AT&T to Stop Offering Two-Year Phone Contracts Starting January 8

[jnappleseed]

Starting on January 8, 2016, AT&T plans to introduce a "pricing simplification effort" that will see the end of device subsidies and two-year contracts. According to an internal training document shared by Engadget, new and existing AT&T customers will only be able to purchase a smartphone at full price or with an AT&T Next payment plan going forward.

As outlined in the document, the new rules apply to all of the phones that AT&T sells, including smartphones and more basic devices, which will be paid for using new installment plans. More information on how AT&T will handle corporate accounts and non-smartphone devices like tablets and wearables will become available after an official announcement from AT&T, but it appears certain corporate users will be able to continue making two-year contract purchases.

The shift away from two-year contracts and iPhone subsidies began with T-Mobile in 2013, when the company introduced its Un-carrier payment plans uncoupling device costs from plan costs. Verizon followed suit in August of 2015, debuting new smartphone rate plans and eliminating its subsidized two-year contract option for new users.

Existing Verizon customers can still renew their two-year contracts, but AT&T's no-contract implementation is more extreme and will not offer existing customers the option to keep their contracts once they expire.

AT&T has already been working on shifting away from two-year contracts by pushing its Next plans. In June of 2015, AT&T forced Apple and other third-party retailers to remove the option to purchase AT&T phones with a two-year contract, leaving customers with AT&T Next or a full-priced smartphone as their only third-party purchase options.

Update: AT&T has confirmed its plans to stop offering two-year contracts in a statement given to Re/code.

Article Link: AT&T to Stop Offering Two-Year Phone Contracts Starting January 8

I don't understand why people are complaining about this. You guys seriously expect to pay only $200 for a $750 and expect the carrier to eat up the remaining cost of the phone?

What they're doing are shifting the cost of the phone to where it actually should be: the consumer.

To all of you complaining: can you buy me a $30,000 car and I only chip in $5,000? And every number of years I also expect you to do it over for me.

 

[Arndroid]

Lease your living space!
Lease your car!
Lease your music!
Lease your phone!

Anyway I'm on VZW and it at least looks like I'll still be able to get a subsidized device since I have that now, unless VZW announces tomorrow to kill that.

But if it gets to the point where I have to shell out close to $2,000 for two mid-storage tier phones to buy outright every two years for my wife and I, I don't think I'll be buying phones every other year as that's an obscene expense to have every other year.

This is not phone leasing. You can pay it off and own it. You can upgrade at quicker intervals and keep making payments.

As someone who was keeping phones for 3-4 years I was getting ripped off.

 

[Arndroid]

Let me know when one of them starts having mobile hot spots and I might consider it.

Also most of the Mvno s are on sprint or tmobiles network which are both significantly inferior to att and Verizon in most places. So yeah crappy service is cheaper we all get that point the mvno evangelists are selling.

 

[AFEPPL]

I know full-priced phones aren't cheap, but contracts are so ****ing overpriced that they need to get removed eventually.

Depends... I'm on a tariff that means even if i bought a US phone, brought it back to the UK, used the minimum PayAsYouGo Monthly SIM it would still cost more. If i didn't get a discount, i'd kinda agree.

However, theres something more at stake.
like cars and their PCPs, the contract system allows people who lets say wouldn't be able to purchase a device outright to have a device of their choosing for a low month cost. I can't see this going away as it would have huge financial impacts on the mobile phone business in general and especially apple as they are mainly a one device company from a profit point of view.

 

[tigres]

I don't know about your math, but if your on a 2 year contract At&t charges $20.00 a month for 24 months that's $480.00 if you take 480+200 =680. I only pay $650 for the phone I can sell that phone anytime I want to. I see that as a better deal. But that's just me.

I am not charged this 20.00 for my contract plan. 3 lines, unlimited on 1, 3gb on 2, 550 shared min w/r-o, unlmt text @ 165 a month INC. Tax and fan. Beat that with any current ATT plan. - cannot btw.

