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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 Schrag4 on 12/12/2013 12:05:51 PM , Rating: 2
$5/month * 24 months = $120. That doesn't mean you're paying $200+$120=$320 for the $700 phone, it just means you're paying $700-$120=$580 for the $200 phone.

You mentioned financial responsibility in your post. I know I'm going to get totally flamed for saying this, but I'm continually amazed when I see friends or family member I know who are just starting out (or starting over) financially but they think it's a good idea to sign up for a 2 year contract that comes out to a couple thousand dollars, just for a phone. My brother, in particular, went through a rough patch where he was unemployed, had nothing basically, but he wanted a smartphone. I told him to do what my wife and I have done - buy a cheap phone and get pre-paid service (not even a monthly plan). We even offered to buy it for him, but he refused. I guess my point is, if people complain about how easy CC companies make it for people to be financially irresponsible, why don't they complain about cell providers?


By Monkey's Uncle on 12/12/2013 2:15:30 PM , Rating: 2
quote:
I guess my point is, if people complain about how easy CC companies make it for people to be financially irresponsible, why don't they complain about cell providers?


Because at the end of that 2-year contract, the phone is paid for. For the financially irresponsible that means they are stuck for a max of 2 years. No more.

That is NOT the case of a credit card that you are paying only minimum payment on - that debt can run for decades and end up costing you double or even triple the full cost of the phone.

Which looks less dangerous in the long term to someone that has issues dealing with money?


By Schrag4 on 12/12/2013 5:25:12 PM , Rating: 2
quote:
Which looks less dangerous in the long term to someone that has issues dealing with money?


Well, obviously it's less dangerous, but dangerous nonetheless. This is really no different than a Porsche dealer trying to tell me that it's only xxx dollars a month, which I probably could pay for somehow, and ignoring the fact that the car is $100K. I think if people really thought about (or were told upfront, perhaps) the fact that their new smartphone is going to cost them nearly $2000 of their hard-earned cash, they might reconsider. Instead, they see $80/month and don't realize what that adds up to.

It might sound like I'm ragging on owners of smartphones and Porsches, but I'm not. All I'm saying is if you have to finance something, perhaps you shouldn't be buying it unless it's absolutely necessary. I need a car to get to work. I don't need a Porsche. A strong argument can be made that everyone should have a cell phone, at the very least so that they don't get stranded somewhere. A family barely scraping by financally doesn't need to spend $1500 a year for cell phones (assuming more than one phone). Still on the CC theme, if a family can't really afford that 2 year plan then all the money they're paying for that phone ends up on their CC anyway, it's just less money they have to pay off their CC debt, so what's the difference?


"Paying an extra $500 for a computer in this environment -- same piece of hardware -- paying $500 more to get a logo on it? I think that's a more challenging proposition for the average person than it used to be." -- Steve Ballmer














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