AT&T Unveils Fast-Upgrade 'Next' Plan

This is how competition works: last night AT&T unveiled "AT&T Next," a new subscription plan that lets AT&T customers trade in and upgrade their phones or tablets every 12 months with no up-front down payment on each phone.

AT&T Next comes on the heels of T-Mobile's "Jump" plan, which lets subscribers upgrade twice a year. Verizon is reportedly working on a similar annual upgrade plan, which Droid Life calls "VZ Edge."

To use AT&T Next, AT&T subscribers agree to pay a monthly fee for their device on top of their regular AT&T service plan. Monthly fees range from $15-$50; a Samsung Galaxy S 4 costs $32 per month.

You're on the hook for 20 payments. After 12 payments, you can trade in your device and get a new one, and the clock starts again. There are no activation or upgrade fees. After 20 payments, the device is paid off. There doesn't appear to be a contract for service, only for the device itself. If you want out, you can pay off the device price early.

This works for AT&T in that the company no longer has to pay subsidies - currently $440 on a Galaxy S 4 with a two-year contract. But it isn't lowering its monthly rates, so over a two-year period someone with an AT&T Next Galaxy S 4 will pay $440 more than a subsidzed customer if they don't upgrade early. AT&T also gets to capture the resale value of the used phones, rather than consumers reusing or reselling them on their own. Customers who want to upgrade in months 13 or 14, and who don't resell their own used phones, will find big savings here, though.

While AT&T doesn't say this in its release, the returned year-old phones will probably be turned around to refurbish and resell, much like T-Mobile plans to do with its "Jump" devices. AT&T currently sells a bunch of refurbished phones on its own site, and its purchase of smaller prepaid carrier Cricket offers another potential major sales channel for refurbished phones.

We'll have a more in-depth comparison of AT&T's and T-Mobile's strategies later, but it's worth noting that while T-Mobile charges less and lets you upgrade more often, AT&T has more LTE cities (328 to T-Mobile's 116) and is much better at getting early, exclusive lock on new phones such as the Nokia Lumia 1020. AT&T also won our Fastest Mobile Network nationwide award this year.

"AT&T Next" will be available starting July 26. For more, check out AT&T Next vs. T-Mobile Jump: Smoke and Mirrors?