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6/10/2013
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AT&T Makes Customers Wait Longer For Device Upgrades

AT&T changes its policy regarding device upgrades, requires customers to wait a full two years between new phones.

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AT&T pulled a fast one on its customers over the weekend. The company announced Sunday afternoon a change to its device upgrade policy. The change is sure to be unpopular with customers, who now must wait until their 24-month contract expires before they can upgrade to a new device at a discounted price. Here are the specifics.

Customers will no longer be eligible to receive promotional pricing at 20 months. They need to fulfill all 24 months of their two-year contract before they will be able to buy a new phone at the lowest cost. AT&T says that people will still be able to share their upgrades as long as the upgrade is used on the same account and within the same device category (e.g., smartphone or feature phone).

After customers have completed six months of their contract, they'll be eligible for a small discount on new gear, but in order to get it they'll have to sign a new two-year agreement. AT&T didn't say how much this discount would be, but don't think it is anything like the advertised price of new phones. You'll still be on the hook for the lion's share of the new device's cost.

Remember, the prices that carriers charge for their devices are subsidized. AT&T might sell the iPhone 5 for $199, but it really costs much, much more. Most new smartphones cost between $550 and $650 unsubsidized. AT&T offers the iPhone 5 for $199 to convince you to sign a two-year contract, during which it recoups the other $449 of the iPhone 5's cost through service fees.

[ Want a new iPhone 5? See iPhone Trade-In Could Aid Apple In Emerging Markets. ]

AT&T said of the change, "This aligns device upgrade eligibility with our standard two-year wireless agreement." Verizon Wireless made the exact same change to its upgrade policy in April.

Of course, AT&T pointed out that customers are still able to take advantage of its trade-in program. AT&T is offering at least $100 for old smartphones that are traded in when customers buy new devices. The trade-ins have to be newer than three years old, and have to function properly.

AT&T noted that customers can upgrade their device at any time as long as they don't mind paying the full retail price. AT&T customers also can use any unlocked GSM handset on AT&T's network.

Who does this policy apply to? Any customer whose agreement expires in March 2014 or later. That means if you bought a new iPhone 5 in September 2012 and expected to be able to grab a new device in May 2014, you're wrong. You'll have to wait until September 2014.

Here's why this policy change stinks. Although the difference of four months might seem insignificant, it isn't. By forcing customers to sit in their existing contracts for another four months, AT&T is guaranteeing itself that cash. It is raking in another four months of revenue per customer between device upgrades. That will add significantly to its already generously padded profits.

What's doubly frustrating is to see AT&T and Verizon moving ahead with customer-unfriendly policies while Sprint and T-Mobile attempt to do the opposite.

T-Mobile recently dropped contracts altogether, and changed the way it accounts for device subsidies so everyone knows how much they are paying for their device and how much they are paying for their service. T-Mobile sees itself as a challenger, and in many ways it is. AT&T and Verizon might not have anything to worry about right now -- their networks are much bigger -- but if T-Mobile's coverage is ever able to rival the two biggest market players, its more consumer-friendly policies could pay off big time.

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keltypack
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keltypack,
User Rank: Apprentice
6/10/2013 | 7:58:08 PM
re: AT&T Makes Customers Wait Longer For Device Upgrades
I live in an area where T-Mobile has pretty decent coverage. True, I don't have LTE (yet), but the $100+/month savings of ATT or VZ more than makes up for paying full price for a phone.

I was "slammed" by ATT in the late 90s and swore to never do business with them again. VZ is just a baby bell (as is the current ATT), so their heritage is the same anti-consumer nonsense that ATT is. I will suffer higher speeds, lower prices, and better customer service to keep away from ATT & VZ.
Terabyte Net
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Terabyte Net,
User Rank: Apprentice
6/10/2013 | 5:33:42 PM
re: AT&T Makes Customers Wait Longer For Device Upgrades
AT&T and Verizon have the best coverage (though AT&T's far worse than Verizon's) and what this shows if is you can screw over your customers if you know they really don't have an alternative. T-Mobile and Sprint have lousy networks. One of my cell phones, issued by a regional carrier, roams on Sprint outside their local coverage area and in several major cities they have essentially zero coverage. In one major NC city I get 1x coverage, 1x, not even 3G and forget voice calls. Until AT&T and Verizon have real competition they will continue to abuse their de facto monopolies.

BTW, don't let AT&T or Verizon fool you, I doubt very seriously that either pay $600 for new iPhone. In the bulk they buy I'm betting they get a pretty significant discount.
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