AT&T exec sees end of phone subsidies on horizon

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  • Reply 81 of 92
    sdw2001sdw2001 Posts: 17,895member
    Quote:
    Originally Posted by chadbag View Post

     

     

    I'd be careful about saying "always." 


     

    OK, I agree with that. Good point. 

     

    Quote:


     I'd bet that a lot of people do want to upgrade as frequently as possible, but I know of several people who pay off the phone and use it another 2-3 years so as to minimize their expenses for the phone -- same cost but longer lifespan = less per month cost to run the phone.


     

    How many people?  Because while I know people who keep their phones longer than their term requires, the thing that seems to impede their upgrade is the upfront cost of several hundred dollars.  I've never (and I mean never in this case) met someone who sits down and calculates the total cost to own and uses it as the decision point for whether or not to upgrade when eligible.    

     

    Quote:


    And I bet that due to the clamor in the market that brought us NEXT (and the Verizon equivalent and the similar plans at others) that once you had paid for the phone (at the end of the contract) your monthly expense, at the time, did not go down.  Due to that, I'd bet there is a significant fraction of people who do run it out to the end of the actual payment period.


     

    Took me a moment to understand what you meant there.  You're saying that the plans go down in price once the phone is paid off (but they didn't used to in these types of plans), and that this is an incentive to keep the old phone.  That is a good point.  Of course, people do get used to paying X amount of dollars per month, and in my estimation are likely to keep paying that amount if they can get a new phone at the same time. That is, unless they need to cut $20 a month in expenses or what not.  I lease cars all the time, and this is how I think.  After the halfway point in the lease, I'm driving an older vehicle but still paying the same price.  

     

     

    Quote:
    Originally Posted by mrboba1 View Post

     

     

    God damn. I wasn't being an ass, but now I will be. I'm sorry you can't get beyond a marketing term (NEXT 18) and the actual contract (for 24 months) I guess you are just too f*ing obtuse to let that go or understand what 18 and 24 actually MEAN in these plans.


     

    At which point did you conclude I don't understand the term NEXT 18 means an upgrade at 18 months and payoff at 24?  

     

     



    Quote:



    Quote:

    AT&T IS doing it and making less money because that is what the market bears.


    Others are undercutting them, so they have to respond and make less money to not lose the customers.

     

    I'm done with your blindfolded ignorance.

     

    Enjoy me being an ass.

     



     

    Let's follow your "ass" logic:  Consumers are addicted to 2 year subsidies.  2 year subsidies (according to The Ass) are making more money for AT&T than other models.  Therefore, AT&T engages in a campaign to end subsidies and make less money.  Oh, and so does Verizon.  And others.  

     

    Yeah, that makes perfect sense.  AT&T is doing it to make less money because if they don't, they'll make...less money.  Are you high? 

  • Reply 82 of 92
    chadbagchadbag Posts: 1,735member
    Quote:

    Originally Posted by SDW2001 View Post

     

    Let's follow your "ass" logic:  Consumers are addicted to 2 year subsidies.  2 year subsidies (according to The Ass) are making more money for AT&T than other models.  Therefore, AT&T engages in a campaign to end subsidies and make less money.  Oh, and so does Verizon.  And others.  

     

    Yeah, that makes perfect sense.  AT&T is doing it to make less money because if they don't, they'll make...less money.  Are you high? 


     

    You keep saying consumers are addicted to 2 year subsidy based contracts etc.  Please support this with some data.  The market seems to say otherwise.    T-Mobile is going gangbusters with their anti-subsidy plans and both Verizon and AT&T are pushing that way, and seemingly with success.  The market clamored for contractless postpaid service.  Please provide support for your assertions.

  • Reply 83 of 92
    karas11karas11 Posts: 32member

    iPhone 6+ 64GB full price is $849.99(on AT&T site.)

    Next 12 plan is 20 installment payments. Next 18 is 24 payments.

    Next 12 plan charge $42.50 per month for above iPhone. 42.50 * 20 = 850.

    Next 18 plan charge $35.42 per month. 35.42 * 24 = 850.08

     

    However, Next 12 plan you can upgrade to next iPhone after 12 time payment done. Start new Next 12 plan.

