Make no mistake – AT&T would rather not give this discount (and that is what makes Stephenson’s remarks duplicitous); until now, smartphone customers spent some number of months paying off their phones with higher bills, and then, once the phone was paid for, postpaid subscribers effectively gave AT&T cash equivalent to their phone’s monthly payoff amount because they didn’t know any better. People who kept phones longer than two years, for example, presuming that ~$20 of every month’s bill was intended for phone payoff, effectively gave AT&T et al. $240 of pure profit in that third year. T-Mobile exposed that, and AT&T is giving some of that money back.
Right, once again we have AT&T CEO Randall Stephenson talking out of his ass. It’s not that the carrier can no longer afford the subsidies on smartphones — these costs are baked into your bill, hence the two-year contract — it’s that the smartphone market is almost saturated (in the U.S.) and others are making it difficult for AT&T to make as much money as they once did while still subsidizing phones.