AT&T to Ditch Two Year Contracts for Smartphones | Hacker News Reader

AT&T to Ditch Two Year Contracts for Smartphones

engadget.com

27 pointsselimthegrim48 comments

My only beef with AT&T Next program is that the naming is dishonest to suggest that there are only [x] monthly payments for program AT&T Next [x]. [x] is the months required before a trade in, not the amount of installments.

AT&T Next 24: Divided into 30 installments; trade in and upgrade after 24 installments.

AT&T Next 18: Divided into 24 installments; trade in and upgrade after 18 installments.

AT&T Next 12: Divided into 20 installments; trade in and upgrade after 12 installments.

I agree, but I can't think of a much better name? Next 24/30 seems more honest, but more confusing at the same time. Especially because now you have Next 18/24 (the 24 overlaps in two plans).

That said, I'm on a Next plan and the sales people have been super clear about this. So I haven't had the experience of them sneaking it in.

Yeah, it's not like they hide it on the sales page, which says:

AT&T Next℠ 18

$0 down with 24 monthly installments. Trade in at 18 months.

I still have an old AT&T contract with unlimited data. I don't really use that much data relatively speaking, so last time I was up for renewal I tried several times to see if I could get a cheaper plan from AT&T, and no matter what I did it was always more expensive than just keeping my current unlimited data plan because they've raised prices on everything else.

So when this iteration of the contract is up, if my only options are going to be something more expensive, and they're not going to subsidize my phone anymore, then that rather lowers the chance that I'd stick with AT&T.

They just raised the price of free data by $5/m. You can leave the contract penalty-free. (Unless your account's pricing didn't change)

From what I've seen, wireless carriers don't care too much about retaining existing customers and focus mostly on acquiring new ones.

Probably a different story with larger business customers.

I'm running the AT&T plan for my family right now and the math worked out such that we would pay almost the exact same amount whether we bought a new iPhone up front or bought it subsidized with a 2 year contract (because of the monthly price difference between Bring Your Own Phone and a subsidized phone).

So I'm not seeing how this is much different for the customer, except that it's more straightforward to understand the pricing model (buy phone up front vs. paying in monthly installments).

What's the difference on month 25 if you don't upgrade? That's always been annoying to me about contract prices: your phone bill didn't go down when your contract was up and presumably your phone was paid off.

AT&T's "Next" plans turn the phone into a separate charge, payable across 18-24 payments. Once paid, the charge goes away and you're just paying for service.

IIRC, they were pressured into this by T-Mobile's offering, and Verizon now offers something similar for the same reasons.

This was the nasty part for me. I had to explicitly contact AT&T customer service and ask them to change my account from a contract plan to a Bring Your Own Phone plan once the contract expired in order to bring the bill down on month 25.

I figured most customers wouldn't notice to take advantage of this which is why I think a clearer separation between phone payments and cell service payments is a good thing.

Yeah this pretty much guarantees that I'll just switch to the iPhone Upgrade Program. I get my upgrade same-day, and my Apple Store always makes it right.

Currently the iPhone Upgrade Program is more expensive than almost any network's Next/Jump!/etc program, by at least $10/month.

The 16 GB 6S is $388.92/year on Apple's plan, $260.04/year on AT&T's Next, and impossible to calculate on T-Mobile's JOD (since T-Mobile don't provide a calculator and can adjust trade-in values on a whim).

If you have the money to spare, the Apple program is the most hassle free, just also the most expensive.

The Apple program comes with AppleCare. Is that included in your calculations?

Nobody offers legitimate AppleCare except, well, Apple. But you can get insurance (inc. one accidental damage claim) for less than Apple's total cost.

It's a bit more complicated than that.

First, Apple includes AppleCare+. Valuing that is a bit difficult, since it is normally $100 but that gives you two years of benefits (including a warranty for year two), and for Apple's plan you only keep the phone for one year. But it's convenient that if you drop your phone in the first year, it's only $100 to replace it.

Second, if you want to trade the phone in at 12 months, you need to do AT&T Next 12, which is $32.50 per month, or a total of $390. So it's about even.

My take is that Apple's plan is better if you really plan to trade it in after 12 months, or if you would have gotten AppleCare+ anyway. If you might keep the phone for longer, and don't care about AppleCare+, AT&T is probably the better choice.