    If you are not finished installment payments on any Next plan, phone is not yours.

    You must finished the installment payments to get ownership of phone. So you can sell the phone and reimburse the cost.

     

    If you have 10GB data plan then monthly cost $100.

    Next 12 plan $42.50 * 12 = $510

    I have 3 people on family plan so after 12 month

    $15 * 3 = $45 + $100 = $145 * 12 = $1740 + $1530($510 * 3) = $3270.

     

    Same for 2 years contract.

    $40 * 3 = $120 +$100 = $220 *12 = $2640 + $1197($399.99 * 3) = $3837.

     

    So per a person save $189.($15.75 per month.)

     

    If you calculate 2 years contract same phone above 2 years later you paid around $6477.

    If you paid full price then total is $6027 for 2 years.

     

    So it does not matter your on subsidy(2 years contract) or not, you will pay full price of phone.

    With 2 year contract plan, consumer will pay more to AT&T $450 per 2 years.(if you have 3 people family plan. 1 person will save $75 per 1 year.)

     

    After 2 years, either you paid in full or not, when you resell the phone, price of reimburse are same.  But bring your own phone or Next plan will save monthly service price. That will compensate subsidy price.

     

    Most of people think 2 years subsidy will save money but actually it is not. AT&T or other carriers are not stupid as you think.

    So technically AT&T is right as they said consumer with the Next plan will save money when consumer paid in full installment payments.

     

    If you can paid full when you start then you might save more money in every year you change the phone.

    Shorter aged phone will be higher reimburse price.

     

    If you can pay full price but want to divide in months then the Next plan is for you. Save money but you must finished the installment payments per plan order to sell the old phone.

     

    If you can not afford the full price then you have to pay more money to AT&T as 2 years contract subsidy phone.

  • Reply 84 of 92
    ipenipen Posts: 410member
    Quote:

    Originally Posted by Inside_line View Post



    Carriers sell 2 things, services and devices, bundled into a single product. If you don't take the subsidized device every 2 years, you are effectively paying more for the service portion of the product. If they stop providing subsidized devices, the end cost of the product should drop, since they will only be selling services at that point. But make no mistake, the monthly fee will not drop, which means we will all be getting less for our dollar when they start charging extra for the devices we are already paying for.



    Do not let the carriers fool you into thinking they only want to sell services.. Everyone wants a piece of the profits in selling the devices.

     

    Bulk of idevice profit goes to Apple.  Not the carriers.

  • Reply 85 of 92
    sdw2001sdw2001 Posts: 17,895member
    chadbag wrote: »
    You keep saying consumers are addicted to 2 year subsidy based contracts etc.  Please support this with some data.  The market seems to say otherwise.    T-Mobile is going gangbusters with their anti-subsidy plans and both Verizon and AT&T are pushing that way, and seemingly with success.  The market clamored for contractless postpaid service.  Please provide support for your assertions.

    They aren't my assertions. Corporate executives themselves have said this. Consumers are addicted to it because that's been the model for a long time, even pre-smartphone.
  • Reply 86 of 92
    chadbagchadbag Posts: 1,735member
    Quote:

    Originally Posted by SDW2001 View Post





    They aren't my assertions. Corporate executives themselves have said this. Consumers are addicted to it because that's been the model for a long time, even pre-smartphone.



    References please?  The market has changed.  I'd like to see evidence this is still the case for a significant majority.  I've given counter examples.

  • Reply 87 of 92
    Quote:

    Originally Posted by ARMANDXP View Post



    The thing I don't understand is:



    I have an iPhone 6 Plus, paid $428.00 after taxes on a two year subsidy. I'll sell it when the new phone comes out and probably pay around the same amount or a little under for a new 2 year subsidy.



    If I were to get an iPhone 6 Plus under Next program, I'll pay $42.50 a month for 12 months and then trade the phone back into AT&T. This ended up costing me: $510.



    As someone who is always going to trade up to a new phone each year, can someone please help me rationalize what really is better for me. I'd seriously like to know which avenue I should go next time. I do still have unlimited data, also.

