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AT&T CEO: The Age of Device Subsidies Are at an End
by Karl Bode 08:43AM Wednesday Dec 11 2013
AT&T last week unveiled their new mobile share value plans, aimed at getting users off contract and driving them to larger, more expensive data plans. The service was in response to T-Mobile, though AT&T continues to insist that T-Mobile is having no effect on their pricing strategies. Speaking at an investor conference this week, AT&T CEO Randall Stephenson reiterated that with the market saturated, the aim of the subsidy is dead, and AT&T's goal is to drive more network usage:
quote:
"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."
Of course carriers themselves have historically admitted they raised the cost of voice, text and data services to more than counter the cost of the subsidies. As such, without subsidies you'd expect the price of service to go down (as in T-Mobile's recent uncarrier pricing plans), but you can be fairly sure that's not happening any time soon over at AT&T.

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JimThePCGuy
Formerly known as schja01.
Premium,MVM
join:2000-04-27
Morton Grove, IL

THANK YOU T-Mobile.

THANK YOU T-Mobile.
The ATT spin doctors will try and make this something ATT wanted all along.
ATT CEO continues to have head buried in the sand.
J

Zenit

join:2012-05-07
Purcellville, VA
kudos:1
Reviews:
·Comcast
·T-Mobile US
·Verizon Online DSL

1 recommendation

Drive more network usage?



Meanwhile at AT&T HQ, it is raining money as they drive Network Usage with low caps and high overages.
itguy05

join:2005-06-17
Carlisle, PA

If Prices Go Down.

Would be nice if prices would go down then...

I don't need or want unlimited texting (I need none), I don't need or want unlimited voice (the 3 of us on our plan can't use our 700 minutes every month), but I do want a reasonable bill for data.

With Verizon's Share your Paycheck plan $200 for 2 iPhones and 1 Dumbphone is unacceptable (Thank God I'm grandfathered in + 19% discount). AT&T isn't much better.

However, Verizon's prepaid plans look decent - $60/mo for 2GB and unlimited?!?!?!

AT&T is just as expensive and T-Mobile is close but their coverage is lacking (it says our house is in a dead zone).
Millenium

join:2013-10-30
kudos:1
Reviews:
·Time Warner Cable

Re: If Prices Go Down.

said by itguy05:

With Verizon's Share your Paycheck plan $200 for 2 iPhones and 1 Dumbphone is unacceptable

How appropriate: Share your Paycheck!

$24,000 of your paycheck over 10 years. Hope everyone really likes their smart phones.
QLR

join:2009-06-23
Tallahassee, FL
The $60 prepaid plan on Verizon is for 3G only devices. LTE phones are not allowed on Verizon prepaid. Keep that in mind if you look into this.
psiu

join:2004-01-20
Farmington, MI
Reviews:
·Comcast
·AT&T U-Verse
said by itguy05:

However, Verizon's prepaid plans look decent - $60/mo for 2GB and unlimited?!?!?!

There is a hidden legacy promo, mostly aimed at dumbphone users, but seems some people with smartphones have gotten it, where you get the same on postpaid. Subsidized phones, 4G, and $60 for unlimited talk/text and 2G data. Do a search on slickdeals for "Verizon $60 legacy plan" to find the gigantic thread about it. Sometimes reps will even help break up family plans to put everyone on their own line (but combined billing).

morbo
Complete Your Transaction

join:2002-01-22
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Reviews:
·Charter
said by itguy05:

However, Verizon's prepaid plans look decent - $60/mo for 2GB and unlimited?!?!?!

Exactly how is that decent for prepaid?
itguy05

join:2005-06-17
Carlisle, PA

Re: If Prices Go Down.

quote:
Exactly how is that decent for prepaid?
Cause on Postpaid Share Your Paycheck that is $100 ($40 smartphone + $60 2GB)

morbo
Complete Your Transaction

join:2002-01-22
00000
Reviews:
·Charter

Re: If Prices Go Down.

said by itguy05:

Cause on Postpaid Share Your Paycheck that is $100 ($40 smartphone + $60 2GB)

Oh, we're only comparing to Verizon postpaid? I'm thinking we were comparing prepaid to all prepaid options, not just Verizon. Because $60 is expensive for prepaid.
itguy05

join:2005-06-17
Carlisle, PA

Re: If Prices Go Down.

quote:
Oh, we're only comparing to Verizon postpaid? I'm thinking we were comparing prepaid to all prepaid options, not just Verizon. Because $60 is expensive for prepaid.
Yeah, as for me the choices are AT&T or Verizon. T-Mo has our house right on the edge of a dead zone. And they have to support the iPhone. I like the Verizon plan as when I'm up for renewal in 2014 I can simply switch my iPhone 4S to prepaid. I don't care about 4G as I only surf basic sites and do e-mail so the 512k-1M that I get is plenty fast for me.

morbo
Complete Your Transaction

join:2002-01-22
00000

Re: If Prices Go Down.

Straight Talk AT&T plan for $45 a month. I believe even lower if you buy annual plan. Or is Sprint bad in your area? Everyone has the iPhone now days, so that is no longer a limiting factor.

