One of the ways carriers in the US and some other countries get customers to join their network is by offering huge subsidies on phones/tablets, as long as the customer is willing to sign a new contract with them. Not taking monthly subscription fees and excess usage into account, a subsidized iPhone is priced at $199, compared to paying full price which is at $649, undoubtedly making it an attractive offer to those who might not be able to afford $649 outright. However it seems that such subsidies may no longer be the way of the future, according to AT&T’s CEO, Randall Stephenson, who spoke recently at an investor conference.
According to Stephenson, “When you’re growing the business initially, you have to do aggressive device subsidies to get people on the network, 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.” It has been estimated that with customers choosing to upgrade as frequently as they can, it can get pretty pricey for carriers and it has been estimated that they could lose up to a few hundred dollars per device.
Stephenson believes the way of the future is not to try to get more customers onto the network, but rather to get existing customers to use more of the carrier’s services, which is what the carrier’s recently launched plans are about. What do you guys think? With subsidized devices having been in place for many years, do you think customers will revolt against these changes? Especially if it means they will no longer be able to afford the latest and greatest smartphone?