    But if you have your own phone or get it under the NEXT plan, your fees for service are about 25$ less per month and you are free to leave to another better deal at any time.  If you still owe on the Next you would need to finish paying for your phone.   Buying your own phone outright or using the Next (and selling it at the end rather than upgrading half way) is a much better deal when you consider cost to buy and cost to run the phone.

  • Reply 88 of 92
    sdw2001sdw2001 Posts: 17,895member
    chadbag wrote: »

    References please?  The market has changed.  I'd like to see evidence this is still the case for a significant majority.  I've given counter examples.

    Dude, I'm not doing a research paper for you. The statements I'm talking about were well publicized. The companies want to end the contract model because it will be more profitable for them if they change to installments. Duh. They are businesses...that's how that works. Asking me for references. Jesus Christ.
  • Reply 89 of 92
    chadbagchadbag Posts: 1,735member
    sdw2001 wrote: »
    Dude, I'm not doing a research paper for you. The statements I'm talking about were well publicized. The companies want to end the contract model because it will be more profitable for them if they change to installments. Duh. They are businesses...that's how that works. Asking me for references. Jesus Christ.

    Dude, you're making claims that frankly I think are now BS and I am just asking you to support them. I guess you can't which frankly backs me up in thinking they are BS.

    Getting off the contract model may or may not be more profitable but it will definitely make business easier for the carriers as they don't front the subsidies which affects quarterly results (even if yearly revenue is about the same). I don't think I disputed that the carriers want to live that way. I only disputed your claim that most people live the subsidy model. Which claim you have not decided to support.
  • Reply 90 of 92
    sdw2001sdw2001 Posts: 17,895member
    Quote:

    Originally Posted by chadbag View Post





    Dude, you're making claims that frankly I think are now BS and I am just asking you to support them. I guess you can't which frankly backs me up in thinking they are BS.

     

    I'm literally laughing out loud right now.  Think about what you're arguing.  You're telling me that industry executives have not talked about consumers (on the whole) being addicted to the subsidy-contract model.  Seriously?  I want you to think about what that means, and what it doesn't mean.  I am not saying it can't change or isn't changing.  I am not saying that companies are failing to sell installment plans.  I am not saying the future lies in subsidies.  I am simply and factually stating that the carriers know their customers are addicted to the contract model.  Is this even debatable?  It's not a surprise, because phones have been subsidized ever since they started becoming more than just phones...as soon as feature phones and camera phones became mainstream.  That's been nearly 15 years.  Yes, the market is shifting.  But AT&T, Verizon and others have had to initiate that change and promote it.  Corporations don't do things that make them less money if they can help it.  

     

    I realize this is the internet, and that the game on message boards for years has been to ask your "opponent" for proof in the form of a link. I'm just not in the mood to play that game.  Just consider what my "claim" really is, and ask yourself if you truly disagree with it.  I really doubt you do.  

     

    Quote:


    Getting off the contract model may or may not be more profitable but it will definitely make business easier for the carriers as they don't front the subsidies which affects quarterly results (even if yearly revenue is about the same). 


     

    Which means "more profitable."  If you prefer, we can say "improve cash flow" or "have a substantial financial benefit."  

     

     

    Quote:


    I don't think I disputed that the carriers want to live that way.  I only disputed your claim that most people live the subsidy model. Which claim you have not decided to support.


     

    I didn't claim that most people live that way (with subsidies), because I don't know the numbers.  Or, I didn't.  I happened to look it up, and while difficult to find, it seems to have been 2/3 of all customers as late as January, 2014.  http://mashable.com/2014/01/25/phone-subsidies-wireless/.  Keep in mind, the total customer base includes those who use prepaid phones, so the actual percentage of people using contracts compared to installments is likely much higher (or, it was...it's probably lower now).  

     

    From what I've found, it seems these installment plans are, in fact, becoming much more popular.  I've never disputed that.  What I'm saying is the carriers weren't "forced" into doing anything by customers.  They started offering installment plans because in the end, they'd make more money, obviously.  They are working diligently and aggressively to end the subsidy model.  You seem to be saying that customers demanded these plans because they were a better deal for them.  That is simply not the case.   These plans were first marketed solely on the customer's ability to get a new phone every year or so.  I know I derided the initial plans, as did many people. The plans have changed to a degree though, and now AT&T/others are advertising them not just a quick upgrade plans, but a better financial deal for customers.  They push the "zero down" mantra and are claiming it actually saves customers money (which is at least debatable as we've seen here).   My point is that this is better for the carriers.  

