AT&T To Offer $15/Month Discounts To Customers With Out-Of-Contract Phones

Want some more evidence that the failure of the AT&T/T-Mobile has resulted in something resembling actual competition among wireless companies? Months after T-Mo’s shift to an “un-carrier” model, in which the price of a monthly subscription is listed separately from the cost of the phone (and where subscribers who own their phones only pay for service), AT&T is following suit by reshaping its plans to offer discounts to customers with out-of-contract phones and AT&T Next members.

Under AT&T’s new “No Annual Service Contract” options (which will become available starting Sunday, Dec. 8), smartphone customers with their own devices — whether they purchased the phones at full price, fulfilled their most recent contracts, or purchased a device through the AT&T Next early upgrade program — can get $15 off their monthly plan. Customers with multiple devices on their Mobile Share plans may see additional discounts depending on which tier of data service they choose.

(NOTE: Existing customers with out-of-contract phones will need to contact AT&T in order to get the discount. It will not be applied automatically.)

So a subscriber with a 2GB/month data plan and owns her phone will be able to get a plan that costs $80/month, $15 off the current $95 plan. This puts AT&T within striking distance of the $70/month plan offered by T-Mobile.

The main difference is that T-Mo’s plan offers unlimited data. Since many consumers still don’t crack the 1GB/month line on data over wireless (though that will surely change in the coming years), 2GB is probably sufficient. And T-Mobile’s LTE coverage lags far behind its larger competitors.

Sprint only charges $60/month for its unlimited data plan for customers who pay full price for their own phones, which is still significantly less expensive than the $80 you’d pay with the AT&T discount. Again, some people will continue to choose AT&T because of its larger coverage area.

There are several reason why AT&T would make this offer.

1. It allows the company to retain some customers who own their phone and complain about having to pay the same monthly subscription as people whose phone purchases were subsidized by AT&T. Of course, you will eventually need to get a new phone, which would mean paying full price for a new device or getting a subsidized phone and losing the discount.

2. Offering the monthly discount may encourage some customers to pay full price for future devices. The age of device subsidies for subscribers is fading and these discounts could nudge some people toward going out of pocket.

That said, you should do some math before plunking down hundreds of dollars for an unsubsidized phone. A savings of $15/month is only $360 over the course of two years. Many smartphones cost north of $400 when paying full price. Hopefully there will be price competition as wireless companies make the transition toward unsubsidized plans.

3. Including AT&T Next customers in the discount takes away one of the biggest problems with the early upgrade plan, which may make it more attractive to some subscribers. Being part of the Next program is a way to both keep the discount and get a new device on a regular basis. Of course, you never actually own the phone you have — unless you choose to not upgrade — meaning you’re effectively locked into AT&T service so long as you want to keep upgrading.

While the discount is still not the best deal available from the major wireless providers, it does give us hope that this will continue setting off the chain of dominos that leads to more competitive monthly rates and real pricing competition on smartphones.

If we can get to the point where the unsubsidized cost of a smartphone is not prohibitive for most people, then consumers will be able to take those devices from carrier to carrier without being nailed with early termination fees. Consumers will finally be allowed to vote with their dollars instead of being stuck in a hellish merry-go-round of upgrades and contracts.

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