Phone buyers are hanging up on subsidies, AT&T says

Almost 3 million picked the installment plan in the first quarter

Installment plans for cellphones are starting to squeeze out the time-honored practice of paying a subsidized price up front, AT&T says.

Buying installments is catching on in a big way, according to AT&T's first-quarter financial results Tuesday. About 2.9 million people signed up for the carrier's Next plan, in which subscribers pay for a phone in monthly installments and can trade it in for a new model after a year. That was more than 40 percent of AT&T's postpaid customer additions or upgrades for the quarter.

Paying in installments is an alternative to buying phones at a price subsidized by the carrier, the way most U.S. consumers have done it up to now.

AT&T introduced Next in July 2013 amid a flood of new plan options among U.S. carriers that was led by T-Mobile USA. Only 15 percent of AT&T's new subscribers and upgraders signed up for Next in the fourth quarter last year, so the plan seems to be gaining momentum. However, some of the uptake in the first quarter came from an offer that let customers upgrade their phones early, the carrier said.

U.S. carriers sell most of their phones at subsidized prices to draw customers in and then lock those subscribers into two-year contracts. With installment plans, subscribers still have to pay off their phones if they change carriers before they've made all the payments, but the monthly cost of the phone -- about US$15 to $50 on Next -- is spelled out on each bill. After 20 payments, the handset's paid for. AT&T says consumers like having a more "transparent" way to pay for their devices.

"Many customers have been choosing to move off the subsidy model," Chief Financial Officer John Stephens said on a conference call Tuesday. AT&T thinks this trend will continue but it's not ready to drop the subsidy model yet.

"I wouldn't suggest it would be eliminated as long as there's a significant number of customers who enjoy and prefer it," Stephens said.

If you're wondering where those trade-in phones go, Stephens said AT&T can sell them to customers of its prepaid plans, use them to fulfill insurance plans that cover phone replacement, or sell them on the wholesale market, as it began doing last year. The fact that AT&T uses the GSM family of network technologies, which is used around the world, helps it get good prices for the used phones, Stephens said.

AT&T's Mobile Share plans also are growing more popular. About 45 percent of its postpaid subscribers are on the plans, which let customers pay for one monthly bucket of data and use it on multiple devices. A lot of shared-plan users are buying big buckets, too: 46 percent of them have plans with 10GB or more per month, the carrier said.

Changes are coming in AT&T's prepaid business, where customers pay ahead of time for what are typically less expensive plans. With its acquisition of Leap Wireless out of the way, AT&T plans to relaunch that company's Cricket wireless brand in the second quarter, folding its own prepaid operations into that business, Stephens said. He estimated it would take about 18 months to move customers off the former Leap network, which uses CDMA, and onto AT&T's GSM-based system.

Stephen Lawson covers mobile, storage and networking technologies for The IDG News Service. Follow Stephen on Twitter at @sdlawsonmedia. Stephen's e-mail address is stephen_lawson@idg.com

Join the Good Gear Guide newsletter!

Error: Please check your email address.

Tags business issuestelecommunicationconsumer electronicsCarriersat&tsmartphonesfinancial results

Our Back to Business guide highlights the best products for you to boost your productivity at home, on the road, at the office, or in the classroom.

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Stephen Lawson

IDG News Service
Show Comments

Essentials

Microsoft L5V-00027 Sculpt Ergonomic Keyboard Desktop

Learn more >

Lexar® JumpDrive® S57 USB 3.0 flash drive

Learn more >

Mobile

Lexar® JumpDrive® S45 USB 3.0 flash drive 

Learn more >

Exec

Lexar® JumpDrive® C20c USB Type-C flash drive 

Learn more >

Lexar® Professional 1800x microSDHC™/microSDXC™ UHS-II cards 

Learn more >

Audio-Technica ATH-ANC70 Noise Cancelling Headphones

Learn more >

HD Pan/Tilt Wi-Fi Camera with Night Vision NC450

Learn more >

Budget

Back To Business Guide

Click for more ›

Most Popular Reviews

Latest News Articles

Resources

PCW Evaluation Team

Azadeh Williams

HP OfficeJet Pro 8730

A smarter way to print for busy small business owners, combining speedy printing with scanning and copying, making it easier to produce high quality documents and images at a touch of a button.

Andrew Grant

HP OfficeJet Pro 8730

I've had a multifunction printer in the office going on 10 years now. It was a neat bit of kit back in the day -- print, copy, scan, fax -- when printing over WiFi felt a bit like magic. It’s seen better days though and an upgrade’s well overdue. This HP OfficeJet Pro 8730 looks like it ticks all the same boxes: print, copy, scan, and fax. (Really? Does anyone fax anything any more? I guess it's good to know the facility’s there, just in case.) Printing over WiFi is more-or- less standard these days.

Ed Dawson

HP OfficeJet Pro 8730

As a freelance writer who is always on the go, I like my technology to be both efficient and effective so I can do my job well. The HP OfficeJet Pro 8730 Inkjet Printer ticks all the boxes in terms of form factor, performance and user interface.

Michael Hargreaves

Windows 10 for Business / Dell XPS 13

I’d happily recommend this touchscreen laptop and Windows 10 as a great way to get serious work done at a desk or on the road.

Aysha Strobbe

Windows 10 / HP Spectre x360

Ultimately, I think the Windows 10 environment is excellent for me as it caters for so many different uses. The inclusion of the Xbox app is also great for when you need some downtime too!

Mark Escubio

Windows 10 / Lenovo Yoga 910

For me, the Xbox Play Anywhere is a great new feature as it allows you to play your current Xbox games with higher resolutions and better graphics without forking out extra cash for another copy. Although available titles are still scarce, but I’m sure it will grow in time.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?