They are going to make their money one way or another, wether it is through service fees that go up in order to keep a subsidy or services fees that stay the same and they have financing it really makes no difference its all just a mental difference for the customer anyway. The thing that isn't sustainable is locking people into long terms that keep the price constant in spite of any inflation that could occur during the term
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AT&T CEO: Carriers Can't Afford Big Subsidies for Devices Any Longer
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Look, I have no great love for AT&T either. Nor do I think what I pay them is exactly fair.
BUT
I am getting a little sick of how this place constantly lauds Apple for being an extremely successful company with HUGE margins, a great stock, and a win over Android where it "counts" by which people mean profit...and yet they then rake AT&T over the goals for, well, for acting a hell of a lot like Apple does.
Let's not forget that Apple's introduction of the iPhone ushered in a new era that shifted money from the carriers to the handset makers. As a consumer and as a stockholder I DO think Apple deserves that, but I'm just saying I recognize that they're not blameless when it comes to calculating the amount my AT&T bill comes out to.
All I'm saying is, the mood in here is a big 180 from what you see in the "Apple stock is doing great" articles.
BUT
I am getting a little sick of how this place constantly lauds Apple for being an extremely successful company with HUGE margins, a great stock, and a win over Android where it "counts" by which people mean profit...and yet they then rake AT&T over the goals for, well, for acting a hell of a lot like Apple does.
Let's not forget that Apple's introduction of the iPhone ushered in a new era that shifted money from the carriers to the handset makers. As a consumer and as a stockholder I DO think Apple deserves that, but I'm just saying I recognize that they're not blameless when it comes to calculating the amount my AT&T bill comes out to.
All I'm saying is, the mood in here is a big 180 from what you see in the "Apple stock is doing great" articles.
You bring 2 notable quotes to mind with your remarks:
1. Some people have more money than sense.
2. Penny-wise, pound-foolish.
Ugh...
cool for customers, i think...
Here, in France, you have unlimited voice+unlimited SMS+ 3Go (for3G Data) for 20Euros/month, and free of contract if you keep your old smartphone, and i think it's a good idea. You save a lot of money if you don't change your smartphone every 18 month....
Here, in France, you have unlimited voice+unlimited SMS+ 3Go (for3G Data) for 20Euros/month, and free of contract if you keep your old smartphone, and i think it's a good idea. You save a lot of money if you don't change your smartphone every 18 month....
While I agree with much of the discussion thus far surrounding the cheek of the US carriers charging what they do and always attempting to force consumers into a tiered plan rather than letting them keep their grandfathered unlimited data plan without any throttling , I'm going to take a slightly different approach here, even though in the amount of time it's taken me to comprise my thoughts, others have likely touched upon the same subject...
The iPhone 5S costs somewhere around $200 to make. This is also the standard subsidized price of the base 16 GB model at most US carriers. However, to buy the device outright with no subsidy costs over 3X that much, meaning Apple is pocketing quite a bit...
Now, I've been a proponent of Apple for over a decade. My experience with their products, both hardware and software, have made my days building Windows PCs from the ground up seem like a frivolous effort due to the infinitely better user experience that I personally found through their products. I feel like they understand the end user experience concept better than any other company out there.
That being said, a 325% markup for a product that has sold like hotcakes... really?? I get R&D costs, marketing, payroll, support, etc. But the fact that a 16 GB iPhone 5S at the full price of $649 costs $30 more than a 16 GB iPad Air with cellular at $629, while the iPad costs only around $15-60 more to build than the iPhone?... I've always believed that you get what you pay for, and again, I feel like I get a better product for my money when I buy Apple. But the Apple price point has also been the primary point of contention for many of my friends & colleagues who've waffled at the premise of switching.
However, Samsung's Galaxy S4 is also $649 at its unsubsidized price, and its build cost is only slightly higher than the iPhone 5S, so...
Shouldn't some of the frustration be directed at the makers of the devices to put a more reasonable price point on their devices?
Another bit of perspective: Sony and Microsoft are both taking a pretty substantial profit hit on their latest next-gen consoles. Granted, the smartphone market is substantially larger than the console market, but still... if smartphone makers cut their unsubsidized pricing down to even 200% of the build cost, I'd be willing to bet that many more people than just me would still buy it, and it would still be profitable. Not as profitable as it's been with the carriers choking down the extra cost, mind you, but it seems to me they'd still be in the black.
