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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:]

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 Dr of crap on 12/11/2013 12:51:28 PM , Rating: 2
So lets see,
What will happen is first $600 for the new iphone 5
Then in one year you want that NEW iphone that's out - another $600, now your card has $1200 charged on it and the payments, only $15 a month have only be reduced $200 at best, so then the next new iphone comes along and of course you have to have it at $700 (a inflation and increased pricing form Apple, they have to make a bigger profit!), and now you at almost $2000 and how much have you paid off - close to 400, leaving you about 1500 in debt.

Now use the current model, I pay $100 a month for 2 years and after that I re-up for the current new model, for almost no cost, and then go another 2 years, and my credit card has no increased charges!

I prefer the current model, thank you f%cktard!

By Motoman on 12/11/2013 1:30:15 PM , Rating: 2
You're comparing buying a new phone every year to re-upping a contract after 2 years...and on top of that, not factoring in the monthly payment for your subsidized option vs. the non-subsidized option.

Go look in the mirror. That's where the f%cktard is.

Math is hard.

By Dr of crap on 12/12/2013 12:31:41 PM , Rating: 2
AS I said, monthly $100 over paying interest on you credit card.

I rather pony up extra $20 each month for 24 months and get a new phone for free each re-up, rather than have to pay over $600 up front.

And here's the real way it will work.
Buy a new iphone for lets say $700. One year later get the next NEW iphone for another $700, and then in another year , $700 all while paying a reduced monthly charge. So if I pay $20 extra for those 24 months - its about a wash!

Really this new math is toooo hard!

By bankerdude on 12/12/2013 12:59:28 PM , Rating: 2
Something you are not considering in your example of upgrading the iphone twice a year is the resale value of the old one you are getting rid of. Apply the amount you can sell your old iphone for to the cost of the new one and the math will change.

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