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Summary:

AT&T’s new Next program is simple: You pay the full cost of your device off in monthly installments, but at month 12 you can trade in your phone for a new device. There are a few catches.

ATT flagship store logo
photo: AT&T

Not to be outdone by T-Mobile’s new smartphone upgrade program Jump, AT&T is launching its own plans next week that will let customers trade up to new handsets before their contracts are up. Like T-Mob’s Jump, AT&T’s Next program comes at a premium to what you’d normally pay for a device, but Next is much more tailored to the way the average consumer would upgrade their device.

Here are the basics of the program: Instead of signing a 2-year contract and getting a steep discount on the cost of your device, AT&T is introducing financing plans that split a phone or tablet’s full cost over 20 monthly payments. However, at the end of 12 months, you can trade your still-working gadget in for a new device, starting the financing process all over again, and you’re off the hook for your remaining 8 payments. (According to Droid Life, Verizon is planning a similar upgrade plan for August.)

Hype exaggeration marketingUnlike Jump, there’s no down payment and there’s no fee to participate in the program. But while Jump lets you upgrade within six months, AT&T makes you wait a full year to trade your old phone in. As I wrote in my financial breakdown of Jump, T-Mobile’s program is ideal for those customers that are constantly switching to the latest and greatest devices, but I doubt most consumers are looking to upgrade so frequently. AT&T, however, has orchestrated Next so that its upgrade cycle coincides with the timeline most device makers use to refresh their flagship handsets.

An upgrade plan that tracks your phone of choice

The iPhone is the perfect example. Apple releases a new version of the iconic handset each year — usually in the fall. With the Next program, an AT&T customer could get a 16GB iPhone 5 by paying $32.50 each month. At the end of 12 months, that customer would have shelled out $390, or 60 percent of the cost of the phone. So long as the device isn’t broken, the customer can trade it in, get the newest version of the iPhone with a new financing program and have all of his remaining payments on the original iPhone 5 forgiven.

In comparison, if you did the same thing on Jump, (which charges you a down payment, regular monthly installments for the device, plus a $10 a month program fee) you would have paid $506 toward the cost of that iPhone 5 after a year, which is only $144 short of the device’s full price tag.

AT&T may have tailored its upgrade plan more smartly, but it doesn’t necessarily mean Next is ultimately a better deal than Jump when you factor in both carriers’ service plans. Basically, AT&T is getting rid of device subsidies for any customer who participates in Next. You either make all of your installments and wind up paying the full cost of the device, or you pay most of that cost and then give AT&T a working device it can then refurb and then resell.

Under its usual pricing, AT&T subsidizes the device with a steep discount up front (say knocking $450 off the cost of an iPhone), but locks you down to a two-year contract. You then gradually pay the cost of your phone through fees factored into your service plan. So if AT&T is making you assume all or most of the cost of your phone, it should lower its rates right? It’s not. It’s charging the same rates as it charges contract customers.

The devil is in the service plan

T-Mobile logo NYSE listingThat’s where T-Mobile has tried to differentiate itself. It’s no longer subsidizing any devices, but it charges far less for service as it’s no longer including device fees in its plans. Let’s put some real numbers to this: AT&T’s cheapest individual smartphone plan with a reasonable data package (450 minutes, unlimited texting and 3 GB of data) is $90 a month. The closest T-Mobile equivalent (with unlimited talk, text and data) is $70 a month. If you factor $20 over 12 months, you wind up with $240 in savings, which more than makes up for the difference in cost between the Jump and Next programs.

I’m not going to sit here and say one plan or program is better than the other because, quite frankly, T-Mobile’s Jump plan is so complex it forces a customer to time his or her upgrade to get the most benefit. AT&T’s Next is simpler to grasp, but you have to keep in mind you’re paying for your phone twice over — a monthly installment plus the subsidy costs built into your service plan. Jump will function as device insurance, but in the case of Next, if you bust your phone, you’re stuck paying the full cost of the device.

Last week on The GigaOM Show, my news editor Tom Krazit raised the point that these upgrade and financing plans may be having the opposite effect than the one they were promoted as having. Instead of bringing transparency to the market, they’re just confusing customers even more.

