Mikey Campbell
President and CEO of AT&T Mobile and Business Solutions Ralph de la Vega said Tuesday that phone subsidies will soon vanish as customers move away from two-year commitments in favor of new financing plans.
According to Re/code, de la Vega believes customers will increasingly choose cellular plans that spread out a handset's full cost over a set period of months. Unlike traditional two-year models, customers don't have to pay an up front fee and have the option to trade in their phone for newer hardware once the term is complete.
"I think it is one of those options that is going to go away slowly," de la Vega said.
The comment comes a year and a half after AT&T CEO Randall Stephenson said carriers will inevitably need to wean subscribers off handset subsidies. Initially, subsidies were instituted to ameliorate the cost of high-priced smartphones, thus incentivizing customer growth and billings. With higher penetration, early subsidy models become unsustainable, Stephenson said at the time.
AT&T already fields an installment program called AT&T Next that spreads out full handset pricing over 20, 24 or 30 months, with upgrade eligibility kicking in after 12, 18 or 24 payments, respectively.
De la Vega believes plans like Next are just as beneficial to consumers as they are for carriers. Flexible options let power users choose a path that upgrades annually, while those not concerned with cutting edge hardware can select longer terms that bring lower monthly fees. Almost two-thirds of all smartphone sales last quarter were sold without subsidies, the report said.
AT&T seems keen on accelerating that transition, however, as it enacted a new policy last week that bars third-party dealers from selling two-year contract pricing. Among those affected by the change is the Apple Store.
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92 Comments
And this is why we need more carriers, not fewer carriers through mergers.
"AT&T already fields an installment program called AT&T Next that spreads out full handset pricing over 12, 18 or 24 months. " This is incorrect. The 12/18/24 plans spread out the payments over 20/24/30 months. The 12/18/24 is after how many months you can trade in the phone on an upgrade. (In all cases if you pay ALL the payments, you keep the phone at the end).
Seems a lot more sensible to me, I never really understood where the subsidy model had come from.
Something funny going on with that table though - for one, it doesn't match the one on Apple's site at http://store.apple.com/us/carrier-financing-overlay/att?product=MGF02LL/A (initial phone cost on the 2 year contract), and two, (going by Apple's site) it can't be right that you can get an iPhone for just $40 activation fee, with no real commitment (a 2 year contract is hardly meaningful if the monthly cost is $0). Very strange.
"I think it is one of those options that is going to go away slowly," de la Vega said.
Hey Ralph. Since you're busy shaping the future, why don't you get rid of data caps too?
I'm grandfathered in to unlimited data. But lots of users aren't. Which sucks for them.
Subsidiary is such a genius plan and I love it. It keeps me getting a new phone every two year without thinking about finance and total cost over two years. There are too many serious things to worry about. I don't want to spend days comparing 10 plans just so I can save $200 in two years.