Just a thought...
, I'm going to take a slightly different approach here, even though in the amount of time it's taken me to comprise my thoughts, others have likely touched upon the same subject...The iPhone 5S costs somewhere around $200 to make. This is also the standard subsidized price of the base 16 GB model at most US carriers. However, to buy the device outright with no subsidy costs over 3X that much, meaning Apple is pocketing quite a bit...
Now, I've been a proponent of Apple for over a decade. My experience with their products, both hardware and software, have made my days building Windows PCs from the ground up seem like a frivolous effort due to the infinitely better user experience that I personally found through their products. I feel like they understand the end user experience concept better than any other company out there.
That being said, a 325% markup for a product that has sold like hotcakes... really?? I get R&D costs, marketing, payroll, support, etc. But the fact that a 16 GB iPhone 5S at the full price of $649 costs $30 more than a 16 GB iPad Air with cellular at $629, while the iPad costs only around $15-60 more to build than the iPhone?... I've always believed that you get what you pay for, and again, I feel like I get a better product for my money when I buy Apple. But the Apple price point has also been the primary point of contention for many of my friends & colleagues who've waffled at the premise of switching.
However, Samsung's Galaxy S4 is also $649 at its unsubsidized price, and its build cost is only slightly higher than the iPhone 5S, so...
Shouldn't some of the frustration be directed at the makers of the devices to put a more reasonable price point on their devices?
Another bit of perspective: Sony and Microsoft are both taking a pretty substantial profit hit on their latest next-gen consoles. Granted, the smartphone market is substantially larger than the console market, but still... if smartphone makers cut their unsubsidized pricing down to even 200% of the build cost, I'd be willing to bet that many more people than just me would still buy it, and it would still be profitable. Not as profitable as it's been with the carriers choking down the extra cost, mind you, but it seems to me they'd still be in the black.
Just a thought...
It's simple math really
700/24 = ~30
Att drops plan 15 bucks a month
That's 15 more a month they are making, that 200 you paid up front before is covered in 13 months and change, beyond that, it's another almost 200 in the pockets of the carriers per contract.
----------
Yes,
These policies will drive a price war on the smartphone production, I believe
saw this coming which is why they even bothered with the 5C
Let's see who can make the best/cheap smartphone in China
700/24 = ~30
Att drops plan 15 bucks a month
That's 15 more a month they are making, that 200 you paid up front before is covered in 13 months and change, beyond that, it's another almost 200 in the pockets of the carriers per contract.
----------
Yes,
These policies will drive a price war on the smartphone production, I believe
saw this coming which is why they even bothered with the 5CLet's see who can make the best/cheap smartphone in China
What lies, AT&T (and the rest of them) must think we're all stupid!
They can't afford the subsidy, yet they're willing to give me $15/month discount if I bring my own phone (i.e. unsubsidised)?
Let's do the math...
The 16gb iPhone 5S costs $649 unsubsidised. Under subsidy, that's $199. Therefore, the carrier is subsidizing $450 ($649-$199).
If you spread that $450 across 24 months (the 2 year contract required when purchasing a subsidised phone), that comes to $18.75 per month. Take out the $15 they're willing to discount me for an unsubsidized phone, and that leaves a difference of $3.75/month, or $90 across 2 years.
So you mean that $3.75 per month is all that stands between success and financial ruin for AT&T? *********. They make that much up in non-mandatory government fees. This is just another smoke screen to screw the consumer, and I'm sure every carrier will eventually follow suit.
Nice job Bob from accounting...
They can't afford the subsidy, yet they're willing to give me $15/month discount if I bring my own phone (i.e. unsubsidised)?
Let's do the math...
The 16gb iPhone 5S costs $649 unsubsidised. Under subsidy, that's $199. Therefore, the carrier is subsidizing $450 ($649-$199).
If you spread that $450 across 24 months (the 2 year contract required when purchasing a subsidised phone), that comes to $18.75 per month. Take out the $15 they're willing to discount me for an unsubsidized phone, and that leaves a difference of $3.75/month, or $90 across 2 years.
