Seems like this era might be coming to an end.
Speaking at an investor conference in New York City on Tuesday, AT&T CEO Randall Stephenson said that with smartphone penetration at over 75 percent and soon reaching 90 percent, wireless operators need to work harder to get customers to use more of the network rather than simply getting on the network.
“When you’re growing the business initially, you have to do aggressive device subsidies to get people on the network,” he said. “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.”
AT&T is now offering $15 a month as an incentive to keep your older phone.
Stephenson also acknowledged that breaking customers of their habit of upgrading to a new phone every 18 months to two years is not an easy task. But he said a business models focused on financing rather than providing a subsidy would be “transformative” for the industry. He said the company’s new AT&T Next program, which offers no-money down and 0-percent financing, drives smartphone penetration in a way that is more sustainable over time.
“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,” he said. “You can use your own device or finance it. I think this will be very powerful. It’s where we see the market going.”
Fascinating article.
They absolutely can afford to, they would just prefer to make more money. Transparent.
If I’m going to use my “older phone” or buy my phone up front in cash, you can bet im not siginign up for an ATT (or verizon or sprint) contract.
I am more likely to just sign up with a smaller prepaid reseller like Red Pocket Mobile or Cricket.
The big carriers charge one hell of a premium and only reason that justifies it is the fact that they subsidize your phone.
Their subsidy is about $20 a month for an iPhone, so this lets them keep a bit more money in their pocket.
You don’t know what they can and can’t afford.
Apparently, 70% of its customers have already moved over to Mobile Share (we have), and now AT&T no longer needs the old incentives. Makes sense.
As always, its customers will vote with their wallets, and we’ll see what results.
I, for one, welcome no more subsidies, as it promises to offer more flexible and frequent upgrades.
I also don’t mind paying for what I get, as long as the price is reasonable.
And Rogers is offering $20/month discount if you bring your own phone.
But the fact remains, most people can’t afford to lay out that much cash at one time for a smart phone. AT&Ts business will suffer if they make customers purchase the phone outright.
The better solution is to break out the phone charge from the plan charge, and rework the contracts that way. For example, your plan is $50/month, and your phone subsidy is $20 per month. Your contract is up when your phone tab reaches zero. If you want out early, pay off your phone tab.
Some smaller carriers are already doing this. It helps keep plan prices low, which benefits customers, but it still allows customers to have smartphones, which benefits the carriers.
If not for subsidies, people wouldn’t have the expensive talk+data plans that AT&T loves. Most people can’t afford to pay $600+ for a phone all at once. The solution is to charge separately for the subsidy and the plan on the monthly bill.
This is the biggest load of crap ever. They have been telling us for years that part of our monthly cost was because they were subsidizing the phone. That is exactly why we had to sign contracts and pay an early termination fee if we broke that contract.
I currently pay $230 a month for three phones. They are NOT losing money on me.
As a BYOD person, this sounds great, but I’m in Toronto, Ontario. 😛
I would say the top 5 carriers here are Rogers, Bell, Telus, Wind Mobile, and Mobilicity, (in ranking order). The first three uses contracts, while the latter two uses the Tab/Supertab method, (and not as popular, however, don’t know if it’s just a coincidence, or because the top three has bigger networks).
Despite the appeal of paying a lower monthly bill, it seems most people just stick with contract/subsidy model because of that initial draw in having a premium device for a subsidized price.
Which doesn’t make sense to me why AT&T would abandon, what should be, a profitable method, ($60×24= $1440 vs $45×24=$1080).
I can, and do, know that, because they’re a public company.
Which means your expense can be reduced to ~$150 a month.
Because an iPhone subsidy costs AT&T ~$650 and $1440-$1080 is $360?
Now there’s some irrefutable logic!
Maybe although would not be shocked if prepaid stared offering some sort of data share plans to compete in the near future.
Well, no, cause the customer also initially contributes $200 for the phone, so that should be factored in too.
AT&T should also get some type of deal for the iPhone, cause I doubt it would cost them $650 per phone.
I’m going to guess that “maintenance mode” actually means (a) reducing network build-out and (b) finding new ways to charge more for different uses of the same bandwidth.
What contract? That’s one of the big selling points of both T-Mobile’s Simple Choice and AT&T’s Mobile Share Value plans: With no subsidy, there’s no need for a contract.
$650 is the average Apple gets for an iPhone, blended across all models and carriers worldwide. If you’re solely talking about iPhones sold with a $200 subsidy on AT&T then it doesn’t cost them $650 per phone, it costs them more.
Some company other than AT+T could trivially provide a payment plan on phones, too.
People want smartphones and they’re willing to pay a premium over time for them.
The carrier doesn’t need to be the one to provide that service; they aren’t in Europe, for instance.
(Also, note the tail paragraph: “You can use your own device or finance it. I think this will be very powerful. It’s where we see the market going.”
Looks like AT+T’s plan is to still offer a contract-like financing option, just not have it be the default.)
“wireless operators need to work harder to get customers to use more of the network rather than simply getting on the network”
I thought the networks couldn’t handle everyone using all the data the want, so they went to tiered plans.
Sounds fishy.
But aren’t the cries for a cheap iPhone for markets that don’t subsidize phones? And Europe has much cheaper phone rates.
A couple of reasons:
Wind and Mobilicity are non-starters for most Canadians. Their coverage is garbage and they’re only interested in serving really high-density areas so they can skimp on towers. If you never leave Toronto, then these carriers are an option. Otherwise you’re paying roaming fees and they’re no cheaper than the big three.
Second, they mark up the cost of phones and give you a larger tab than they should. Go look up the Nexus 5 on Wind. They quote $500 CDN as the retail price, yet you can purchase it from Google for $350 US. Your tab is based on the $500 price. Simply put, they’re ripping you off.
I can’t speak for Bell, but Telus and Rogers now give you a $20 cheaper price on their “share” plans if you bring your own device. But their prices are still unusually high.
3.8 billion profit last quarter compared to 3.6 year-earlier quarter. they arent starving…theyre getting fatter.
I have calculated what it would cost me to move to a mobile share plan and it would cost me for a similar amount of service that I already pay for.
If you want me to pay for my device outright, then you better show me some better prices than what you are offering right now.
$95 per month (including the smartphone device fee) for a 2GB mobile share plan is insane.
Meanwhile here in Canada pretty much the opposite has just taken place, with new legislation forcing carriers to end the tyranny of three year contracts before being able to upgrade and instead offer two year contract/upgrade cycles. My 4 was on a three year. My 5s is on a two year.
And if AT&T manage to pull this off, you’d better hope Apple do a better job of updating the software for older phones. My 4 took an immediate nosedive in performance when I upgraded to iOS 6. Made the last year of using it an exercise in waiting patiently between taps.