If you're on the Next program you're enrolled in a Protection plan. For multiple phones on the plan you actually have a decreasing deductible (with limits) so the last time my screen cracked - or rather in this case, "was run over by a car", it was $99 to replace.

I'm not on any program at all, and replacing my cracked screen was still $99. ???

Really? Any details on that? I figured that was an add-on, like everything else from AT&T.

The $260/year plan on AT&T Next is a 30-month installment plan with the ability to trade in after 24 months. Apple's plan allows you to trade in after 12 months.

AT&T Next 12 is $32.50/month + $15 activation, compared to Apple's plan at $32.41/month (including AppleCare). If you never use AppleCare, then the two plans are pretty much the same. If you do use AppleCare, Apple's plan is ~$129/year cheaper (the price of buying AppleCare every year).

The other advantage to Apple's plan is that they give you an unlocked iPhone. AT&T's are locked until you pay the phone off (which is never if you're trading in every 12 months).

For T-Mobile, the phone is $27.09/month but you also have to pay $10/month for Jump. So that's $445.08/year for the latest base model iPhone. Jump also has a $150 deductible if it needs to be replaced under the program.

I was hoping Google was going to offer a similar program. I have Jump with T-Mobile and would like to get the latest Nexus every year but it they don't sell them through carriers then Jump sucks.

T-Mobile had jump and jump-on-demand. The latter is most similar to AT&T next 18, but less expensive and allows 3 phone changes a year.

> If you have the money to spare, the Apple program is the most hassle free, just also the most expensive.

Next upgrade, I will either be buying outright or using the Apple plan. AT&T Next was a disaster for me.

When you purchase an AT&T Next upgrade via Apple, an email is sent from Apple with forms and instructions for returning your old phone. For one of my phones, I received this documentation. For the other, it was nowhere to be found. The link on Apple's site to resend the email didn't do anything.

First I talked to Apple. They said talk to AT&T. People at AT&T didn't even know why I was trying to return my phone. Basically, they didn't even know what AT&T Next is. I finally got someone at Apple who immediately said "don't talk to AT&T; we'll take care of this." And he tried. Even though the email comes from Apple, it hits a backend AT&T system. And it was AT&T's system that was stuck. All said and done, it took me a month to get my form, just so I could actually send the phone back.

And then one of my fears was realized. Not having received the phone in a timely manner, AT&T charged my account for not sending it back. That took another month to resolve.

I wasted hours and hours trying to fix this and it was one of the worst consumer experiences of my life.

> AT&T Next was a disaster for me.

They forgot to bill us for the first nine payments (got a letter saying an error had occurred and we wouldn't be responsible for them), so I've been happy with it thus far. :-)

Having said that - that actually sounds more like an Apple issue.

I was able to trade my girlfriend's iPhone in on the Next plan at a Best Buy Mobile store without any issue. All the documentation and return was handled in store.

They've already tricked everyone into dropping the better plan with free upgrades ever 2 years in exchange for a hike in data service fees... best marketing snowjob ever. Plus, with their "pay the phone off a month at a time" crap almost everyone opts for they still effectively have contracts.

I got a nice upgrade in service and a discount in cost when I made that switch. And I get to buy my phones outright so I don't have to worry about convincing AT&T to unlock them. Seems like a total win to me. I've always been dissatisfied with carriers selling phones on contract, and I'm glad to see that this whole model is dying. With the Next plan you so criticize, people still have the option of paying for their phone gradually, but now it's genuinely a choice.

Are the fees for the phone and the service separate, such that, say, I can get a new $600 phone with minimum advertised $25/month payments over two years, but I could pay it off in 3 months at $200/month, and from then on out just pay for service?

I know Verizon lets you do this - you can pay off the phone by itself at any time.

Looks like that's probably true for all of them now. I have Sprint and after posting my question I looked up Sprint's "Easy Pay" option, which is exactly this. For some reason I thought it was a rebranding of the current subsidized model where your phone and service payments were locked together.

A phone company providing reasonable options and not screwing you over at every opportunity is rather weird, and I didn't believe it at first either.

Agreed - there's probably a business reason for it. Perhaps the fact that it's now a bog-standard financing arrangement forces them to allow it to be paid off separately?

Here's an idea: What if they studied customer behavior and found that when the traditional 2-year contract is up people started shopping around with other providers to see if they could get a better deal, and an unacceptable number were then lost as customers? I'm betting this happened quite a bit, actually.

