AT&T CEO: Wireless carriers can't keep doing big subsidies on smartphones

By on December 11, 2013, 6:45 PM
smartphone, att, wireless carriers, randall stephenson, subsidies, phone subsidies, att next

During a recent speaking engagement at an investor conference in New York City, AT&T CEO Randall Stephenson said wireless networks can’t afford to continue to subsidize devices like they have been for years.

During the early days when it was critical to get customers to join wireless networks, it made sense to entice customers in with subsidized smartphones. But now, Stephenson said, smartphone penetration is over 75 percent and will soon reach 90 percent. Instead of simply getting people on the network, carriers need to focus on getting customers to use more of the network. The model has to change, he said.

AT&T appears to be moving along the path of eliminating traditional subsidies. Following in the footsteps of recent trendsetter T-Mobile, the wireless carrier launched an early upgrade program known as Next over the summer that would allow customers to upgrade handsets once a year and spread the price of the device out over the course of 20 monthly payments.

The problem, however, was that AT&T didn’t offer a discount on regular plans to make up for the fact that you were now also paying extra to finance your own phone subsidy. The company finally got with the times and introduced cheaper rates this past Sunday for off-contract customers.

Stephenson said the changes in the business model will be very powerful as it is where they see the market going now that most carriers have seeded the market with smartphones.




User Comments: 17

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insect said:

Um... yes they can. They make it back over the course of the contract plus some, especially if you don't upgrade every 24 months exactly.

Win7Dev said:

Um... yes they can. They make it back over the course of the contract plus some, especially if you don't upgrade every 24 months exactly.

I 100% agree. There is no reason subsidies cannot exist on current pricing. What carriers will do is eliminate subsidies without reducing prices.

Guest said:

Why not you greedy b****rds!?!

These cellular companies have been ripping us off for years now.

KenLuskin KenLuskin said:

The big winner from SUBSIDIZATION has been Apple and Samsung.

As people begin to realize that they do NOT need to upgrade so often, or how MUCH they are paying because of huge monthly fees.. the price of phones will FALL!

Apple makes 80% of their profits from selling iphones.

Apple's margins, profits, earnings, and share price will all COLLAPSE!

Trillionsin Trillionsin said:

So what they did worked... and now they want more, and take away from the customer? If they have almost 90% "penetration" then they should be happy to know they wont go bankrupt any time soon, and keep the customers happy... but it's not about customer satisfaction...

Trillionsin Trillionsin said:

The big winner from SUBSIDIZATION has been Apple and Samsung.

As people begin to realize that they do NOT need to upgrade so often, or how MUCH they are paying because of huge monthly fees.. the price of phones will FALL!

Apple makes 80% of their profits from selling iphones.

Apple's margins, profits, earnings, and share price will all COLLAPSE!

I hope that if they do take this away, that the prices will drop... but I have a feeling it wont drop enough still.

KenLuskin KenLuskin said:

Prices are based upon supply and demand.

MSFT will be charging ZERO for their windows phone OS, just like Google.

Asian competitors will use the FREE OS to produce more powerful phones that have access to MSFT powerful applications: OFFICE, SKYPE, BING, etc.

Competition is GOOD for consumers.

It will produce LOWER prices.

Apple shareholders will suffer while the world will benefit.

The writing is on the wall...

hahahanoobs hahahanoobs said:

I've been buying my phones off kijiji since the Windows Mobile 6.1 days, and use prepaid service plans. I don't see myself going back to contracts anytime soon.

Guest said:

What a revelation from the AT&T CEO who has been receiving a 20+ million dollar compensation package for a flat stock and for playing catchup with TMobile.

Skidmarksdeluxe Skidmarksdeluxe said:

I've been buying my phones off kijiji since the Windows Mobile 6.1 days, and use prepaid service plans. I don't see myself going back to contracts anytime soon.

I agree with you wholeheartedly. I once had a two year contract but after doing some simple arithmetic... it's pay as you go all the way for me. I've never looked back.

MilwaukeeMike said:

So what they did worked... and now they want more, and take away from the customer? If they have almost 90% "penetration" then they should be happy to know they wont go bankrupt any time soon, and keep the customers happy... but it's not about customer satisfaction...

Why do you think the customers get screwed? T-mobile dropped subsidies and they've been signing up people faster than anyone else. AT&T isn't trying to upset their customers, they're try to find what works best for them and their customers. If they don't please their customers, the customers will leave.

it's totally about customer satisfaction, unhappy customers for AT&T = new customers for T-mobile = AT&T in the red.

EClyde EClyde said:

So what they did worked... and now they want more, and take away from the customer? If they have almost 90% "penetration" then they should be happy to know they wont go bankrupt any time soon, and keep the customers happy... but it's not about customer satisfaction...

Why do you think the customers get screwed? T-mobile dropped subsidies and they've been signing up people faster than anyone else. AT&T isn't trying to upset their customers, they're try to find what works best for them and their customers. If they don't please their customers, the customers will leave.

it's totally about customer satisfaction, unhappy customers for AT&T = new customers for T-mobile = AT&T in the red.

I would never think customer satisfaction and ATT would be used in the same sentence. That needs to be rephrased to "customers money" and ATT.

MilwaukeeMike said:

I would never think customer satisfaction and ATT would be used in the same sentence. That needs to be rephrased to "customers money" and ATT.

I don't have ATT, so I don't know about their customer satisfaction, but if people don't like they, they'll leave. There's already no reason to use ATT. If you want a huge network and are willing to pay for it, go Verizon, if you want a cheaper plan and are ok with a smaller network, go T-mo. ATT phones even work on T-mo's network.

If you want to pay for a really slow big network then use Sprint.

Anyway... this guy wasn't talking about ATT dropping subsidies, he said everyone will do it.

EClyde EClyde said:

I don't have ATT, so I don't know about their customer satisfaction, but if people don't like they, they'll leave. There's already no reason to use ATT. If you want a huge network and are willing to pay for it, go Verizon, if you want a cheaper plan and are ok with a smaller network, go T-mo. ATT phones even work on T-mo's network.

If you want to pay for a really slow big network then use Sprint.

Anyway... this guy wasn't talking about ATT dropping subsidies, he said everyone will do it.

Let me rephrase: I would think customer satisfaction and ATT, Verizon, T-Mo, Sprint, Asus and on and on would be used in the same sentence. That needs to be rephrased to "customers money" and et al.

Fbarnett Fbarnett said:

There is no reason a good phone should cost more than 200 bucks. and you should be able to buy phones for 50 to 150 dual cores

ucould2 ucould2 said:

This long list of comments to me says that you all are just so happy with being charged for an incoming call. And not only do the Telcos make a buck from you answering the device you've got on hire-purchase from them, you think its sweet that they also charge the person who's calling you too. How come everyone over there can be satisfied with this Double Dipping attitude?

GeforcerFX GeforcerFX said:

Now that tracfone has decent smartphones I will never have to go back to a contract phone ever, even with a discount on either Verizon or at&t through my work my tracfone is beyond cheaper.

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