Mobile phone users in the US tend to hate being tied to a two year contract, but many really appreciate the massive subsidies they get on new smartphones with that contract. You can buy the latest smartphones outright and not have a contract, but the price is several times that of the subsidized cost. AT&T CEO Randall Stephenson says that these big subsidies can’t continue.
According to Stephenson, the time of major subsidies on smartphones is coming to an end. He says that major wireless providers like AT&T can’t continue to fund an unending smartphone upgrade cycle. This is part of the reason why AT&T rolled out it Mobile Share Value plans recently that offer discounts monthly for users who bring their own smartphones.
Stephenson said that subsidies are required to get people on your network. However, he points out that as the penetration of smartphones grows, carriers have to move to maintenance mode. Maintenance mode includes more device upgrades and he says at that point carriers can’t afford to subsidize devices.
Stephenson is apparently looking to a business model based on financing expensive wireless devices rather than subsidies. He says such a business model would be “transformative” for the wireless industry. AT&T is trying to do this already with its no money down, 0% financing deals on the AT&T Next program.