Following T-Mobile’s lead, AT&T over the weekend took a step to end what one writer called “the phone subsidy scam.”
It’s a common practice to get a big discount on a new smartphone, and then pay off the balance of the device’s price tag through higher monthly fees over a two-year contract. However, CUB has written about how absurd it is that you continue to fork over money for those high monthly fees, even after you’ve paid off the phone.
Now we’re witnessing a big shift in the way cellphone carriers do business. Earlier this year, T-Mobile pioneered the option of allowing customers to pay off their phones separately in return for paying lower monthly service fees. AT&T, as of Sunday, followed suit.
AT&T says its new Mobile Share Value Plans could save customers $15 a month—once they’ve paid off their devices. This new option is open to customers who…
1) Buy a device at full price; or
2) Already own a device that’s compatible with AT&T’s network; or
3) Are already with AT&T but their contract has expired; or
4) Participate in AT&T’s “Next” plan, for paying off a phone in monthly installments.
Obviously, customers who have paid off their phones can enjoy immediate savings from the lower service fees. But people still paying off a phone will have to do the math to see if they come out ahead. The Associated Press reports that there’s a chance you could pay more with this option—temporarily—if you own a high-end device, such as the iPhone 5S or Galazy S4, and are switching from a contract plan to Next.
PCMag.com says the $15 a month in savings over a two-year contract in effect adds up to a $360 subsidy. So if the traditional two-year contract plan offers a higher subsidy, that may be the better option over AT&T’s new Mobile Share Value Plans.
Given the math, how will this development impact the popularity of more expensive devices? Could AT&T’s good news for customers be bad for the iPhone?
What about the other major carriers? Sprint also offers lower rates—but for a limited time. Verizon so far hasn’t made any announcements. We can’t resist: Hey Verizon, can you hear us now? End the phone subsidy scam!