AT&T Is Doing Away With the Two-Year Contract Once and for All

Starting January 8, you'll no longer be able to get a cellphone from AT&T on a two-year contract. You won't even be able to quietly ask for one in AT&T retail stores anymore.

This has two major ramifications for AT&T customers. First, this means device subsidies are becoming officially obsolete. That discount on a phone you used to get for being locked into AT&T for two years? Gone. Instead, you'll pay for your cellphone either outright in full, or on a monthly installment plan under the company's AT&T Next program.

Second, because AT&T will no longer renew your old contract, you'll enjoy more freedom. So as long as you've fully paid off your device, you'll be able to switch carriers pretty much when you want. If you no longer owe any device payments and decide to stick with AT&T, you'll likely benefit from lower monthly payments because your phone will have been taken care of.

"Our customers are overwhelmingly choosing AT&T Next," the company said in a statement. "Starting January 8, AT&T Next will be the primary way to get a new smartphone at AT&T. This does not apply to business customers under a qualified wireless service agreement."

The change, which was first disclosed in an internal AT&T memo obtained by Engadget, comes after a year of tumultuous changes in the wireless industry. T-Mobile was the first to move away from two-year contracts, followed by AT&T when it initially unveiled its Next upgrade program. (The deal allows customers to switch to a new handset as often as every year.) Verizon was the next to follow suit. And Sprint lets customers lease their phones for a monthly payment.

It also reflects a growing trend by the industry to adopt new business models, leaving others behind. Today, wireless carriers make much of their money selling data and services that run atop those mobile Internet connections - not text messages, voice service or handsets. (Though part of the reason companies are allowing more frequent upgrades is because the traded-in phones are likely to fetch a fair price on the used handset market.) That's poised to accelerate as Americans consume more data on lucrative, metered plans.

One potential downside of the end of contracts is that consumers will have to confront the full cost of their devices, now that the true price isn't being obscured by a phone subsidy. The question is, will more people choose to pay for their phones in full from the get-go, or will they opt for installment plans that let them upgrade every year? If the former, people may end up keeping their devices for longer. If the latter, we'll see greater turnover in handsets.

Given the pace changes in technology and how greatly we value novelty, I'd put my money on the latter.

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