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

[AppleScruff1]

What you are saying is "they won't be buying $700 phones for the kids if they get a bill that shows the phone costs $700 phone, instead of a monthly phone bill that hides the $700 payment".

They also won't buy $700 phones every two years when they don't have a contract where they have to _pay_ for a new phone every two years anyway, whether they buy it or not. With T-Mobile you paid for your phone after two years, so your bill goes down unless you want a new phone. With other carriers, your phone bill doesn't go down.

I'm saying they won't be buying $700 phones period if they have to pay that upfront. They will by the cheaper phones, just like they do in other countries where there are no subsidies. And I agree, the carriers were the ones benefiting when people didn't buy a new phone after their contract was up. They charged the same rate.

 

[portishead]

This is funny. Those carriers will follow AT&T's lead as when one carrier does something the rest will soon follow. Go where you want, but in the end they will all be the same.

Probably but like I said, verizon hasn't said anything. I bet they'd get a lot of business if ATT did this.

 

[eXan]

Do you have any statistic for that, because latest number show that they have less than 10% share

no, but thats what it feels like. After coming to Canada I immediately noticed how few had iPhones compared to Russia. Everyone seems to have either Blackberry or Samsung.

 

[bigwig]

How about a-la-carte plans? Buy your own damn device, get whatever plan you want, from whomever you want.

That's basically what Ting does. If they weren't a Sprint MVNO I'd seriously consider them.

 

[AppleScruff1]

If by "owns the market" you mean those markets are flooded with cheap, almost disposable, semi-smart feature phones running multiple variations of Android for their 90 day warranty period of existence, and on which the manufacturer made little if any profit, sure.

I meant exactly what I said. More people will buy cheaper phones if there is no subsidy. Quality was not mentioned in my post if I recall correctly. Sales of all top end phones will likely suffer if people have to pay full price upfront, not just Apple. Apple does not do as well in unsubsidized market and people tend to buy cheaper phones. I would think that the same holds true for Samsung's and everyone else's high end phones too. And why would those consumers care if the company was making a smaller profit than Apple? Apple is the only company I have ever heard non shareholders brag about how high their profits are.

 

[bigwig]

AT&T's idea of a 'subsidy' is a joke. People who own their phones or buy them outright pay just as much monthly as people who are subsidized.

That's why MVNOs exist. High value customers using subsidized plans stay on the major carrier, while lower value customers are pushed to an MVNO.

 

[Syk]

i have both an iphone 5 and a galaxy s3. at this point both can be used a lot longer than 2 years with no issues. very different than when the 3GS first came out

I think you're hitting on a key point. Phones now have pretty much peaked like computers. When the iPhone finally comes out with a larger screen it's not going to be a lot of reason to upgrade other than wanting the latest phone.

Android has pretty much came into its own also.

Bumping hardware specs and cameras really won't be a reason to upgrade.

Google is on to something with their Nexus line. You're getting good hardware for a reasonable price.The only down fault really is the battery. Buy a battery pack to top it off as need be or wait till warranty is out and unseal and put in a larger battery.

It comes down to all the phones can text,voice,email,instagram,facebook or whatever and can play game. It's getting harder to justify a $650 phone vs a $350 that is just as capable.

 

[Syk]

Probably but like I said, verizon hasn't said anything. I bet they'd get a lot of business if ATT did this.

This was just announced. I'm willing to bet that the higher ups at Verizon are looking into this model.

Why tie of money on hardware for two years when they can deal with selling services?

Verizon & AT&T follow each other. Look no further than how they both raised their activation fees not long after the other, got rid of unlimited data, similar mobile share plans.

Tmobile & other prepaid carriers are making Big Read & Big Blue show their hand.

I'm all for it but they have got to adjust their rate plans to compete with the other services.

They can still offer subsidies for those who want it but those who bring their own device should get a better rate and I'm not talking about the $15 off they're advertising now.

----------

I meant exactly what I said. More people will buy cheaper phones if there is no subsidy. Quality was not mentioned in my post if I recall correctly. Sales of all top end phones will likely suffer if people have to pay full price upfront, not just Apple. Apple does not do as well in unsubsidized market and people tend to buy cheaper phones. I would think that the same holds true for Samsung's and everyone else's high end phones too. And why would those consumers care if the company was making a smaller profit than Apple? Apple is the only company I have ever heard non shareholders brag about how high their profits are.

