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

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Wireless carriers like AT&T and Verizon will not be able to continue the smartphone subsidy model that has driven widespread smartphone penetration to this point. AT&T CEO Randall Stephenson, speaking at an investor conference today, said the current model is not economically viable, reported CNET.

With more than 75 percent of mobile phone users owning smartphones -- and that number growing towards 90 percent -- Stephenson said carriers will "move into maintenance mode" and that "the model has to change" because carriers "can't afford to subsidize devices like that". Many higher-end smartphone power users also tend to upgrade their phones as often as possible, something that can become expensive for carriers subsidizing those purchases to the tune of hundreds of dollars per device.
Stephenson also acknowledged that breaking customers of their habit of upgrading to a new phone every 18 months to two years is not an easy task. But he said a business models focused on financing rather than providing a subsidy would be "transformative" for the industry. He said the company's new AT&T Next program, which offers no-money down and 0-percent financing, drives smartphone penetration in a way that is more sustainable over time.

"If you are a customer and you don't need to upgrade your device, you can get unlimited talk and text and access to the data network for $45 all-in," he said. "You can use your own device or finance it. I think this will be very powerful. It's where we see the market going."
As part of a larger strategy to move away from straight device subsidies, AT&T rolled out its AT&T Next smartphone and tablet upgrade program earlier this year -- following T-Mobile's lead -- to entice customers to pay for devices in full, spreading the payments out over several years with no down payment or upgrade fees.

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. The new plans come after several price adjustments to AT&T Next plans as customers analyzed similar offerings from other carriers.

Stephenson noted that carriers have largely solved their data capacity issues because of LTE and can now focus on lower end customers, saying that AT&T will "go very aggressively in the prepaid market".

Apple has seen huge success with the iPhone, largely because of carrier strategies that saw its smartphones heavily subsidized while locking customers into two-year contracts. As demand in Western countries begins to peak, Apple executives have often spoken of the importance of growth in countries where purchasing phones for full-price, with prepaid voice and data plans, is more popular.

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

go4theko

macrumors member
Jul 29, 2011
30
0
California
so basically a new way to extort more money out of consumers. I'm sure they make huge profits on forcing basically all phones to have data plans already... unsustainable my boootay
 

JRomero

macrumors regular
Jun 29, 2006
115
0
I'm not going to shell out $700 for a new phone every few years. Are they crazy?

EDIT (because I don't need my inbox blowing up with notifications): No I don't upgrade my phone yearly, and I'm not paying $100+ a month on my phone bill like some of you are claiming. Good lord.
 
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chodges

macrumors newbie
Sep 18, 2012
6
0
SoCal
Yeah well charge me less for your service if I buy my own device outright and then we can talk about it.
 

TypeEE

macrumors member
Jun 10, 2009
70
14
I thought subsidy model was for their own good. Stop doing that and people will get an unlock phone and hop between networks. At the end, consumer wins.
 

Rad99004

macrumors 6502
Nov 12, 2009
286
4
Looks like a plan to allow AT&T and Verizon to pocket more money and charge the same or more money for your contract. You just wait and see.
 

luqtotheman

macrumors regular
Jun 14, 2012
198
3
If they can no longer afford the subsidy model, then the monthly plans should be cheaper since users are paying for their own device full price.

That sounds logical but the big three are greedy and want us to pay full price for the device and continue to pay the same price for the plans that payed for the subsidies.
 

lolkthxbai

macrumors 65816
May 7, 2011
1,333
371
Yeah well charge me less for your service if I buy my own device outright and then we can talk about it.
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?
 

Illusion986

macrumors 6502
Mar 12, 2009
354
3
Id be interesting to see what kind of impact would apple get on sales if all major carriers went that route....
 

xkmxkmxlmx

macrumors 6502a
Apr 28, 2011
885
113
I'm not going to shell out $700 for a new phone every few years. Are they crazy?
Given that you pay about $200 now per upgrade, you do in fact pay more than $700 for a new phone every 'few years'.

Assuming you upgrade yearly.
 

dagamer34

macrumors 65816
May 1, 2007
1,359
101
Houston, TX
Of course, they'll stop subsidizing your phone, but I don't expect them to lower your bill for much longer.

Also, keep in mind that AT&T discounts $15/month = $360/2 year contract, but $650 - $200 = $450 for every iPhone. $450 - 360 = $90 extra cost to subsidize an iPhone vs other phones. Similar for Galaxy phones as well.

If they are going to move to a no-subsidy model, the price of the phone should decrease as the year goes on. It makes no sense to pay $650 for a phone when a new model comes out a day later.
 

AppleScruff1

macrumors G4
Feb 10, 2011
10,026
2,947
Id be interesting to see what kind of impact would apple get on sales if all major carriers went that route....
I would venture to guess that sales would go down if all subsidies are taken away, especially without carrier financing.
 

Rad99004

macrumors 6502
Nov 12, 2009
286
4
Its criminal what they charge for data anyway.

15 dollars off a month if you choose to not have them subsidize your phone, what a joke !
 
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