AT&T CEO Says Carriers Can No Longer Foot the Bill for High-End, Subsidized Smartphones
December 11, 2013 10:55 AM
comment(s) - last by
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
, 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.
This article is over a month old, voting and posting comments is disabled
RE: Thank you, T-Mobile for bring the United States to the light
12/11/2013 1:01:43 PM
The landline industry had much lower ongoing capital expenses than the mobile industry does. They went decades between major backend upgrade over the last century they've done: human operators to electro-mechanical switching (relays), to digital switching, to IP telephony; with the latter still ongoing. The wireless industry needs to upgrade the RF hardware and backhaul data connections on its towers every couple of years in addition to still having to expand the tower density in sub/urban areas to keep up with the growth in data consumption.
"It seems as though my state-funded math degree has failed me. Let the lashings commence." -- DailyTech Editor-in-Chief Kristopher Kubicki
AT&T Goes After T-Mobile with Reduced Off-Contract Prices, New Base Rates
December 5, 2013, 11:28 AM
T-Mobile Introduces Free Roaming for Unlimited International Text, Data
October 10, 2013, 12:38 PM
T-Mobile Unveils New Jump! Program: Twice Yearly Upgrades for $10/Month
July 10, 2013, 4:56 PM
Man Who Shot Father for Texting During Movie Previews Was Also Texting
March 14, 2014, 2:25 PM
Sony's PS4 Outsells Microsoft's Xbox One for February
March 14, 2014, 12:36 PM
Skrillex Releases Free Album Inside App, But Crashes Torture Fans
March 13, 2014, 8:04 PM
Microsoft Waives Windows Phone OS Licensing Fees for Two Hardware Makers in India
March 13, 2014, 1:07 PM
Huawei Says Windows Phone is "Low Priority", Relegates It to Dual OS
March 13, 2014, 11:21 AM
$1,200 Nikon 1 V3 Mirrorless Camera Offers 120fps Slow Motion Capture
March 13, 2014, 9:04 AM
Most Popular Articles
Bitcoin King Pt. II: Mt. Gox's Dictator Karpelès Proves Tragically Flawed
March 7, 2014, 1:12 PM
Hack Reveals Fallen Bitcoin CEO's Posh Tokyo Penthouse
March 10, 2014, 4:28 PM
Tesla Motors Calls New Jersey Out on New Rule Against Its Direct Sales Model
March 11, 2014, 12:01 PM
NASA Considering SpaceX "Red Dragon" for Returning Mars Samples to Earth
March 10, 2014, 2:43 PM
India Could Rock Google With Its Biggest Antitrust Fine Yet -- $5B USD
March 10, 2014, 8:12 PM
Latest Blog Posts
Tesla vs. BMW: Who Has the Safer EV?
Feb 1, 2014, 2:56 PM
Justice Leaks Details of Next HTC One Two Flagship Phone
Dec 5, 2013, 4:04 PM
Global Cyber Espionage Concerns Reveal Growing Cyber Armies
Nov 29, 2013, 11:04 AM
Is The Period Becoming an Expression of Anger?
Nov 26, 2013, 2:02 PM
NSA and Congress -- You Will Never Kill the Constitution, It's an Idea
Nov 10, 2013, 2:00 PM
More Blog Posts
Copyright 2014 DailyTech LLC. -
Terms, Conditions & Privacy Information