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

[ladeer]

[deleted]

 

[EbookReader]

https://forums.macrumors.com/threads/1565972/
Do you want AT&T, Verizon and Sprint to adopt T-Mobile uncarrier strategy?

T-Mobile Uncarrier strategy is simple

1) Pay for the phone upfront or in monthly installments (paying for the HDTV)
2) Pay for the service (paying for the cable/satellite bill)

Yes 186 79.83%
No 47 20.17%

Look like about 80% want AT&T to abandon subsidy and goes with T-Mobile model of separating the cost of the phone and the cost of talk/text/data

 

[iLilana]

to be fair

subsidies are the reason your bills are so fn high. That and the enormous profits raked in as well as the unreasonably large bonuses the top execs get. Losing subsidies will force companies like apple to focus on lower cost phones. Its a good thing. However the sad irony is carriers will just keep the prices the same.

 

[ugahairydawgs]

It sucks that I have to trick customers everyday to think AT&T has their best interests for them...

They have it in mind to the extent just about any for-profit company does. At the end of the day most companies want to do good by their customers so that they keep their customers. But they have to turn a healthy profit while they are at it or they won't be around too long.

And when did it become the standard to assume all consumers are just complete rubes? Most folks generally get that companies have to turn a profit to keep the doors open.

 

[EbookReader]

From another thread. THE SUBSIDY effect on MARKET SHARE

Which is why iOS has a 62% market share in Switzerland.

As tongxinshe pointed out, there's a correlation between subsidies and iPhone market share.

The larger and more available the subsidy, the higher the adoption of iPhones.

 

[kevinof]

Europe and US markets are roughly the same size. Also points 1-6 apply equally to any operator in Europe. exactly the same issues.

You can't have unlimited data plan in America in comparison to Europe because 1. America is much bigger and costly to operate as a mobile carrier than Europe.
2. Carriers have to recoup billions of dollars that invested early on in building its network
3. To make money, carriers need to charge $ somehow. They used to do that w/ voice plans (different tiers). For example, when the first iPhone came out, people actually cared about how many minutes they had in their monthly plan. That was the differentiating factor.
4. Due to the popularity of data based text app (WhatsApp, LINE, iMessage, etc.), people started to text a lot more (using data). Now, people also do voice talk via LINE, FaceTime, Skype, Google Hangout, etc.
5. Minute usage drastically decreased which led to voice-plan based revenue.
6. To survive carriers have to come up with a new pricing that profit from the new resource--data--that consumers love to use.
7. Compare American pricing and European is like saying how come European pay 2-3x higher in gas/petro than American do? There are many reasons behind our differences from government, policies, regulatory environment, geographies, to population densities, etc.
8. American carrier market is a free market with 4 big and dozens of small players. This is NOT an oligopoly but a relatively competitive and cut throat market. You can rest assured that the price you are paying is very close to a reasonable price that carriers must set in order to maintain an industry average profitability. This will happen by laws of economics as each company resembles a price taker because it's closer to a "perfectly competitive market" than oligopoly. I know you might argue that there are not that many players, but you have to understand that 4 plus all the regional and budget carriers are quite a lot of this industry. It's against law to collude or fix price and they increase their revenue largely from stealing each other customer. The series of uncarrier moves by TM that triggered these responses are a prime example of this market being a perfectly competitive market. In a perfectly competitive market, the price is NOT dictated by the sellers, but an equilibrium where supply/demands meet. It's a reasonable and most efficient price point.

 

[iMikeT]

What the hell is this moron talking about with carriers not being able to afford to subsidize devices when customers are paying the subsidized price off while being locked into a two year contract for two years? Furthermore, up until this month, AT&T continued to charge the subsidized price even after a contract expired.

What this says to me is that these greedy telecoms don't want their customer's money over a two year period, they want it now.

I'm so glad T-Mobile now officially supports the iPhone because it's giving AT&T some real competition for a change. I can't wait until October 2014 because my contact with AT&T will be up and I'll have the opportunity to jump ship to T-Mobile.

 

[EbookReader]

Getting rid of subsidies will benefit phones that are sold with low profit margin. For example, the Nexus 5

$349 off-contract/ unlocked

4.95" 1080p display (IPS TFT for those interested)
16GB and 32GB internal storage
2GB RAM
MSM8974 aka Snapdragon 800 at 2.3GHz
8MP OIS rear camera, 1.3MP front camera
2300mAh battery
Sensors: Accelerometer, Gyroscope, Compass, Proximity/Ambient Light, Pressure
Slimport compatibility
Micro SIM slot
Notification light
Wireless charging
NFC
Bluetooth 3.0 (We assume this is an error – Bluetooth 4.0 appears elsewhere in the document, but according to the last page it's still a draft.)
UMTS/GSM/CDMA/LTE compatibility

or the MOTO G

$199 off-contract / unlocked

Specs:

4.5″ LCD 1,280 x 720 display
1.2GHz Qualcomn quad-core processor
1GB of RAM
16GB of storage
5MP rear-facing camera
1.3MP front-facing camera
2070mAh battery
Dimensions: 129.9 x 65.9 x 6-11.6mm
Weight: 143g

 

[Evangelion]

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

Um, you do realize that you are already paying full price for the phone? The price of the phone is simply buried in your monthly service-bill. I find it really amazing that some people actually think that these "subsidies" lets them get phones for less money. They are not. These subsidies are directly paid by the users.

