AT&T's Next to Shorten Wait for Device Upgrades

In an obvious response to T-Mobile US's newly launched JUMP plans, AT&T is launching a new service option that does away with device subsidies and shortens its customers' wait time for device upgrades from two years to one.

AT&T Next, as it will be called when it goes live on July 26, lets new or upgrade-eligible customers pay monthly installments for their smartphone or tablet with no down payment. After 12 payments, they can trade in the device for a new one or continue to pay it off until they outright own it after 20 months.

AT&T says the new plan is available for any device in its current portfolio with payments ranging from $15 to $50 depending on the retail value of the chosen device (the full retail cost divided by 20). A $650 iPhone 5, for example, would cost $32.50 per month versus the $200 it would cost up front on a traditional two-year contract.

In announcing AT&T Next, the carrier also slipped in that it now covers 328 markets with LTE, reaching 225 million people, having just added two new markets in Missouri and Texas. The carrier, which announced its intention to acquire Leap Wireless late Friday, says it will cover 90 percent of the U.S. with LTE before the end of the year and reach 300 million people by the end of 2014. (See AT&T to Acquire Leap Wireless for $1.19B.)

Why this matters
Next is clearly AT&T's response to T-Mobile and its "uncarrier" ways. T-Mobile was the first to get rid of device subsidies earlier this year and last week, began letting its customers upgrade every six months for an extra $10 per month.

AT&T's Next gets rid of the device subsidy, but it doesn't drop the price of service at all. Even so, it's just one of many plans the carrier now offers, so it may appeal to those consumers who don't like to wait for the latest and greatest handsets. AT&T's hope is that it keeps them from jumping ship by more frequently trading up their device with the operator.

When T-Mobile first dropped handset subsidies, many predicted other operators would soon follow suit. That has yet to happen in the U.S., but an LTE pricing war is clearly underway. Both Sprint Nextel Corp. and Verizon Wireless are still sticking to subsidies, but Sprint last week made an unlimited guarantee -- promising its customers they wouldn't lose their unlimited data as long as they stick with Sprint.

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— Sarah Reedy, Senior Editor, Light Reading