According to the Wall Street Journal, no-contract plans help carriers avoid the expense of subsidizing new smartphone models, which they usually try to offset by signing their customers up for long-term contracts.
AT&T Next will allow cell phone buyers to purchase their phones on 20-month payment plans with no upfront fee and no contract. You pay the rest of the installment fees if you leave early.
The announcement came just a week after T-Mobile launched a similar upgrade model, which offers frequent upgrades on a contract-free plan.
CNET explains the difference between the two:
AT&T Next sounds similar to T-Mobile's no-contract plans, with a few tweaks. T-Mobile charges an upfront fee that goes as high as $150 for the Galaxy S4, with monthly payments of $20 on top of the service plan. The monthly installments go for 24 months, unlike AT&T's 20 months. Under T-Mobile's Jump plan, which costs an additional $10 a month, users can upgrade their phone twice a year after the first six months, and the fee includes insurance.