“Perhaps fearing the rapid, recent growth of T-Mobile, AT&T has unveiled a new plan that could lead to the carrier selling fewer of Apple’s iPhones,” Sam Mattera writes for The Motley Fool. “Starting next week, AT&T subscribers will have the option of signing up for the ‘Mobile Share Value Plan’ — a plan that would separate the cost of their smartphone from the cost of their service. Subscribers who pay for their phone up front, activate an old phone they already own, or pay for their phone in monthly installments, will receive a discount on their monthly bill.”
“Among subscribers that opt for this plan, cheaper handsets powered by Google’s Android could become far more attractive,” Mattera writes. “AT&T subscribers who switch might be enticed to pick up a less expensive Android phone rather than a more expensive iPhone.”
MacDailyNews Take: If they do, they’re not the type of quality customers that Apple wants anyway.
“It’s overwhelming clear that Apple depends on carrier subsidies for its iPhone sales. In emerging markets, where most carriers don’t subsidize phones, Google’s Android dominates. Where phone subsidies are relatively generous (like in the U.S. or Japan), Apple accounts for a large portion of the market,” Mattera writes. “That’s why this trend toward reduced carrier subsidies should be worrying for Apple. Despite T-Mobile’s recent growth, it remains one of the nation’s smallest carriers — but AT&T is the second largest. AT&T isn’t abolishing subsidies entirely, but its new plan gives subscribers the option of forgoing subsidies in favor of reduced monthly bills.”
Read more in the full article here.
MacDailyNews Take: AT&T isn’t abolishing subsidies. Therefore the answer to Mattera’s headline question is “no.”
Related article:
AT&T’s new pricing plans: Who saves and who doesn’t – December 6, 2013
I’ll take my business elsewhere if I have to. AT & T can kiss my ass.
I’m getting my wife and myself new iPhone 5s models for Christmas and I’m switching from AT&T to Verizon in the process. It will cost me more but I’ve had it waiting for them to upgrade the service in the area where I work. People with Verizon can watch a movie while I can’t even make a phone call in the building. They can stuff their crappy coverage where the sun don’t shine.
ah, capitalism.
I’m thinkin’ Darwinian selection with AT&T starring as the Dodo bird. This could be a nice win for Verizon with a good ad campaign.
It’s the opposite where I live. ATT’s call quality is significantly better than Verizon, their coverage of my life-area is perfect in contrast to V., the data is faster, and their customer service is excellent. I was on Verizon for one year and couldn’t wait to hand them $220 to kiss my aßß and take a long walk off a short pier.
It’s all relative, I suppose. Relative to where you are.
Agreed. T-mobile works fine in my area.
People always have the option to get an Android or iPhone. In general, the iphone still does well.
You should get whatever works best for you. We travel a lot so my wife has Verizon & I have ATT, increasing our odds of having coverage. I was quite surprised that on a recent camping trip pretty far out into the woods that my iPhone 5 got 5 bars and hers got just one. Even inside the camper I had flawless audio streaming and we watched a show on HBOGo.
Here is another idea. AT&T should AUTOMATICALLY reduce monthly “subsidy” charges once the phone has been paid in full. Otherwise, AT&T just bilks money from those people who hang on to their older phones for a while. Think about it: $10 or $15 per month on millions of phones. There ought a be a law.
I also don’t understand why AT&T has the legal right to lock my phone to prevent me from using a cheap local SIM card when I travel. It is so easy to do and can save people a lot if money. (The starting point is contacting AT&T to implement their “software unlock” via iTunes.) it is a bit of a hassle and a lot of people don’t know how to do it. AT&T should at leadt AUTOMATICALLY unlock phones that are fully paid for.
Seems sleazy to me not to do these things automatically. Where are the consumer rights advocates?
That’s what is happening. And here in Canada, legislation is being passed to force carriers to stop over-charging customers for goods & services they technically shouldn’t be paying for. Right now, if I walk into Rogers with my own handset, they will charge me the same as a custom that walks out with a brand new one. It’s truly sleazy.
The monthly subsidy charge is probably more like $20 to $30 per month, isn’t it? When the phone is payed in full, these charges should come off the bill automatically.
I’m on the verge of going to VZW. AT&T just keeps getting worse. They should focus in more LTE service. The T-Mobile international data and voice is also overdue and pretty awesome.