I agree and maybe we can start seeing phone prices inline with Nexus prices.

 

[AppleScruff1]

I agree and maybe we can start seeing phone prices inline with Nexus prices.

That would be excellent for consumers. Motorola had a special this Monday and last week on Cyber Monday offering the Moto X for $349, a nice phone for the price too.

 

[XboxMySocks]

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

You already pay much, much, much more in a monthly bill if you get a subsidy. Hahahaha.

 

[JohnDoe98]

Corporations exist to make money for their shareholders. That's the whole point. A CEO who doesn't take steps to advance the company's profits is derelict in his duties.

That said, I think we're getting screwed here in the good ole' US of A, and it's eventually going to start hurting business here. What we pay for data and internet is absurd.

No, that's not what is absurd. What is absurd is everyone seems to complain that the telcoms are exploiting their customers, yet nevertheless, the customers continue to allow this to happen. Remember telecoms can only run their business using public spectrum, so what is absurd that these people who think their are being exploited continue to grant the same old terms for the use of their public spectrum.

Change the dam terms... Threaten to make the spectrum and telecom service public if they don't offer more competition and reasonable prices.

And that is precisely why people trying to compare Apple profits to telecom profits are ridiculous. Apple isn't running their company on the backbone of publicly owned spectrum. They can charge whatever they want and we can walk away. Since spectrum is limited, we can't walk away from the telecoms after we allocated the spectrum to them. We allow telecoms to remain a private service, but we should only do so, so long as (1) they can make a profit, but (2) only insofar as it doesn't involve exploiting us.

 

[Dobiewonkanobie]

Ceo's need a paycut

Sounds the ATT Ceo's just need a paycut.

 

[kage207]

I've always been about buying the phone (and other devices) outright and having a lower cell plan bill. Though, they should lower it for the Shared Mobile Data.

I mean, it is $30 for adding a phone on top of data, should be $20 for all devices. Screw voice / text. Just do it over data (VOIP). Let me pick the apps I choose to communicate with. I'd like to pay $100 for 20GB of data. I think that's fair. Though, I do have the 10GB plan now.

Let me pick my phone (and other devices) cycle. I'd like to buy a new iPhone and iPad every 3 years. A new computer ever 3-5 years. I also would buy a MacBook Air with a cellular antenna. Really, why should I have to use BlueTooth?

Just let the computer see it is on WiFi turn off the cellular antenna and vice versa when no WiFi. I'd pay $129 difference. Just make sure you design the hell out of the always keeping me connected at the best battery life.

Just [bleeping] connect me.

 

[KPOM]

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?

Well, given that the subsidy is $450 for an Apple iPhone or high-end Android phone like a Samsung Galaxy S4 or Note 3, $15/month over 2 years doesn't sound like as good a deal.

 

[UnfetteredMind]

3 months ago I moved from att to T-mobile, best move ever. Even with my 19% att corporate discount I was paying $75/month for 400 mins, unlimited text and data (up to 5gb)

I now pay $30*/month on t-mobile prepaid plan that gets me 100mins (last month I used 49! as I also use VoIP applications), unlimited text and data (up to 5gb 4g)

My data speeds are also significantly faster in NYC where att was just pure crap on 3g (I never got the new lte phone)

I'm scratching my head as to why I didn't move to that plan earlier! (Although it was a bit of pain as it's walmart/online exclusive plan, not well advertised, and I went through t-mobile store to get it activated even though they aren't supposed to do that!)
Oh by the way, I switched my girlfriend too. We're together saving easy $80-90 a month and enjoy our service.

*corrected price; it's 32.33 with tax in NY

Following the link provided by EbookReader, I see the following description (bit more than what is shown in his screenshot):

$30 per month - Unlimited web and text with 100 minutes talk
100 minutes talk | Unlimited text | First 5 GB at up to 4G speeds
This plan is only available for devices purchased from Wal-Mart or devices activated on T-Mobile.com

Did you bring your existing iPhones over? I have an iPhone 4 that I'd like to bring over and I'm wondering if I'd be able to get this deal (even better than the one I was looking at from Wal-Mart for $40/mo). I'm wondering if I can just buy a T-Mobile SIM ($10) and then activate it on T-Mobile.com and get this deal.