And could we move away from the term "subsidy"? "Subsidy" implies that someone else is handling part of the cost. But that is not the case here, as the customer is still handling all the costs. Something like "deferred payment" would be more accurate.

I always buy my phones fair and square. I just bought my wife iPhone 5s that cost 799e. Her cell-phone bill is about 15 euros per month. And that includes unlimited data. Compare that to you "subsidied" phones where you pay less for the phone upfront, but you pay through your nose for the service. Doesn't sound like a good deal to me.

 

[Tech198]

I would have thought this is EXACTLY what mobile companies wanted.


Right ??

They locked you in for a "reason" so they have you.... while you pay it off on a 2 year contract....

They get more money anyway over 2 years then if you payed outright... So what are they even worried about ??

And while do they only feel the burn now ? After soo long. ? Doesn't add up.

 

[ThomasJL]

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

Exactly.

AT&T released a deceptive new service plan this past Sunday that allegedly gives customers who bought factory unlocked phones from third parties to have non-subsidized pricing. But when the total prices are added up, the pricing is the nearly or slightly over the same as someone who is currently paying a monthly subsidized fee would pay.

This sounds like typical deceptive rewording from AT&T which separates fees into smaller-looking parts, but when the parts are added up, there is not much difference between what someone currently on a monthly subsidized plan is paying. AT&T has never lowered prices for people off contract who have paid off their subsidy.

Furthermore, even when AT&T stops offering subsidies, something tells me that the phones they will be selling at full price will be locked. That is how it currently is with full-priced/no-contract iPhones that are tied to AT&T's name. One can request an unlock, but they come locked to AT&T.

 

[EbookReader]

Here's what T-Mobile did after it got rid of subsidy.

http://www.t-mobile.com/cell-phone-plans/family.html

$50 (1st line) + $30 (2nd line) + $10 (3rd line) + $10 (4th line)

Line 1: unlimited talk, unlimited text and 500MB of 4G LTE data, unlimited 2G
Line 2: unlimited talk, unlimited text and 500MB of 4G LTE data, unlimited 2G
Line 3: unlimited talk, unlimited text and 500MB of 4G LTE data, unlimited 2G
Line 4: unlimited talk, unlimited text and 500MB of 4G LTE data, unlimited 2G

With no contract. Cancel anytime.
You can add 2GB for an extra $10 to any line you want.


4 lines for $100 a month total. Each line have unlimited talk, text and data. It would be $120 if you want line 2 and line 4 to have 2.5GB of LTE speed.



As for the phone, you buy it separately. Either through finance, bring your own phone, buy it on ebay, etc...And you can cancel your T-Mobile wireless contract anytime. You can cancel your "phone finance" contract if you pay it up in full. Or just not pay and take a hit on your credit rating.

 

[Florals]

I'm not from the US so I don't know quite what the pricing is like over the pond, but here in the UK the iPhone subsidies are looking less and less enticing. When I signed up for a contract with the iPhone 5, getting a subsidised phone saved me money compared to buying it outright and signing up for a rolling monthly tariff.

I did the same calculations for the 5S, and it's substantially cheaper to just suck it up and buy it outright. Plus, you then have the added bonus of an unlocked device that isn't tied down to a carrier. If the networks think I'm going to be giving them £50 every month for the next two years they can jog on.

 

[EbookReader]

From this thread, it seems that people here hate what AT&T is planning.

But 80% on Macrumors actually want AT&T to get rid of subsidy

https://forums.macrumors.com/threads/1565972/



Getting rid of subsidy = actual competition in smartphone which will bring down the price.

Right now, subsidy distort the actual cost of a smartphone.

 

[roadbloc]

Good job neither ATT or Verizon are UK carriers. They can keep their dumb ideas, terrible service and high prices in the US.

 

[Ieo]

Let's see....their $15 a month savings over a 24 month contract saves me...$360. The difference between an unlocked and a subsidized iPhone is $450.

That doesn't add up AT&T. Just another scheme to screw us over. It's like they think we can't do basic arithmetic. And those that can't or can't be bothered to listen to those of us who do...

 

[tl01]

$3.8 billion in third quarter profits.... Sounds like the are struggling. I'm feeling really sad for AT&T now. They made more profit this year than last on the same quarter.