     

    To be honest, I'm softening my position on the whole thing anyway.  It's no money upfront, so that's a plus.  In the end I think it can end up costing more depending on when you upgrade, and I don't like the whole "renting a phone" thing.  Then again, I lease my cars, so whatever.  

  • Reply 91 of 92
    chadbagchadbag Posts: 1,735member
    Quote:

    Originally Posted by SDW2001 View Post

     

     

    I'm literally laughing out loud right now.  Think about what you're arguing.  You're telling me that industry executives have not talked about consumers (on the whole) being addicted to the subsidy-contract model.  Seriously?  I want you to think about what that means, and what it doesn't mean.  I am not saying it can't change or isn't changing.  I am not saying that companies are failing to sell installment plans.  I am not saying the future lies in subsidies.  I am simply and factually stating that the carriers know their customers are addicted to the contract model.  Is this even debatable?  It's not a surprise, because phones have been subsidized ever since they started becoming more than just phones...as soon as feature phones and camera phones became mainstream.  That's been nearly 15 years.  Yes, the market is shifting.  But AT&T, Verizon and others have had to initiate that change and promote it.  Corporations don't do things that make them less money if they can help it.  

     

    I realize this is the internet, and that the game on message boards for years has been to ask your "opponent" for proof in the form of a link. I'm just not in the mood to play that game.  Just consider what my "claim" really is, and ask yourself if you truly disagree with it.  I really doubt you do.  

     

     

    Which means "more profitable."  If you prefer, we can say "improve cash flow" or "have a substantial financial benefit."  

     

     

     

    I didn't claim that most people live that way (with subsidies), because I don't know the numbers.  Or, I didn't.  I happened to look it up, and while difficult to find, it seems to have been 2/3 of all customers as late as January, 2014.  http://mashable.com/2014/01/25/phone-subsidies-wireless/.  Keep in mind, the total customer base includes those who use prepaid phones, so the actual percentage of people using contracts compared to installments is likely much higher (or, it was...it's probably lower now).  

     

    From what I've found, it seems these installment plans are, in fact, becoming much more popular.  I've never disputed that.  What I'm saying is the carriers weren't "forced" into doing anything by customers.  They started offering installment plans because in the end, they'd make more money, obviously.  They are working diligently and aggressively to end the subsidy model.  You seem to be saying that customers demanded these plans because they were a better deal for them.  That is simply not the case.   These plans were first marketed solely on the customer's ability to get a new phone every year or so.  I know I derided the initial plans, as did many people. The plans have changed to a degree though, and now AT&T/others are advertising them not just a quick upgrade plans, but a better financial deal for customers.  They push the "zero down" mantra and are claiming it actually saves customers money (which is at least debatable as we've seen here).   My point is that this is better for the carriers.  

     

    To be honest, I'm softening my position on the whole thing anyway.  It's no money upfront, so that's a plus.  In the end I think it can end up costing more depending on when you upgrade, and I don't like the whole "renting a phone" thing.  Then again, I lease my cars, so whatever.  




    You are the one making claims about consumers being addicted to the subsidy model (now).  When asked for confirmation (for a reference) you declined to provide one.  The changes in the market point to you not being correct.   There are certainly some consumers that rely on the "subsidy" model but you have put forth no evidence for your claims that this is the overwhelming preference of consumers.  You said that they were "mostly" addicted or something like that.   I'd have agreed with you 2 years ago, even 1 year ago.  But the widespread change in the market in the last 12 months make me doubt that it is true today.   T-Mobile's whose Schtick is anti-contract based, and changes at AT&T and Verizon were, at least in part, due to consumer pressure to lower bills once a device was paid for.

