Verizon Eliminates Contracts and Device Subsidies
by Brandon Chester on August 7, 2015 2:58 PM EST
North America has always had a fairly unique pricing structure for buying mobile devices. In many places, the concept of purchasing a device for a heavy subsidy and committing to stay with a given carrier for two or three years is unheard of, but in the United States and Canada it has always been the norm. However, that dynamic has been changing as it has become more difficult for operators to subsidize expensive smartphones for the wide market of consumers. Both T-Mobile and AT&T have moved away from the original model of contracts and subsidies in favor of installment plans or simply selling devices at full price, and today Verizon announced that they will follow in their footsteps.
With Verizon's new plans, there are no more contracts and no more device subsidies. Instead, consumers pay for their phones, pay for a bucket of data, and then pay a fee for each device that they add onto the account. The base monthly data fees are 1GB for $30, 3GB for $45, 6GB for $60, and 12GB for $80. On top of the data bucket fee, users will pay $20 to add a smartphone to the account, $10 for a tablet/data stick, and $5 for a smartwatch with cellular capabilities. Additional data over the limit will cost $15 per gigabyte,
As for existing consumers, Verizon will apparently offer avenues for them to get another subsidized device when they transition to these new plans, and they can also hold onto their older plans if they desire. Verizon customers interested in the new plans can switch over when they go live on August 13.
Source: Re/code
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masouth - Tuesday, August 11, 2015 - link
I don't think it will be all doom and gloom for the phone makers. The industry has already been moving towards a payment plan system instead of a subsidized system. I know people who have already let the phone company set that hook in their mouth. As an artificial example:"$25 a month for 3 years to get a new iphone? Sign me up!"
Meanwhile 18 months later they have already paid in $450, they now want the new iPhone, and they are still another 18 months/$450 dollars in the hole.
That + a monthly bill are a much better business model than a service contract. They have to pay on that phone even without the service. So many short sighted people just look at that $25 a month and completely ignore the term, the resulting total amount they will pay, and if they are actually going to want this phone for the next 3 years. It's just money in the bank for the companies.
Murloc - Monday, August 17, 2015 - link
most iphones I talked about with people were sold subsidized with a contract.Iphones have a noticeably smaller marketshare in Europe than they do in the US regardless, although it depends on the country.
In my country and in neighbouring ones there are traditional monthly subscriptions for data (if you don't use data then prepaid is more usual) so most people also get a subsidized phones when they renew them every 2 years.
Murloc - Monday, August 17, 2015 - link
I think you're right, when you have to dish out 600$ cash for a phone (that many people break or lose) it stings more than if it's 200$ and the rest is paid through monthly contract fees (that's why lending and leasing are popular among people who can't afford stuff.....), and no lower fees are available if you don't use the subsidy for a new phone at all.If there are no subsidies anymore 200$ phones will be more successful. Luckily for Microsoft that's where they are strong.
izdlang - Friday, August 7, 2015 - link
What I really want to know is.. what does this mean to me and my unlimited data? Does this mean that I can no longer renew my contracts and get cheap devices using the old switcheroo?jeffkibuule - Friday, August 7, 2015 - link
Yep, if you want a new device, you'll be paying full price for it one way or another. Period.whiteiphoneproblems - Friday, August 7, 2015 - link
FOR comparison: TMO gives you 3GB *per line* (not "shared bucket") for *$10* -- with no "device access fee," other than the $5/line for each line after the first. That's on base Unlimited Talk/Text plan for $60. (I know TMO's coverage ain't great in some places, and people who pay for VZW do so for a reason -- but there's the price comparison all the same.)whiteiphoneproblems - Friday, August 7, 2015 - link
(Actually, $5/line for each add'l line after the second -- the first two lines are included.)DanNeely - Friday, August 7, 2015 - link
Currently I'm on a VZW contract that gives one smartphone and 2GB of data for $60 +tax; that came with ~$300-400 in device subsidy. For hand waving purposes, call it $360 or $15/month. Under the new plan, for $50/mo I'd only get 1GB of data and the loss of the device subsidy means I'd either pay several hundred more up front or $15/mo amortized over 2 years; meaning instead of $60/mo for 2 GB, I'd be paying $65/mo and only getting one.VZW math at its finest.
Unfortunately in the relatively rural area where I live VZW Network >> Everyone Else's Network is also valid math; so I can't really switch without a big loss of quality of service.
piiman - Saturday, August 8, 2015 - link
"VZW math at its finest."Of course! You don't think they changed it for your/our good did you?
Heck the data is 3x that it used to be (3 g for 29.99 now 1 g for 29.99 WTF?!) Sooo long Verizon.
This also explains why they keep calling me trying to get me to change plans.
Shadowmaster625 - Friday, August 7, 2015 - link
That is going to stick a fork into apple and samsung both. Say goodbye to outrageously priced $800 ripoffs. An LG G2 is currently selling for $120.