AT&T Next scam: you're paying twice and ETO is a better option
I was actually just about to start writing an article on this very topic, when I saw in my news feed that T-Mobile exec Andrew Sherrard had essentially done my job for me (although he was far more succinct than I was likely to be on the subject.) Sherrard called out AT&T on its new "Next" frequent upgrade program as essentially being a scam.
Sherrard talked to CNET earlier, and started out by calling AT&T Next a "poor imitation" of T-Mobile's JUMP plan. The crux of Sherrard's argument was exactly the point I had wanted to make, as he said:
They're charging you twice on the same phone and calling that a good deal.
The AT&T Next plan is set up to sound good, because it removes the up-front costs, and allows you to upgrade your device after 12 monthly payments. For example, with the normal route, you would pay $200 for a Samsung Galaxy S4, not be able to upgrade for 2 years, and at the end of that time you would own your Galaxy S4. With Next, there is no up-front cost, but you have to pay $32 per month for the device. If you pay for 20 months ($640), you can keep the device; or, if you pay at least 12 months ($384) you get to upgrade a year early, but you don't get to keep the device.
Here's the problem: with either option, you're paying the same monthly service cost which already includes the phone subsidy. You remember subsidies, right? It's that thing that allows you to pay $200 for a device that would normally cost $600+ outright. T-Mobile removed subsidies from its monthly service charges when it first switched to Equipment Installment Programs (EIPs), but AT&T still has the subsidy built into the monthly service charge, which effectively means that with AT&T Next you're paying twice for a device that you don't even get to keep. You may not get to keep your T-Mobile JUMP device either, but at least the costs work out similar to a lease.
Of course, AT&T doesn't see it that way. AT&T sees it as a simple matter of giving the consumer more choice, with a rep telling CNET:
We're not taking away anything. We're just giving people choice by removing the upfront cost and allowing them to upgrade their phone.
The AT&T rep also pointed to AT&T's larger LTE network as if that had something to do with the argument, although I'm struggling to see the connection. Sure, AT&T has better service in many areas, especially rural areas, than T-Mobile, but AT&T's LTE isn't always faster than even T-Mobile's HSPA+. But, that's not even the argument, because AT&T's service is already more expensive than T-Mobile's even when you remove the subsidy.
A single line on AT&T with unlimited voice and text with 4GB of data will cost you about $115 per month. Let's say that the subsidy is about $20 per month, that means just for the service alone, you should be paying $95 per month on AT&T. T-Mobile doesn't have a plan that exactly matches up, but for unlimited voice and text with 2GB of data, it would cost you $60 per month, or for unlimited data, it would be just $70 per month. So, even accounting for the subsidy, you're paying an extra $25+ per month just to have the "better" service (depending where you are) on AT&T.
Conclusion: ETO may be better
In the end, while it is nice that AT&T has added the choice for users to upgrade sooner, as T-Mobile CEO John Legere said when he announced JUMP, there are a lot of steps that had to come before T-Mobile could do this properly, including removing subsidies, killing contracts, and moving to EIPs. He said at the time that even if other carriers tried to do what T-Mobile has done, it wouldn't work, because they hadn't done the proper building towards it.
Frankly, it looks like he was right, because here's the truth about AT&T's Next plan: signing up for it will cost you at least $384 plus your service costs in order to get your early upgrade after one year, and you don't get to keep your device. But, if you sign up for a normal plan, and pay $200 for a device, and pay your service charges for one year; at the end of that time, your early termination option fee would be $205 ($325 minus $10 for each month: 325-120=205). Even if you add in the activation fee of starting a new contract, you could terminate your agreement, and get to keep your device for just $56 dollars more than if you signed up for AT&T Next. Then you either have an extra device, or something you can sell on craigslist for a few hundred dollars.
So, where exactly is the deal again?