AT&T(s t) seems to be in cost-cutting mode of late. Following news of a new $0.61 monthly administrative fee on May 23, the carrier has modified its rules for subsidized phone upgrades. On Sunday, AT&T changed its policy and now customers must wait a full 24 months before becoming eligible for a handset upgrade at the lowest subsidized price.
This allows AT&T to recoup another 4 to 6 months of handset subsidies before providing the next one to a customer. The company says “it applies to any customer whose agreement expires in March 2014 or later,” so it retroactively applies to AT&T subscribers that signed a two-year contract during or after March 2012.
Ironically, my wife’s contract with AT&T is up this October. And under AT&T’s eligibility rules before the change, she can actually upgrade now at the fully subsidized cost, i.e.; an iPhone 5(s aapl) for $199, for example. But when she does that, she’ll sign a new two-year agreement and will have to wait the full 24 months under the new rules.
AT&T says that early upgrades are possible after six months of a contract, but “you qualify for partial discount off the full retail price.” And you’ll have to sign a new two-year agreement at that point. For those that don’t like their handset or get bored with it in the first few months, that’s a reasonable out. Don’t expect the lowest price for your new phone at that point, however.
It does make logical sense for handset upgrades aligned with contract lengths. AT&T is doing anything nefarious in that regard. It’s simply taking something away that consumers could take advantage of.
Ideally though, the carrier would follow in the footsteps of its peer, T-Mobile(s tmus), and simply abolish contracts while decoupling device costs from voice and data services. (Note: AT&T says you can bring your own phone and it will provide contract-free service, but there’s no mention of lower monthly costs.)
Then consumers could be in control of their own hardware costs and upgrades. Instead, in this generally saturated market, AT&T is looking to grow revenues from fees and slower upgrade cycles.