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  • AT&T CEO: Subsidized Smartphone Prices Will Have to Come to An End Some Day


    When we buy high-cost smartphones from cellular carriers, such as iPhones, we generally get a price break as long as we go with a two-year contract. For example, the iPhone 5s would generally cost anywhere from $649-$849 unlocked with no contract, but carriers will generally sell it for $199 with a two-year agreement. This is known as a subsidized price model, in which the carrier eats a part of the cost of the smartphone initially that they can expect earn back throughout the life of your two-year agreement.

    While customers have been enjoying the ability to buy their smartphones at the lower cost with a two-year agreement for years, AT&T CEO Randall Stephenson explained to investors that subsidized smartphone pricing will some day have to come to an end:

    When you’re growing the business initially, you have to do aggressive device subsidies to get people on the network. 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.
    Stephenson points the finger at device upgrades, which generally come into effect for the customer before their two-year agreement is up. Customers can upgrade to a new smartphone at a subsidized price as well, which means less money for the carrier if the customer chooses to upgrade early before the two-year agreement is completed.

    If AT&T were to put an end to selling subsidized smartphones, they would be limiting their reach to their consumers. Many people just don't have $649-$849 to flush down the toilet on a new smartphone in addition to the high monthly payments.

    Sources: CNET
    This article was originally published in forum thread: AT&T CEO: Subsidized Smartphone Prices Will Have to Come to An End Some Day started by Anthony Bouchard View original post
    Comments 27 Comments
    1. atorres062's Avatar
      atorres062 -
      Greedy *** corporations!!!!!
    1. cpotoso's Avatar
      cpotoso -
      Subsidizing? My *****. You are simply FINANCING the phone with higher payments in the 2 year contract, you just don't call it that way... The real shame is the greediness that does not reduce the contract pricing after 2 years even if you do not update the phone. That is why, long time ago, I went to different pastures, away from ATT. There are plenty of options other than 2-year contracts.
    1. Eagleye's Avatar
      Eagleye -
      I'll just leave this here…
    1. Scotty Manley Silberhorn's Avatar
      Scotty Manley Silberhorn -
      If they lower rates like data use and phone usage, I don't have a problem with that. But I thought the main reason why we are paying so much for phone and data plans is because the phones are subsidized. Correct me if I'm wrong.
    1. Christophxr's Avatar
      Christophxr -
      Quote Originally Posted by Eagleye View Post
      I'll just leave this here…
      (Image)
      Thank you.
    1. edwilk55's Avatar
      edwilk55 -
      This guy's an eff'n idiot! He'll tank AT&T b4 it's over with which I don't care about because I'm sure they'll end my grandfathered unlimited plan eventually. The coverage is crap when it's crap and it's crap in a lot more places than Verizon! I'm counting on Verizon not giving two [email protected] what this guy does and keeps the structure in place. I'm gone if that day comes.

      I'm wondering if this guy's a victim of his own marketing department. Ridiculous!
    1. revsteve's Avatar
      revsteve -
      Im fine if there are no more subsidies. Just lower the cost of my plan the requisite $30 a month which covers the subsidy and I'll bring my own phone. Oh - you can't do that you say? Shocker.
    1. fleurya's Avatar
      fleurya -
      Quote Originally Posted by Eagleye View Post
      I'll just leave this here…
      [Iimage]
      PREFECT!
      You win all the internets today!
    1. bigboyz's Avatar
      bigboyz -
      ...and this is the double edged sword we call capitalism. Our greatest achievement is also our biggest threat. GREED. Yet, businesses as a model are created/built to make money. So you can't really get mad at a corporation that exists soley to find ways and make more money efficiently. If you owned the company or had stake in it, you would applaud his words. Unless bartering comes back into mainstream economy, expect to get raped with phone prices moving forward..its the american way :]
    1. csglinux's Avatar
      csglinux -
      His comment would be entirely fair if users' monthly charges were lowered as a result of scrapping the subsidy. But that will never happen - in fact, AT&T has already increased prices for the most popular mid-tier monthly shared data plans without a contract. Expect a further price hike in addition to the removal of carrier subsidies. AT&T are even discussing continuation of carrier-locks on any full-priced, unsubsidized devices they sell or ship from their own stores. Just watch this space!

