AT&T saying goodbye to subsidized phones and 2-year contracts

by: Derek ScottDecember 30, 2015

AT&T logo Shutterstock

In an internal document distributed to AT&T employees this morning, the carrier revealed that it would be ending 2-year contracts beginning January 8th. That means that if you want a new phone on an AT&T plan, you’re going to have to pay for the device up front or set up a financing arrangement.

The memo reads as follows:

Effective January 8, 2016, AT&T will launch a pricing simplification effort for device purchase options and pricing plans across all channels.
Simplify Device Purchase Options
– AT&T Next and no-commitment (full-retail price) will become the only smartphone purchase options available for new and existing Consumer, standard Individual Responsibility Users (IRU).
– AT&T will introduce installment plans for Quick Messaging devices (QMD) and Basic devices. Installment plans and no-commitment (full-retail price) will become the only purchase option for new and existing Consumer, standard Individual Responsibility Users (IRU).

samsung gear s2 review aa (7 of 24)See also: AT&T now letting you share your phone number with your Samsung Gear S22

It looks like the carrier will be applying these changes across the board, affecting not only smartphones, but also traditional flip phones and “Quick Messaging Devices,” which are non-smartphones with full keyboards.

Samsung Strive

Seems like the age of the two year contract really is coming to a close. T-Mobile was the first to jump ship in a move that appealed to major carrier subscribers who felt like they had been locked into lackluster service. Verizon also began to back off two year contracts earlier this year, and AT&T has been leaning ever harder on their “Next” payment plan.

Engadget’s AT&T tipster also released an internally distributed FAQ if you’re curious for more details:

Can existing customer upgrade from a two-year agreement upgrade to a new two-year agreement after January 8, 2016?
No. Existing customers can choose to purchase a new smartphone on AT&T Next or pay no-commitment price. Existing customers who want to purchase a new QMD or Basic phone can choose to purchase on an installment plan or pay no-commitment.

Will two-year agreements still be available for employees on EMO accounts?
No. Employees on EMO accounts wishing to add or upgrade their Smartphone, QMD, or Basic device can choose to purchase a new device on AT&T Next/installment plan or pay the no-commitment price.

Can a new customer purchase a smartphone, QMD, or Basic phone on a two year agreement after January 8, 2016?
No. New customers can choose to purchase a smartphone on AT&T Next or pay no-commitment. New customers who want to purchase a QMD or Basic phone can choose an installment plan or pay no commitment.

Can Custom IRU and CRU (with FAN) customers purchase a new smartphone/QMD/Basic device on a two year agreement?
Yes. CRU accounts on a FAN agreement may purchase a smartphone on a new two-year agreement from AT&T Retail and Authorized Retail.

What do you think of AT&T’s transition away from 2-year contracts? A savvy (if late to the game) business maneuver or a betrayal to users who rely on the subsidized device prices that contracts provide? Let us know in the comments below!

Next: Best AT&T Android phones (December 2015)

  • TheElwoodBluez

    I wonder what they’ll do with Cricket. I’ve been on them 2 years now. Outstanding coverage here. But I’m still sitting on KitKat on my Moto G.

    • bobdon

      Re: Cricket. Been with them for years as well and agreed on the outstanding coverage. I’m contemplating switching to Consumer Cellular if ‘they’ f*** up.

      • billy frank jordan

        I wouldn’t be surprised if they left Cricket alone. They could just leave it open as its own separate thing like T-Mobile has been doing with MetroPCS.

        • bobdon

          Yeah..that’d be good! Please let’s not try to f*** up….Dear AT&T

    • balcobomber25

      Being stuck on Kit Kat is a Motorola issue not a Cricket issue. Moto has been very slow updating the G line to Lollipop, as of November they still hadn’t updated every phone. But given the relatively weak hardware of the G it is probably better to keep it on Kit Kat.

  • GhostRecon55

    I feel this is a betrayal to users who rely on the subsidized device prices that contracts provide. A lot of customers used the 2 yr subsidized contract to have the ability to buy a family service plan to include the phones at a discounted price. The AT&T Next program was/is/&will be an overpriced program when purchasing phones.
    I left AT&T for Sprint’s 10 GB Family Plan the got me 1 quick messaging phone & 3 iPhones forever @ $180.00 a month. We’ve never used more that 10 GB total in 6+ yes with AT&T and in the short time we’ve been with Sprint.
    The iPhone forever is exactly what it sounds like. Each time a new iPhone is released, our current iPhone is replaced… Free. So, we went from the S6 to the S6s for free. Just called the Sprint store & checked for the latest one in stock, then went and got it.

