Just days after reports circulated that ESPN was in talks with a Tier 1 wireless operator about potentially subsidizing consumer access to the company's content via mobile, AT&T (NYSE:T) Chairman and CEO Randall Stephenson told investors at a J.P. Morgan Global Technology, Media and Telecom Conference that he expects content and app developers to soon introduce new types of business models that will allow customers to get access to their content without racking up high data usage bills.
Although Stephenson didn't elaborate on the details of these new models, he suggested advertising may be one option. "There will be models that emerge where they defray consumer charges by paying it themselves or by advertising," he said.
Just last week, the Wall Street Journal reported that ESPN was in discussions with at least one large U.S. carrier about subsidizing wireless access to its content. These talks could potentially lead to a "toll-free" data plan, thus opening up new revenue streams for both parties. However, nothing official has been announced.
Stephenson also said that the second quarter looks much better for AT&T's wireless business, and he hinted that new products or services will be introduced in the third quarter. He also said that AT&T Mobility will not see much growth from new business initiatives in 2013; however, he expects the connected car arena to become "meaningful" in 2015.
In February, General Motors announced it will replace Verizon Wireless' (NYSE:VZ) service with AT&T Mobility's service in its OnStar offering beginning in 2014. As part of the deal, AT&T will provide service to GM's OnStar in Chevrolet, Buick, GMC and Cadillac vehicles. AT&T will power OnStar's existing calling and monitoring services, and will support a new suite of infotainment services like streaming audio, web access, applications, and even video for backseat passengers. AT&T will also power GM's in-vehicle Wi-Fi hotspots and voice calling services.
During his appearance, Stephenson talked at length about the transition to LTE and how AT&T expects to see traffic on its HSPA network decline, resulting in little capacity investment in 3G. Because LTE is about 50 percent more capital efficient than 3G, Stephenson expects a big downward trend in capital expenditures for the company.
He also expects handset prices to decline. He explained that, if cloud storage becomes popular, consumers will need less storage and possibly less processing power on their phones, thereby reducing the prices of those devices.
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