AT&T to kill contracts for all new phones

The move marks another nail in the coffin for what was once a cornerstone of the U.S. wireless industry
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AT&T (NYSE:T) confirmed that it will stop offering two-year contracts to consumers on Jan. 8. The carrier said that beginning this week, both new and existing customers must either buy a new phone at full retail price or through AT&T Next, its equipment installment plan (EIP).

The move was first disclosed last week in an internal document sent to employees and accessed by Engadget.

U.S. carriers have increasingly moved away from subsidized handsets and contracts for postpaid users since T-Mobile (NYSE:TMUS) dumped the model in early 2013. The strategy proved effective as T-Mobile grew its base of lucrative postpaid subscribers during each of the first three quarters of the year.

Verizon (NYSE: VZ) has since dropped contracts for new customers. Sprint (NYSE:S) had vowed to stop offering them by the end of 2015 but has yet to do so.

AT&T had been relatively slow to move away from contracts, but it stopped offering two-year pacts for smartphones at some national retailer and local dealer partners in June. Ralph de la Vega, CEO of AT&T's Mobile & Business Solutions Group, said last year that AT&T would eventually be forced to drop the contract model because "customers will choose it less often."

Indeed, AT&T's statement confirming the move notes that its customers "are overwhelmingly choosing AT&T Next" rather than signing contracts for subsidized phones.

AT&T's new no-contract policy applies not only to smartphones but also to feature phones. It does not apply "to business customers under a qualified wireless service agreement," the carrier said in a prepared statement. And AT&T will continue sell tablets, IoT devices and some other devices on contract.

For more:
- see this Engadget report

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