 

[zhenya]

Let's see....their $15 a month savings over a 24 month contract saves me...$360. The difference between an unlocked and a subsidized iPhone is $450.

That doesn't add up AT&T. Just another scheme to screw us over. It's like they think we can't do basic arithmetic. And those that can't or can't be bothered to listen to those of us who do...

Exactly. In theory people think they want subsidies to end. In practice I guarantee you that the new plans will be calculated to extract slightly more money from the average user every month while getting the subsidy off the carrier's books. Plans will be reworked to obfuscate this, but it's exactly what they do every couple of years.

Apple will be the big loser if this happens as there will be a race to the bottom price-wise for phones.

 

[Hyper-X]

What they're trying to say is that they've grown comfortable from all the huge smartphone sales figures and are now complaining that they won't be making nearly as much.

 

[dumastudetto]

It doesn't matter whether carriers subsidise iPhones or not. Consumers love these incredible devices and they will find a way to finance the latest and greatest iPhones every year regardless. I know consumers are willing to make a lot of sacrifices to stay current with the latest technology.

 

[gnasher729]

I'm not from the US so I don't know quite what the pricing is like over the pond, but here in the UK the iPhone subsidies are looking less and less enticing. When I signed up for a contract with the iPhone 5, getting a subsidised phone saved me money compared to buying it outright and signing up for a rolling monthly tariff.

I did the same calculations for the 5S, and it's substantially cheaper to just suck it up and buy it outright. Plus, you then have the added bonus of an unlocked device that isn't tied down to a carrier. If the networks think I'm going to be giving them £50 every month for the next two years they can jog on.

There are some differences between UK and USA: 1. The monthly charges are not as ridiculously stupidly high in the UK as they are in the USA - one of the few things where the UK prices are a lot lower than US prices. 2. The cost of the phone is higher, due to VAT and better consumer protection laws which come at a cost. 3. Combined, the portion of your monthly payment that is for the phone and not the service is a lot higher.

Most important, all the phone providers are either awfully bad at maths or they are deliberately trying to confuse people, because their monthly charges are all over the place. But that's why they teach kids how to use spreadsheets at school, because a simple spreadsheet will show you easily what are the best offers.

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it depends but i get your point. Its easier for most people to pay 200 up front for a phone and 100 every month for service than paying 600 up front and then paying every 50 for service, though these two examples may pay the same over 2 years, i think most people would prefer to pay less up front..

You are living proof why the phone carriers _love_ subsidies.

200 up front + 100 per month = 2,600 over two years.
600 up front + 50 per month = 1,800 over two years.

 

[bigwig]

Telecom companies outside the US are taxpayer-subsidized. That's why their rates are, on the surface, so cheap.

 

[awitti]

I think some of you are misinterpreting what the AT&T CEO is really saying. AT&T and the other carriers have clearly profited from the subsidy model. If they could keep that model indefinitely, I'm sure they would.

This is a reactionary move. T-Mobile has cracked the window and American customers are slowly waking up to the reality that "subsidies" aren't such a great deal. AT&T sees the writing on the wall. Their customer bases are eroding. Customers are unlocking their old phones or buying new ones off contract and are looking for the cheapest decent carrier plans available.

AT&T is just positioning themselves for the next leg. They know that T-Mobile and smaller carriers are drawing more interest from savvy shoppers. They have to start competing with them.

As an example, I took my iPhone (originally purchased with the AT&T subsidy, but unlocked after contract ended) overseas last year. I paid $19 a month for unlimited text/talk and 500mb data. When I got back to the States, I needed a new phone, but I wasn't about to sign another contract, and I didn't feel like paying $700 for a new iPhone. I bought a N5 and a $45/month T-Mobile plan. It's not perfect. I'd prefer a 5S (I'm holding out for the 6 and I'll sell my N5), and $45/month is still way too much for what I need. But it's better than anything AT&T or VZW are offering.

What concerns me is how this will impact AAPL. No one can deny that they have benefitted the most from the subsidy model. If others think the way I do (and I could have afforded a $700 handset, I just chose not to pay that much this time), then Apple could see a lot of people hold off on that next upgrade. They may not lose market share (they may even gain due to device durability), but they could certainly lose sales.

 

[Tech198]

Don't mobile carrier make enough off Data and SMS anyway?

What they are saying "it's too much money" we have if we continue subsidies.

That's a hoot....

Don't force people to pay outright, because you'll loose customers straight away.

People choose to go on a contract with a small up-front cost, for a reason...

You should have a choice.

I'd buy phones outright whenever because i can freely move to other networks without been penalized with early termination fees and unlock codes from mobile carrier.

I sure hope we (Australia) don't move this way where you can only buy outright...

It won't effect me anyway, but it will to those that can't afford a phone up-front.

 

[gnasher729]

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

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.