    • billy frank jordan

      Well, regarding subsidized phones, I don’t think anything will really change. Provided they’re going the route that T-Mobile (which it definitely sounds like) You make the downpayment (or what on-contract is known as the subsidized price) and continuing paying monthly, its just happening apart from the service bill.

    • kld2009

      So Sprint gets a slightly used iPhone to refurbish & sell at Apple prices to another customer & keep you as a customer. Not bad.

      • GhostRecon55

        Well, the Sprint store manager said the phones are turned into Apple for refurbishing and resold as refurbished devices. However, I don’t think Sprint is rich enough for the lawsuit arising from selling them as new devices. Plus, why would they if Apple is behind this program of supplying new phones for Sprint’s iPhone forever program?
        Your post makes no sense. Sprint will give a new updated iPhone for one that is a step below… For free. How is a user getting an overpriced refurbished iPhone if they are next gen iPhones? It’s impossible.

  • Kaiju420

    Call 1800 Waahhhhh

  • Tandem

    Is it going to be the same case as Verizon? I have known at least 3 people who were able to get a subsidized phone (Note 5 to be specific) from Verizon, not via its website though. Also they all are new customers.

  • Luis

    Plenty of phones that people can buy that a r ent 5/6/700 bucks. You can get an excellent phone for under 300-350. Phones arent becoming as outdated as before. You can get a Lg G2/3, Samsung Note or galaxys, Asus Zenphone, Motoroloa X Series, Sony Xperias and all will work fine.

    • balcobomber25

      Or you can get a brand new flagship from China with the same hardware as the 5/6/700 dollar phones for $300-350.

  • RH

    I’ve been using straight talk for almost 3 years, with a full price phone (huawei ascend mate2).
    Savings, based on a G5 (when I ran the numbers), for what the phone cost me, plus the straight talk
    fee, in a typical 2 year contract, I save about 90 dollars per month, versus the same type deal from
    a carrier.
    When the American public finally wakes up from the fact the 2 year contract was WAY more expensive
    than buying the phone full price + an MVNO, and start balking at the silly inflated prices of cell phones
    (200-250 costs of parts, versus full price). (at least in the usa) that, and carriers, manufacturers are keeping
    out a LOT of choice in phones for the American public. People are use to going to the phone store to buy
    a phone, so they only offer a few choices. People haven’t figured out you can find all sorts of phones online,
    but you have to be sure they have the frequencies you need to work.
    Once more people stop paying the inflated prices, and manufacturers start catering to the mid range phone,
    maybe the excess prices for phones will come down.

    • balcobomber25

      I switched to Chinese phones a few years ago and never looked back. I recently compared my total 2 year costs to my sister who uses a “free” iPhone. Here is what our costs will end up:

      Cost of Phone: $330 (Meizu MX5, got mine for free but this what it would cost roughly)
      2 Years of Service: $720 ($30 unlimited everything on Tmobile)

      Cost of Phone: “Free” (iPhone 6)
      2 Years of Service: $1919.76 (79.99 a month on Verizon)

      She pays over double what I do for her “free” phone, and she has a data cap of 3GB. I have unlimited data with up to 5 GB of LTE. You are never getting anything for free when it comes to phones, the costs are baked into your monthly service plan.

    • John Kildal

      In Denmark where I live the carriers can only hold you to a plan in six months. After that you can downgrad even if you are paying for a phone.

    • Hai Hoang

      yea. it’s way more expensive on the next plan, but for poor people that live paycheck to paycheck, they’re happy to be able to get a new phone for around $40 bucks added to their phone plans. poor people can’t afford to buy the phone outright.

  • Jeremy Cush

    will be bad news for apple as they cant say the new iphone costs 199 anymore but the full price which wont sound so good at the iphone event . having to pay up full price will cause apple to loose customers as the phones will be too expensive . its about time networks stopped selling phones in contracts as this means a cheaper contract for the end user.

    • SamsaraGuru

      Excellent point. Some of the shine may come off the Apple I’m thinking when people actually have to pay for their overpriced, second rate hardware.

  • balcobomber25

    This is great news for one particular segment of the industry: Chinese Phones. Now those $300 flagships from Xiaomi, LeTV, OnePlus and Meizu will look a lot more attractive if people have to pay the full price for a Samsung or LG up front.

  • SamsaraGuru

    Capitalism working the way it was intended. Now, AT&T, Verizon will have to begin competing based on service and quality as well as value, rather than hiding the real costs behind a artificially subsidized price. This can only result in better value for the consumer. No wonder they hated T-Mobile for breaking the mold and bringing their gravy trains to a halt.