Verizon’s New Phone Plans Prove Sometimes You Follow the Little Guy

| Analysis

Verizon, the largest single cell service provider in the United States, is finally throwing in the towel and following T-Mobile's lead by ditching traditional contracts for its customers. Instead of two-year contracts and subsidized phone prices, Verizon is going with flat monthly fees for services and customers will pay full price for their smartphones—showing that sometimes the little guys really can make big changes happen.

Verizon ditches old-school contracts & subsidized iPhone dealsVerizon ditches old-school contracts and subsidized iPhone deals

The little guy in this case is T-Mobile, the third largest U.S. cell service provider well behind Verizon and AT&T. T-Mobile started shaking up the smartphone market by offering no contract deals for its customers, along with monthly payment plans for new phones instead of the traditional subsidized pricing we've dealt with for years.

Verizon's new plans cost US$20 a month, plus the price of a data plan. Those come in at $30 for 1GB a month, $45 for 3GB, $60 for 6GB, and $80 for 12GB. Going over your monthly data cap will cost you an extra $15 per gigabyte, which will no doubt have customers watching their usage closely considering how hefty the fee is.

Customers will also pay unsubsidized prices for their smartphones, either up front or as a recurring monthly fee on top of their regular bill. That's another change T-Mobile introduced, and AT&T later followed with its Next plan.

iPhone critics say pushing customers out of subsidized plans could have a negative effect on Apple's sales because so many Android-based phones are cheaper. If T-Mobile and AT&T sales figures are any indication, however, Verizon and Apple will continue to do just fine. Customers who otherwise have to wait two years to buy their next iPhone can get into a new model sooner with the no subsidy plans, and the cost difference compared to Android phones doesn't seem to be having a big impact.

Instead, unsubsidized prices may have a bigger impact on higher end Android phone sales—at least for the cost-conscious consumer. Shoppers in the market for pricier Samsung Galaxy smartphones, for example, may be lured in by lower cost Android phones from other companies.

For Verizon, it probably isn't much of a concern which smartphones its customers use as long as they stay with the company, and that's likely a big driving force behind the move away from traditional contracts and subsidized pricing. The plans T-Mobile is using to entice new customers forced AT&T's hand, and now Verizon's. Neither wants to lose customers, which is what they're facing thanks to T-Mobile's upstart ways and game-changing no-contract plans.

In other words, it's the little guy setting the rules the big guys have to play by. Considering how expensive and feature-limited U.S. smartphone plans have been, that's a refreshing change, and hopefully T-Mobile will continue to buck the trend and come up with more ways to keep the competition alive.

Comments

Lee Dronick

iPhone critics say pushing customers out of subsidized plans could have a negative effect on Apple’s sales because so many Android-based phones are cheaper.  If T-Mobile and AT&T sales figures are any indication, however, Verizon and Apple will continue to do just fine.

Yeah, maybe some folks won’t update as often, but after watching friends wrestle with their Android phones I am not interested in entering that arena

vpndev

This is proof that the FCC made the right call in not allowing AT&T to buy T-Mobile. Had that happened we’d have just two carriers today (Verizon would quickly have gobbled Sprint). The two-year contracts and all the other consumer-unfriendly stuff that we had then - would still be standard.

Thank you, FCC.

Gerard Angeli

Alright well here’s what has been on my mind. I am due for an upgrade as we speak. So say I spend $200 plus the $40 activation today the day BEFORE it all starts and get the iphone6 that has the highest actual dollar spent to MSRP ratio available with a total MSRP of $649.

The article above quotes:
“Customers who otherwise have to wait two years to buy their next iPhone can get into a new model sooner with the no subsidy plans”.

This is telling me I can upgrade tomorrow and then upgrade again on Thursday as well. So okay, then come Thursday, my contract i just signed is abolished when i can jump right into another new phone that id pay for over the course of the next 2 years in monthly payments. So now i have my original phone. a brand new boxed iPhone 6 (today) and for the hell of it, another iPhone 6 (new plan on Thursday). I see two phones i can sell on eBay for profit. Galaxy S5 (original phone) for $250 and the iPhone6 for $500+ easily. My old phone covers the costs of the phone i would purchase today and now I’m looking at my upgrade today as 100% profit. Come Thursday Verizon should and will be able to offer me a new plan under new the new conditions. Sure I’ll absolutely upgrade then!

Think its not possible?

Well consider the following…
Imagine 1 month ago (before the Verizon announcement) you upgraded your 2 year contract for the latest and greatest at the time to replace your old phone. Would Verizon screw you over and make you wait out the rest of you contract time or because they are removing contracts, you would be able to upgrade come Thursday to their new ways?
Imagine doing it a year ago for the iPhone 6 and having to wait an additional year even though they changed the system. Same should go for if i happen to upgrade later on today. As the article states, i shouldn’t have to wait for the new policy so why not make $500 on a loophole Verizon may have not seen coming? Or perhaps they did but are willing to take the loss in turn for keeping customers for the long haul.

Right now with contracts you pay $40 a month for each phone line. If you were to switch over come thursday with a smart phone you already own (ahem i can own 2 if i upgrade today for $240) your rate drops to $20 a phone line/month. I would save money not having to pay $20 EXTRA a month for 24 months on contract and already have a new phone without having to pay $25-30 for a phone each month under the new system. doing some math quick, $20/ month X 24 months = $480 saved. I can then sell that iPhone 6 i buy today for $500+ on eBay. Then because of the new plans, upgrade to say another iPhone 6. The fee is $20 per line instead of $40 now and basically I’m paying the same (regardless whether u keep your contract phone or not) because instead of having a subsidized phone, you are paying for it over 24 months which comes to about $25. so its $5 MORE over 24 months. Yes you may save on bundled family data if you have more than one phone line BUT the math is where its at. $5 by 24 months is $120. but Guess who just created upwards to $1000 worth of saving just by upgrading the day before the new plans? Total offset in saved costs puts you over $800 and also puts around $400 cash in your pocket.
Divide that by 24 with say a .... 3 person 6 GB shared $190 verizon bill.
Your true payments come down to $173.34. a huge savings in the long run of the next 2 years.

Now imagine if your whole family of 3 can upgrade today. If you each did what i say and gain the $400 off of selling your old phones and new iPhone 6’s and then upgrade again Thursday successfully, you will have a totally profit of $1200. Guess what your monthly payment will now be…
$1200/24 months = $50 a month over the next 2 years!!!!
Your bill can go from almost 200 a month to less than $150!!!

Really folks, data is a scheme in itself. its creating money out of practically our savage over use of the internet. The big companies have figured out the money is in the data because they can create data out of thin air. What was costing them was the phone the whole time. So now you blatantly pay for the technology you own and then slave away for data. You pay money for them flipping a switch for how many GBs you can use.

So in turn is it possible to stick it to the system for once?

What do you think will happen?

Log in to comment (TMO, Twitter or Facebook) or Register for a TMO account