Will AT&T’s new plan crush Apple’s iPhone business?

“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

43 Comments

    1. 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.

      1. 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.

      2. 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.

    2. 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?

      1. 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.

      2. 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.

  1. 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$$.

  2. 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.

  3. 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.

  4. “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.

      1. 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.

  5. 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.

  6. 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.

    1. 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.

    2. 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.

  7. 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.

    1. 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.

      1. 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.

  8. 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.

  9. 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.

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