AT&T may soon reduce device subsidies

December 11, 2013
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AT&T recently announced some new plans. These new plans favored users with a contract-free device by giving a monthly discount. Moving forward, it looks like AT&T is going to be further changing gears. There has been some recent talk about how they may reduce device subsidies and start shifting customers to a place where they use a device they own, or one they finance.

Randall Stephenson, AT&T CEO, recently spoke about how smartphone penetration is over 75 percent and will soon climb to 90 percent. He went on to mention that carriers need to find a way to get customers to use more of the network, as opposed to getting them on the network. He said "as you approach 90 percent penetration, you move into maintenance mode."

This means more device upgrades are taking place and according to Stephenson, "the model has to change" because the carriers "can't afford to subsidize devices like that." This could mean users will simply keep their existing phone for longer. Or alternatively, those customers could go for the financing route, which AT&T already offers through the Next program.

Further comments from Stephenson touched on how they need to break customers of the habit of upgrading every 18-24 months and that moving from a focus on subsidy to a focus on financing will be "transformative" for the wireless industry. Essentially, reducing or removing the device subsidy will bring higher prices for the customer.

Or at least the appearance of higher prices. Some are already familiar with the retail price versus the subsidized two-year agreement price, but for some this may come as a surprise. Anyway, so far there hasn't been any timeline given as to when this may go into effect with AT&T, but Stephenson did touch on how he thinks this "will be very powerful" and how this is where they "see the market going."

SOURCE: CNET


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  • AbbaCabba

    Um didn’t T-Mobile do this a long time ago? I am pretty sure AT&T was snarky and unimpressed when they were asked what they thought about it. AT&T is an evil entity just like Verizon. All they do is look for ways to belittle the competition and slow innovation, and all of this is done while they look for ways to squeeze every last penny out of their customers. It’s truly a disgrace that they are allowed to operate this way. They want you to use more network? Really? If that is the goal then where is my unlimited data and reasonable pricing structure. Record profits every quarter and marginal services are all AT&T brings to the table. Shame on you!!! Every time someone in your company opens their mouth it is a fail.

    • Cal Rankin

      fortunately for the consumer, they are slightly less evil than verizon. I don’t like them much, but they have better prepaid options and aren’t complete bullies about prepaid (3G only and no BYOD? Seriously??) If they adopt a similar model to T-Mobile, a lot of people will be happy. Where I live, AT&T has coverage far superior to T-Mobile (It’s HSPA+/LTE vs. 2G), so the new option would be a great idea.

  • John Kneeland

    Bad news for Apple, which has far higher market share in countries where its outrageous price is hidden through subsidies.