I agree (and not just because Tom’s my boss). I’m glad that the U.S. mobile industry is trying to give us more options, but the fine print is just making the simple acts of buying a phone and plan almost unmanageable.

New & Improved image courtesy of Shutterstock user B & T Media Group Inc.

  1. ATT and VZ still have contracts, and charge more every month, even if you buy your own phone with no subsidy.

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    1. Kevin Fitchard Monday, July 15, 2013

      Hi Keninca,

      This AT&T program is a little different. You’re basically locked into service into you pay off your phone. So if you pay it off early you’re free to take your device and go. If you go the full 20 months, you’re under no obligation when the final payment comes due. If you keep using Next and keep upgrading every year, you’re pretty much locked into AT&T, but there’s not much reason to sign up for Next if you’re not willing to remain a continuous AT&T customer.

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      1. yes, but don’t they charge you the same monthly rate, whether you get their subsidy nor not?

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        1. Solomon Ashurov Monday, July 15, 2013

          (facepalm)

          meant “peace of mind”

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    2. Solomon Ashurov Monday, July 15, 2013

      no exactly. if you buy your device outright with VZW, you can buy a pre paid plan with no contract. their prices aren’t as bad as people think.
      $60 gets you unlimited talk and tex + 2GB of data
      $70 gets you unlimited talk and text + 4GB of data

      yes, this is pricier than say T Mobile or a European carrier, but people fail to realize just how big of an area VZW has to cover. For comparison, Germany is half the size of Texas. In the last year I have traveled to odd parts of the US for work, like Johnson City TN, Jacksonville FL, etc. and I ALWAYS had great LTE coverage. I personally think that the premium is worth the piece of mind for people who travel around the US a lot. You never have to wonder, “will i have service there?” it’s a big relief.

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      1. Kevin Fitchard Tuesday, July 16, 2013

        I think a lot of people are convinced by that argument, Solomon. After all, despite T-Mo’s aggressive pricing, VZW is more than twice the size of it, and it’s growing at much faster clip.

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  2. Kevin Fitchard Monday, July 15, 2013

    Yep, pointed that out in the post. While I give AT&T credit for making this upgrade plan relatively simple and suited to the way people want to upgrade, ultimately AT&T is having its cake and eating it to. It’s selling you a phone without subsidy but still charging you the normal service rate it charges subsidized contract customers.

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    1. Exactly. AT&T and soon Verizon, aren’t really offering any incentive or subsidy when it comes to their rate plan. Which means it’s actually cheaper to get a subsidized price of $199 and lock your service for 24 months, and get to keep that phone.

      T-Mobile on the other hand not only has a cheaper plan, but with EIP you can pay the phone at your own pace… either minimum monthly or more if your finances allow you. Jump takes that to a whole other level.

      I’m very happy that T-Mobile is raising the bar and at this point changing the way our industry works. This can only bring good to customers in the US.

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    2. You call this simple?

      AT&T Mobile No Contract
      +$70/m unlimited talk
      +$20/m unlimted text
      +$30/m 3GB data plan
      +$32/m Samsung S4 monthly payment Next program
      +$10/m device insurance
      ——————————-
      $162

      Compare with T-Mobile, and the price you pay for unlimited talk, text, and true unlimited, you’re just paying for the talk unlimited portion on AT&T. Not to mention, the insurance is built into the Tmo Jump program.

      T-Mobile
      +$50/m unlimited talk/text
      +$20/m unlimited data plan
      +$20/m Samsung S4 monthly payment
      +$10/m Jump program (includes premium device insurance)
      ——————————-
      $100/m

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      1. Kevin Fitchard Tuesday, July 16, 2013

        Sorry T Nguyen, but you’re just adding up columns, which doesn’t convey whether something is simple or complex. I agree with you T-Mobile is going to cheaper. I made that abundantly clear in my post, so there is no argument there. But the AT&T plan is much simpler to grasp. You just pay off the full-cost of the phone in 20 payments. T-Mobile’s jump plan has a down payment (which you didn’t bother to mention) as well a program fee. That IS much more complex.

        If you were to ask me what the best deal out there on device and service, I would hands down say T-Mobile’s. You buy a device up front or in installments. You pay a much cheaper monthly service rate and you get more data.

