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AT&T to cut down on phone subsidies, CEO gives Nokia Lumia 900 and HTC One X as shining examples

Posted: , by Daniel P.

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AT&T to cut down on phone subsidies, CEO gives Nokia Lumia 900 and HTC One X as shining examples
Times are changing in the way carriers are handling smartphone subsidies that bleed them dry, lining up the pockets of companies like Apple and Samsung. After T-Mobile's CEO battle cry to ditch phone subsidies altogether, Verizon introduced a $30 upgrade fee for a new handset, and top carriers overall are making every effort to make you keep you phone much longer.

Just yesterday Verizon said, for example, that if you want to keep your unlimited data plan you were grandfathered in when switching to a new handset, you'd have to pay its full price, or give up the all-you-can-eat buffet if you want the phone subsidized.

Moreover, AT&T's CEO Ralph de la Vega said at a J.P. Morgan investor conference webcast yesterday that the carrier will do whatever it takes to minimize the amounts it gives away in phone subsidies - "...you can take it to the bank that our thrust is to lower that in every case that we can" were the exact words. 

One way of doing this is to find the best value for the money phones and offer those to customers. "We have to watch subsidies and make sure that we bring devices to market that customers love and will keep and have low subsidies", said AT&T's CEO. He gave two examples - the Nokia Lumia 900 and the HTC One X - as such phones. "These are great devices that I think customers will like," said de la Vega.

Apple's stock was down almost 3% more yesterday on these comments and some analyst ruminations, but our take is that we have to brace for a new era of shelling out more for the high-end smartphones from carriers, and prepare for an onslaught of upper mid-rangers at current subsidy prices.

source: AT&T (webcast)

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posted on 18 May 2012, 06:13 14

1. Allen3697 (Posts: 86; Member since: 26 Mar 2012)

If we have to start paying 600 dollars for a new phone, there better be no contracts and it's like 20 dollars for unlimited everything. The only reason there's such high contract prices is to help the carriers make the phone subsidy money back.

posted on 18 May 2012, 06:47 3

2. remixfa (Posts: 14605; Member since: 19 Dec 2008)

How about $30 bux for unl text and 5 gig of web before it throttles, with 100 mins a month?
Worth paying full retail for the phones for that. :)


posted on 18 May 2012, 07:23 3

4. Mxyzptlk (unregistered)

You get what you pay for. You pay little, you get little.

posted on 18 May 2012, 07:25 4

6. bigdawg23 (Posts: 462; Member since: 25 May 2011)

No its not worth it. Especially if its T-Mobile. Most people use more than 100 Mins. Use Google Voice and Text means nothing.

posted on 18 May 2012, 07:38 2

9. simplyj (Posts: 406; Member since: 23 Dec 2009)

I have this plan. It's a plan for people who do NOT talk on the phone, or are okay with using Google Voice for voice calling. Since WP doesn't have a good GV app, I find myself going over the 100 minute limit frequently. It's only 10 cents a minute, but still.. I miss the unlimited minutes I had with Sprint.

posted on 18 May 2012, 07:44 1

10. cert15z (Posts: 1; Member since: 18 May 2012)

You add unlimited calls to any mobile and 200 mins to land lines and I would pay $40 a month

posted on 18 May 2012, 09:20 1

16. annymu5 (Posts: 15; Member since: 01 Feb 2012)

No way

posted on 18 May 2012, 20:40 1

26. sithman (banned) (Posts: 299; Member since: 21 Apr 2012)

That's a horrible plan dude

posted on 18 May 2012, 23:15 1

28. remixfa (Posts: 14605; Member since: 19 Dec 2008)

Its an awesome plan if you dont call. I use 20 mins a month, max. I text and use data. If you want unlimited calling with that, its $60. Still el-cheapo.

And no, Mxy,
you dont always get more by paying more. If that were true companies like Apple would have the same profit margin as companies like Samsung instead of double to triple. With VZW and ATT your paying for the name as well as the service.

If your out in the boonies, u need to stay on VZW. If your life is in a metro area like most people, you owe it to yourself and your wallet to try the other carriers.

