NEW YORK -- AT&T is joining T-Mobile in reducing monthly fees for people who pay for their own devices.
It's the latest break from a longstanding practice of offering subsidies on devices to lock customers into two-year service agreements. Many customers have been forgoing those subsidies anyway as they opt for plans that allow frequent phone upgrades. But until now, AT&T's and Verizon's service fees have still factored in the costs of those subsidies, whether the customer uses them or not.
Beginning Sunday, customers will be able to switch to the cheaper plans if they buy or bring their own phone. That includes paying for the device in installments through the frequent-upgrade Next plan. Those whose contracts have run out also qualify.
It follows T-Mobile's decision in March to separate the costs of service and devices, allowing customers to see reductions in overall monthly bills once the devices are paid off.
Most customers will save at least $15 a month under the new AT&T plans.
Customers switching from contract plans to Next may end up paying more at first, as high-end devices such as Apple's (AAPL) iPhone 5S and Samsung's Galaxy S4 typically cost $27 a month for 20 months. However, those already on Next have been paying that monthly charge without any reduction in service fees. So their bills will now go down.
AT&T is also offering a new Next option to stretch out the payments to 26 months. Assuming AT&T charges the same prices, the high-end devices will cost $21 a month. Those people will be able to upgrade to a new phone every 18 months, instead of every 12 months.
Sprint also reduces the monthly service fees for customers who pay for the phones separately in installments. But unlike T-Mobile, Sprint's discount ends after the phone is paid off over two years. T-Mobile customers can keep the lower service rates indefinitely.
Verizon doesn't currently offer any service fee reductions and won't comment on its plans.