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AT&T: Device Subsidies Likely to Go Away

Dec 10, 2013, 12:27 PM by Eric M. Zeman

AT&T CEO Randall Stephenson today said that the modern practice of device subsidies is unsustainable for the wireless industry. In order to convince people to use their network, wireless operators generally subsidize the cost of the handset. This is what makes a $649 device appear more affordable when priced by the carrier at $199. The carrier recoups the $450 in subsidies over the lifetime of the contract. "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% 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." AT&T recently dropped the cost of service plans for those customers who bring their own device to the network, or continue to use an old one. AT&T also allows more frequent device upgrades as long as customers agree to pay for a larger share of the device's actual cost. Stephenson didn't announce any concrete plans to move away from providing device subsidies, but the company has already laid the groundwork. Stephenson also noted that once it completes its acquisition of Cricket Wireless, it will move more aggressively into the prepaid space. AT&T has already said it will merge Cricket with its own Aio Wireless prepaid service.

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Comments

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Zpike

Dec 11, 2013, 10:48 AM

But lets be realistic

This isn't going to lead to reduced costs for consumers. One way or another ATT will be raking in more dough at the expense of its customers.

andrewbearpig

Their actions are saying different.

...

T Bone

The fact of the matter is that the price of wireless service has been rapidly declining for decades.....back in the 1980's when they first introduced only the rich could afford to have a cell phone, your defined region of coverage was minuscule, and y...
(continues)

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Zpike

Dec 12, 2013, 2:32 PM

For all those who think ATT is cutting you a deal

Here's a piece that breaks it down pretty well.
http://news.cnet.com/8301-1035_3-57614735-94/why-at- ... »

T Bone

Let's be realistic....there is no pricing plan which is better for absolutely every customer....that should't be any company's goal...

The fact of the matter is that the market is changing, the old market was based on people who had feature phones,...
(continues)

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Zpike

Dec 11, 2013, 10:54 AM

I also found this line funny

>>"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% 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."

So, is ATT in maintenance mode or growing the network?Because if they're in maintenance mode, then that means the network has already paid for itself and the price of plans should decrease dramatically.

But if they're still growing the network, i.e., rolling out LTE, LTE-A and other future technologies, then it sounds like they still need " aggressive device subsidies to get people on the network".

jmmeister

Getting rid of device subsidy doesn't mean that you aren't 'growing' or enhancing the network. Part of maintenance includes system upgrades, so rolling out LTE and LTE-A is still on the agenda for AT&T.

When the carriers are paying a large amount ...
(continues)

...

T Bone

They aren't talking about the network, they are talking about the CUSTOMERS.....he's talking about 'maintaining' customers.....i.e. making sure they don't switch to another carrier....

Let me put what he is saying in another way..

Back when we w...
(continues)

...

Zpike

Dec 11, 2013, 10:46 AM

No subsidy - No carrier locking

If carriers want the customer to be fully responsible for their own device, then they need to stop locking phones. They also need to stop imposing restrictions on what those devices can do on their networks and they should never put any pre-installed bloat on the phones. Furthermore, there should be a "significant" drop in the price of the plan. But as long as they want to muck up good devices to do only what they want them to do and only work on their network, then they should be eating some of the cost of the phone. Plain and simple.

jmmeister

You can unlock any device if it's not in a contract with AT&T.

https://www.att.com/deviceunlock »

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T Bone

If there is no phone subsidy then people will be responsible for getting their own phone and the carrier has no input into the decision....what this actually means is the abolition of carrier branded equipment....there won't be 'at&t phones' and 'Veri...
(continues)

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msteven3

Dec 10, 2013, 2:46 PM

Translation

Translation: we're still going to gouge you every month, but now you're going to have to pay full price for your phones.

tjobrien21

I believe you're spot-on correct. It's all about profit. And if there are no new customers to profit from due to saturation, there is only one answer: Take the customers you have, and squeeze harder. Because 7.3 billion (2012 AT&T) in profit just won'...
(continues)

T Bone

The article specifically says the exact opposite, it says that as a result of dropping the subsidy, monthly fees will be lower. Monthly fees will be lower because without having to give away phones, the cost to the carrier of maintaing a customer wi...
(continues)

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rwalford79

Dec 10, 2013, 1:02 PM

AboutFace

Oh coming from the carrier that once thought T-Mobile was crazy for no-subsidy pricing.

ALL service should be the same features, plans and cost. The only difference between Prepaid and Postpaid is a deposit. If you want no deposit, pay up front for device and service, if you want to pay once you get a bill and finance the handset, pay a deposit equal to three months rate plan charge but not to exceed $200.

Rather than fold prepaid into all these big carriers, the big carriers should take their normal plans and just offer them, without credit checks, deposits, and "Oh you had an account with us in the past, even though this is no deposit, no credit check, you cant get service because you're in collections" kinda crap that T-Mobile pull...
(continues)

T Bone

Not practical, the churn rate on pre-paid plans is absurdly high.....many pre-paid customers are only a customer for one term of service 30 days or 90 days and they never renew....if carriers offered exactly the same plans to pre-paid and post-paid cu...
(continues)

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