AT&T will ditch two-year contracts in 2016

Photo (c) AT&T

(Truman Lewis @ ConsumerAffairs) AT&T will kick off the new year by scrapping two-year contracts, instead steering customers to its AT&T Next plan, joining Verizon and T-Mobile and leaving Sprint as the sole major carrier still offering contracts and subsidized phones.

What's the difference? Primarily, instead of AT&T subsidizing your phone, it will be financing it for you. Previously, customers signed a two-year contract and AT&T underwrote the cost of a new phone in exchange for the guarantee of two years of revenue.

Now, AT&T will be selling phones at full price -- think $1,000 for an iPhone 6S -- and financing it for two years while providing connectivity at the going rate.

To hear AT&T tell it, customers are swarming all over the new plan.

“With $0 down for well-qualified customers, the ability to upgrade early and down payment options available with even lower monthly installments, our customers are overwhelmingly choosing AT&T Next,” reads an AT&T statement quoted by Consumerist. “Starting January 8, AT&T Next will be the primary way to get a new smartphone at AT&T. This does not apply to business customers under a qualified wireless service agreement.”

Six of one ...

It works out about the same for the consumer. You will probably be paying about the same on a per-month basis and could theoretically take your phone and go to a different carrier if you wanted. Of course, you'd have to pay off the phone first, which would amount to something roughly similar to the early cancellation fee you would have paid if you were still bound by a two-year contract.

Then there's the little matter of the connectivity and data charge. The two-year contracts, in some instances, had at least some price protection. Under the new AT&T plan, which is similar to Verizon and T-Mobile's, the company can more easily change the rate it charges you for data.

Of course, it can do that under the two-year agreement too in some circumstances. And, to be fair, without an agreement the consumer should also be able to buy less data per month as usage habits change.

Another option

There is another way to handle your wireless needs. You can buy an "unlocked" phone and purchase wireless connectivity from whatever carrier offers you the best deal. You'll need to front the money for the phone or finance it yourself, which could be good or bad depending on the state of your personal finances.

Wireless bills being what they are, you will still need some patience and concentration to decipher exactly how much you're paying and why but this option puts a little more control in your hands.

The "unlocked" option is becoming more attractive as new entrants flock to the wireless scene. One of the most promising is Project Fi from Google. Bring your own phone and pay $20 per month plus $10 per GB for data. No contract, no muss, no fuss. That's the promise anyway. We haven't tried it yet but plan to do so soon.