“T-Mobile may have started the trend of making its customers pay for their own devices, but AT&T is running with it,” Roger Cheng reports for CNET.
“AT&T said 40 percent of its smartphone gross customer additions and upgrades went with its ‘Next’ monthly installment plan. In total, 1.1 million customers opted for ‘Next’ in the first quarter, the company said on Tuesday,” Cheng reports. “The plan makes for a subtle change in a person’s monthly bill, but the separation of the device cost from the service fee represents a shift in how the industry has long operated, and AT&T’s numbers suggest more consumers are beginning to understand the value of paying for their own device.”
Cheng reports, “Customers get more clarity on what they’re paying for, while AT&T no longer has to shoulder the burden of phone subsidies… In the fourth quarter, 15 percent of its customers moving to a smartphone opted to sign up for ‘Next.’ In the first quarter, it was 40 percent. AT&T said it sold 2.9 million smartphones through ‘Next’ in the quarter.”
Read more in the full article here.
I wonder when Gravity kicks in?
If the law of what goes up must come down is correct.
Zzzzzz, znorrrrr, Zleep bloggingzzzzzz, Snorrrrrrrrrrrr.
Gravity has had zero effect on you, and you’re the lowest form of hanging fruit. You just can’t let it go, can you?
They’ve actually made it a no brainer. I didn’t want to make the change, but when we upgraded my son’s phone last month, it knocked about $50 off of our average monthly bill, knocked about $50 off the upfront purchase of the iPhone 5s, and made him eligible for a new phone in 18 months instead of 24.
I upgrade mine when the 6 comes out, so that’ll jump our bill back up another $25, but still will be cheaper in the long run. And I’m not a fast upgrader, so at the end of that period, the price will drop again, rather than continue to be elevated to pay for the phone.
Oh, and I still hate AT&T. I finally gave up unlimited data to do this, because their service sucks so bad where I live, it will never be relevant anyway.
This article is supposed to be a warning about high un-subsidized iPhone pricing. However, as long as the phone carriers still charge you for the phone in installment payments what’s the difference. Sure there will be some that put off buying a new phone, but it’s not the doom a gloom that it’s being made out to be.
That’s exactly what I was thinking
All other things being equal, this new contract structure costs less, because the phone itself is no longer taxed as mobile services, but instead as regular retail sale. Retail sales taxes in the US are well below 10% in most states. Meanwhile taxes on mobile services reach beyond 20% in some states. This difference can be $50 and more per each device.
Ironically, carriers get an additional accounting windfall for this. Under the old “subsidy” model, they could report sales revenue for devices only for the up-front price (ex. $200 for the iPhone), and the remainder of the device price, which is recovered through the monthly plan, would be reported as it was being received.
Under the new plan, the phone is sold at full retail price up-front, and they can report that sale as full sale. The interest-free loan that is spread over 20 – 26 months is then set up as a receivable, but for accounting purposes, it has already been reported as revenue in its entirety.
In other words, when AT&T reports quarterly revenue, they can now report full $650 price for each iPhone sold, rather than just the $200 they got at the signing of the contract.
Why would anyone opt for separating the phone cost and service fees if there isn’t any savings in doing so? I guess the same reason why people are suckered into paying for unlimited texting when it is just another way for the carriers to bill for a very small percentage of data usage in a different manner.
If you’re seeing savings, by all means switch, and perhaps that is more likely with family plans and multiple phones. But I still don’t think the average consumer has any clue as to the actual cost of an iPhone. Give me $50/mo unlimited service (minutes, text and data) and I’ll happily buy my iPhone up front.
Like Steve said, the telcos are just dumb pipes.
It’s already available, called Net10. Just ask for ATT connectivity.
I replaced 2 iPhone 5’s that still had 18 months on contract that were replaced with Next iPhone 5S’s with no money out of pocket or activation fees and my bill stayed exactly the same with a 10GB mobile share plan. I then handed down one of the iPhone 5’s to my daughter and sold her iPhone 4S and my iPhone 5. I like Next.
Next plan sucks. It’s still far cheaper to have two lines per person with contracts and upgrade every year than to pay full price for a phone. They are forcing their uses into this new plan. No one is “choosing” it.
You can’t get a fully subsidy every year on the contract plan. It’s every 2 heard. So, it’s cheaper to do Mobile Share with no contract and pay for the full price of the phone. You save $150 over 2 years doing that, assuming you upgrade every 2 years.
0 NOES!!? the BURDEN of feeding freely on a captive customer base!! What MONSTER forced them into this!?
Cellular “service providers” don’t like subsidies despite the obvious advantages for them; a direct, unchanging money-drip straight from the vein is less…interruptible. Less distracting to just drink their fill.