        But Jump muddies the waters. It adds costs to T-Mobile’s service that frankly make it a bad deal if you don’t hyperactively upgrade your phone. I don’t think an offer you have to “time” to take advantage of is simple.

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        1. You seriously think ATT’s price is simple? The $70 a month you pay just for unlimited voice has subsidized phone pricing embedded in it. You’re in essence paying for a phone twice with your 20m payment for full cost of a phone.

          The $70 a month you just pay for unlimited voice on ATT, you get unlimited voice, text, AND unlimited data on TMo. Then add on text plan (expensive unlimited or expensive PPU). Then add on data but better figure out your estimated use, otherwise, you overpay for underutilization or or underpay for overutilization and get hit with gotcha overcharges.

          Jump doesn’t muddy any water. It’s just a fancy insurance in essence. You’re covered from accidents, damage, theft, and now bleeding edge obsoletion.

          It really isn’t that bad of a deal even if you don’t ‘hyperactively upgrade’. Device insurance alone for a top tier T-Mobile phone is $12/m. You get this included with Jump. But if you don’t ”hyperactively upgrade’ on ATT Next in the 24 months, you get double penetrated. Not only did you pay full price on a phone that a contract customer got for $99-199, but you practically paid a subsidized monthly plan on a phone you just paid full price on.

          Get with it. I expect better tech journalism than this.

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          1. Kevin Fitchard Thursday, July 18, 2013

            Tim,

            I’m not saying AT&T is fair. I’m saying the outline of its plan is much simpler than Jump. And to your point, what happens if you don’t upgrade on Jump for 24 months? You pay $240 over the cost of your phone. Amazingly that’s still much cheaper than AT&T, but it’s still hardly fair to the consumer. If T-Mobile wanted to make this simple and transparent, all it would have to do is assert a simple policy: Once you’ve paid 60% (or 75%, whichever number works best) the cost of your phone off, you’re eligible for a trade in. If you want to buy insurance on top of that, fine,

            Sure you can look at this as fancy insurance, but I feel — and I believe a lot of people feel the same — that most phone insurance is a huge rip off. If you’re just looking at this purely as an upgrade program, and you’re looking to upgrade only once every 12-to-18 months, then you’re much better off just sticking with T-Mo’s regular financing plan, and just pay it off in a year instead of $20. You keep your old phone, you “upgrade” to a new device or you trade it in to T-Mo for a discount. That in my mind is simple, and a much better value.

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          2. Tristan Milgram Friday, July 26, 2013

            Exactly! You’re paying for the phone in the service plan, AND the installment payments. If you don’t upgrade after 12 months, you’re essentially locking yourself into a 20 month contract and paying nearly twice for the phone. For AT&T’s program to make any sense, they need to reduce the service plan price for unsubsidized phones.

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        2. To sum it up, AT&T’s service is MUCH more reliable than T-Mobile. You can’t put a price on travelling worldwide and receiving calls and handling business in Nigeria as you would at home in the US.

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  3. Janice Williams Monday, July 15, 2013

    Yeah, but T-Mobile has more towers, which can directly relate to a lower overall price for service.

    Basically, T-Mobile’s network has more “Available Bandwidth Per Square-Mile”. This means that their 40 million customers will get a lower rate than AT&T’s 90 million customers ever will. Fewer customers + more towers = lower priced plans.

    When I stopped at BestBuy last week, and they recommended switching my 3-line family plan to AT&T. Under AT&T’s plan, I would be capped at 4GB for three phones, and the monthly cost would be $190.

    When I worked at AT&T, an employee, during training, said they got rid of unlimited plans so fewer people use the service they sell. I was confused, but they said that this enables them to hire more customer service reps to answer the phone and explain overage charges which frequently show up on the bill. They called the efforts, of overage charge explanation “Customer Re-Education”. I quit working at AT&T.

    Anyways, I’m sure many AT&T customers probably enjoy employing customer service reps to explain expensive rateplans, overage charges, and fees.

    Our family is still paying half of AT&T’s plans right now, because we’ve been with T-Mobile for over 5 years, and all of us have unlocked iPhones.

