AT&T's CEO Randall Stephenson has indicated at an investor's conference in New York that the company will stop offering subsidized phones soon.
Stephenson suggested that smartphone penetration in the U.S. is at more than 75 percent and is expected to reach 90 percent soon. Carriers in the U.S. will have to work hard to get customers to use the network more than just getting new customers on the network.
"When you're growing the business initially, you have to do aggressive device subsidies to get people on the network," said Stephenson. "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."
AT&T recently announced a new pricing plan where customers can save $15 a month by keeping their old phones.
Stephenson also said that the company has been working for a few years to create a more balanced pricing structure, which may attract more customers to the carrier and at the same time retain existing customers. In the U.S., AT&T was the first major wireless carrier to remove unlimited data plans and replace them with usage-based service plans. The company says that over 70 percent of its customers are now on plans based on consumption.
Stopping customers from upgrading to a new handset every 18 months to two years is a difficult task; however, giving an incentive for using their existing handset may entice some customers.
"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," said Stephenson. "You can use your own device or finance it. I think this will be very powerful. It's where we see the market going."
However, AT&T is not the only U.S. carrier, which is working towards removing subsidizing phones. The "uncarrier" T-Mobile got rid of subsidy on handsets earlier this year.
