If you've been paying attention to the mobile industry in the last couple weeks, there are a slew of new announcements coming out. Mostly to do with upgrades - and the mobile carriers coming out with plans that let their customers upgrade sooner to have the latest and greatest more often. Which, I find somewhat amusing simply based on the fact that most of them just changed their contract upgrade policies to make people wait longer (from 20 to 24 months now, on AT&T).
These new plans though are made to look as if you're getting a good deal on upgrading to a new device and being able to do so more often. For the purpose of this writing, I’m going to refer mostly to AT&T's new Next program (but Verizon's plan will be very similar, if not worse with their $2/mo financing fee shit).
Right now, if you want a new phone, you pay a something like $200 out the door and AT&T appears to eat the rest of the phone cost so you don't have to pay full retail up front. The rest of that phone cost though is actually rolled into what I like to call a "subsidy fee." You won't see this on your bill, but you're paying for it every month, whether you have a new phone or not. That's how they can charge you so little for a phone ($200 vs $650+ for a new device at retail) and still make money. It's just how the system works here.
But anyway, everyone pays this subsidy fee. Even if you've gone 24 months and your contract has ended, you're still paying this fee (notice your phone bill never went down after your contract was up?). Your phone is, in a sense, completely paid for at this point and yours free and clear - but your bill never goes down and that "subsidy fee" never goes away.
How is this new plan different?
With AT&T Next, there is no more up front $200 cost. The full retail price of the phone is broken up into 20 monthly installments (based on the cost of the phone) and added to your bill. So if you want the new Galaxy S4, you can pick that up for zero cost up front but add on another $32/mo to your regular bill. Not a bad deal right? Stick with me though.
After 12 months on this payment plan, you can choose to upgrade to a new device if you want - but you have to trade in that Galaxy S4 to do so. Your remaining payments on the Galaxy S4 go away and you basically choose another phone and start over again. If you decide to keep the Galaxy S4 longer and pay it off in 20 months, the phone is then yours and you can decide to upgrade again or do whatever you want. After the 20 months though, that $32 payment goes away. Still sounds pretty nice, right?
Remember that "subsidy fee" I mentioned? You're still paying that too. If you're in the Next program, your bill never goes down from the previous plans. So if you pick up a new phone on the Next plan, you're paying that hidden subsidy fee AND then also paying $32 (or however much) per month for your new phone on top of the original bill. They're double charging you for your phone. And happy to do so.
Like I said, this is very similar to the details that Verizon will soon announce – so if you think you can switch from one to the other and get away from these shenanigans, you can’t. Your only options are to switch to either Sprint or TMobile – who are both at least slightly more customer friendly.
I just wish I could pay a company that I didn’t think sat down each week and thought “how can we screw our customers out of more money but look like we’re being generous?”.
How can you avoid getting screwed by these types of programs? Oh, that’s the best part… you can’t. If you’re on AT&T or Verizon, you’re getting screwed either way. And that’s not going to change. You just have to figure out what plan or program screws you less or you can put up with the most. Even buying new phones outright from someone other than the carrier (like I do) isn’t the best solution. Really it just means I’m giving AT&T SOME less money than I would have.
And that’s… OK.
Here's some math if you're curious... assuming $100/mo phone bill, over 4 years.
Current Plan w/ 2 Year Upgrade Cycle:
- $200 for new device up front.
- Sell old phone after 2 years is up for $300.
- $100/mo x 48 months + $200 x 2 new phones - $300 sale of first phone.
- Total spent over 4 years: $4900 - with another phone to sell if you choose at the end of the 4th year.
NEXT Plan w/ 2 Year Upgrade Cycle:
- $0 up front but $30/mo for new phone.
- Phone is paid off after 20 months. Keep for another 4 months and then sell for $300.
- $130/mo x 40 months + $100/mo x 8 months - $300 sale of first phone.
- Total spent over 4 years: $5700 - and a phone to sell at the end of the 4th year.
NEXT Plan w 1 Year Upgrade Cycle (what they want you to do):
- $0 up front but still $30/mo for new phone.
- Upgrade each year, so no phone to sell - it is traded back in to AT&T.
- $130/mo x 48 months.
- Total spent over 4 years: $6240 - and no phones to sell after the 4th year.
To summarize, if you continue to upgrade every 2 years like you probably are now, you'd pay roughly another $800 over 4 years for this new program compared to the current system (consider this how much you'd be double paying in addition to the "subsidy fee" I mentioned). If you want to take advantage of the yearly upgrade on NEXT, you're now paying another $1340 over 4 years compared to upgrading every 2 years now.
So... what are you going to do?