So you mean that $3.75 per month is all that stands between success and financial ruin for AT&T? *********. They make that much up in non-mandatory government fees. This is just another smoke screen to screw the consumer, and I'm sure every carrier will eventually follow suit.
Nice job Bob from accounting...
Phone cost: 4 high end devices ($349 Nexus 5) = $1396
Wireless cost: unlimited talk, text, and 2.5GB of LTE data on all 4 lines: $140 x 24 months = $3360
Total cost of phone and talk/text/data plan: $4756 over 2 years
That works out to be $49.54 a month for each person to have a high end smartphone and an unlimited talk, text, and 2.5GB LTE data.
Wireless cost: unlimited talk, text, and 2.5GB of LTE data on all 4 lines: $140 x 24 months = $3360
Total cost of phone and talk/text/data plan: $4756 over 2 years
That works out to be $49.54 a month for each person to have a high end smartphone and an unlimited talk, text, and 2.5GB LTE data.
There is certainly a "sweet spot" for what consumers are willing to pay for gadgets. Generally, it's around $300. Look around and see how many devices you see sell for at or near this number. For whatever reason, we seem to be able to justify this level of expense. Cutting out the subsidy is going to present a huge obstacle for Apple (and other high-end makers). Apple will have to step in with a finance model to keep their customers. Some will continue to gladly fork over $700 for what they perceive as the best available, but look around at all the people using iPhones. A good number of these people simply cannot afford to write a $700 check. As competition continues and as the low end of the market improves, it will be harder and harder for most to reconcile the high cost of Apple.
And I don't mean to bash Apple. I love their products. And I think exclusivity is something a lot of people are willing to pay for. But if you own AAPL, I think you need to keep your eye on this issue going forward.
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.
Except that it's not $15 of my existing plan if I buy my phone w/o subsidy, it's $15 off ATT's newest price jacked up share plan. I've done the math and $15 off ATT's newest place is net loss of $300 for me if you include the subsidy. If ATT took $15 off my existing plan then sure, fair deal and I'm all in. But that's not the case.
What ATT is doing with the whole $15 off model is similar to what the Airlines did with checked baggage. It's a ginormous shell game. After the airlines started charging for checked baggage did base airfares decrease? No they continued to go higher. Now the cost of flying is considerably more whether you check or don't check. The same is happening w/ cell service.
When T-Mobile drop subsidy, it drops its wireless price by $20 a month.
When AT&T drop subsidy (for their Mobile Value Share Plan), it drops its wireless price by $15 a month.
What make you think that Verizon and Sprint won't drop their price if they drop subsidy? If they don't, their customers will switch since their plans will now be $15-20 more expensive than AT&T/T-Mobile.
Which would be fantastic if single people or new families could clone themselves to the point 4 phones in the household would be needed. It's not one size fits all like your assumption seems to make.
Now we understand why Apple is doing C series (iPhone 5C), they probably saw this coming. They probably did price C high as long as they can to rake in profits as much as possible from it.
Eventually, as the subsides ends, the prices on C will drop to the lowest possible without losing at least 20-30% profit margins.
The S series will retain the same price or even go slightly below to match the high-end status.
There is no plus side here and it's not 10 years. You are generalizing too much for something that has little impact. US is one of the few markets that does subsidies, and US is barely any dent on the population of the human race you mentioned. The rest of the world still does the same without subsides.
This place is called MacRumors, it's an Apple site, it's where all Apple folks come in and share their thoughts. Of course, they're going to praise Apple in some ways, what are you expecting them to do?
In addition, ATT is entirely at fault here. If they want to end the subsidies, they also need to end the silly and BS high rates on the monthly plans and they're not.
Their recent "value" plan is BS and everybody know it. ATT is here to make money in any way they can, just like Apple.
In the end, companies are here to make money in any way they can and partnerships will never get in that way. If ATT thinks Nexus-type of phones will make them more money than iPhones, they'll be gladly to ruin their image slightly and destroy any partnerships to make this possible. ATT and other companies know that people are just not going to do anything as long as you confuse them with different *options* and explain why it is better than the previous even if it is not factually. Facts are not going to do anything here, saving money will.