With the new system when the two years are up (assuming the phone wasn't paid off before then) the customer automatically sees a nice little drop in their bill, which may make them feel more positive about staying with the company, or upgrading their phone again with the thought of "I was already paying that extra amount before anyway".

Just a thought, but I wonder what kind of research has gone into this sort of thing.

Yep, totally separate. Pay it off early, buy the phone outright, pay it off on schedule, however you do it the service itself stays the same.

Yes, a current AT&T phone bill for a 64GB iPhone line looks like this:

Mobile Share Value iPhone: $40

Discount for Mobile Share Value Savings: $-25

Equipment Charge ($749 financed over 24 months): $31.21

If you were on contract, the second two lines would go away. After the phone is paid off, the equipment charge goes away.

> Plus, with their "pay the phone off a month at a time" crap almost everyone opts for they still effectively have contracts.

A contract as in you have to pay for the phone? I mean, why pay $700 up front when I can get a free loan over 2 years that I can at any point pay off? T-Mo will buy the phone back from you which is usually within ~$100 of what you would owe after the year. I should sit down and do the math if the Apple plan or TMo way is better to keep an up to date iPhone.

Sadly you don't get a discount on your plans even if you don't get a subsidized phone.

You do get a discount. But they are getting rid of the subsidized phones (which honestly, for many/most people turned out to be a bad idea after the introduction of Next).

My 2-year AT&T contract just ended (and I kept service), but my monthly price is still the same. Should my monthly price have gone down?

Switch to a mobile share plan. The subsidized plan never gets cheaper. One reason they were bad.

Wait, will this nullify existing plans? Should I rush to get an upgrade on my device by signing up for a 2 year contract just to have the contract nullified on the 8th leaving me with a new device and no contract?

That's typically not how these things work. You are bound to contracts you sign -- and the contract would indeed stipulate a 2-year agreement of some sort. Possibly, the contract could allow changes in a way that you can enter the new 'iphone upgrade peogram' agreement... but it's probably to AT&T's benefit, not yours. Point being, you can't win this game that easy. :)

They actually did something similar to that a couple of years ago. If you switched your family plan to Mobile Share from a contract, they gave you the off-contract $25 discount per phone immediately instead of when the contract expired. You were technically still on contract for the two years, but you essentially never paid for the rest of your phones. We made out like bandits on it.

Edit: Forgot to mention that this kind of backfired on AT&T. A lot of people got switched to the Mobile Share plan by salespeople and it cut their bill for the length of the contract, but they didn't realize that it would go back up if they got a new phone. So a lot of people started with a very negative view of Next.

Wonder if this will lead to people preferring lower priced SKU's once they better understand the full cost of the Phone they are using.

I think many people will not only start to look harder at lower-priced phones, but they will consider going longer between upgrades, and become more interested in second-hand phones.

The biggest thing going on here, in my opinion, is that there is now a decoupling between "device" and "plan" in the consumer's mind where there was previously a very strong coupling. Savvy users have been able to buy a phone somewhere besides an AT&T store for a long time, but up until now it's never been a normal/default choice compared to going into an AT&T store, buying a phone there and signing a bunch of stuff that involves contracts and plan changes and fees. The default expectation now is that I should be able to plug a SIM into a phone and start using it without having to consult anyone, make account changes, pay fees or other BS.

Yeah, my brother and sister-in-law are saving up for a new house. When their phones reached the end of their Next plan after two years, it was effortless to just keep using them at a now reduced cost, instead of shelling out $30/month more each just to get the shiny new phone.

Evidence suggests not -- they still finance it, and the difference between $27/month (for a $650 phone) and $18/month (for a $450 phone) is one that most people would wave off.

The biggest difference is that it makes sub-$450 phones much more of an option. When every phone contract included a $450 subsidy, it didn't make any sense to get a cheaper phone. You don't get cheaper than free. Now you can buy a basic smartphone for $100, and a pretty good one for $200.

(IMO, cheap smartphones make the most sense if you can get on someone's family plan. It only costs us $15 plus tax per month to add another smartphone to our plan, which is within the means of everyone in our family, especially if they buy a budget phone.)

Cool. Now I can switch to the Apple plan, get the AppleCare, and jump carriers whenever the mood takes me.

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