While on a rant, I laugh everytime I see the word subsidy. To get that subsidy I need to: pay a $45 upgrade fee, and lock in a two-year contract. Yeah, subsidy my a$$.
Yes, my iPhone 4 did cost me $200 up front, but at the end of the contract, I sold it to a reseller for $150, so my new iPhone 5 cost me $50 up front.
So……..not likely I will change for a plastic Android.
Don’t forget the $30/month built into your service.
The total outlay will probably be approximately the same, so it should only have an effect on the BYOD crowd and price-only shoppers. I don’t see Apple losing anything.
“Google’s Android” does not dominate anywhere in the world except, perhaps, at Google’s headquarters. Android-based phones have gained a majority market share across most of the world, but only because most of the Android handsets sold are low-end units replacing old “feature phones” from years past. I have no doubt that the average selling prices for smartphones will gradually trend downwards. Apple will follow that trend, but will maintain product quality and gross margins.
Apples to Apples.
HTC one and Samsung S4 cost just as much as iPhone.
You can only get a pretty junky phone for cheap.
Disagree on some level. Sprint has had buy one, get one free… Then recently, no up front cost. Anyway, the interestg part is despite these galaxy 4s promotions, ppl still pay for the iphone 5s/c.
AT&T makes money on selling service plans, not hardware. So, customers bringing their own devices, or purchasing their phone directly from AT&T unsubsidized will matter little to them as long as a get a new carrier plan going, and this new approach opens up that opportunity. AT&T will continue with subsidizing the more expensive phones, because that brings in the higher end users who really make use of the strengths of those devices and consume more data than the entry level customers. Not subsidizing the high end phones probably would reduce the numbers of sales of those devices, but it would also open the door for those customers to look elsewhere, potentially losing those valuable data plans. Continued subsidization encourages customers to upgrade every two years and stick with them, an easy choice.
I think the author is right about the effect on Apple, but misses the boat on why. The real issue is that many people won’t feel the urgent need to upgrade every two years (since they’re paying for the new phone whether they get it or not). As such, I expect slightly longer upgrade cycles for a large number of AT&T customers. That will definitely affect Apple’s sales.
Granted, many people around here will feel the need to upgrade to every Apple device that ever appears, but that’s only a majority of the customers out there.
Speaking for myself, I’d be more inclined to push an upgrade off for a little bit of time and take some money off my monthly bill.
As someone who buys my phones outright, I have bought a new iPhone more regularly than 2 years not less.
The phone is worth 75% of what I paid generally when sold, and I get a bonus similar to what ATT are proposing.
I get the best phone for business and it costs me less!
Of course here in Australia, I see a lot of Androids in the wild, but of the people I know, most have cone back to Apple after a short stint despite continual carrier advertising.
The only few settlers for knock off rubbish are people who buy as part of a plan and seem to want pirate music / apps.
I agree with your analysis, Apple’s day of “I gotta have it” fever is over.
Excellent point but, in some cases, the exact opposite will happen. Consider the scenario where you have an iPhone n for 18 months and the iPhone n+1 comes out. With the new plan, you can sell your iPhone n (at a pretty good price) with no provider penalty and use the proceeds as a down payment on the iPhone n+1.
The old way pretty much forced you to wait 2 years before buying your next phone. The new way eliminates the penalty for not waiting.
I honestly don’t understand why everything that is introduced is considered to be some huge threat to Apple and not to other companies. Apple as a company isn’t exactly financially hanging on by a thread. I’m sure Apple has enough money to make whatever changes needed in order to survive. It’s not like every user in the world is going to change to this plan. As it is there are still plenty of people tied into two-year carrier plans so it’s not going to affect Apple overnight.
There never seems to be anything that ever benefits Apple for some odd reason. I would just think Apple would have to keep building iPhones that consumers like and enjoy and that would be enough to keep them loyal.
Here is another one “don’t understand” if I may.
I really don’t understand what’s the difference (or what difference does it make) between “carrier subsidy” and “pay for their phone in monthly installments”.
The thing I do understand is the part where it says “separate”. Other than that it looks the same to me.
Is it that now, if users chose that plan, Apple will not get the full phone cost up front?