 

[aristobrat]

I am not charged this 20.00 for my contract plan. 3 lines, unlimited on 1, 3gb on 2, 550 shared min w/r-o, unlmt text @ 165 a month INC. Tax and fan. Beat that with any current ATT plan. - cannot btw.

Looks like the plan you're on becomes significantly more expensive than current AT&T plans if you factor in that you'll be paying $649+ for each of the phones plus $160/month.

Are you going to switch carriers, or just switch to a current AT&T plan?

 

[CEmajr]

Welcome to the new reality of the US telecom industry AT&T users. Glad to see contracts finally dead

 

[pooleman]

I've stayed on 2-yr contracts because they have been cheaper for me than buying the iPhone for full-price.

The iPhone costs $650 retail (plus tax).
I could always sell the iPhone for about $200 at the end of the 2 year contact.
Subsidy was $450.

So doing the math, I was always breaking even after 2 years. In other words I have been getting free iPhone upgrades for the last 6 years. Coupled with Unlimited data and it was a sweet deal.

If the 2 year contracts were soo overpriced, AT&T would be making a huge profit from it and would keep them. The fact that they are getting rid of them shows that they were actually too good a value for the consumer.

So if I keep my current subsidized phone past the 2 year contract on the same plan will my bill be reduced?

 

[BobVB]

To all of you complaining: can you buy me a $30,000 car and I only chip in $5,000? And every number of years I also expect you to do it over for me.

Excellent analogy but there is a better:

The AT&T Now program is like leasing a $30,000 car for 2 years that charges you $30,000/24 a month and then when you go to get a new car they want the old car back.

Or to put it another way you are paying full price for the phone and then giving up all equity in it as the financing cost on the installment plan on the next. That works out to a financing plan with about a 30% interest rate.

Save the same amount of money each month, buy your next phone outright and you will have a new phone every 2 years AND a phone to sell or give away.

 

[aristobrat]

In two years, if I decide to get a new phone, I will. If not (why upgrade to a new device if my existing one is workmen fine?) I just keep paying my $65!

That's the part where some people will say that you're getting ripped off.

On 2-year contracts, your monthly bill remains the same, regardless of if you upgrade at the end or not. Part of the $65 you pay every month goes towards subsiding your phone. So after two years, if you haven't upgraded to a new phone, you're still paying towards subsidizing your phone, except your phone is actually already paid for and doesn't require subsidizing anymore.

With AT&T Next, as soon as you've paid the $649 (or whatever the price of the phone was), your monthly bill decreases, as you only pay for the service. You do not continue to pay a portion of your monthly bill towards a phone that's already been paid off.

When will you all see that NEXT is a contact plan? Its just not cut and dry like the traditional 2-year plans were. You are locking into a plan and they are conveniently selling you on a low monthly price for something that used to be cheaper to own if you bought up front.

I don't think that there's anything "cut and dry" about the traditional 2-year plans were.

I think 2-year contracts are sometimes better values because most are based on rates that haven't changed in almost a decade, but I don't find anything "cut and dry" about a monthly payment that includes both the charge for the service and the charge for the device that doesn't change once the device is paid off, or allow you to pay off the amount owed for the phone at any time (allowing you to upgrade at your convenience, even if it's before the 2-year contract has come to an end).

 

[nt5672]

Well I went into the local ATT store 2 weeks ago and they would not cell a subsidized iPhone. It was either full price or Next Plan. They (ATT) are counting on very few being able to come up with the outright purchase price and being forced into the Next lease arrangement. I would bet that if Apple did not allow outright purchase, that ATT would not do it either.

 

[aristobrat]

Excellent analogy but there is a better:

The AT&T Now program is like leasing a $30,000 car for 2 years that charges you $30,000/24 a month and then when you go to get a new car they want the old car back.

