Carrier AT&T is veering away from subsidized phones, and it's paying off

EbookReader

macrumors 65816
Original poster
Apr 3, 2012
1,190
1
http://www.engadget.com/2014/01/28/att-next-growing/
AT&T is veering away from subsidized phones, and it's paying off

The wireless industry in the United States is in the midst of some rather significant changes. Ever since T-Mobile implemented its Jump program early last year, the carrier has turned subscriber loss into massive gains. The company's success is rubbing off, too. AT&T's Next program is very similar to Jump, which lets customers pay off their phones in monthly installments and become eligible for upgrades earlier, and is just one example of a major transformation taking place throughout the industry.

According to AT&T's earnings report, the company saw more than 1 million Next sales, which accounted for 15 percent of all smartphones sold in the quarter. AT&T CFO John Stephens elaborated in today's investor call, saying that Next accounted for 20 percent of total sales in December alone. This doesn't sound like much right now, but the big picture shows a different story. Next is actually growing at an incredibly fast pace, and it's unlikely that AT&T will change course anytime soon.

At present, 1.5 million subscribers have signed onto Next. Again, this is a small number compared to the company's total customer base (there are now 110 million subscribers, with nearly 73 million of those being postpaid), but what's interesting is how quickly that number has grown. According to the numbers, 1 million people signed onto Next just in the past quarter; this means that only 500,000 subscribers -- one-third of its current total -- were activated in the three months following its July launch.

The fourth quarter is a huge one thanks to holiday sales, but AT&T is quite optimistic that this is the way forward for the company. In today's investor call, Stephens said the market is embracing these kinds of plans, and AT&T customers are loving it. "You have to be aggressive in the marketplace and have your ear to the ground to what the consumer wants," Stephens said.

That's talking the talk, but AT&T is showing that it can walk the walk. Last week, the company announced that any postpaid subscriber currently on a standard two-year contract will be able to switch to Next and upgrade to a new phone once they're six months into their commitment. In August, the carrier lowered Next device prices to compete with Verizon's Edge plans; and last month, it added more pricing options and offered monthly discounts to anyone who is signed up for the service.

There's a reason why AT&T wants its customers to switch plans: The old-school contract model is just not working out as well as it once did. At a December investor conference, CEO Randall Stephenson noted that subsidy plans are unsustainable. Stephenson noted: "As you approach 90 percent [smartphone] penetration, you move into maintenance mode. That means more device upgrades. And the model has to change. You can't afford to subsidize devices like that."

This wasn't the first time a wireless executive has made this observation, and it likely won't be the last. Carriers are always interested in finding new ways of making money, and as the vast majority of consumers embrace smartphone use in the US, it's simply going to be tougher for them to bring in the revenues they're used to enjoying. According to Stephenson, plans like Next and bring-your-own-device (in which you pay less per month if you don't have a subsidy) are more sustainable over time.

Not only is Next quickly catching on with AT&T customers, it's also exactly what the company wants -- and it's going to get even more aggressive about it. This year, expect to see a lot more drive from the company to accelerate Next adoption. Change is happening in this once-stale industry, and the transformation is coming a lot faster than we think.
 

easy-peasy

macrumors regular
Jan 31, 2014
155
0
As long as they lower their monthly prices and let us pay for the phone with reasonable monthly installments, I'm all for it.

Of course it's always a better deal to simply find a dynamite pre-paid carrier if you want significant savings.
 

barkomatic

macrumors 601
Aug 8, 2008
4,027
1,798
Manhattan
If they get rid of subsidies altogether then I'll just pay for the device outright. I don't wanna mess with another monthly bill and deal with a locked iPhone.
 

bniu

macrumors 6502a
Mar 21, 2010
985
179
If they get rid of subsidies altogether then I'll just pay for the device outright. I don't wanna mess with another monthly bill and deal with a locked iPhone.
I agree 100%. I want one thing from AT&T, simplicity. With simplicity, AT&T makes fewer mistakes, their reps are more easily trained, their costs drop dramatically. As a customer, as lovely as some of the phone reps can be, I don't want to talk to them fixing AT&T's mistakes (which thankfully I have seen few of).

I just want consistent service at a consistent price and being able to acquire new devices at consistent prices whenever I want. I don't want to play games trying to save every nickel I can. AT&T's job is to provide me a pipe and get the heck out of my way. I send them some money each month, and that should be the only interaction I have with them each month.
 

mtneer

macrumors 68030
Sep 15, 2012
2,756
1,780
?.......

I just want consistent service at a consistent price and being able to acquire new devices at consistent prices whenever I want. I don't want to play games trying to save every nickel I can. AT&T's job is to provide me a pipe and get the heck out of my way. I send them some money each month, and that should be the only interaction I have with them each month.
That's exactly what AT&T or any other company in its shoes will desperately try to avoid - go from being a source of primary value creator to a commoditized utility provider. AT&T will be in the same boat as Intel - having to spend billions in capital and yet find all the benefits of that spending go to other companies while they are left with commoditized pennies. I think they will fight to the last to be able to control the customers value experience.
 

easy-peasy

macrumors regular
Jan 31, 2014
155
0
All I gotta say is $130 for 2 lines and 10GB of data is NOT BAD at all!
While I agree, the fact that you are costing yourself $900 in iPhone subsidy every two years means the plan really costs $167.50/mo ($83.75 per line) which is still a good value for unlimited talk, text and 10 gb of shared data nonetheless.
 

maflynn

Moderator
Staff member
May 3, 2009
63,853
30,369
Boston
Correct me if I'm wrong, but only the US uses subsidized pricing, carriers in Europe offer no such program.

