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AT&T To End 2-Year Phone Contracts

As of next week, AT&T customers who want new cellphones will have to update their devices by paying the full retail prices upfront or through monthly installment plans. That’s because the carrier is doing away with its previous program that offered new phones to customers who signed two-year contracts for AT&T service.

First reported by Engadget yesterday, the change was confirmed today by an AT&T spokesperson who told us, “Starting January 8, AT&T Next will be the primary way to get a new smartphone at AT&T.” The spokesperson added that the change doesn’t apply to business customers with qualified wireless service agreements.

AT&T introduced Next in July 2013. Under the program, customers can get new smartphones or tablets every year by making 12 monthly payments and then upgrading, or they can keep their AT&T devices after they make installment payments for 20 months.

‘Pricing Simplification Effort’

Mobile carriers have gradually moved away from the two-year phone contract model over the past couple of years, and Sprint, T-Mobile and Verizon no longer offer such options. As Quartz noted today, “AT&T is the last major wireless carrier to eliminate the two-year pricing model.”

Yesterday Engadget posted an internal document it claimed AT&T had sent to employees earlier that day announcing the end of two-year contracts.

The document, headlined “What’s Changing,” told AT&T employees to “[e]xpect more information about this topic . . . during the week of January 4, 2016.” Additionally, the document noted, “Effective January 8, 2016, AT&T will launch a pricing simplification effort for device purchase options and pricing plans across all channels.”

After that date, the only purchase options for customers would be either paying the full retail prices of the smartphones upfront or agreeing to installment plans under AT&T Next, according to the document. The company also plans to introduce installment plan options for Quick Messaging and Basic (i.e., non-smartphone) devices.

Upgrading Phones Less Frequently

Once the primary means by which many people bought cellphones, the purchase contracts enabled customers to obtain relatively up-to-date devices without paying the full, often high, retail costs upfront. In return, however, customers had to make long-term commitments to service with the carriers.

Over time, however, new options — fueled by growing competition in the industry — emerged, causing more people to dump their contracts. Pre-paid cellphone service and the growing availability of pre-owned phones, in particular, helped build momentum against the old contract model.

Once they had their own smartphones, many people also opted to hold onto those devices longer rather than upgrade regularly. A Gallup survey in July found that 54 percent of smartphone owners in the U.S. now plan to upgrade only when their existing devices stop working or become totally obsolete.

“Mobile carriers’ attempts to entice customers to upgrade to new and ‘better’ models more frequently is not yet catching on with smartphone users,” the polling company said at that time. “A mere 2 percent say they upgrade their phone ‘when a new model is released, usually about every year.'”

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