The dirty truth is that where 95% of everyone is, all 4 big carriers work about the same. There will be a spot here or there where one works and the other doesnt, but its hardly noticeable to most people.

posted on 18 May 2012, 07:36 3

7. PimpStrong (Posts: 310; Member since: 25 Jul 2011)

Exactly, and T-Mobile is changing that with their "bring your own phone" strategy and cheaper monthly charges than subsidized plans. That's the way is should be and they are the only ones doing it.

I personally would rather pay the $10-20 or whatever more per month and get that money back every other year (via $300-400 subsidy) when I upgrade my phone. Bringing your own phone is great for people who don't plan on upgrading to the next awesome phones.

posted on 18 May 2012, 23:19

29. remixfa (Posts: 14605; Member since: 19 Dec 2008)

you havent done the math.

You would rather pay 250-300 for a top end phone on upgrade, plus the upgrade fee which is up to 36 bux, and a higher monthly bill?

Even at Tmobile's rates, the difference between regular and value plans is $480 per line per contract cheaper. Add in the cost of that "upgrade" phone, and there is no way you will ever save money by being on a regular contract. Not even with the current BOGO sale going on.

Tmobile's unl talk, text, 5gig of web with tether is only $75. Whats that on VZW/ATT? 140 - 170?

Do the math, your just spending money for no reason.

posted on 18 May 2012, 08:43 1

13. smacsteve (Posts: 75; Member since: 16 May 2012)

This is what it was like back in the day when Sprint PCS was first with it's digital network. You didn't have a contract and the phone was full price. Ariel was another that did this too. I think it was when VZN and ATT entered the digital phone market that it changed to subsidized with contracts. It wouldn't surprise me to see this come back in some way.

posted on 18 May 2012, 06:50 1

3. Feech (Posts: 4; Member since: 01 Dec 2011)

Silly CEO. If you want customer to keep phones longer, stop offering better services with newer phones. Also, make sure people get updates for phones without going through a 6 month review of the new software. Dummy..3G is only 2 years ago in most cases and maybe less than that, but you are still selling 3G phones next to 4G phones..

posted on 18 May 2012, 07:49

11. PimpStrong (Posts: 310; Member since: 25 Jul 2011)

I would be WAAAAY less inclined to to get a GS3 if I knew my GS2 would get Jellybean.

That's good for the carriers but not so good for the manufacturers.

posted on 18 May 2012, 07:23 3

5. dcgore (Posts: 231; Member since: 24 Feb 2012)

This benefits google and its play store model. People will start buying unlocked phones now like the gnex. The loser: Verizon. Its phones are not compatible with other providers, can't import one that work on its network either.

posted on 18 May 2012, 07:37 2

8. JeffdaBeat (unregistered)

I'm kind of excited for this move. I'm absolutely tired of having to sign a contract. The only reason I do is because I can't take my phone to another carrier if I wanted. If all things were universal, I'd never sign a contract again.

As for AT&T...well...this will be the result of lack of competition. I'm sure AT&T will follow Verizon's lead on unlimited data. Luckily there is still Sprint and T-Mobile...but just imagine if there weren't. It'd be one or the other.

posted on 18 May 2012, 15:59

23. networkdood (Posts: 6330; Member since: 31 Mar 2010)

Jeff, the days of signing a 2-yr contract are not going away, he only was referring to the cost of the phone that AT&T has to pay to carry it - that will be going down, or at least the CEO believes he will lower the company's cost.

posted on 18 May 2012, 21:40

27. android_sucks (Posts: 111; Member since: 28 Jul 2011)

As an AT&T customer, this would not be too bad because I buy most of my phones from ebay. I still have unlimited data and would like to keep it. But if they decide to make me get rid of it, then I am going to Boost mobile.

posted on 18 May 2012, 07:50 1

12. KingShango (Posts: 89; Member since: 16 May 2012)

I find it ironic when the CEO's complain about subsidies when they themselves created the business model. "Let's a $600 phone for $200 because well make it up later". Except that average use skyrockets and their regular service plans are no longer as profitable. On top of that does Verizon really need to carry and subsidize 6 different Moto phones? Manufacturers realized as long as they could keep the hype train going by releasing new phones every month they'd rake in cash because the carriers were picking up the tab.

