AT&T CEO Says Carriers Can No Longer Foot the Bill for High-End, Subsidized Smartphones
December 11, 2013 10:55 AM
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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
, 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.
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RE: Thank you, T-Mobile for bring the United States to the light
12/11/2013 6:01:28 PM
Ok dude you need to realize there is a distinction between financing a phone and getting a subsidized phone with a service contract. The latter is the evil one, that one should go away, yes. HOWEVER, purely financing the phone is not a bad thing, this is how T-Mobile does it. Your service is entirely separate from your loan for your phone. If you want to cancel service 4 months in on T-Mobile, there is no cancellation fee. You do, however, need to pay the rest of the balance of the phone itself. And also, when you finish paying for your phone, if you choose not to upgrade, your monthly bill essentially goes down because you are no longer paying for the 'phone loan' portion.
It is quite short-sighted to make such a blanket statement as to say, "phones should only be available at full price." Especially without considering other good options.
Also there is no need for you to get all high and mighty about how it is not good to use credit cards and blah blah. People's personal finances are exactly that, PERSONAL. They can do what they want, and it's none of your damn business.
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