Or to put it another way you are paying full price for the phone and then giving up all equity in it as the financing cost on the installment plan on the next. That works out to a financing plan with about a 30% interest rate.

Save the same amount of money each month, buy your next phone outright and you will have a new phone every 2 years AND a phone to sell or give away.

AT&T Next is 0% APR financing. Remember, you always own the phone and are not required to turn it in at the end of the Next payment plan. You can sell it or give it away. Try doing that with a leased car.

 

[nt5672]

. . . .
Has anyone ever moved to Next and still was able to get the Unlimited Data Plan?

I was told this same thing in the store 2 weeks ago.

 

[OllyW]

On 2-year contracts, your monthly bill remains the same, regardless of if you upgrade at the end or not.

In the UK you can drop on to a cheap SIM only tariff at the end of the contract which don't include the cost of the subsidy. Do the US networks not offer anything similar?

 

[aristobrat]

In the UK you can drop on to a cheap SIM only tariff at the end of the contract which don't include the cost of the subsidy. Do the US networks not offer anything similar?

IMO, AT&T Next/Verizon EDGE/T-Mobile Jump etc are functionally the same as what you're describing.

To me, the issue is that the carriers have been letting folks in the US keep renewing 2-year contracts at rates that mostly haven't changed since the original iPhone launched back in 2007.

So in comparison, the monthly charge for 2-year contracts based on rates that old are sometimes cheaper than just the service (SIM-only) rate of current plans here.

 

[apple_iBoy]

Well I went into the local ATT store 2 weeks ago and they would not cell a subsidized iPhone. It was either full price or Next Plan. They (ATT) are counting on very few being able to come up with the outright purchase price and being forced into the Next lease arrangement. I would bet that if Apple did not allow outright purchase, that ATT would not do it either.

What kind of plan were you trying to keep? I was able to get a $299 64GB iPhone on a 2 year unlimited plan 3 days ago.

Maybe your plan didn't exist anymore? Or maybe they just didn't want to re-up you (they're probably discouraged from it), in which case I would raise holy hell.

 

[nightcap965]

It's about bloody time. Ever since the first iPhone, all I ever wanted to do was be able to buy it outright. With the iPhone 6, I was told I couldn't buy it outright, but could essentially pay for it over two years at 0% (a good deal, make no mistake, but not quite what I wanted).

 

[aristobrat]

What kind of plan were you trying to keep? I was able to get a $299 64GB iPhone on a 2 year unlimited plan 3 days ago.

Maybe your plan didn't exist anymore? Or maybe they just didn't want to re-up you (they're probably discouraged from it), in which case I would raise holy hell.

Did you renew your 2-year contract in-store or online? I thought I read (a few months ago) where some folks could only renew them online.

 

[Scottadus]

Starting on January 8, 2016, AT&T plans to introduce a "pricing simplification effort" that will see the end of device subsidies and two-year contracts. According to an internal training document shared by Engadget, new and existing AT&T customers will only be able to purchase a smartphone at full price or with an AT&T Next payment plan going forward.

As outlined in the document, the new rules apply to all of the phones that AT&T sells, including smartphones and more basic devices, which will be paid for using new installment plans. More information on how AT&T will handle corporate accounts and non-smartphone devices like tablets and wearables will become available after an official announcement from AT&T, but it appears certain corporate users will be able to continue making two-year contract purchases.

The shift away from two-year contracts and iPhone subsidies began with T-Mobile in 2013, when the company introduced its Un-carrier payment plans uncoupling device costs from plan costs. Verizon followed suit in August of 2015, debuting new smartphone rate plans and eliminating its subsidized two-year contract option for new users.

Existing Verizon customers can still renew their two-year contracts, but AT&T's no-contract implementation is more extreme and will not offer existing customers the option to keep their contracts once they expire.

