Upgrading to a new iPhone in an AT&T Mobility store this weekend was a simple, straightforward process … sort of. The sales associate explained that the carrier has eliminated contracts for the iPhone, and quickly showed us what our monthly payments would be with the AT&T Next plan over a two-year period. A quick check of the Apple website showed the same: All AT&T iPhones are being offered through the Next device financing plans.
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Smartphone sales are a growing slice of the revenue pie for AT&T, and the carrier is shifting its pricing plans to encourage more frequent upgrades. With ATT Mobility’s Next plans, customers are eligible to upgrade as soon as one year after purchase. The carrier offers three versions of the Next plan, giving customers the option to upgrade to a new device after 12, 18 or 24 months. The longer the wait, the lower the monthly payments.
For most iPhone models, an AT&T Mobility customer’s monthly payments will be between $20 and $35 per month. That’s just the cost of the phone; service is a separate payment.
“If you talk to AT&T, they’ll say that they’re just at the beginning with Next,” said analyst William Ho of 556 Ventures. Ho thinks that over time the carrier will probably try to eliminate service contracts for all smartphones.
“It’s great for reducing churn,” said Ho. Without the natural break point of a two-year service contract, customers seem less likely to switch carriers. AT&T’s reported a 1.02% churn rate for postpaid subscribers during Q1, its lowest first quarter churn rate ever.
Using an iPhone for the full two years with AT&T Next may end up costing a bit more than the same phone would have cost with the old two-year contracts. The Verge ran the numbers for one scenario and found that the difference was $51 over two years.
AT&T was the first carrier to sell the iPhone, and still has a large base of longstanding iPhone customers. The carrier launched its Next plans almost two years ago, and added the option of a 30-month payment plan late last year. By the first quarter of this year, Next accounted for more than two-thirds of the carrier’s gross postpaid smartphone subscriber additions.
T-Mobile US eliminated smartphone service contracts more than two years ago, meaning that Verizon Wireless and Sprint are now the only two nationwide carriers offering service contracts for the iPhone.
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