AT&T CEO Ralph de la Vega is now saying something T-Mobile has already known for a long time: subsidized mobile phone prices are going away. That means eventually we'll all pay the actual price for our iPhones instead of a lower subsidized price that ultimately costs us more over the life of our service contract.
AT&T says subsidized mobile phone prices are going away
In an interview with Re/code, Mr. de la Vega said, "I think it is one of those options that is going to go away slowly. Not because we insist on it but because customers will choose it less often."
He also said the two-year contracts most carriers use to lock customers in will be going away. That's another place where T-Mobile is ahead of its competitors. T-Mobile has been selling unsubsidized phones without two-year contracts since 2013.
Ditching subsidized pricing means the upfront cost for new smartphones will be higher, but the overall cost will be lower. The current subsidized model spreads the full cost over several months as part of your regular bill, and continues to charge that extra amount even after it's paid off. That's been like free money for the carriers.
T-Mobile's plans have customers paying for their new phones outright, or financing them interest-free over several months. Once the phone is paid off, their monthly bill lowers.
AT&T has been making moves towards T-Mobile's model by offering unsubsidized smartphone options through Apple and Best Buy. You can, for example, buy an unsubsidized iPhone from Apple for AT&T's network. The phone will be unlocked so you can use it on other compatible networks, too.
Mr. de la Vega says that even though T-Mobile was first to market with no-subsidy phones, they weren't the catalyst for AT&T. He said AT&T was already looking at offering similar options to its customers and that T-Mobile "got there maybe a week or two ahead."
T-Mobile beat AT&T to market with its unsubsidized plans, and it did it with more enthusiasm, too. Where T-Mobile offered its new deals as big game changers, AT&T's felt more like a begrudging move into a changing market.
Still, AT&T did start offering actual cost smartphone deals and Mr. de la Vega is now openly talking about how this is something consumers are looking for. Considering how successful T-Mobile says its unsubsidized offers are, and now that AT&T is clearly headed down the same path, your next iPhone may cost you more up front—but less in the long run.