THXULTRA

@mooseintl.org

Wish T-Mobile had better coverage

Really like the tmobile strategy best. Can get a new phone every 6 months and pay what I pay now with AT&T. Plus they have true unlimited data no throttling. If they had better coverage I would switch in a instant.

dnoyeB
Ferrous Phallus

join:2000-10-09
Southfield, MI
kudos:1
Reviews:
·Comcast

Re: Wish T-Mobile had better coverage

Right. T-Mobiles limited plans throttle after the limit. So their 'unlimited' plan couldn't rightly do that and call itself unlimited.

T-mobile is pretty good, but it does assume everyone uses text messages and internet. If you don't the new rates are slightly higher for you.
--
dnoyeB
"Then said I, Wisdom [is] better than strength: nevertheless the poor man's wisdom [is] despised, and his words are not heard. " Ecclesiastes 9:16
en103

join:2011-05-02

2 recommendations

Re: Wish T-Mobile had better coverage

Personally - I'd take throttled over paying more.

n2jtx

join:2001-01-13
Glen Head, NY

Re: Wish T-Mobile had better coverage

I am on Sprint so I am already permanently throttled. I would prefer any plan that either throttles after the limit is reached OR shuts down the service. I hate the automatic chargeback for additional usage. Kind of the like overdraft fees banks foisted on people who did not want overdraft protection.
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MTBikerChris
Premium
join:2001-08-28
Broomfield, CO
I am on the unlimited plan now for 20 bucks, But I use to have the 2.5 gig data plan and it would go to 2g after 2.5 Gigs no thanks , But Now i don't have to worry cuz its truly unlimited since i am at 5 gigs for the month !

monchis
Premium
join:2002-12-09
Los Angeles, CA
kudos:1

1 recommendation

I believe the unlimited plans are truly unlimited now, unlike before. But even then if they throttled you at 10GB+ ... who the hell needs to use that much, cheepskate?
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nogaps

join:2011-01-08
Greenbush, MI

New math

AT&T Wireless profits of $3.8 billion in third quarter 2013, up from $3.6 billion in the same quarter a year ago.
»mobile.nytimes.com/2013/10/24/te···fit.html

Yep, seems unsustainable....

Steve B
Premium
join:2004-08-02
Auburn, WA

Maybe Someone Can Help Me Out Here....

Contact/Subsidy - You pay less up front and pay it off month to month over the term of the contract and beyond.

Non-subsidy - You "CAN" pay less up front and still pay it off month to month.

Randal is going on about how they can't supposedly afford to subsidize any longer. Yet, these new plans carriers are starting to move to still give the customer the option of paying less up front and paying on the rest month to month. Isn't that still subsidizing? I know prices of plans "could" go down after the device is paid off but, the subsidizing still took place.

What am I missing??

tommyanon

@comcast.net

Re: Maybe Someone Can Help Me Out Here....

said by Steve B:

Contact/Subsidy - You pay less up front and pay it off month to month over the term of the contract and beyond.

Non-subsidy - You "CAN" pay less up front and still pay it off month to month.

Randal is going on about how they can't supposedly afford to subsidize any longer. Yet, these new plans carriers are starting to move to still give the customer the option of paying less up front and paying on the rest month to month. Isn't that still subsidizing? I know prices of plans "could" go down after the device is paid off but, the subsidizing still took place.

What am I missing??

the problem with this 'financing' is that it does not help to drive down the full retail price of handsets. anyone who looks at the pricing difference between an ipod touch and an iphone can see that phones are outrageously overpriced. this is 100% due to a culture of financing phones instead selling at full price up front.
itguy05

join:2005-06-17
Carlisle, PA

Re: Maybe Someone Can Help Me Out Here....

quote:
the problem with this 'financing' is that it does not help to drive down the full retail price of handsets. anyone who looks at the pricing difference between an ipod touch and an iphone can see that phones are outrageously overpriced. this is 100% due to a culture of financing phones instead selling at full price up front.
Not necessarily. There is the cost of building, testing, and certifying the cellular ratio in the iPhone. And paying patent holders for the use of said radios.

When you look at the price of an iPhone 4s vs an iPod touch you'll see roughly a $100 difference, same as the iPad.
sonicmerlin

join:2009-05-24
Cleveland, OH
kudos:1

Re: Maybe Someone Can Help Me Out Here....

Patent royalties on the radio are FRAND, essentially pennies per device. Radios are not that difficult to incorporate into devices. Think about it. Every dumb phone has a radio. Every super cheap android smartphone has a radio. Every Symbian, blackberry, etc. phone has had radios for decades. It's a known quantity. Also the iPhone 4S is 2 years old. Compare a iPhone 5S or 5C to an iPad Mini.

Better yet, compare the price of a "phablet" 6" phone with the price of a 7" tablet. It's triple the price. Hardly justifiable, especially when the networks move to VoLTE.
itguy05

join:2005-06-17
Carlisle, PA

Re: Maybe Someone Can Help Me Out Here....

