Lauren Goode

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AT&T’s “Next” Plan Offers A New Smartphone Every 12 Months, With Some Strings

Rather than “rethinking possible,” AT&T is rethinking its plans, as it becomes the latest wireless carrier to offer customers the option to upgrade their phones more frequently.

AT&T chicago flagship store

Starting July 26, AT&T will offer new “Next” plans for smartphones and tablets, on a post-paid basis. The plan allows customers to trade in their devices (feature phones excluded) every 12 months, provided the customer pays a monthly installment fee based on a 20-month cycle.

So, you would take the full retail price of a smartphone or tablet, divide it by 20 and add that cost to your monthly traditional or family-share AT&T plan. Twelve months later, you trade in that device for a new one, and a new cycle begins.

If you decide you want a new phone before the 12 months is up, Next owners still owe the cost of the remaining months’ fees.

But trying to make sense of these plans in abstract is hard, so here’s an example of AT&T’s Next plan using Apple’s iPhone 5. The unsubsidized price of the phone would be $650. If you divide that by 20 months, you get $32.50. You’d pay that amount on top of your regular wireless calling and data plan.

Provided that the device is still in “good working order” when you turn it in — no cracked screens or waterlogged components — you can begin a new cycle with a new device. If you turn it in damaged, your trade-in value will take a hit.

AT&T’s Next plan comes right on the heels of T-Mobile’s announcement last week, a program called Jump in which customers could upgrade to new phones every six months for a $10 monthly fee on top of their existing “un-plan” plan. (It should be noted that AT&T sent out a teaser for this event prior to the T-Mobile event last week — so it’s hard to say which company actually set the plan in motion first. But, yes, AT&T’s announcement chronologically follows T-Mobile’s.)

My colleague here at AllThingsD, Ina Fried, did an excellent story on how the economics of T-Mobile’s program works.

AT&T insists it’s offering an even sweeter deal for consumers than T-Mobile is, based on the fact that it does not require an activation fee or a down payment on devices, and that the Next plan applies to tablets, not just smartphones.

T-Mobile would surely point out that it has taken the cost of a device out of its rate plans, while AT&T’s existing plans are designed to swallow the cost of a new phone every two years.

For AT&T, the benefit lies mostly in the company’s ability to keep customers in a cycle with the carrier, according to Chief Marketing Officer David Christopher. “[The plan] keeps customers in the latest technology, keeps them buying new phones, using our network as it advances — basically, it has a churn benefit,” he said in an interview with AllThingsD.

T-Mobile, too, sees a primary benefit of its plans in giving customers a strong incentive to stick with the carrier rather than jump ship to a rival.

Sprint meanwhile is hoping to maintain customers with the promise of continued unlimited data, something that AT&T and Verizon have largely abandoned.

As to whether consumers actually want to upgrade their mobile devices that regularly, Christopher cited a recent report from mobile analyst Roger Entner, who believes the U.S. to have the fastest handset replacement cycle in the world: Once every 21.7 months.

It has been a busy couple of weeks for AT&T. Last week the company agreed to buy tiny rival Leap Wireless for $1.2 billion in cash, a deal that’s expected to be closely scrutinized by regulators.

AT&T also rolled out high-speed LTE service to two new markets in Missouri and Texas, and expanded coverage in four other areas, bringing the telecom company’s total LTE markets to 328.

AllThingsD’s Ina Fried contributed to this report.


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