talk about it.

I agree exactly.

siurpeeman · Dec 10, 2013

westrock2000 said:
I don't see how this new "model" is better from the old model from the carriers point of view.

The old model was charge $80-$100 a month for service plus free phone. That rate stayed the same regardless of how long the user had the same device.

That comes out to $1920-$2400 for the 2 years, and continues after the 2 years regardless if the customer upgrades the phone or not. The customer is locked into that 2 year contract with a hefty $250-$350 fee if they break.

This new model is pay $40-$50 a month for the service plan, an upfront cost of $100-$150 for the device and then "finance" the remaining amount over a period of 2 years, which comes out to about $20-$30 a month. The carrier is doing the financing so they are getting all that money. And the customer can pay off the phone at any point.

That brings a 2 year duration to $960 to $1200 for the service, plus another $500-$800 for the device. And the customer can leave at any time, only having to fully pay off the device.

How is scenario 2 better for the carrier?????

the $45 quoted in the op is misleading. it's $45 for the data bucket, but it's another $40 to add the first "shared" device.

MacNut · Dec 10, 2013

JRomero said:
I'm not going to shell out $700 for a new phone every few years. Are they crazy?

Shouldn't your bitching be aimed more towards Apple for over charging for the phone in the first place? Considering it only costs a few 100 dollars to make. They don't subsidy phones in Europe do they? Are we just spoiled Americans that we get cheap phones?

Illusion986 · Dec 10, 2013

AppleScruff1 said:
I would venture to guess that sales would go down if all subsidies are taken away, especially without carrier financing.

Lots of people also use credit cards and so many other factors come in...Personally I don't upgrade my phone every year and skip one generation because i feel its a waste of $200 for me but if it was $700 i might want to skip another year not that i could not afford it but $700 is significant amount on top of monthly carrier fees i mean you can lease a Jetta for under $190 a month....

westrock2000 · Dec 10, 2013

siurpeeman said:
the $45 quoted in the op is misleading. it's $45 for the data bucket, but it's another $40 to add the first "shared" device.

Sorry, I was going more off my own experience. We have the T-Mobile contract free service which is where I got the numbers.

If they are charging $85, plus making you buy the device that is pretty bad.

Dobbs2 · Dec 10, 2013

lolkthxbai said:
This month, AT&T introduced a new "value plan" that gives customers a $15/month discount on smartphone plans when users bring an off-contract device, purchase a phone at full retail price, or use an AT&T Next financing plan.

Is that what you're talking about?

No we are talking about service like in the EU. Unlimited internet, texts, hotspots and talk for around $30. Its not hard and very common across the EU.

I'm not paying $700-800 x 2 for a device to be locked into a contract at $120+ a month for two years.

I will pay for $700-800 x 2 and $30-60 a month for service and no contract

AppleScruff1 · Dec 10, 2013

Bistroengine said:
Translation...We ran out of ideas to rape our customers of every last nickel, but then Bob from accounting had a brief moment of brilliance. Bob has just been promoted to Chief Rape Officer or CRO of AT&T. Congratulations Bob.

Maybe they're following Apple's example?

westrock2000 · Dec 10, 2013

MacNut said:
Shouldn't your bitching be aimed more towards Apple for over charging for the phone in the first place? Considering it only costs a few 100 dollars to make. They don't subsidy phones in Europe do they? Are we just spoiled Americans that we get cheap phones?

All the top tier cell phones cost about the same, in America at least. Samsung, LG, HTC, Motorola, Apple. They all charge around $550-700 for the entry level (if the storage is not upgradeable, some like Apple charge more for more storage).

And I don't think the price is that unreasonable, they pack a lot of stuff inside these phones for the size. I'm referring to all smart phones.

Dobbs2 · Dec 10, 2013

MacNut said:
Shouldn't your bitching be aimed more towards Apple for over charging for the phone in the first place? Considering it only costs a few 100 dollars to make. They don't subsidy phones in Europe do they? Are we just spoiled Americans that we get cheap phones?

Off contract iPhones are pretty similar in price to other off contract smart phones

swingerofbirch · Dec 10, 2013

Don't know a lot about the industry, but I have a feeling t-mobile will be ascendant.