Eventually, as the subsides ends, the prices on C will drop to the lowest possible without losing at least 20-30% profit margins.
The S series will retain the same price or even go slightly below to match the high-end status.
There is no plus side here and it's not 10 years. You are generalizing too much for something that has little impact. US is one of the few markets that does subsidies, and US is barely any dent on the population of the human race you mentioned. The rest of the world still does the same without subsides.
This place is called MacRumors, it's an Apple site, it's where all Apple folks come in and share their thoughts. Of course, they're going to praise Apple in some ways, what are you expecting them to do?
In addition, ATT is entirely at fault here. If they want to end the subsidies, they also need to end the silly and BS high rates on the monthly plans and they're not.
Their recent "value" plan is BS and everybody know it. ATT is here to make money in any way they can, just like Apple.
In the end, companies are here to make money in any way they can and partnerships will never get in that way. If ATT thinks Nexus-type of phones will make them more money than iPhones, they'll be gladly to ruin their image slightly and destroy any partnerships to make this possible. ATT and other companies know that people are just not going to do anything as long as you confuse them with different *options* and explain why it is better than the previous even if it is not factually. Facts are not going to do anything here, saving money will.
Here's what happened since T-Mobile dropped subsidies and separately the phone cost from the wireless cost:
T-Mobile 2Q of 2013: added 1.1 million subscribers
T-Mobile 3Q of 2013: added 1 million subscribers
We will see how many subscribers it will add in 4Q.
T-Mobile 2Q of 2013: added 1.1 million subscribers
T-Mobile 3Q of 2013: added 1 million subscribers
We will see how many subscribers it will add in 4Q.
No company is dropping prices. It's an illusion like Macy's sales and coupons.
What source do you have that Apple makes 75% profit on iPhones? It certainly isn't their financial statements.
Right, but it's among the wealthiest. Follow the $. Also in the rest of the world cell service recieves a much greater government subsidy to keep rates lower than the U.S. So it's a bit disingenuous to say the rest of the world doesn't have subsidies. They just come from a different place or in a different form.
multiplied by how many customers? That seems like a substantial monthly amount to me ... of course, many people lose perspective once they file a company into the "big evil" category.
If AT&T, Verizon and Sprint all drop subsidies like T-Mobile did
The winners are CONSUMERS
The losers are high end smartphone manufacturers that rely on subsidy to mask the true cost of a phone.
The winners are CONSUMERS
The losers are high end smartphone manufacturers that rely on subsidy to mask the true cost of a phone.
It Appears the Telco Presidents Played Golf Together
The math has been done on this innumerable times, the cost of the subsidies are recovered in the first year of the two year contract even with the smallest data plan. I am guessing Randall Stephenson, Daniel S. Mead of Verizon and Matt Carter of Sprint met for a friendly game of golf and "joked" about how much better their bottom lines and bonuses would be if their respective companies did not have to subsidize their smartphone offerings. I mean, if they were to actually plan this sort of thing together it would be colluding and that of course is illegal, but meeting for a game of golf and joking about new ways to gouge costumers is not collusion.
The math has been done on this innumerable times, the cost of the subsidies are recovered in the first year of the two year contract even with the smallest data plan. I am guessing Randall Stephenson, Daniel S. Mead of Verizon and Matt Carter of Sprint met for a friendly game of golf and "joked" about how much better their bottom lines and bonuses would be if their respective companies did not have to subsidize their smartphone offerings. I mean, if they were to actually plan this sort of thing together it would be colluding and that of course is illegal, but meeting for a game of golf and joking about new ways to gouge costumers is not collusion.
For anybody else, the above is talking about T-Mobile family plan. Also, it's 2.5GB of LTE speed and then slower speed for unlimited web data.
Here's what it is for ATT Value:
For ATT Value plan, it's 55$ just to share 2GB of LTE among all devices, not per line. Then it is 25$ for each line, that makes it 155$ already.
So, a shared pool of max 2GB for 4 smartphones would be $155x24 = $3720.
Final 2 year costs would be $5116 not including taxes.
It's about 400$ cheaper to go with Tmobile plus you get unlimited data.