      The only way Randall Stephenson will ever play nice is through stiff competition (T-Mobile?) or the threat of a strong electric current after having electrodes attached to his genitals.
    1. Breezy215's Avatar
      Breezy215 -
      Kinda reminds me when the machines took over in The Terminator... lol all jokes aside, if that actually happens, that will be the end of my 10 year stint with AT&T!
    1. buggsy2's Avatar
      buggsy2 -
      Quote Originally Posted by bigboyz View Post
      ...and this is the double edged sword we call capitalism.
      Whatever market system we have in the USA is sure not capitalism.
    1. DieselVexx's Avatar
      DieselVexx -
      Buggsy +1!!!
    1. hemptation's Avatar
      hemptation -
      Quote Originally Posted by revsteve View Post
      Im fine if there are no more subsidies. Just lower the cost of my plan the requisite $30 a month which covers the subsidy and I'll bring my own phone. Oh - you can't do that you say? Shocker.
      That's the point. The have no intentions of lowery the cost of your plan. Lol. And the minute they do this. I will buy my phone outright and head to net 10 and pay 50$ less a month This will hurt AT&T. Dramatically. So I don't see this ever happening
    1. *T*'s Avatar
      *T* -
      Seriously, screw this guy. What a d1ck.
    1. Orby's Avatar
      Orby -
      Quote Originally Posted by hemptation View Post
      That's the point. The have no intentions of lowery the cost of your plan. Lol. And the minute they do this. I will buy my phone outright and head to net 10 and pay 50$ less a month This will hurt AT&T. Dramatically. So I don't see this ever happening
      Well, AT&T did drop their smartphone charges on their shared plans by $15 recently...

      Unfortunately, Net10 (and all of América Movil's other MVNOs in the US... all the MVNOs that aren't carrier-owned, really) are totally reliant on AT&T/Sprint/TMo/VZW to set their wholesale "bucket" and access prices. Even Sprint and T-Mobile are stuck paying special access prices from AT&T and Verizon for PSTN along with some bandwidth and cell sites.

      If AT&T loses, say, fifty million customers to Net10 (who are still using AT&T's spectrum, bandwidth, cell sites, interconnects, etc.), AT&T will duly raise prices on Net10's access, in turn, raising Net10's monthly charges.

      There will be a winner and a loser. The winner will always be the ILEC; the loser, the consumer.
    1. csglinux's Avatar
      csglinux -
      Quote Originally Posted by Orby View Post
      Well, AT&T did drop their smartphone charges on their shared plans by $15 recently...
      It's not quite that simple Orby. The flat rate line charge is down, but the data prices that go along with it have gone up, leaving most users worse off:

      http://news.cnet.com/8301-1035_3-576...gain-for-some/

      Quote Originally Posted by Orby View Post
      There will be a winner and a loser. The winner will always be the ILEC; the loser, the consumer.
      I'm not so pessimistic. If T-Mobile's network expands (which it eventually will), this will be a win for the consumer.
    1. hemptation's Avatar
      hemptation -
      Right on. Either way. Lol. I will switch service providers if they can't hook me up and keep my bill the same They even started the NEXT plan , so we can get yearly upgrades. And the bill for the phone is placed on our monthly bill. Sounds good? Yea right. Come to find out, they charge 40$ a month for 18 months. That's on a 32 gig ip5s So that's basically full price. I don't think I had to renew my contract on that tho. I did say I would never make that mistake again. Would rather pay the 300$ up front and stick to the contract And my bill isn't that bad. I pay 165 a month for 2 iPhones Unlimited text and web and unlimited mobile to mobile. We share 700 minutes a month But that's only to land lines And who has a home phone anymore? And free nights free weekends. So I don't have anything to complain about in all honesty
    1. stolenpentium's Avatar
      stolenpentium -
      If this happens, many subscribers will jump ship to tmobile/metro.
    1. Pepsolman's Avatar
      Pepsolman -
      They want to charge full price for the phone with a 2 year contract. That's what they want.