AT&T CEO admits subsidy model is at an end, proves T-Mobile’s Uncarrier is the right move

AT&T’s CEO has finally, finally, finally come to his senses and admitted that the “era of big subsidies for devices is coming to an end.” Continuing the smartphone upgrade cycle has always worn on the carriers margins and is something I know I have personally wished would go away a long time ago.

Speaking at an investor conference in New York City yesterday, AT&T CEO Randall Stephenson says that smartphone penetration is now at 75 percent and as it nears 90 percent its going to get harder for the carriers to push increased network use on customers.

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

Stephenson has apparently had an epiphany and completely ignored that this message is one T-Mobile has been espousing since March of 2013. He admits that breaking customers of their upgrade habits will not be easy, but that financing devices is “transformative” for the industry over providing a subsidy.

“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,” he said. “You can use your own device or finance it. I think this will be very powerful. It’s where we see the market going.”

T-Mobile’s Uncarrier strategy of removing device subsidies and financing handset models has thrust them back into the spotlight. Where the Magenta carrier was once the lame duck of the telecom industry, they are now forcing the competition to react and Stephenson’s comments are reflective of that.

Will AT&T’s moves lead Verizon into admitting the subsidy model is at an end? Sprint has already begun offering handset financing ala T-Mobile but as AT&T and Verizon continue to account for the lions share of the US wireless customer base, moving customers away from the subsidy model entirely remains a clear uphill battle.

via CNET