Don’t you love paying only $200 for a new $650 iPhone or Android device every two years? Well if smartphone subsidies come to end, that iPhone or Galaxy device could get a lot more expensive.
AT&T CEO: Smatphone Subsidies To End
Speaking at an investor conference in New York City on Tuesday, AT&T CEO, Randall Stephenson, said wireless operators can no longer afford to fund a constant smartphone upgrade cycle. Stephenson recently spoke about how smartphone penetration is over 75 percent and will soon climb to 90 percent.
“When you’re growing the business initially, you have to do aggressive device subsidies to get people on the network,” Stephenson 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 has recently announced new plans that encourage users to either bring their own phone or upgrade less frequently. This new deal offers consumers savings of up to $15 a month on their bill. “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,” Stephenson said.
What will carriers do without smartphone subsidies?
For all those smartphone fans like myself who want the latest and greatest models, I expect carriers to “jump” on the T-Mobile bandwagon soon. T-Mobile offers a type of contract free plan in which you pay a minimum down payment for the device and then finance the phone over 24 months interest free. This type of plan makes it clear to the consumer that your plan has no subsidy cost rolled into it, hence the lower monthly bill on T-Mobile.
As carriers compete for your dollar, expect the cost of the plans and the devices to decline over the next few years. If subsidies go away, the majority of consumers just won’t be able to afford to spend $600-$800 every year on a phone. At the end of the day, no matter which carrier you are on, upgrading is going to cost you money. Whether it is rolled into your monthly bill or payed all up front, nobody will get anything for free from any carrier.