AT&T Rumoured to be Abolishing Two-Year Contracts

by Matt Klassen on April 20, 2015

For years wireless carriers have operated under one ironclad business model: lock customers into multi-year binding contracts and reap the benefits over the long term. In fact, since the emergence of mobile handsets post paid contracts have been viewed as the only way to make serious money in the wireless business, a framework that went unchanged for years. But then a few years ago, at the beginning of its ongoing UnCarrier revolution, T-Mobile decided to do things differently, and thus became the first carrier to abolish contracts in favour of a monthly installment plan. Since then T-Mobile has been the only carrier to implement such a policy, but it likely won’t be the only one for long.

But while the rumour mill has long tagged Sprint as the next carrier to likely abolish contracts, in an ironic twist it may actually be AT&T that is the first to follow T-Mobile’s lead, despite its own protestations that T-Mobile’s UnCarrier promotion is unsustainable and Ma Bell maintaining that T-Mobile’s promotional campaign has no influence on its own plans or strategies.

If the rumours prove true and AT&T does indeed abolish two-year contracts, it would mean the company’s early upgrade Next program, which allows customers to pay off their phone through a monthly instalment plan and upgrade earlier than post paid options allow, would become the default way to buy a subsidized phone on the carrier. According to reports though, Ma Bell is still unwilling to go all in as T-Mobile has done, refraining from offering unlimited data packages as well.

The rumour about AT&T abolishing two-year contracts was first leaked by Android Authority, the website stating that “AT&T is using this new business model under the codename “Project Alice”, and when the end of May rolls around, only the carrier’s Next program will be available to consumers.”

Should this rumour come to pass, it will be interesting to see how AT&T manages its Next plan on a significantly grander scale. Since Next was created—the first time AT&T begrudgingly followed T-Mobile’s lead—the company has required a favourable credit check for customers to participate, otherwise they were directed to the contract option to subsidize their phone. It’s unlikely AT&T will be able to continue the credit check requirement if Next becomes the default option, meaning the company will need to find another way to hedge its bets as it moves away from the easy money post paid contracts provided.

But truth be told this wouldn’t be as big a story as it is if AT&T hadn’t spent much of the last three years lambasting T-Mobile and all its plans, promotions, and strategies, only to find that it needs to follow T-Mobile’s lead in order to stay relevant in a quickly changing wireless market. Ma Bell has long stated that T-Mobile’s UnCarrier revolution has no impact on AT&T’s bottom line, no relevance for its future plans, and ultimately has no sustainability in today’s post paid wireless market, all claims it seems to be taking back now as it’s sheepishly falls in line.

In fact, should these rumours prove true it’ll be interesting to see how Ma Bell’s spin doctors present this move, as no doubt it will downplay any and all impact of T-Mobile’s promotions while praising its own talking heads for their radical, paradigm altering, out-of-the-box thinking.

All that to say, however, Ma Bell has not yet confirmed or even acknowledged this rumour, meaning until we hear otherwise it does stand as little more than speculation.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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