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    1. Kevin Fitchard Tuesday, July 16, 2013

      I’m not sure where you’re getting your information from, Janice, but I can assure you T-Mobile doesn’t have more towers than AT&T. T-Mobile might have higher cell density, and it definitely has fewer customers, which could translate into better service, but T-Mobile’s in-network coverage has always been weaker. It’s not a knock on T-Mobile. It’s just chosen to prioritize denser urban markets.

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  4. Gavin Wayfarer Tabb Tuesday, July 16, 2013

    No one factors in AT&T Data Share plans? I have 5 lines on my plan and we all pay $65 a month for basically unlimited everything.

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    1. Unlimited everything and BASICALLY unlimited everything are 2 different things. Stream some music and see what happens

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  5. Sorry, don’t have time to read through this, but there is NO WAY AT&T or Verizon are going to offer better deals than T-Mobile. It’s simply not in their DNA.

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  6. Did you forget to add that JUMP! $10 charge also includes handset protection which you would also be paying at AT&T if you were smart. They won’t trade in a broke phone

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    1. Kevin Fitchard Tuesday, July 16, 2013

      Hi AndroidLife, I did mention that Jump functions as insurance in this post and pervious posts about Jump. But it is a good point. If insurance is important to you then Jump is worth considering, but because of the payment structure you’ve also wound up paying most of the cost of the phone off in a year. It’s a trade off.

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  7. I think the T-Mobile aspect is pretty simple. Considering if you buy a high end phone from them the service plan plus the phone payment is the same thing they used to charge monthly for plans where you got an upgrade every two years.

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  8. I think the T-Mobile aspect is pretty simple. Considering if you buy a high end phone from them the service plan plus the phone payment is the same thing they used to charge monthly for plans where you got an upgrade every two years.

    So let’s say you got an iPhone 5 and paid the the $99 in store.

    Your bill for unlimited everything plus Jump insurance and your phone payment would be $100 a month.

    Twice a year you can trade in your old phone and pay the advertised low price on a NEW phone that we all are usually only eligible for every two years. Then your bill to T-Mobile stays EXACTLY the same… and that’s all people mostly care about.

    What’s beautiful about this is that $100 a month for one line is what T-Mobile post paid customers who got upgrades every two years were paying ALREADY.

    It seems a lot of people are confusing themselves with the phone payments but really if they aren’t accruing any interest you should focus on your final monthly cost per month.

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    1. Kevin Fitchard Tuesday, July 16, 2013

      Hi Saykredcow,

      I’ve been hearing this, but I’m not really following the math. Jump requires an additional $10 a month payment. When you factor in the additional down payments for the new devices, you’re paying much more. Your obviously getting new phones so there’s a reason why you’re paying more, but I don’t see how you’re arriving at this being the same cost.

      Now if the argument is that after all of these charges, T-Mobile Jump or no Jump still saves money on AT&T’s plan, you won’t get any argument from me. But in my mind just buying a T-Mo phone upfront (or under installments) without Jump is better deal than paying for Jump if you’re only upgrading every year or more. The fact that this last sentence has so many qualifiers shows how confusing the Jump program is.

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  9. Anonymous Coward Tuesday, July 16, 2013

    All of this is just smoke and mirrors to disguise (or try to delay) the fact that wireless carriers are providing a commodity service.

    Ideally, phone manufacturers would make multinetwork phones, and sell one SKU unlocked at full price. The carriers would have a rate plan, then a phone financing plan on top of that. Buy the phone at full price? Pay just the rate plan. Want to finance the phone? It’s just like taking out a loan.

    I have this pipe dream of a phone that hops networks at will, where I pay by the bit, and where I don’t really have to know the brand name of the wireless service I’m using–much less have a mutli-year compulsory contract with them. I sincerely hope my pipe dream is every carrier CEO’s recurring nightmare.

    If any other industry had this insane model people would scream bloody murder and get the government to step in.

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    1. Kevin Fitchard Thursday, July 18, 2013

      Here Here, Anonymous, I agree completely

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  10. On multi-line customers (3 or 4) isn’t T-Mobile much less expensive. ($30 on second line and $10 on each add’l instead of the $50)

    And why doesn’t AT&T Next even let you 2 more than 2 lines?

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