Why AT&T’s ‘Next’ device upgrade program is a bad deal

By , Jul 17, 2013

AT&T Chicago store (interior 001)

Yesterday, AT&T introduced a new device upgrade program called AT&T Next. An obvious response to T-Mobile’s ‘Jump’ plan, Next will allow customers, willing to pay a monthly fee, to trade in their device and upgrade to a brand new one every 12 months.

At first glance, this sounds like a good deal. After all, the carrier’s current policy is that you only get a subsidized equipment upgrade every 24 months. But after crunching a few numbers, it’s fairly clear that the Next plan is actually a big ripoff for customers…

So the way the AT&T Next program works is that customers will make monthly payments equivalent to 1/20 of their device’s full retail price for 12 months, and then they get to trade it in for a new device. They don’t get to keep it unless they make 20 payments.

Now, let’s do some math. 1/20th of the full retail price ($650) on a 16GB iPhone 5 is $32.50, and paying that 12 times comes out to $390. That essentially means that AT&T is going to give you $260 for your one-year old handset when you trade it in, right? Wrong.

As pointed out by The Verge’s Nilay Patel, that $32.50 you would pay a month is in addition to your rate plan that actually already factors in a device subsidy. Patel puts that number at about $20 per month for average handsets, which drastically changes things.

Take that $390 we said you would pay for a 16GB iPhone 5 after 12 months of $32.50 payments, and add an additional $240 ($20 x 12). That comes out to $630—meaning not only did you end up practically paying full retail for the phone, but you don’t get to keep it.

But hey, remember, you do get to keep it after 20 months of payments. Unfortunately, though, that’s even worse. 20 x $32.50 for the Next fee, added to 20 x $20 for the subsidy cost already in your rate plan equals $1050. You just paid $400 over the full retail price.

“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”

I agree with Nilay here. The only way that the AT&T Next plan would work out in favor of the customer is if the carrier removed the subsidy cost built into its rate plans, thus making the plans cheaper. But just what do you think the chances of that happening are?

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  • inf3rn0

    Great analysis Cody! Sure to help plenty of readers :)

    • O. Bakerman

      Yeah, math is great, isn’t it?
      Once you master it, you’ll spot plenty of those “deals”.

      • Yunsar

        I don’t understand. Are you against math?

      • O. Bakerman

        Not at all. I strongly recommend it’s usage beyond “detecting deals that are none”.

  • The One

    The flaw with this reasoning that they are ripping you off is this: if you just paid for a device at full retail, and pay it upfront, you are still paying the exact same for the rate plan anyway. This new offer simply breaks up that full retail payment into monthly payments, making it more affordable.

    • Elvin Topalov

      But you don’t keep the phone unless you pay for 20 months, which is a lot more expensive than retail. That is a rip off.

      • The One

        How is that more expensive? Aren’t they dividing the full retail price up over 24 months? If the price of a device is $600 full retail to buy it upfront, what’s the difference in dividing that same price of $600 over the 24 months?

      • Elvin Topalov

        Nope, they only divide it by 12. and it’s not 24 months, its 20. But either way it’s a rip off because if you buy the iphone 5 16gb and want to keep it using this plan, you’re going to have to pay for 20 months which comes out to $1050. You can buy an unlocked iphone for less than that.

      • The One

        Ok even if they divide it up over 20 months, how does it come out to 1050? For example, if a device costs $600 full retail, would they not charge you $30/month for 20 months, which still equals $600?

      • Elvin Topalov

        Just read the article, lol.

      • The One

        Lol ok I see what you are saying, however, from what the article shows, if they pay for the device over the 20 months, aren’t they just paying for the full cost? That $20 subsidy fee is already in the monthly phone plan regardless of whether or not you buy a phone upfront at full retail, or if you pay for the full price over 20 months.

      • Bob Tawsky

        It would be easier and cheaper to add a line to a share everything plan that you don’t use. It initially seems like a waste, until you want that new phone… After you are a year into your contract with your current phone you can switch to a new phone for only $200′/$300 and pay only a nominal rate. THINK about it folks. These plans are SCAMS for people who don’t bother putting together their own options. Though the flaw in my plan is if you have to cancel, then you are stuck with a higher cancellation fee for sure. You’re screwed no matter what! Just get a flip phone and rid yourself of the burden.