Because, as I was saying, from the user perspective it would be pretty much the same thing.
This is stupid speculation. Subsidized pricing is popular because customers like it. I don’t mind AT&T providing more options, but that’s not going to make subsidized pricing any less popular than it is now.
Click bait article.
Are the majority so mindless that they just upgrade for the sake of it when a contract is up? Do they just buy the cheapest / first thing that they are offered? Are they happy with knock off plastic junk? Will they settle for a non-ecosystem with reverse security?
Apple didn’t get large, successful or rich on the backs of such people.
I don’t do subsidies for phones, I buy an iPhone approximately every year. It costs me less than ‘subsidised’ phones and I can upgrade when I like. Even if it cost me more I’d wear it to have the best phone.
I don’t think it is overwhelmingly clear that a lack of subsidies in the US will hurt apple. The fact that tmobile is taking customers should be worrying for ATT if anything.
Once tmobile gets their at a little bit more together- gladly goodbye att and you can keep your bullshit grandfathered data plan.
In reality, there is no subsidy and there has never been one. AT&T has fully recovered the cost of the iPhone by the end of the two year contract. In some cases, AT&T has reaped a windfall when the customer continued to pay the contract price without upgrading their phone. AT&T continued to be paid the service cost plus the equipment cost recovery amount. This took advantage of customers who were lethargic or bad at math or waiting for the next iPhone.
I suspect not much will change with respect to iPhone sales. What should change is AT&T will no longer get payments for a phone that is fully paid for, but they will give customers a path to stay with them with their old equipment instead of leaving for an MVNO unlimited plan. It will be interesting to see what my options are when my current contract expires. I think the life-cycle of the iPhone 5s is going to be considerably longer than 2 years.
I’m a fan of buying outright and paying less per month. Now that I’m spending a lot of time outside the U.S., I’ve switched my paid-for and unlocked iPhone 4s to GoPhone (the bastard offspring AT&T hides in a closet) so I can activate it only while I’m home and use a local SIM card while I’m abroad. In Tajikistan, pay-as-you go cost me about $5/month for minimal metered voice and $9/month for 1GB of prepaid 4G data.
Did they write the same article about the galaxy? Doubt it.
In late October, Sprint gave me two iPhones, one a 5C and one a 5S with both unlimited everything for $162 a month after junk fees. Also, they waived both activation fees and gave $100 off both phones for switching from AT&T to Sprint. I paid $108 up front for both phones combined. It did take three weeks for the gold 5s to arrive and I did have to deal with accented saleswomen in the Phillipines, but we are happy now.
Today i just switch from greedy as MF AT&T to H2O F. AT&T and the way the freaking to business, after more than four years with them and 4 iPhone (4, 4S, 5 & 5S) the last iPhone I bought it cash no contract anymore and guess is going to be the way I will do it every year. hell with contracts.
AT&T can kiss my a$$.
If you both the low end iPhone $199 at best buy you can finance for 6 months. Sure you pay $15 more, but in 6 months at $33 per month you are done. The financing deal for 20 months will cost you about $30 per month. After 6 months you will be paying $15 more per month than the subsidized plan. Stupid is as stupid does.
Now if you both two phone from best buy, you would have interest free financing for 18 months. $400 divided by 18 means $11 per phone per month. The unsubsidized installment at $30 means you save nothing. Tmobile started something that is totally bogus. Even their suppossedly free international data is sham. Look at how much data they are giving you. Three minutes worth of YouTube HD.
Sucker born every second. Americans have just become plain idiots which the shysters of WS love.
Crush? No.
Impact? Yes.
Re: MDN’s take, “If they do, they’re not the type of quality customers that Apple wants anyway.”
That’s not really true, or not the point. Apple wants those customers, they’re just not going to race to the bottom to get them. Prior to this move by AT&T, there was a subset who was more price-sensitive and compared the cost of a Android phone versus iPhone, and on the subsidy policies, the price wasn’t much different, if at all. If they were locked into AT&T (due to location, work, etc…), the price choice wasn’t an option. Now it is.
As we’ve seen, and as the article clearly demonstrates, where phones are subsidized, Apple comes out better than where they’re not.
While AT&T will still offer a subsidy plan, some who are shy of contracts who are also price sensitive will likely choose AT&T.
