AT&T Inc. (T) Ditching Tablet Subsidies – Pros and Cons for Consumers

AT&T Inc. (NYSE:T) had been selling both smartphones and tablets with deep discounts to purchasers, offsetting the deep discounts by writing in the price in the two-year contracts for data plans. Now, starting today, AT&T ir dropping the data contracts from all of its tablets, which will mean the company will sell these computers at full retail price.

AT&T Inc. (NYSE:T) realized that it had to handle tablet computers very differently than smartphones. First and foremost, AT&T was not making much on tablet data plans, simply because tablets have fairly easy access to Wi-Fi in many parts of the country, which of course allows users to bypass the At&T network to download and transfer data. The subsidies  were designed to cover the loss for selling the tablets with two-year contracts. Now, with dropping the data plan contracts from the tablet computers, AT&T Inc. (NYSE:T) now can sell tablets at competitive retail prices but will drop the $5 monthly surcharge that its phone bills had attached that was for tablet computers.

But this article cited above also considered an additional step – AT&T Inc. (NYSE:T) should drop the rates for its various data plans, so the rates more accurately depict the data usage and no longer include the premium for subsidizing the tablets. So on the positive side, AT&T is dropping the contracts and the data-plan subsidies, which should help customers buy tablets with paying in “installments” over a two-year contract. On the downside, AT&T Inc. (NYSE:T) will sell tablets at a more competitive up-front retail price – but, purchasers won’t be tied down with a contract for data.

Whether this will pay off for AT&T Inc. (NYSE:T) will be something to watch over the next several months as a series of new tablets get released. This news will likely be watched by investors like hedge funds – including D E Shaw.