Entering The Era Of $600 Smartphones

Better get used to paying upwards of $500 for that brand new iPhone 5s or Galaxy S4 because carrier subsidies are soon to become a relic of a bygone era, or so says AT&T CEO Randall Stephenson.

Stephenson’s comments, delivered at a New York City investor conference yesterday and reported by CNET, come in the wake of AT&T’s rollout of new pricing options designed to encourage users to keep their old smartphones in exchange for cheaper monthly rates.

"When you're growing the business initially, you have to do aggressive device subsidies to get people on the network," Stephenson said. "But as you approach 90 percent penetration, you move into maintenance mode. That means more device upgrades. And the model has to change. You can't afford to subsidize devices like that."

The pricing tiers were announced last week and represent a $15 monthly savings compared to plans where AT&T provides a subsidized smartphone.

"If you are a customer and you don't need to upgrade your device, you can get unlimited talk and text and access to the data network for $45 all-in," he said. "You can use your own device or finance it. I think this will be very powerful. It's where we see the market going."

The new wireless plans, called AT&T Next, are not dissimilar from T-Mobile’s UnCarrier initiative, which debuted earlier this year. Both T-Mobile and AT&T’s new pricing options represent a general trend in the telecom industry that reflects a saturation of smartphone devices where just a half-decade ago, there wasn’t one.

Carriers today have made and continue to make massive investments into their wireless data networks so the selling proposition is no longer about the device itself so much as the services delivered to it.

Like most carriers, AT&T no longer offers an unlimited data plan and according to CNET, more than 70 percent of its customers are paying data rates based on usage.