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
12/12/2013 12:55:24 PM
They're already paying the $300 subsidy (or whatever it really is), so that $153/customer-yr is still profit. Taking the subsidy away would suggest that given the same customer-base, AT&T will double their profits annually ($300/2 + $153).
But we all should know that you can't do simple math like this - there are so many unknowns and so many things that affect profits, that this is purely misleading.
I don't think greed is the problem here. I think the issue is that many CEOs have narrow vision and can't see the benefits in a better world where they aren't nickel-and-diming their customers.
"DailyTech is the best kept secret on the Internet." -- Larry Barber
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
Buoyed by Strong iPhone Sales, Apple Reports Revenue of $42.1B, $8.5B in Profit for Fiscal Q4
October 20, 2014, 5:21 PM
Windows 8.1 + Android "Sell Mini PC" w/ Bay Trail Creates New PC Form Factor
October 20, 2014, 5:07 PM
OnePlus to Open Pre-orders on October 27
October 20, 2014, 1:34 PM
Apple Releases iOS 8.1; Adds Apple Pay Support, SMS Relay, Instant Hotspot
October 20, 2014, 1:00 PM
Quick Note: Android Gmail App to Gain Yahoo, Outlook Account Support
October 20, 2014, 9:15 AM
Forbes: Microsoft's Smartwatch to Launch Next Month
October 20, 2014, 8:36 AM
Most Popular Articles
Google Launches "Same-day Delivery" Subscription Service for $95/year
October 14, 2014, 10:37 AM
Google Announces Android 5.0 “Lollipop”, Nexus 9 Tablet, and Nexus 6 “Phablet”
October 15, 2014, 12:41 PM
Ireland to Close Loophole Apple and Google Used to Evade EU Taxes
October 13, 2014, 10:45 PM
Update: Motorola Droid Turbo Coming Oct 28, 48-hour Battery Life Confirmed
October 19, 2014, 9:19 PM
Samsung Develops 802.11 AD Wi-Fi, But Will it be Sunk by Poor Penetration?
October 14, 2014, 4:30 PM
Latest Blog Posts
The Surface Mini That Was Never Released Gets "Hands On" Treatment
Sep 26, 2014, 8:22 AM
ISIS Imposes Ban on Teaching Evolution in Iraq
Sep 17, 2014, 5:22 PM
Space Terrorism is a Looming Threat For the United States
Apr 23, 2014, 7:47 PM
Facebook Aims to Provide Internet to "Every Person in the World" with Drones, Satellites
Apr 1, 2014, 10:20 AM
Retail Mobile Sites Experience Outages in Light of Simplexity's Bankruptcy
Mar 14, 2014, 8:48 AM
More Blog Posts
Copyright 2014 DailyTech LLC. -
Terms, Conditions & Privacy Information