      • jay!

        If you pay $299 for the phone with a 2 year contract its only 4 more months and your saving $300! bottom line!

      • Sid Nag

        now add a line and think of getting phone for the additional line as well, this is where the scam is, the second line also will automatically be in ATT Next plan and hence pay 30$, it gets double the cost

      • SoCoMagNuM

        If you buy an unlocked phone for full price your rate plan is still the same thus your will still be paying over $1000 for the phone. Buying the phone retail/unlocked etc before your contract is up is going to be a ripoff regardless cause the subsidy is included in ur plan regardless of what phone you buy. U wiol always over pay unless u get the phone free. When you buy a new iPhone at launch for $199 w/2 year contract u will be paying $20-25 a month for 24 months for those 2 years. Thats another $400-600 subsidy for that phone snd if you dont upgrade ur still going to be paying subsidy even tho phone is been paid for. Rate plans will always be a ripoff no matter how you swing it.

      • basco

        I’ve contacted AT&T twice trying to get things cleared up. here’s my take on my PARTICULAR situation:

        We are moving to the mobile share plan with 5 people. Lets say we add a 6th person:

        $15/mo extra IF I bring my own phone

        If I choose to get a new phone through AT&T, it’s $40/mo extra on top of whatever my family is paying for the phone, so $25/mo extra to get a phone from ATT (not sure about which phones are eligible)

        You must pay this for 2 years, so a total of $600 for the new phone (a little less than the NEXT plan if you get a phone worth $650 for example).

        With AT&T next, lets say you pay off your phone so you can keep it, thats $650 in the article’s example which is the same cost if you bought the phone retail.

        @elvintopalov:disqus

        You mentioned that you would pay $1050 over the course of 20 months which comes out to more than an unlocked phone. The way I see it, thats $650 + what you were going to pay monthly regardless, so why is it a bad thing? If you went out and bought the phone retail for $650, only difference is you’d pay $650 up front and then $20 a month for your plan, right?

  • Jack Wong

    Smartphone is more like car business now…

    2nd hand market is more profitable than new device…

  • BigVinnieG

    this reminds me of all the “great deals” at rent a center or aarons. that is if you stupid enough to pay 2x 3x or even 4x as much for anything you get from them.

    • Chliii

      Go back to Syracuse. Lol

      • BigVinnieG

        Love the CUSE how the hell did you know that.

  • Yujin

    I have my own plan…i have the family plan for my family, so every year i upgrade one of my lines and get the newest models…works for me and happy with ATT, no issues and their LTE is faster than Verizon (at least in NYC)

  • SteveO_in_NY

    The Flaw in both the Next plan, and buying an unsubsidized phone at retail and using it without contract is that AT&T is still going to charge you the same rates that they charge their subsidized customers (and in the case of Next, an additional amount). You may as well get the subsidized phone, since you’ll be paying for it anyway.

  • Gabriel Knight

    Of course it costs a bit more, saving money is not what the plan is about. the idea of this plan is the ability to upgrade your phone after 12 months – instead of 20. You are also not charged service fees. This is no different than renting a car. Every year, you get to upgrade to the newest model. It costs more, but you always have a shiny new car. Lets not forget that AT&T also has a 12 month warranty on their phones. So, if you are changing phones every 12 months, you save from not having to spend more on insurance.

    • Ariana M

      Wrong, you still have to pay insurance in case you lose or get you cellphone stolen.

      • Gabriel Knight

        I guess that is true. Not an issue I ever worry about, but good point.

    • sirjonk

      If you buy the phone unlocked you pay roughly the same after a year as you would on ATTNext, except you get to keep the phone.

