AT&T launched a new wireless subsidiary called Aio Wireless on Thursday that offers phones like the iPhone 5 with no annual contract.
The creation of Aio (pronounced Ay-oh) was partly a response to T-Mobile USA's no-contract, low-subsidy phone initiative that was formalized in late March, several analysts said.
So far, Aio only serves Houston, Tampa and Orlando, but is expected to add other markets as part of AT&T's national network.
Aio has three rate plans for unlimited talk, text and data that range from $35 to $70 a month, offering 4G HSPA+ download speeds of up to 4 Mbps. Customers can bring a compatible unlocked phone from another network to Aio or pay upfront in installments for the full, or nearly full, unlocked cost of a new phone.
An iPhone 5-in. black with 16 GB of storage on Aio will set customers back $649.99. There are also reconditioned iPhone 4s for $349.99 and iPhone 4Ss for $499.99. Lower-end phones are available from Samsung, such as the Galaxy Express ($249.99) and Galaxy Amp ($99.99). Compatible phones from ZTE include the Prelude ($49.99) and the Lumia 620 ($179.99).
Basic phones and a single tablet, the ZTE Velox, are also available. The Velox tablet sells for $179.99 and features a 7-in. display and runs Android 4.1.2. It has a 1.2 GHz dual processor and a 4,000 mAh battery.
While Aio will serve customers over AT&T cell towers, it will have its own network core for handling voice, data and text, officials said. AT&T already offers prepaid plans with Go Phones, a group of basic phones.
What makes Aio different from Go Phones is the offer of powerful smartphones at an attractive price, said independent analyst Jeff Kagan.
"Having the AT&T brand name behind Aio Wireless will provide a level of comfort and trust to customers," Kagan said. "Having a different company name and face gives Aio opportunity for growth. Customers typically like the idea of pre-paid wireless, but that segment has not grown as quickly under the post-paid brands."
Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen or subscribe to Matt's RSS feed. His email address is email@example.com.