 

[mizzouxc]

Can You Really Afford it?

If "plunking" down $700 at once a year to upgrade your phone sounds expensive, then you really can't afford to upgrade your phone.

Everyone's had the blinders put over their eyes in the last many years with all these carrier subsidies. You pay for the phone (often times MORE than the phone sells for) one way or another. A subsidized phone only costs you more in the super high telecommunications tax. They charge you more for service that includes the subsidy and you pay 18% + in tax each month on that subsidy.

Me, I save for a year, walk into the store and buy my phone outright on prepaid. It's only about $60 a month to save that amount of money. I do get the stink-eye from the sales clerk though and they always make me feel like a 2nd class citizen because I'm not on postpaid though. Who'd have thought actually saving and having cash to pay for things would be a bad thing.

 

[Syk]

Following the link provided by EbookReader, I see the following description (bit more than what is shown in his screenshot):



Did you bring your existing iPhones over? I have an iPhone 4 that I'd like to bring over and I'm wondering if I'd be able to get this deal (even better than the one I was looking at from Wal-Mart for $40/mo). I'm wondering if I can just buy a T-Mobile SIM ($10) and then activate it on T-Mobile.com and get this deal.

You can get the sim for free off Tmobiles website or at least you could as of late last week. They ask for a card number but never charge you.

Once you get the Sim activate it online and choose the $30 plan

 

[cmwade77]

Ok, I don't think anyone really understands how the subsidies are working:
AT&T:
$70 per month gets you unlimited talk and text with 2GB of data with a subsidy.

Over the course of a two year contract, this works out to $1,680 and you still pay $199 for the phone up front, coming out to a total of $1879

T-Mobile:
$30 per month, as previously mentioned gives you 5GB of high speed data and 100 minutes with $0 down on most phones. This makes the service $720 for 24 months. Phones average about $550, bringing the total to $1,270.

Which means that by not subsidizing the phone, you get a savings of about $609 over two years and this doesn't count lower roaming costs, international calling, etc.

In addition by not subsidizing, there are no contracts, which means you can easily switch when something better comes along. You also now have no upfront costs to purchasing a phone, which is something you had with the subsidized plans.

Bottom line is the consumer can no longer afford "subsidized" phones, they are starting to wake up and realize that the better bet is to "finance" the phones. For example, in the TMobile example, the monthly total for the first two years would be $53, after that you could drop to $30 until you were ready for a new phone.

 

[osofast240sx]

I'm saying they won't be buying $700 phones period if they have to pay that upfront. They will by the cheaper phones, just like they do in other countries where there are no subsidies. And I agree, the carriers were the ones benefiting when people didn't buy a new phone after their contract was up. They charged the same rate.

People buy laptops upfront. People by tablets upfront. Almost certain nothing will change with cell phones, especially with no interest financing. People will just adapt like they always do

 

[crosseyedbum]

What do you want?

We can't have our cake and eat it too....
What do we really want as consumers. There is an outcry about the control over the prices they charge for data. There are people complaining about the controlling hold that a 2 yr. contract places on the consumer. Why can't we upgrade our phones when we want to? Why can't I buy an unlocked phone?

Well, the fact is the control these large carriers have (or some would argue had) over the system has allowed the consumer market for years to flourish. The control of the process has made it easy and sometimes free upfront to get a smartphone. How many people would buy an iPhone if they saw the $900 dollar price tag (and they had to pay it up front)? I fear the extravagant launch lines at Apple's front door my be cut down by a sizable margin.

Over the course of the past few years in particular, the carriers grip on market prices, software features, and hardware capabilities has slowly lessened. Now the carriers are saying that it's fine, but in order for them to still make a profit, consumers and the phone manufacturing companies (albeit Apple, Samsung, etc.) can haggle out the cost vs. value struggle that they have buffered for so long.

So what do you want? Do you want control and fair prices or cheap phones for all. Because no smart business man is going to come up with a business model that gives you both while still maintaining a profit margin that investors expect. We have been spoiled, the carriers got greedy, we said not so fast, and they are slowly giving us what we want.