  • Derek

    The next plan is a ripoff so here is what I have done and to me I came out ahead and th8s was even suggested by the ATT worker I talked to on the phone. I wanted a new device and didn’t want to wait for my 2 years to come up or do the next program cause I wanted to resale my phone for a godd price on craigslist. I simply added a new line of service and then suspended the line and transfered my current phone number, contacts and etc. over to the new phone. You then pay for 2 years the $9.99 for the suspended line of service but after just 1 year you can call ATT and they will remove this charge if you are on the preferred customer list. The phone I hot was at retail price over $600 but new line of service it only cost me $200 and they waved the activation fee which was over $30 and I paid $120 over the next 12 months for the suspended line and resold my note 2 for $400 on craigslist. I just did this again the other day and got my wife the S4 and me the note 3 and sold both of our S3′s that I unlocked myself for any carrier for $300 a piece which offset the $240 I will pay for the 2 suspended lines for the 12 months @ $9.99 a month plus tax. Just some food for thought of how to get around the next program, waiting 2 years for an upgrade or leaving ATT to go to another carrier that has better programs.

  • Dan Verarde

    Look at it this way, you remove the $20 price from the plans and add the $32, your plan just became $12 more. Ok, that could work for a year upgrade. But what they don’t tell you is that if you just buy the unlocked phone or buy the phone 3rd party without the plan, you can upgrade in a year anyway. Now look at the logical end of it. Your phone, if taken care of, WILL last over several years.

  • Jeffy Cottom

    I guess I’m not understanding why you decided to add the 20 extra a month

  • patstar5

    “is if the carrier removed the subsidy cost built into its rate plans, thus making the plans cheaper. But just what do you think the chances of that happening are?”
    Well now it’s Decemeber and Att has value plans. So for me that’s $25 for each off contract phone and $40 for each on contract phone, it is $35 right now for 6gb plan. So rate plan drops to $80 and there is 1 off contract smartphone and 2 dumb phones that cost only $20 now plus one on contract smartphone. Pay $220 right now. On this ($80+20+20+40+25) I pay $185 a month or $35 less. Once the contract expires it drops to $170 a month. So Att next would raise it to around $200 for 16gb iPhone 5s but it would even out. (Rather buy off contract unlocked phone like nexus 5 for $399)

  • Leo MG Nesfield

    In the UK O2 Have this it is called O2 Refresh

  • nlcatter

    they did remove the SUBSIDY !

    are you thAt ignoRant AND ARROGANT

  • rojocube

    I don’t. get the part where he said “we can’t keep the phone” we bought the phone so it makes no sense to say we can’t keep it. If you get the HTC m8 for $24 extra a month. For 20 months . Its yours to keep they can’t force you to trade it in. It makes no sense . And you don’t need to trade in your current phone either.. the only problem is the retail prices are far too high. The iPhone is the same every year just a different color. It’s worth maybe $150 from the launch. M8 or S5 is worth probably $200-250 but only because they are far and away superior to the iPhone.

    Personally I’d rather only pay $50 flat out at best buy then only pay $60 a month .. Att needs to bring back unlimited data though

  • Damien Percival

    I don’t believe this article is fair to AT&T. I just signed up for the NEXT plan and I am thrilled. I wanted the monthly payments and I wanted to be able to pay off the phone and get a new one at any time. There are no extra hidden fees involved other than your monthly installment. NO sign-up fee, NO installment charges, NO upgrade fee.
    My bill actually is CHEAPER now that I am on the NEXT plan. The 1 GB plan is cheaper than last year and they include a −$15.00 Discount for Mobile Share Value Savings.
    Here is a breakdown of my bill:
    Mobile Share Value Plan 1GB
    $25.00

    Mobile Share Value Smartphone 4G LTE w/ VVM
    $40.00

    Discount for Mobile Share Value Savings
    −$15.00

    International Roaming – Expanded
    $0.00

    Mobile Protection Pack – Enhanced Support and Mobile Locate
    $3.00

    Mobile Insurance Premium
    $6.99

    $59.99SAMSUNG SM G870A CAMO
    Amount Financed: $714.99
    Installment 1 of 20
    06/03
    $35.75
    Balance Remaining after Current Installment: $679.24