galaxy samsung smartphoneSome fresh thinking about wireless comes from Anthony Ruben of Inflection Point Consulting, who penned a research note titled “AT&T Has a Unique Opportunity to Zig While the Market Zags” for Seeking Alpha.

According to Ruben, Sprint’s announcement this week that it will no longer offer two-year contracts with embedded subsidized phones will leave AT&T as the only service provider that still offers customers a subsidized option. And that could be an important differentiator, Ruben says.

While competitors are shifting tactics and “zigging,” AT&T now has an opportunity to “zag” by highlighting its contractual plans, Ruben argues.

Subsidized Cellphones on the Wane?
Service providers have tried hard to convince customers that it’s a smart move to purchase their own devices. But from some consumer’s point of view, a case can still be made for a subsidized plan.

Ruben argues, for example, that “[h]istory tells us that there is a cadre of consumers who prefer the convenience or are otherwise advantaged of a bundled offering and the comfort of knowing they will be getting a new iPhone every two years. For example, employees who receive bill reimbursement from their employers prefer a bundled bill.”

And there can be some substantial advantages to AT&T in offering a subsidized service – the same advantages that caused carriers to offer such plans in the first place. As Ruben notes, a contractual customer has minimal churn and if priced right, can be as profitable or more profitable than an a la carte customer.

Ruben likens AT&T’s position to that of Fox News which “zagged” when it began offering a more conservative viewpoint when other networks “zigged” to become more liberal. But I think a better analogy is Southwest Airlines, which declined to follow competitors in charging customers for checking even a single bag. I know people who opt for Southwest whenever it’s an option for that simple reason.

AT&T isn’t putting all its eggs in the subsidized cellphone basket, however. Like its competitors, the company also offers an unsubsidized offering, dubbed Next, which as Ruben notes, should appeal to those who don’t mind keeping their device for a while.

Join the Conversation

Leave a Reply

Your email address will not be published. Required fields are marked *

Don’t Miss Any of Our Content

What’s happening with broadband and why is it important? Find out by subscribing to Telecompetitor’s newsletter today.

You have Successfully Subscribed!