Mobile phone buyers will soon be able to spread the cost of new handsets over 30 months, at least if they buy their phones from Ma Bell. AT&T, the second-largest mobile phone company in the U.S., announced a new payment plan on Tuesday that would give customers two and a half years to pay for their phones. The company currently offers both 12-month and 18-month payment plans.
Under the plan, customers can buy new phones with no money down. Dubbed AT&T Next 24, the new payment plan allows users to upgrade their phones after two years. But in order to upgrade a phone that has not been fully paid off, customers will be required to turn their old handsets over to AT&T before getting their new ones.
Almost Paid Off
Essentially, users will have paid off 80 percent of phones that they no longer own. AT&T, meanwhile, will be able to resell the pre-owned handset. Users will have the option of waiting an additional six months to pay off the balance on their existing phones, but AT&T is hoping most will opt to trade theirs in at the 24-month mark.
The company seems keen to push its new program. It is offering customers with existing two-year contracts the option to break their contracts early if they switch to Next 24. It is also offering a $150 credit to new customers switching to AT&T and buying smartphones.
Aside from that carrot, the company is also hitting existing customers with a pretty heavy stick: AT&T customers with two-year contracts who recently upgraded to the iPhone 6 discovered that the company had quietly increased their monthly access charges to $40, from $15 to $25. Over two years, the price hike adds up to an additional $600, very nearly the cost to buy a new, unsubsidized iPhone. AT&T is also charging customers an additional $40 for upgrading to the new iPhone.
Installment Instead of Subsidy
The Next 24 model represents a distinct change from the traditional mobile phone billing structure. In most cases, mobile carriers offer users handsets at highly subsidized prices to lock them in to two-year contracts. The phones on Next 24, however, will not be subsidized.
The new, unsubsidized payment plans that offer early upgrades appear to be popular with customers. AT&T said that about half of its new subscribers and existing customers opt for one of their Next plans rather than subsidized two-year contracts.
The move away from the subsidized pricing model first began with T-Mobile. Looking to take the offensive against larger carriers such as AT&T and Verizon, T-Mobile has been targeting customers with no-contract, no-subsidy service agreements. Sprint, meanwhile, has also suggested that it might begin offering installment programs in lieu of subsidized contracts.