AT&T has already been working on shifting away from two-year contracts by pushing its Next plans. In June of 2015, AT&T forced Apple and other third-party retailers to remove the option to purchase AT&T phones with a two-year contract, leaving customers with AT&T Next or a full-priced smartphone as their only third-party purchase options.

Update: AT&T has confirmed its plans to stop offering two-year contracts in a statement given to Re/code.

Article Link: AT&T to Stop Offering Two-Year Phone Contracts Starting January 8

I love att. I do the next plan. and I get 20 gb Data for 100 bucks. I love att the speed and coverage is great.

 

[pooleman]

The "subsidy" was baked into the cost of the data plan. You were paying AT&T back, and then some. If you were on an MVNO you'd easily pay half of the monthly cost and save yourself hundreds of $$ over a two-year period.

I love att. I do the next plan. and I get 20 gb Data for 100 bucks. I love att the speed and coverage is great.

Thank You Secret AT&T employee.

 

[DEMinSoCAL]

Excellent analogy but there is a better:

The AT&T Now program is like leasing a $30,000 car for 2 years that charges you $30,000/24 a month and then when you go to get a new car they want the old car back.

Or to put it another way you are paying full price for the phone and then giving up all equity in it as the financing cost on the installment plan on the next. That works out to a financing plan with about a 30% interest rate.

Save the same amount of money each month, buy your next phone outright and you will have a new phone every 2 years AND a phone to sell or give away.

Your analogy isn't quite right. NEXT is more like leasing a $30,000 car and paying $199/mo for 36 months then trading it in for another lease. Your payments then become more like rent and like any rent, it is a useage fee, not an investment in the item. If you make all the payments (a 0% APR loan), though, it is yours to keep and sell, and resale on iPhones, in particular, are high. That is the smart move. Otherwise, you are right, you throw away all the equity you have in the phone when you upgrade early.

When did the $25/mo discount for NEXT or BYOP options move to 15GB or higher plans? When I signed up, it was 10GB or higher. I have a 10GB plan @ $80/mo and am worried I will have to upgrade to 15GB if I switch to a NEXT plan. Currently, all 6 phones on our plan are BYOP.

 

[Carlanga]

I don't understand why people are complaining about this. You guys seriously expect to pay only $200 for a $750 and expect the carrier to eat up the remaining cost of the phone?

What they're doing are shifting the cost of the phone to where it actually should be: the consumer.

To all of you complaining: can you buy me a $30,000 car and I only chip in $5,000? And every number of years I also expect you to do it over for me.

Seems you don't know that the difference is stuck inside the monthly price of the plan. Or did you think the contract monthly pricing we pay is higher than the month to month plans just because we like paying more. Do the math and see for yourself who pays more at the end of 24 months.

-------------


So i guess I will have to seriously consider changing from att after my 6s contract ends.

 

[jmpnop]

I've stayed on 2-yr contracts because they have been cheaper for me than buying the iPhone for full-price.

The iPhone costs $650 retail (plus tax).
I could always sell the iPhone for about $200 at the end of the 2 year contact.
Subsidy was $450.

So doing the math, I was always breaking even after 2 years. In other words I have been getting free iPhone upgrades for the last 6 years. Coupled with Unlimited data and it was a sweet deal.

If the 2 year contracts were soo overpriced, AT&T would be making a huge profit from it and would keep them. The fact that they are getting rid of them shows that they were actually too good a value for the consumer.

iPhone is never free. You end up paying the subsidy over the contract term and likely even more than buying device outright! So, iPhone costs a minimum $650 and up.

 

[Carlanga]

Welcome to the new reality of the US telecom industry AT&T users. Glad to see contracts finally dead

I would be glad if pricing made sense. Right from the get go they are just taking advantage of customers. They should charge similar rates to Europe and other non contract places.

 

[b0nd18t]

For me, this was essentially already in place. If I subsidized my phone they would charge my plan an extra ~$30 a month. So absolutely no difference. Service is still the best in my area and I use it for work so I can't have **** networks like most are.