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He said carriers need to stop focusing on luring in new subscribers and instead set their sights on getting existing customers to use more of the network

AT&T's CEO recently said that carriers could no longer afford to pay subsidized prices for subscribers' new smartphone hardware.
 
According to a new report from CNET, AT&T CEO Randall Stephenson told an investor conference in New York City on Tuesday that subsidies for high-end smartphones must end.
 
More specifically, Stephenson sees smartphone market penetration at 75 percent in the U.S., and it's expected to climb to 90 percent "soon." This kind of growth, he said, means that carriers need to stop focusing on luring in new subscribers and instead set their sights on getting existing customers to use more of the network.
 
"When you're growing the business initially, you have to do aggressive device subsidies to get people on the network," said Stephenson. "But as you approach 90 percent 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." 
 
Before Apple's iPhone launched in 2007, wireless carriers placed their focus on bringing new subscribers in to the network. Once the iPhone was released, it was made exclusive to AT&T initially, where the carrier offered unlimited data plans through its 3G network as a way of drawing in data-hungry customers who wanted the new iDevice. 
 
In 2010, AT&T was the first carrier to eliminate the unlimited data model and move to tiered plans instead.
 


Randall Stephenson [SOURCE: phonearena.com]

But the goals have changed for AT&T. Now that the iPhone and other smartphones have flooded the market, it wants to move away from subsidized pricing as a way of building customer growth and instead help customers make better use of its network. 

One of the ways it has done this is through its Next plan. This allows customers to purchase a new handset with no money down and pay a monthly fee for 20 months as part of their wireless bill. After one year, the handset can be traded in for an upgrade to newer hardware. From there, a new 20-month cycle starts based on the price of the device.

"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," said Stephenson. "You can use your own device or finance it. I think this will be very powerful. It's where we see the market going."

AT&T also recently reduced off-contract prices and changed its base costs for each data tier. 

Stephenson added that AT&T will be looking more toward the lower end of the market now that capacity problems have been addressed for the high end (thanks to LTE). Part of the low-end strategy is utilizing its latest purchase of Leap Wireless, a prepaid carrier that AT&T purchased for $1.2 billion back in July of this year.

"You will see us go very aggressively in the prepaid market," said Stephenson.

It seems like AT&T has been watching T-Mobile's latest "UnCarrier" moves. T-Mobile eliminated contracts for reduced cell phone plans in March and was the first to introduce an early phone upgrade program in July. Then, in October, it started offering a free unlimited international text and data plan.

More recently, T-Mobile announced Tuesday that it would be dropping down payments for Apple's new iPhone 5S and iPhone 5C handsets, as well as certain iPad models. It's a limited holiday offer, though. 

Source: CNET



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By Mint on 12/11/2013 12:48:26 PM , Rating: 4
There's nothing wrong with financing. Why are you drawing the line at cell phones? What about cars and homes?

The problem is not that vendors are letting people avoid paying for phones all at once. The problem is, as you mentioned, the obfuscation of total price.

There should be a law where all contracts for all consumer products show the total commitment in a big font on the front page.

Something tells me that prices would be a little more competitive if AT&T iPhone contracts showed $2376 on them instead of $200.


By Motoman on 12/11/2013 1:31:59 PM , Rating: 2
quote:
There's nothing wrong with financing. Why are you drawing the line at cell phones? What about cars and homes?


Do you have to pay an ETF is you sell your car or home after a year? No? Huh. Guess you're not comparing apples and apples then, now are you?

Also, as noted, the obfuscation of the true cost is another unique issue. People financing a car or a house have 100% understanding of what their actual cost is. Traditional long-term cellphone contracts are deliberately constructed and marketed to obfuscate that actual cost.


By Accord99 on 12/11/2013 4:28:58 PM , Rating: 2
quote:
Do you have to pay an ETF is you sell your car or home after a year? No? Huh. Guess you're not comparing apples and apples then, now are you?

You pay an ETF if you break your contract, try breaking a mortgage early.

quote:
Also, as noted, the obfuscation of the true cost is another unique issue. People financing a car or a house have 100% understanding of what their actual cost is.

The housing bubble and the proliferation of consumer leasing of cars says most people don't really know much more than the monthly payment.


By Motoman on 12/11/2013 4:42:00 PM , Rating: 2
quote:
try breaking a mortgage early.


I have. It's called selling your home. You think there's an ETF in there?


By Jeffk464 on 12/11/2013 1:36:37 PM , Rating: 2
Financed home yes, financed car no, finance daily spending absolutely not. Financing takes your spending income and drops it around 10-18%, it also puts you in deep do do if anything happens to your income.


By Monkey's Uncle on 12/11/2013 3:53:04 PM , Rating: 2
quote:
There's nothing wrong with financing. Why are you drawing the line at cell phones? What about cars and homes?


Finance phones, cars and homes? Are you MAD?

I buy my cars and houses for cash only. Finance them ... feh!


By Monkey's Uncle on 12/11/2013 3:55:13 PM , Rating: 2
(hit submit too quick)

Phones I get on contract!!


By JediJeb on 12/11/2013 5:36:49 PM , Rating: 2
quote:
There's nothing wrong with financing. Why are you drawing the line at cell phones? What about cars and homes? The problem is not that vendors are letting people avoid paying for phones all at once. The problem is, as you mentioned, the obfuscation of total price. There should be a law where all contracts for all consumer products show the total commitment in a big font on the front page. Something tells me that prices would be a little more competitive if AT&T iPhone contracts showed $2376 on them instead of $200.


What should be done is a requirement that the phone financing be separate from the service. Let the phone companies sell the phones, but make them sell them separately, that way you know just how much you are paying for service and how much you pay for phones.


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