posted on 19 May 2012, 10:29

31. Fuego84 (Posts: 352; Member since: 13 May 2012)

I wouldn't chose a subsidized phone any time soon seeing as its only available with a two year lockdown. I just bought an HTC One S from t-mobile @ bestbuy for a total of $703.-- . I still haven't had the the 30 days with the device so I can still return the phone but hell no I won't do it, because I also purchased the two year Black tie replacement program for $168.-- and I'm covered even from accidental handling (spills, drops,cracks) also before the two year coverage ends if my handset gets discontinued and I'm in need of repair I have the option of getting an other cellphone at the price of my original purchase which was $703.-- or more expensive by just paying the difference.

posted on 18 May 2012, 09:01

14. Jyakotu (Posts: 854; Member since: 12 Dec 2008)

They've been doing this overseas for awhile. It makes sense that if you're one of those willing to pay full price, especially for high end smartphones, then your plan is cheaper. People who do prepaid in the US, especially if they're using GSM, understand this. For example, with AT&T GoPhone, the smartphones are full price, but you can get a $75 ($50 for unlimited talk/text + $25 for 1 GB) or a $50 ($25 for 250 min/unlimited text + $25 for 1 GB) monthly plan.

The business model will take awhile to catch on for mobile phones though. As one who prefers GSM, most unlocked phones don't work with AT&T or T-Mobile's 3G or 4G data network. But, we'll see how this pans out. It's working for Europe, so maybe it can work here.

posted on 18 May 2012, 09:13

15. rallyguy (Posts: 620; Member since: 13 Mar 2012)

This doesn't make sense. They talk about adding new phones to their network, but they don't want people to upgrade.

How about stop giving kickbacks to Radio Shack, Firefly, and Amazon. Amazon is selling the HTC One X for $130 right now.

posted on 18 May 2012, 09:45 2

17. McLTE (Posts: 922; Member since: 18 Oct 2011)

What works in Europe will never work here.

in the US, the providers will not switch to a new model and radically reduce the plan costs if we purchase devices at full price.

They will cut subsidies on the phones, which increases the prices AND keep the service costs at nearly the same rates. The American way.

Just look at healthcare. Nuff said.

posted on 18 May 2012, 09:47 1

18. jaytai0106 (Posts: 1888; Member since: 30 Mar 2011)

That sucks. Just got my One X recently. Won't be upgrading my phone for a while :) Good timing.

posted on 18 May 2012, 11:34 5

19. DigitalMD (Posts: 226; Member since: 17 Feb 2010)

Where did AT&T find this moron Cheap Executive Officer? At a used car lot?

posted on 18 May 2012, 12:51 2

21. downphoenix (Posts: 3165; Member since: 19 Jun 2010)

at least he isnt as bad as their other CEO. Not that it is saying much as this guy's awful to.

posted on 18 May 2012, 11:49 1

20. Techsword (Posts: 31; Member since: 30 Apr 2012)

Werent the cell phone companies taken to task a few years ago regarding contracts? And wasnt their response that they have contracts so they could offer subsidies? Seriously we need to smack these guys down using OUR public air space. Im all for companies being succesful but forcing high prices on people just because they can is messed up.

posted on 18 May 2012, 14:16

22. speckledapple (Posts: 892; Member since: 29 Sep 2011)

And as they do this, much like the music industry and movie industry before them, people will find ways around such things like develop new ways of using the service or creating a way around the service. For the movie industry it is downloading which is hurting them tooth and nail. The music industry learned and paying for individual songs versus whole albums of crap has become the norm. Carriers are going to learn very hard how powerful consumers are when they flock to those alternative sources and leave their margins nice and low.

Its interesting though, it seems like companies just do not learn.

posted on 18 May 2012, 16:04 2

24. DigitalMD (Posts: 226; Member since: 17 Feb 2010)

Its a business model made famous by the internet itself. Offer something at a low price until people are hooked on it, then fleece the SOBs till they bleed.

posted on 18 May 2012, 17:01 2

25. kanagadeepan (Posts: 981; Member since: 24 Jan 2012)

If carriers want us to keep our phones for LOOONG time, then STOP M0LESTING the phone's firmware with CR@PWARE and give FREQUENT UPDATES....

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