Me personally, I am not one to go backsies. But I am not an individual that would have to most likely have to revert to flip phone as a result of the upheaval. I will take the sticker price upfront as the price for more control over plans and eventually more competitive pricing. Make the carriers work for their customers for a change.

 

[Syk]

We can't have our cake and eat it too....
What do we really want as consumers. There is an outcry about the control over the prices they charge for data. There are people complaining about the controlling hold that a 2 yr. contract places on the consumer. Why can't we upgrade our phones when we want to? Why can't I buy an unlocked phone?

Well, the fact is the control these large carriers have (or some would argue had) over the system has allowed the consumer market for years to flourish. The control of the process has made it easy and sometimes free upfront to get a smartphone. How many people would buy an iPhone if they saw the $900 dollar price tag (and they had to pay it up front)? I fear the extravagant launch lines at Apple's front door my be cut down by a sizable margin.

Over the course of the past few years in particular, the carriers grip on market prices, software features, and hardware capabilities has slowly lessened. Now the carriers are saying that it's fine, but in order for them to still make a profit, consumers and the phone manufacturing companies (albeit Apple, Samsung, etc.) can haggle out the cost vs. value struggle that they have buffered for so long.

So what do you want? Do you want control and fair prices or cheap phones for all. Because no smart business man is going to come up with a business model that gives you both while still maintaining a profit margin that investors expect. We have been spoiled, the carriers got greedy, we said not so fast, and they are slowly giving us what we want.

Me personally, I am not one to go backsies. But I am not an individual that would have to most likely have to revert to flip phone as a result of the upheaval. I will take the sticker price upfront as the price for more control over plans and eventually more competitive pricing. Make the carriers work for their customers for a change.

Why can't we have both? Nexus 5 and Tmobile and a lot of other prepaid offer better rates. Over seas many providers don't offer subsidies.

Maybe phone prices out right will eventually come down just like with laptops and computers years ago.

I don't see why carriers can't make money but not offering subsidies or not subbing as much of the phone and decent rate plans. They won't have their money tied up phone inventory

 

[Mechanic]

When I read the headline my first reaction was: An glad I am not an Apple Share holder. Much of Apple profits come from the iPhone, due to the high profit margin they are sold at. The reason Apple come sell the iPhone with such a high profit margin is the subsidised carrier model in the US.



Kantar Worldpanel number from MR

Image

You see that iOS has higher marketshare in the US than the EU or AU, this is largely due to the the high monthly cost of smartphone plans in the US that have allowed carriers to subsidise higher end (~$650+) smartphone.


All iPhones get a $450 subsidy. 450/24 months = $18.75 per month of the your plan that effectively goes straight to Apple. A $15 per month discount is actually low.

Problem is that I pay ATT $90 a month $120 with taxes plus $20 for unlimited text and text is pure gravy for the carriers (because it uses the locator signal bandwidth that has to be there anyway to make your cell phone work). So minus your 18.75 I'm paying ATT $71.25 a month after paying the subsidy. And even after the phone is payed off Im paying them the full 90 plus 20 for unlimited text.

Sorry but I don't believe that ATT needs 71.25 a month for running there network for my data and voice usage from me. ATT's CEO is a liar pure and simple and just wants more money to line his and his companies pockets. Him telling the public that this model is unsustainable is pure and utter bs. The fact is the carriers have made every dime of there subsidies (a.k.a. phone loans) back and then some.

 

[koban4max]

Why are people here debating about subsidy and all that...either buy it as whole or don't..and move on.

 

[cult hero]

I've had five smart phones and paid for all of them outright new or on Craig's List. (G1, Nexus One, MyTouch 4G, Galaxy Nexus and Nexus 4) One of the things keeping my away from Apple is that the phones are too expensive in my opinion and the older ones hold their value too well (although, this helps frequent upgraders).

The nice thing about subsidies dying will be devices coming factory unlocked at that point.

Moving to T-Mobile prepaid has been even better.

 

[UnfetteredMind]

You can get the sim for free off Tmobiles website or at least you could as of late last week. They ask for a card number but never charge you.

Once you get the Sim activate it online and choose the $30 plan

Thanks for the info, that's a great deal. Bonus that even the SIM kit is free!