AT&T CEO Randall Stephenson says big phone subsidies may soon become a thing of the past

att-headquarters4:40 PM – It’s no surprise that wireless carriers are in to make money, just like any other business.  They try to leak out as much money as they can out of their customers.  Such as imposing ridiculous fees (ex. upgrade fees), and charging very high for plans.  One thing that carriers do is give phone subsidies so that customers can buy phones at a lower cost in return for a 2-year contract.  This is so that the carrier can make its money back in the long run, with profits of course.

At a recent investors conference in which AT&T’s CEO Randall Stephenson took part in (via CNET), he stated that carriers will soon have to stop keeping up with big subsidies.  This is the current strategy currently being used by many carriers.  Instead of focusing on big subsidies and trying to appeal devices, carriers should instead focus their attention on data plans and how to get customers to sign up for them.

“When you’re growing the business initially, you have to do aggressive device subsidies to get people on the network,” CEO 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.”

As you know, AT&T was one of the first carriers to eliminate unlimited data plans.  Soon after, several others carriers followed including Verizon.  This new mind set of charging and making profit off of data plans isn’t anything new.  CEO Stephenson’s main point is that the business strategy should be changed in order to have bigger profits and not necessarily force customers to upgrade.  Recently, AT&T introduced low-cost plans for customers who are off-contract.  Customers off-contract can keep their device if they wish not to upgrade, while at the same time they won’t have to pay high prices for plans AT&T currently charges.

“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,” said AT&T CEO Stephenson. “You can use your own device or finance it. I think this will be very powerful. It’s where we see the market going.”

Also before, carriers use to charge for text messages, but services such as iMessage, WhatsApp, and Viber has brought down the profits.  So now, the wireless carriers have leverage in the data plans arena.

What do you think?

Hamza Khalid

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