     

    "more profitable" means that they have more profit after expenses.    It does not mean that an adjusted, less roller coaster cash flow means "more profitable" by default, as the overall revenue for the customer is about the same (to less).  That does not mean it is a wash.  AT&T certainly receives benefits from it like not having huge amounts they have to front on subsidies which smooths things over.  But it does not necessarily make them "more profitable."     Profit is income minus expenses.  If the overall income per user is not really changing, then the end profit won't change (quarterly profits may change plus or minus but in the end the overall profit doesn't).  Unless this lowers the absolute expenses per customer as well due to increased efficiency in the accounting, or supply chain efficiencies, or whatever.

     

    You keep saying that the carriers "make more money."  Please explain. The overall revenue per user is about the same or goes down in the new model.  How are they making "more money"?

     

    And in reality it is not really any more "renting a phone" than buying a car with a loan is "renting a car."  It is the same installment loan either way.  It is not a lease, as you are not just paying a finance fee plus depreciation and you don't have a separate buy-out at the end.

     

    And on a contract, you are really paying each month for the phone as well.  It is just hidden in the service fee.

  • Reply 92 of 92
    sdw2001sdw2001 Posts: 17,895member
    Quote:

    Originally Posted by chadbag View Post

     



    You are the one making claims about consumers being addicted to the subsidy model (now).  When asked for confirmation (for a reference) you declined to provide one.  The changes in the market point to you not being correct.   There are certainly some consumers that rely on the "subsidy" model but you have put forth no evidence for your claims that this is the overwhelming preference of consumers.  You said that they were "mostly" addicted or something like that.  


     

    Wow, you really can't let this go, can you?  I think the problem is that we're not understanding one another on what I mean by "addicted."  I am not referring to specific people, but the numbers of people currently on the subsidy model.  I believe that this is what various executives mean when they make these kinds of statements.  Customers as a whole are addicted to it.  That said, I agree the market is changing rapidly, as you note.   

     

    Quote:


     I'd have agreed with you 2 years ago, even 1 year ago.  But the widespread change in the market in the last 12 months make me doubt that it is true today.   T-Mobile's whose Schtick is anti-contract based, and changes at AT&T and Verizon were, at least in part, due to consumer pressure to lower bills once a device was paid for.


     

    You can disagree all you want, but the most recent data I found (which I shared) was that 2/3 of users had a subsidy contract.   However, that was 18 months ago.  It may be that number is closer to 50% or even lower.  We don't disagree there.  Where I think we disagree are the reasons as to why this has happened.  

     

    Quote:


    "more profitable" means that they have more profit after expenses.    It does not mean that an adjusted, less roller coaster cash flow means "more profitable" by default, as the overall revenue for the customer is about the same (to less).  That does not mean it is a wash.  AT&T certainly receives benefits from it like not having huge amounts they have to front on subsidies which smooths things over.  But it does not necessarily make them "more profitable."     Profit is income minus expenses.  If the overall income per user is not really changing, then the end profit won't change (quarterly profits may change plus or minus but in the end the overall profit doesn't).  Unless this lowers the absolute expenses per customer as well due to increased efficiency in the accounting, or supply chain efficiencies, or whatever.


     

    I know how profit is defined, thanks.  But there is absolutely going to be a financial motivation for the move.  

     

     

    Quote:


    You keep saying that the carriers "make more money."  Please explain. The overall revenue per user is about the same or goes down in the new model.  How are they making "more money"?


     

    I honestly don't know the particulars.  It could be something as simple (or actually, complex) as the way the accounting works.  It may have to do with efficiency as you noted.  The point is that large companies don't do things without a financial reason.  Occam's Razor applies here.  The simplest explanation is that the minds at the large carriers decided ending subsidies was a better business model for them.  You seem to consistently imply that consumers demanded these changes, and the carriers had no choice but to offer them what they wanted.  Yes, the market has shifted.  But that's because the carriers wanted it to do so.  

     

    Quote:


    And in reality it is not really any more "renting a phone" than buying a car with a loan is "renting a car."  It is the same installment loan either way.  It is not a lease, as you are not just paying a finance fee plus depreciation and you don't have a separate buy-out at the end.


     

    Agreed.  I would bet, however, that lots of people don't understand their phone isn't paid off in the number of months they are eligible for an upgrade.  People are dumb.  

     

    Quote:


    And on a contract, you are really paying each month for the phone as well.  It is just hidden in the service fee.


     

    I know.  

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