AT&T’s head honcho says phone contracts will eventually go the way of the dinosaurs

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AT&T CEO of mobile and business solutions Ralph de la Vega told Recode that traditional two-year contracts and subsidized phones will go away, albeit somewhat slowly — much like how unlimited data plans disappeared.

De la Vega believes the shift to financing phones over a period of time, instead of getting them subsidized with a two-year contract, will happen mainly because customers will opt out of signing contracts. He doesn’t think that AT&T will have to force the choice on them. De la Vega’s statements come just after AT&T nixed two-year contract purchases at third-party retailers, such as Best Buy and the Apple Store. The carrier now only offers its Next plans at those stores.

AT&T introduced phone installment plans back in 2013, in the form of AT&T Next 12, Next 18, and Next 24, which let you pay off your smartphone over a span of 12, 18, and 24 months, respectively. After that point, you can upgrade to another phone of your choosing. Even though T-Mobile beat them to the punch with the no-contract model during its first Uncarrier event in 2013, de la Vega said AT&T already had plans to introduce Next when T-Mobile announced Jump!

“T-Mobile and us came out within weeks of each other,” said de la Vega. “They got there maybe a week or two ahead.”

Regardless, interest in two-year contracts is waning quickly — Almost two-thirds of AT&T’s smartphone sales were made through one of its Next plans. For AT&T Mobility and its CEO, this statistic makes the carrier’s recent move away from contracts and subsidies a little easier to understand, though Recode raises the point of whether people are really taking advantage of AT&T’s Next plans by upgrading their phones more frequently.

“We need to give it a little more time,” responded de la Vega.

It’s still unknown when AT&T will remove two-year contracts entirely. Based on an earlier report on the carrier’s strategy, however, it seems that it will do so in stages. At this point, customers still interested in two-year contracts can continue purchasing them through AT&T stores.


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