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AT&T's Next phone upgrade plans are a huge ripoff

AT&T's Next phone upgrade plans are a huge ripoff


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AT&T (stock)
AT&T (stock)

AT&T unveiled its new Next plan today, which allows you to pay a small monthly fee for the privilege of upgrading your phone every year without a down payment. It's an obvious response to T-Mobile's Jump plan, which costs $10 a month and allows for an upgrade every six months. Both plans sound like a great idea: you'll get a new phone much faster than before, without having to pay full price up front or resigning your contract every time.

The big differences with AT&T's Next plan are that it costs anywhere from $15 to $50 a month depending on which phone you buy, and also that it's an absolutely clear ripoff designed to cheat customers into paying full price for their phone without actually buying anything.

Next is an absolutely clear ripoff

Let's do the math: AT&T says that the Samsung Galaxy S4 will have a monthly installment fee of $32, on top of your existing AT&T service fees, which already include a device subsidy. The exact amount of that subsidy is unknown — AT&T declined to comment when I asked — but most industry estimates have put it at something like $20 per month. That's how you can get a GS4 for $199 with a new two-year contract, even though it costs $620 at retail: after two years, AT&T will have collected $680 in total device payments from you, and you get to keep the phone.

But the balance tips entirely towards AT&T with Next. Assuming that same $20 subsidy, after 12 months of Next you will have paid AT&T $384 in Next monthly installments and $240 in device subsidies, for a grand total of $620. Again, that's exactly the full retail cost of an unlocked Galaxy S4 — but you don't get to keep that phone, even though you just paid full price for it. You have to trade it in to get a new phone — effectively giving AT&T a free GS4 to refurbish and resell to its next unwitting customer.

Now, you do get to keep your Next phone if you pay 20 monthly installments, which will cost you a whopping $1,040 if you assume a $20 subsidy: $640 in Next payments, plus $400 in subsidies built into your AT&T plan. That's $420 in pure profit for AT&T, which just made you pay full price for a phone while charging you inflated service prices that include a subsidy specifically designed to lower the upfront cost of that phone.

AT&T's reaction to T-Mobile's transparency is to be more deceptive than ever

There simply isn't a scenario in which paying for Next is better than just buying an unlocked phone at retail — AT&T is fundamentally taking advantage of consumers trained to think new phones are a magical gift bestowed on them by greedy, controlling wireless carriers. And as a response to T-Mobile's Jump plans, it's as cynical as it gets: Jump may not be the best deal, but at least T-Mobile CEO John Legere is outspoken in his desire to transparently decouple the cost of wireless service from the cost of phones themselves. AT&T's reaction is apparently to be more deceptive than ever.