AT&T is preparing to end its two-year contracts at the start of 2016.

According to an internal memo obtained by Engadget, the company will soon only allow new and existing customers to purchase a phone at full retail price or in a series of installments via the carrier's AT&T Next plan.

The change will officially take effect on Jan. 8, and it will apply to all phones purchased through AT&T, including older flip phone models and "Quick Messaging Devices," as the company refers to non-smartphones.

An AT&T spokesperson confirmed the news to the Verge.

"With $0 down for well-qualified customers, the ability to upgrade early and down payment options available with even lower monthly installments, our customers are overwhelmingly choosing AT&T Next," the spokesperson said. "Starting January 8, AT&T Next will be the primary way to get a new smartphone at AT&T. This does not apply to business customers under a qualified wireless service agreement."

The move is a significant step for AT&T as it shifts away completely from phone subsidies. Last June, the company stopped offering contracts to customers purchasing smartphones through local dealers and other retailers like Best Buy or Apple. Buyers who wanted a two-year contract on a smartphone had to request one directly from the AT&T store. That's no longer an option.

AT&T's new direction is reflective of a changing industry in which carriers are abandoning the contract model. The trend was sparked by T-Mobile, and AT&T soon followed suit. Verizon also seems to be headed in a similar direction.

What this means for customers is that they will no longer be locked into contracts with carriers. However, buyers will also have to confront the true retail price of these devices. With many consumers likely hesitant to pay hundreds on a smartphone upfront, the installment plans offered by AT&T and others provide an alluring alternative with the option to upgrade to newer models when available.