I think the industry in the US is moving away from subsidized pricing, first it was T-Mo, and seeing the success they had, AT&T is fighting back. Even VZW is moving away.

There is a financial incentive for these carriers to get people to pay full price and it seems many consumers would rather avoid being locked into a 2 year contract when they get a subsidized phone.
 

cnotes2019

Suspended
Aug 17, 2013
1,514
56
But isn't a "contract" just semantics when in the end you still have to pay a lump sum if you want to switch carriers be it called an etf or the balance of the phone? I say just wait a couple months after a phone comes out and negotiate a price via swappa to get the latest and greatest at a cheaper price :) and stay on the plan your and do the same for the new carrier (and just take over someone else's contract to avoid activation fees etc via aol)!
 

Menel

macrumors 603
Aug 4, 2011
6,199
1,050
But isn't a "contract" just semantics when in the end you still have to pay a lump sum if you want to switch carriers be it called an etf or the balance of the phone? I say just wait a couple months after a phone comes out and negotiate a price via swappa to get the latest and greatest at a cheaper price :) and stay on the plan your and do the same for the new carrier (and just take over someone else's contract to avoid activation fees etc via aol)!
Its choice. Many phones last longer than 2 years. Or they'd like less cumbersome freedom to sell and buy a different phone.

Not everyone freely finances left and right, especially not a commodity like a phone handset.
 

PNutts

macrumors 601
Jul 24, 2008
4,835
336
Pacific Northwest, US
This is old news.
Old news? The title says "paying off" which is a point in time claim and the referenced link referenced AT&T's fourth quarter earnings that were released last Tuesday.

That information was three days old when the this thread started. I'm not a mayfly and I don't live in the forums so this wasn't old news to me.

A better approach is to simply report the thread to the Mods and refrain from making off-topic comments.
 

Apple Trees

macrumors 6502
May 28, 2013
261
0
Negative ghost rider.
No that's pretty much true. AT&T and VZW are making their money by attracting customers with their widespread, fast LTE networks but the data plan allotments really limit the actual use people can get out of those networks. The mobile share plans are the prime example. As the networks get faster, people will need more data. Their choice is either to increase their data allotment by increasing their monthly bill or risk $15/gb overages. Overages are a goldmine for the carriers. Luckily I still have unlimited with Verizon.
 

Steve686

macrumors 68040
Nov 13, 2007
3,183
1,121
US>FL>Miami/Dade>Sunny Isles Beach>Condo
No that's pretty much true. AT&T and VZW are making their money by attracting customers with their widespread, fast LTE networks but the data plan allotments really limit the actual use people can get out of those networks. The mobile share plans are the prime example. As the networks get faster, people will need more data. Their choice is either to increase their data allotment by increasing their monthly bill or risk $15/gb overages. Overages are a goldmine for the carriers. Luckily I still have unlimited with Verizon.
10gb with 2 lines for $130 a month is in no way gouging. In fact, they have added 6gb(4gb/mo. to 10gb/mo.) compared to the old style plan and dropped the price almost half for me. I averaged about 2.75-3.0gb usage on my plan a month total at an average of 25gbits/second LTE service. Even if LTE could sustain an increase of 2x speed, I won't even come close to 10gb usage. I don't see where you think it is gouging?
 

OllyW

Moderator
Staff member
Oct 11, 2005
16,747
6,364
The Black Country, England
Correct me if I'm wrong, but only the US uses subsidized pricing, carriers in Europe offer no such program.
You are wrong. :)

There are plenty of subsidised plans on offer in the UK though they are different to those on offer in the USA. Plans with a lower monthly cost plans mean you pay more up front for the handset while more expensive plans result in the handset being cheaper or free (including the latest iPhones).

There are also a lot of low cost SIM only plans with good call and data allowances.
 

Apple Trees

macrumors 6502
May 28, 2013
261
0
10gb with 2 lines for $130 a month is in no way gouging. In fact, they have added 6gb(4gb/mo. to 10gb/mo.) compared to the old style plan and dropped the price almost half for me. I averaged about 2.75-3.0gb usage on my plan a month total at an average of 25gbits/second LTE service. Even if LTE could sustain an increase of 2x speed, I won't even come close to 10gb usage. I don't see where you think it is gouging?
It's only $130 without included the price of the phones. Add in the price of 2 iPhones on NEXT and it's $200. You'll be getting no more subsidies on that $130 plan. AT&T has already done their math.
 

bushman4

macrumors 68030
Mar 22, 2011
2,544
375
There's no difference to subsidizing a cellphone or letting you pay it off. The price of the phone is built into your service each month when it's subsidized and when it's NOT-subsidized the price appears separately each month. So we
What's the difference we as custers pay it either way
 

jplusc

macrumors 6502a
Jul 5, 2010
610
99
The simple fact is that this makes sense. Yes, you're essentially going to pay the same price if you always want the newest device. Period. But many people keep a phone for more than 2 years and they shouldn't have to pay a device subsidy built into the service costs. Furthermore, some people like less expensive smartphones (like the Nexus 5). This just makes sense and I'm happy the change is finally happening. You should be paying for what you want, period. No hidden or other built in costs.