It's hard to get those radios working properly on networks and in various conditions. Look at the Antennagate from the iPhone 4 - Apple showed some of what goes into the testing. Then you have FCC testing (every model must be tested and certified), carrier testing (for non GSM), etc. It's much more than slap a radio on it and throw an antenna out there and ship it.

And it's always been that a radio adds about $1-200 to the cost of a device. iSuppli pegs the cost of the Qualcomm radio in the iPhone 5s to be $32. That's not counting board design, packaging, etc.

The best examples we have of the cost of a radio are the iPhone 4 and the iPod touch and the iPads with and without radios. Why the iPhone 4? Cause it's what the current Touch is based on so it's a fair comparison.

It doesn't matter what "super cheap" Androids do - buy them off contract and they are still $2-300. Even Google, with the Nexus 5 is pricing it very close to (or lower than) cost and it's $349.

"Phablets" are expensive because they sell in low quantities cause only a moron would buy such a huge phone.
Happydude32
Premium
join:2005-07-16
kudos:1
Hopefully this weekend I’ll be getting my phablet. Unsubsidized price for the HTC One Max is $600. Subsidized price is normally $250, there’s a $100 off special, my Droid DNA will be an almost $100 trade, and a $50 invoice credit will be like getting one of the best phones on the planet right now for free. I guess $600 is a lot considering my 10” tablet was $100 less. But in comparison, the much lesser iPhone 5S is $650 unsubsidized. With it’s dinky screen, lower resolution display, slower processor, smaller battery, half the amount of RAM, poorer front facing camera, lack of IR, lack of NFC and only 16 GB of storage versus the HTC One Max’s standard 32GB on board plus micro SD. I would feel raped buying such an inferior, outdated, POS phone at full retail price.
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grabacon9

join:2013-08-21

2 recommendations

AT&T out of touch.

Just like most companies. AT&T is out of touch from reality and probably deserve karma where it hits them. They will go down! Down! Get too greedy and nobody has money for your services!

IowaCowboy
Iowa native
Premium
join:2010-10-16
Springfield, MA
kudos:1

When I'm due for an upgrade

I think I'll give the Verizon Edge plan a try. I'd like a new iPhone every time Apple comes out with the new iPhone, not just every other year.
firedrakes

join:2009-01-29
Arcadia, FL

Re: When I'm due for an upgrade

i wise google get into the cell phone business for real like fiber.
itguy05

join:2005-06-17
Carlisle, PA
quote:
I think I'll give the Verizon Edge plan a try. I'd like a new iPhone every time Apple comes out with the new iPhone, not just every other year.
You do realize Verizon Edge is a pi$$ poor plan, right? You pay full price for the phone and it's not yours until it's paid off. You can do better now where you pay full retail, sell your phone after year 1 for 60-90% of the initial price and repeat as needed....

GoRepublic

@optonline.net

Major Mobile is out of control!

Go to smaller outfits like RepublicWireless.com for a much better deal.

Unlimited 3G=$25/mo

Unlimited 4G=$40/mo

That is more like it.
BiggA

join:2005-11-23
EARTH

This will bring price competition into the smartphone market

This is really good. It will force Apple to bring their prices back into reality. Google is offering the Nexus 5 at $400 with 32GB of storage, Apple's equivalent iPhone is $750. Apple will have to adjust without the big subsidies to hide behind.

michieru
Premium
join:2009-07-25
Miami, FL
Reviews:
·Comcast Business..

Re: This will bring price competition into the smartphone market

When the primary phone of choice is seen as better built and higher quality the additional $350 additional is justified mentally by the consumer. You also need to understand the power of fans when it comes to products available in the market. It does not matter if you can get better specs with more features because at the end of the day it's still an "iPhone" "Mercedes" etc etc.

This applies to all markets in some form or another. So I don't expect costs for phones to go down unless the economy starts to tank even further and a luxury items becomes out of reach for most consumers.
BiggA

join:2005-11-23
EARTH

Re: This will bring price competition into the smartphone market

It's not a better built device. I like my iPhone, but if I were looking for a new phone at this point, and interested in the Mobile Share plans, then it would be a really tough sell to spend that much MORE for the iPhone over the highly capable Nexus 5. The Nexus 5 is priced somewhat at a premium, but the iPhone is just out of control, and has been all along. I'm not sure that Apple is going to lower their prices, but you can be sure that they will be getting stiff competition from the Android front, where brutal competition will cause prices to drop quite a bit. I think Apple will hold steady and make small adjustments, if any, and be OK with losing some market share in the name of keeping margins fat.
rmdir

join:2003-03-13
Chicago, IL
Problem is people don't see the total cost of the phone, they only see what they put down and that's it. I just looked and ATT has an iPhone 5 listed at $200 down with a 2 year contract. That's a $650 phone. Subtract the $200 down, divide by 24 and you're looking at $18.75 per month to pay off the balance of the phone. After 24 months when it's paid off does this mean ATT users see their monthly bill reduced by 18.75?
BiggA

join:2005-11-23
EARTH

Re: This will bring price competition into the smartphone market

Yeah, at the end of the contract the prices goes down. This makes people see the prices of the phones, however, even if they end up choosing to take the subsidy, which will now cost them $15/mo.