Is AT&T Killing Tablet Subsidies?

AT&T Inc. (NYSE: T) has reportedly stopped subsidizing tablets, adding to the up-front cost to the consumer that wants to buy an Android mobile device.

Engadget has published a document suggesting that AT&T stopped offering subsidies on tablets this weekend and will let users pay as they go for monthly 3G and 4G connectivity on the devices or sign up for a Mobile Share data plan.

AT&T is following Verizon Wireless in stopping the subsidy on its Android tablets. Big Red stopped the practice in June as it moved to shared data buckets.

Neither carrier has ever subsidized the top-selling Apple Inc. (Nasdaq: AAPL) iPad. Customers pay full-price for the Apple device and buy connectivity month-by-month or on its shared data plans. (See AT&T Joins Verizon in the Shared Data Pool.)

Why this matters
The top two carriers in the U.S. appear to be harmonizing on an iPad-like model for all tablet sales. None of the carrier Android tablet launches so far have dented the iPad and the recent devices like the Nexus 7 tablet and the Galaxy Note 10.1 are being offered as Wi-Fi-only gadgets, so the incentive for carriers to put these devices on contract appears to be declining.

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joset01 12/5/2012 | 5:23:31 PM
re: Is AT&T Killing Tablet Subsidies?

Maybe Wi-Fi alone is the way to go for these data-hungry hippos?

shygye75 12/5/2012 | 5:23:27 PM
re: Is AT&T Killing Tablet Subsidies?

Just a general question -- when did LR become a consumer advocacy site?

sarahthomas1011 12/5/2012 | 5:23:27 PM
re: Is AT&T Killing Tablet Subsidies?

GigaOm makes this point well...if consumers no longer have to "pay back" the subsidy to the carriers, then shouldn't data be cheaper?

sarahthomas1011 12/5/2012 | 5:23:27 PM
re: Is AT&T Killing Tablet Subsidies?

I still think it is and will remain so for LTE tablets unless operators get less stingy with data or more creative on pricing.

joset01 12/5/2012 | 5:23:26 PM
re: Is AT&T Killing Tablet Subsidies?

It hasn't.

Looking at how the two dominant carriers in the US charge for 3G and 4G data on an important new class of device is right in our wheelhouse.

shygye75 12/5/2012 | 5:23:25 PM
re: Is AT&T Killing Tablet Subsidies?

OK, but the discourse often defaults to criticizing carriers for high service prices -- as in the observation attributed to GigaOm about device subsidies. Operators have the right and the motivation to make a profit. I understand questioning the logic (or lack thereof) of certain market strategies, like tiered pricing.

jalawler 12/5/2012 | 5:23:23 PM
re: Is AT&T Killing Tablet Subsidies?

Under the new Verizon and AT&T share plans, the lack of subsidy seems to me to be reflected in the cost per month per device. Granted, the higher cost of a phone includes usage as well, but it would make sense that part of the difference is the subsidy.

I'm one of those few who wants data on my tablet. I carry it with me most of the time. I prefer the larger screen for almost all purposes, from reading on the commuter train to Twitter and web browsing. The only reason I bought a smartphone was to combine the separate phone, iPod and ancient PDA I was carrying. If I could, I'd drop the data plan on it.

jdbower 12/5/2012 | 5:23:22 PM
re: Is AT&T Killing Tablet Subsidies?

jalawler, in Verizon-land the subsidy is about $10/month.  A MiFi device is subsidized and has a per-month fee of $20 whlie tablets are not and are $10 - both are dumb data sinks so I'm attributing the delta to the subsidy.  Feature Phones are both subsidized as well as have the voice overhead and are $30/month which places voice service at $20/month.  This meshes nicely with Smartphones at $40/month which breaks down to $10/month for subsidy, $20/month for voice access, and $10/month for data access.

I really hope they stop subsidizing MiFi devices soon, while upgrading a smartphone every two years seems like an eternity it's hard to imagine a MiFi feature that would make me lust after an upgrade.

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