AT&T's Stephenson: Device subsidy model is 'fundamentally changing'

AT&T CEO Randall Stephenson said that the model that has prevailed in the US wireless industry for years of customers getting subsidized devices in exchange for signing two-year contracts is radically shifting.

Stephenson said that competition ramped dramatically in 2013. It was sparked mainly by T-Mobile US, which shifted away from contracts and device subsidies and has since kept up the pressure, offering to pay the early termination fees of customers who switch to T-Mobile and trade in their devices. Other carriers have embraced device financing models in the wake of T-Mobile's actions.

Stephenson said the average customer now "has a lot more transparency" and can more clearly understand the value proposition of what carriers are offering. They can see the cost of devices more clearly and then force carriers to compete more directly on network quality and pricing. Customers are opting to choose lower monthly pricing in exchange for paying for the device up front or in installments, Stephenson said. "The customers are overwhelmingly choosing that equation," he said.