AppleScruff1 · Dec 10, 2013

Illusion986 said:
Lots of people also use credit cards and so many other factors come in...Personally I don't upgrade my phone every year and skip one generation because i feel its a waste of $200 for me but if it was $700 i might want to skip another year not that i could not afford it but $700 is significant amount on top of monthly carrier fees i mean you can lease a Jetta for under $190 a month....

I think people would tend to buy cheaper phones. They won't be buying $700 phones for the kids. IMO.

MacNut · Dec 10, 2013

westrock2000 said:
All the top tier cell phones cost about the same, in America at least. Samsung, LG, HTC, Motorola, Apple. They all charge around $550-700 for the entry level (if the storage is not upgradeable, some like Apple charge more for more storage).

And they are making 75% profit. If the subsadies end they would be forced to lower their prices. Look at the N5 it only costs $399 unlocked.

----------

Dobbs2 said:
Off contract iPhones are pretty similar in price to other off contract smart phones

Off contract or normal price?

kensic · Dec 10, 2013

watch, one day they will announce that they will push everyone that has a grandfather plan into their current ones.

everyone is following the steps of T-mobile

macs4nw · Dec 10, 2013

chodges said:
Yeah well charge me less for your service if I buy my own device outright and then we can talk about it.

That's the whole idea. If this injects renewed true competition in those monthly rates, I'll gladly buy my own handset, and sell it privately, if and when I feel like upgrading to a newer model, rather than have that option dictated to me by the carrier.

rockosmodurnlif · Dec 10, 2013

What's this $45 all-in plan he's talking about?

BornAgainMac · Dec 10, 2013

Well, it sounds really bad because of how they tell it from their prospective. There is benefits to the consumer that upgrades every year if this news is really true.

* No contracts by default (I hate extending it every year when I upgrade)
* Less expensive plans (Used phones if you want a cheap phone)
* Purchase a new phone as often as you want

MacNut · Dec 10, 2013

macs4nw said:
That's the whole idea. If this injects renewed true competition in those monthly rates, I'll gladly buy my own handset, and sell it privately, if and when I feel like upgrading to a newer model, rather than have that option dictated to me by the carrier.

If all the carriers say no more subsidies who would be hurting more, the customer or the supplier? Apple and Samsung don't want to lose those sales and if the providers decide not to eat the cost anymore people won't buy expensive phones. Forcing the suppliers to lower prices.

currentinterest · Dec 10, 2013

If they finance the phone over two year period (paid monthly with one's bill), and lower the price of the monthly contract, it will likely be a wash for the consumer.

Iamthinking · Dec 10, 2013

AppleScruff1 said:
I think people would tend to buy cheaper phones. They won't be buying $700 phones for the kids. IMO.

They might. Or people might be a little more value-conscious if they are footing the bill upfront for the whole phone. I think this will probably be a good thing for Apple as people can reasonably expect 3-5 years out of an iPhone (I've got an iphone 3 in a drawer that still works like a champ), but I hardly ever see a samesong or htc phone in use that's more than 2years old.

-iamthinking

4ubrey · Dec 10, 2013

Stephenson:
"can't afford to subsidize devices like that"

AT&T Quarterly Earnings Call in October:
"AT&T Reports Strong EPS Growth with Solid Wireless Gains, Record U-verse Results in the Third Quarter"

3.8 Billion in PROFIT last quarter

Source: http://www.att.com/gen/press-room?pid=24925&cdvn=news&newsarticleid=37119&mapcode=

MacNut · Dec 10, 2013

Iamthinking said:
They might. Or people might be a little more value-conscious if they are footing the bill upfront for the whole phone. I think this will probably be a good thing for Apple as people can reasonably expect 3-5 years out of an iPhone (I've got an iphone 3 in a drawer that still works like a champ), but I hardly ever see a samesong or htc phone in use that's more than 2years old.

-iamthinking

3-5 years if you could remove the battery.

AT&T CEO: Carriers Can't Afford Big Subsidies for Devices Any Longer

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