Customers to Pay More for Phones
AT&T's CEO Randall Stephenson told investors in New York City that the day of big device subsidies are on their way out. Last week AT&T offered new plans that are aimed at customers who are bringing their own device to the network. The days of upgrades every 12 or 18 months are disappearing. Carrier subsidies are fading to the background. New financing plans of T-Mobile's Jump, Sprint's One Up, AT&T's Next, and Verizon's Edge plans may or may not be in the best interests of consumers.
How this news affects you:
It’s a big loss for phone manufacturers and especially for manufacturers like Samsung. For instance, the Google Edition of Galaxy S4 is $649 and the AT&T Galaxy Note 3 unsubsidized is $724. Samsung’s approach is to try to fill every possible price point and size with their offerings which they update every year (sometimes sooner). Going forward, customers will be more prone to keep their current phones and will only elect to upgrade or buy a new phone when their current phone no longer works. Google may be in a great position to win since it is offering phones at a reasonable cost to customers. Phone manufacturers are becoming more cost conscious and cautious with design, hardware, and offerings.
The shift in subsidies also affects customers that always have to have the best and fastest phone. This group also includes those that get bored with their phones, like to trade often, or are accident-prone will have to open their wallets the widest. The costs of the phones are continuously becoming more expensive. Apple’s latest and greatest iPhone 5s 64gig unlocked is $849. Most customers are unwilling or unable to pay that much for a phone. Phone manufacturers are may be less likely to take chances with designs and innovations for fear of raising the cost of the phones. Ultimately, there will be less of a selection of phones that will be on the market. This would be a loss for those wanting the most cutting edge phone and may have to settle on something they would be able to afford.
Reviewers are going to have to be more creative when doing their phone reviews and may have to start comparing phones with features rather than specifications. We will see more of OS apps, daily use case, and battery life comparisons in the very near future.
This change in business will be a new time for customers dividing them even more distinctly in the have and have-not. Phones with multiple LTE bands are increasing becoming offerings that can utilize almost any network. This could be a great win for customers who can compare cell companies on their plans as opposed to the $0 off or down. Shrewd customers can buy their phone in full and go where they want to go. No more 2-year plans with early termination fees and lower monthly costs. If the customer doesn’t like their provider’s cell coverage cost, or service they can easily take their phone to another company. Customers that finance are going to feel way more pain. Manufacturers are making more expensive phones and cell companies are shifting the weight to the customers that finance. The monthly cost of service will increase for customers and dramatically for families.
Depending on how much money the customer has in pocket when buying the phone will put them either in the win or loss column with the new carrier changes.