We can rag on those he-haws all we want, but the reality is that this move by AT&T will at least slightly negatively impact iPhone sales in the US.
As for me, I’m all about the subsidy with AT&T. My fees are written off as work related, so I get a new iPhone each year under full subsidy and couldn’t be happier.
Finally dumped AT&T and bought a no contract, 32MB 5s with T-Mobile. I am traveling more, and now have the choice of getting a local sim card, or pay the low fee (whatever suits me best at the time). Pretty sweet. And I do like it that I can upgrade whenever I want, although as some posters mentioned above, this 5s is as future proof as it gets. This is the first iPhone that makes me feel I’d want to keep it longer than two years. And no, a bigger screen will not do it for me. In the morning, I walk into my garden. I sit sown to take in the news and sip a cup of Tonks coffee. like to hold my cup of fresh grinded coffee on my right hand, and my iPhone on the left hand. Anything bigger than the 4″ screen will not work as well.
ATT PR should be reading ALL the feedback on this thread and seriously take to heart the resentment and negative sentiment of almost everyone with AT&T.
AT&T should realize the implications and repercussions awaiting them as a result and read the writing on the wall… Everyone hates this arrogant immoral, greedy and ungrateful company for good reason ( Not that Verizon is much better, mind you).
The alternatives are growing by the minute – Too bad Apple can’t provide it’s users with an Apple alternative , so that we can tell them to stick it where the sun don’t shine.
I think this is great even for people with payed for hand me down phones. Why get stuck with paying extra for a phone you own already. And if apple wants to lose market share and not compete let them. It’s called choice and I am a full apple user.
This article’s logic is flawed from the very beginning. The “rapid, recent growth” of T-Mobile is attributed to iPhones. Before T-Mobile starting carrying iPhones last summer, this carrier was losing customers left and right. iPhones literally “saved” T-Mobile. This is a recent, verifiable fact the author either decides to ignore, or simply has no knowledge of. If what happened at T-Mobile is any indication, AT&T should gain iPhone customers because of the new plan,, or at the minimal keep them from switching to T-Mobile.
I switched to Sprint’s new plan and now have unlimited everything for my iPhone 5s. Sprint’s LTE service in KC is great, it’s twice as fast as ATT.
That is a simple thing to answer. NOPE!!!
Americans have their mindset stuck in this subsidy model. They don’t realize that it is noticeably more expensive than the non-subsidy up-front purchase model. T-Mobile went away from subsidy last spring, and their offerings have become noticeably cheaper since then.
Let’s use iPhone as an example. The price of a base model is $650 (for iPhone 5S). With a subsidy model, you pay $200 up-front, and the remaining $450 ends up being recovered by AT&T (or other carriers) through the subsidy, which is built into your monthly plan, and which is around $25. There are two problems with this. First, this subsidy is an integral part of your monthly phone plan, and when the phone is paid off, the plan never goes down. In other words, after two years on the contract, you begin donating free money to AT&T, until you get the next subsidized phone.
Second problem is that the taxes on mobile phone services are much higher than the simple retail tax for merchandise. When you pay $80, or $100, or $120 for your AT&T service, that amount is taxed at the rate often exceeding 20%. Your normal retail tax for the iPhone, if you were to buy it from Apple, is less than 10%. So, you are paying an exorbitant tax on that subsidy portion of your plan, which is nothing but an installment for your phone, and should be taxed at much lower rate.
With T-Mobile, you buy your phone up-front, and you sign no contract. Your monthly wireless service will be $50, or $70, or whichever plan you choose, but it will NOT include any subsidy. You can either pay for the phone in entirety $650, or you can put a $150 downpayment, and get the rest on an interest-free loan, over the two years. The end result is, you only paid retail tax on that phone (8% in NY state, for example), and not wireless service tax (22% in NY). The difference (14%) comes out to about $100.
T-Mobile has NO early termination fee (there’s no contract), and the upgrade price is NOT higher if you are still in contract (again, there’s no contract). If you want to get a new phone, just pay off the remaining balance on the current one and get the new one under same conditions ($150 down, 24 interest-free installments).
The article is, in other words, incorrect. It is much more likely that people will upgrade sooner, now that they DON’T have to wait until the end of some two-year contract.