Randall Stephenson

It would seem that T-Mobile was onto something when it announced that it was doing away with device subsidies earlier this year, because that appears to be where the whole industry is headed. Carriers simply can’t afford to continue heavily subsidizing phones and tablets.

That’s what AT&T’s Randall Stephenson thinks anyway. Speaking at an investor conference this week, the CEO said that the current model is not economically viable. More customers are upgrading to smartphones now than ever before, and they’re upgrading more frequently…

CNET’s Marguerite Reardon:

Speaking at an investor conference in New York City on Tuesday, AT&T CEO Randall Stephenson said that with smartphone penetration at over 75 percent and soon reaching 90 percent, wireless operators need to work harder to get customers to use more of the network rather than simply getting on the network.

“When you’re growing the business initially, you have to do aggressive device subsidies to get people on the network,” he said. “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.”

Stephenson went on to say that breaking customers of their current upgrading habits won’t be an easy task, but they’ve already starting putting things in motion. Earlier this year, the carrier announced the ‘Next’ financing program and last week it announced new no-contract plans.

The most interesting part in all of this, to me anyway, is that T-Mobile seemingly predicted all of this before anyone—or at least was the first to act on it. And in doing so, it’s managed to wrap all these would-be ‘scary’ changes into its consumer-friendly ‘Un-carrier’ campaign. Genius.