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

[bathysphere]

Let's for the sake of argument that this is true; the price is "baked into" the price of the monthly payment and AT&T is making even more money after the contract ended. Would it make an ounce of financial sense to end such a payment scheme? Is this AT&T being a fair corporation?

Next argument. Anybody?

That is basically how it works(ed). It was a great scheme, until smart phones came along, and people began to upgrade their handset every two years or so. When that started, AT&T (and Verizon, and etc., etc.) lost a reliable, somewhat hidden from the customers perspective, revenue stream, and in order to maintain profit margins are now attempting to separate the cost of the phone from the cost of the phone service while keeping the 'service cost' the same.

In my particular case it's painfully obvious: I'm on a familytalk plan with two lines, 2gb of data/line. I pay $120/month for the service, which includes the cost of the subsidized phone. Now, if I move to a shared plan the cost of the service is $110 with two lines, but without the actual cost of the phones. With the phones, the monthly bill would be around 160 if I wanted to upgrade every 2 years like I do now, which is about a 35% increase.

 

[Fernandez21]

Let me clarify. It is $40 per month including data per line so if you have a FamilyTalk 700 with four lines, it is $70 for the first two lines and $20 ($10 per line for each additional line). Messaging is $30 per family. Assuming everyone is on UDP, it is $35 (new rate) per line so the total cost is $70 + $20 + $120 + $30 for a total $240.00 per month. On a 15 gig plan it is $100 + $15 per line for a total of $160 or $190 on a 30 gig plan. This obviously excludes any taxes or FAN discounts.

Yeah, but your forgetting the price of the phones. So with 4 lines your looking at least $100 more on top of the plan cost with AT&T next.

 

[suerte66]

False.
The iPhone gets unlocked once is not associated with a carrier contract agreement.

are you sure about this apple juiced? if this is true then i am almost certainly going to be canceling att in february.

 

[suerte66]

If you cancel the contact, youre not an at&t customer anymore, they only unlock if you are their customer.

well now i don't know what to believe

 

[bpeeps]

You have looked at interest rates since the 2008 crash have you? It has almost got to the point where the customer is paying the bank to look after their money rather than the banks paying interest.

There's no such animal as a interest free loan from the carrier. Believe me when I tell you the carrier is getting that money back somewhere, they are not running a charity.

Plenty of ways to get higher interest rates than a bank savings account lol. Do your research.

 

[suerte66]

You have looked at interest rates since the 2008 crash have you? It has almost got to the point where the customer is paying the bank to look after their money rather than the banks paying interest.

There's no such animal as a interest free loan from the carrier. Believe me when I tell you the carrier is getting that money back somewhere, they are not running a charity.

well, they are getting you locked into a 2 year (or however long) contract, but instead of it being for the service, its for paying off the phone. and in the mean time, I'd say you are less likely to switch to another service provider while you're paying off a phone on their network.

 

[suerte66]

How will i freaking find out if my premier account will be one of the accounts that will continue that let me upgrade? I ask because I need to know whether to not to burn my 3 early upgrades then.

Second question, how would pricing work? So my plan would still be identical (I have 5 lines. 130 base line + 10 add a line and one of them having UDP) but I just do upgrade pricing anymore? Does NEXT require me to switch my plan? So many unknowns..

you should for sure get the upgrades asap, unless i'm seriously missing something

 

[Snide]

I don't know where people are getting that they can go to NEXT and still keep unlimited data. I wasn't given that option , and believe me I asked about it.

I was given that option, and believe me I asked about it.

 

[Applejuiced]

are you sure about this apple juiced? if this is true then i am almost certainly going to be canceling att in february.

100%
You get out etf free and your iPhone is unlocked.

 

[kas23]

That is basically how it works(ed). It was a great scheme, until smart phones came along, and people began to upgrade their handset every two years or so. When that started, AT&T (and Verizon, and etc., etc.) lost a reliable, somewhat hidden from the customers perspective, revenue stream, and in order to maintain profit margins are now attempting to separate the cost of the phone from the cost of the phone service while keeping the 'service cost' the same.

That's still throwing the baby out with the bath water. If a hidden price is "baked in", then it still makes no financial sense for a carrier to ditch that plan. Even if people automatically upgraded at 2 years (which they actually don't, it's basically a MR phenomenon), they were still getting their money back, while trapping a customer at the same time. That's a guaranteed revenue stream. That's gone now for them.

Subsides are/were just a cost of doing business. It was the price the carrier had to pay to guarantee 2 years of payment. It never directly passed on to the consumer, but more likely hidden in their already exorbitant prices.

As for their real reason for getting rid of subsides; its gives the consumer a false sense of confidence that they're "free" and aren't "tied down" to a contract. I say a false sense because relatively few people likely change services (people hate change) and for every customer that does end of switching, another is thinking the same thing on Verizon and switching to AT&T. The net flow of customers and still likely negligible.

 

[JayLenochiniMac]

That's still throwing the baby out with the bath water. If a hidden price is "baked in", then it still makes no financial sense for a carrier to ditch that plan. Even if people automatically upgraded at 2 years (which they actually don't, it's basically a MR phenomenon), they were still getting their money back, while trapping a customer at the same time. That's a guaranteed revenue stream. That's gone now for them.

Two things: 1) By getting rid of the two-year contract, it's now $450 cheaper for them and $450 more expensive for us if we still want to keep unlimited so yes, it makes financial sense for them to ditch it and 2) while they might lose this guaranteed revenue stream, there are other ways to trap customers including offering 0% financing through NEXT and locking the iPhones to at&t.

 

[ToroidalZeus]

Two things: 1) By getting rid of the two-year contract, it's now $450 cheaper for them and $450 more expensive for us if we still want to keep unlimited so yes, it makes financial sense for them to ditch it and 2) while they might lose this guaranteed revenue stream, there are other ways to trap customers including offering 0% financing through NEXT and locking the iPhones to at&t.

Ya, as long as people keep financing their cell phones, they are in the exact same ETF scenario but under a different name.

 

[Rigby]

Let's for the sake of argument that this is true; the price is "baked into" the price of the monthly payment and AT&T is making even more money after the contract ended. Would it make an ounce of financial sense to end such a payment scheme? Is this AT&T being a fair corporation?

Next argument. Anybody?

There is more behind it than just squeezing a few more dollars out of some customers in the short term. For one, the big carriers have to counter T-Mobile's successful "uncarrier" marketing. Also, believe it or not, sometimes AT&T actually tries to improve their service to attract or retain customers. One area where the new contract-free plans are superior to the old model is flexibility. Some customers always want the latest tech and upgrade every year, others want to save money by keeping their phones longer than 2 years. By decoupling the device from the service plan, customers are now given that choice.

Another aspect is that the price of the phones is now transparent to consumers. This creates pricing pressure on the device manufacturers (who had so far been largely shielded by the subsidy model) and incentivizes consumers to shop around for less expensive devices or use devices longer. Both will lower the device costs in the long run, which is good for the operators because it lowers the price barrier.

 

[JayLenochiniMac]

Another aspect is that the price of the phones is now transparent to consumers. This creates pricing pressure on the device manufacturers (who had so far been largely shielded by the subsidy model) and incentivizes consumers to shop around for less expensive devices or use devices longer. Both will lower the device costs in the long run, which is good for the operators because it lowers the price barrier.

Aren't paying full price for the device and pay as you go plans much more common in the rest of the world, yet we haven't seen a downward trend in device prices? Why would this start with the US?

 

[Rigby]

Aren't paying full price for the device and pay as you go plans much more common in the rest of the world, yet we haven't seen a downward trend in device prices? Why would this start with the US?

In China, for example, phones (including iPhones) are much cheaper than in the US. In Europe, price competition could be one of the reasons why Apple has a smaller market share than in the US (since Android phones tend to be less expensive). But until a few years ago, the subsidy model dominated in Europe too, so we may not have seen the full effects yet.

To get a clear picture of what has been going on so far just compare AT&T's profit margin to Apple's ...

 

[uwdude]

That's true, during the subsidy era, as long as the manufacturers kept the cost of the phone to $650 or less, or $450 if they wanted it to be free to the consumer with the contract, then consumers didn't notice how much the device was costing. But now that consumers will have to shop comparing monthly device payment amounts or the full cost of the device, suddenly that $30 per month or whatever for each phone to have the latest and greatest is going to add quite a bit to your phone bill. So I guess we will see if people continue to choose the flagship devices or go for the lesser ones with $15 or $20 per month payments instead.

 

[JayLenochiniMac]

In China, for example, phones (including iPhones) are much cheaper than in the US.

Only because the contract is longer (3 years). However, the no-contract prices are actually higher compared to the US (which is typical for most countries).

 

[nolegirl01]

am I reading this wrong? I have unlimited data...after seeing this why would I give up my unlimited plan?!

 

[GuardsRed Apple]

am I reading this wrong? I have unlimited data...after seeing this why would I give up my unlimited plan?!

View attachment 608520

As a high-data user, you should probably stay with your UDP even despite the price increase/loss of subsidy. But the 25Gb MSV plan would be $175 + $15 + $15 = $205 for 2 smartphones since pretty soon you will not have 2-year contract prices. The $255 above includes the $40 x2 smartphone access fees for 2-year contracts which are going away.

 

[ToroidalZeus]

There is more behind it than just squeezing a few more dollars out of some customers in the short term. For one, the big carriers have to counter T-Mobile's successful "uncarrier" marketing. Also, believe it or not, sometimes AT&T actually tries to improve their service to attract or retain customers. One area where the new contract-free plans are superior to the old model is flexibility. Some customers always want the latest tech and upgrade every year, others want to save money by keeping their phones longer than 2 years. By decoupling the device from the service plan, customers are now given that choice.

Another aspect is that the price of the phones is now transparent to consumers. This creates pricing pressure on the device manufacturers (who had so far been largely shielded by the subsidy model) and incentivizes consumers to shop around for less expensive devices or use devices longer. Both will lower the device costs in the long run, which is good for the operators because it lowers the price barrier.

Wrong on both fronts.

On the first front take a look at this users options. Decoupling the service plan from the device is a moot point when the service costs more now.

am I reading this wrong? I have unlimited data...after seeing this why would I give up my unlimited plan?!

View attachment 608520

As for the second note. Device costs are still hidden with the monthly fee since most people do not see the full 650 cost. Plus anyone getting financing through the carrier (e.g. NEXT) is still locked into the carrier as the "ETF fee" simply becomes the "remaining balance."

 

[nolegirl01]

As a high-data user, you should probably stay with your UDP even despite the price increase/loss of subsidy. But the 25Gb MSV plan would be $175 + $15 + $15 = $205 for 2 smartphones since pretty soon you will not have 2-year contract prices. The $255 above includes the $40 x2 smartphone access fees for 2-year contracts which are going away.

Here it is broken down with the phones we currently have using a new plan with ATT Next...If we keep our current plan that we pay $162 (with taxes) and get new phones through the Apple Iphone Upgrade program (which is very similar to ATT Next), it will equal almost the same as getting a new plan with ATT and using ATT next. The difference is we would be giving up our unlimited plan and getting a capped at only 25GB. I still think keeping our unlimited is a better deal.

 

[GuardsRed Apple]

Here it is broken down with the phones we currently have using a new plan with ATT Next...If we keep our current plan that we pay $162 (with taxes) and get new phones through the Apple Iphone Upgrade program (which is very similar to ATT Next), it will equal almost the same as getting a new plan with ATT and using ATT next. The difference is we would be giving up our unlimited plan and getting a capped at only 25GB. I still think keeping our unlimited is a better deal.

View attachment 608528

AT&T Next is just a 0% financing program for the phones. Don't even consider that in your calculations since you basically have to pay full price for phones now. It won't matter if you choose to go with Next program or Apple's upgrade program. It's all the same (except Apple forces you to pay extra for Applecare). Of course, AT&T also forces you to pay $15/phone extra in "upgrade fees" to use Next as in the picture above. Apple program won't cause that charge.

Now, what you really need to focus on is your service plan. You should keep your current grandfathered plan exactly where it is at. It sounds like you have 2 phones on UDP and pay $160/mo. This will stay the same until you change it (if ever) only you no longer get to upgrade your phones for subsidized prices. You will just have to pay full price, use Next to pay monthly, or use Apple's program. Keep your unlimited service at $160/mo until AT&T raises costs more or takes it away from you b/c it's more expensive on their current MSV plan for your usage.

Mobile Share Value plan for 25Gb is currently $175 + $15 + $15 = $205 per month if you were to switch to that (which I'm saying don't based on your high data usage). You're already having to pay more out-of-pocket for your phones now, so why switch to MSV and pay higher service costs too?

Make sense? It's late

EDIT: Also, if you're currently on contract for your current phones (the iPhone 6s's above) then just ride that out on your UDP plans until you are not on contract and then reassess the situation.

 

[GuardsRed Apple]

Here it is broken down with the phones we currently have using a new plan with ATT Next...If we keep our current plan that we pay $162 (with taxes) and get new phones through the Apple Iphone Upgrade program (which is very similar to ATT Next), it will equal almost the same as getting a new plan with ATT and using ATT next. The difference is we would be giving up our unlimited plan and getting a capped at only 25GB. I still think keeping our unlimited is a better deal.

View attachment 608528

It also looks like you have a FAN discount of $26.25 in the picture above.

So, if you switch to the 25gb MSV plan your monthly cost would be $148.75 + $15 + $15 = $178.75/mo which is still more expensive than you are paying now and you'll have a cap on your data.

Your current plan at $160/mo is still cheaper even with the impending $5 per UDP line increase coming.

 

[aristobrat]

Let's for the sake of argument that this is true; the price is "baked into" the price of the monthly payment and AT&T is making even more money after the contract ended.

Would it make an ounce of financial sense to end such a payment scheme?

They're not ending it -- they're massively (!!) expanding it.

Right now, the only people that fall into that "payment scheme" are the minority of customers who don't renew their two-year contracts when they're up.

By getting rid of two-year contracts, AT&T is effectively moving every customer (that chooses to stick with their old grandfathered plan rate) into that "payment scheme" (because they can't renew their two-year contract when it's up).

So that "payment scheme" just expanded from consisting of a subset of 2-year contract customers to consisting of all 2-year contract customers.

And for the customers that choose to jump to a newer Mobile Share plan, from looking at the majority of posts in this thread, they'll be paying more overall to AT&T each month than they currently are. So in terms of financial sense for ending two-year contracts, this also makes sense.

 

[GuardsRed Apple]

They're not ending it -- they're massively (!!) expanding it.

Right now, the only people in that "payment scheme" are the minority of customers who don't renew their two-year contracts at the end.

By getting rid of two-year contracts, AT&T is effectively moving literally every customer that chooses to stick with their old grandfathered plan rate into that "payment scheme".

So now that "payment scheme" has gone from consisting of just a subset of customers on two-year contracts to EVERY customer on a two-year contract (seeing as how they can't renew and get a $649+ phone for $199+ ever again).

Exactly. They effectively just raised the cost for everybody staying on an older, grandfathered plan by $450 per line every 2 years in one fell swoop.