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Verizon Wireless Kills Phone Subsidies, Contracts: Some Customers Will Pay More

Phillip Dampier August 7, 2015 Competition, Consumer News, Data Caps, Verizon, Wireless Broadband 6 Comments

610px-Verizon-Wireless-Logo_svgThe days of the wireless phone subsidy are numbered with today’s announcement Verizon Wireless will end all smartphone subsidies and service contracts next week. It’s a path we’ve predicted at Stop the Cap! since at least 2013.

In an effort to “simplify” wireless pricing, Verizon Wireless is radically shaking up its wireless plans starting Aug. 13 — raising prices for its lightest users, ending the two-year phone contract, and requiring customers buy or finance their devices at the full retail price. Instead, customers will pay $650 up front for a phone like Apple’s iPhone 6, or finance it for around $27 a month for the next two years.

Phone plans are changing as well. Eliminated are “individual” and “family plans.” In their place, there is just one plan with four data options:

  • Access Fee (includes unlimited voice/text): $20/mo per phone, $10/mo per tablet or portable hotspot, $5 for connected devices (eg. watches)
  • Shareable Data Option: $30 (Small – 1GB), $45 (Medium – 3GB), $60 (Large – 6GB), or $80 (X-Large – 12GB)  —  Overlimit Fee is $15/GB

Average and heavier users will save a few dollars with Verizon’s new plans. The “Medium” plan is $5 less than Verizon used to charge and the “Large” plan is $10 less. You get 2GB of extra data for your $80 comparing Verizon’s older plan and its newer one. The benefits seem less compelling when you realize just a few years ago Verizon charged $30 for unlimited use data plans.

Budget customers will find Verizon’s new plans the least attractive. Customers with 6GB or less data plans used to pay a $15 access fee. Now they will pay $5 more per phone. Those who want Verizon’s cheapest 500MB plan for $20 are out of luck. That plan is being dropped, according to Verizon, because customers were confused over the difference between MB and GB. Customers now on that low-end plan will probably be able to keep it, but may eventually have to choose a “Small” data plan for $10 more per month. Budget customers used to pay around $35 a month. Now they will pay at least $50.

Heavy data users may be concerned Verizon’s top data plan tops out at 12GB. The company plans to privately offer bigger data buckets to customers, but only if they visit a Verizon Wireless store to discuss their needs.

Current customers still on contract will not see any changes immediately. Verizon will continue to charge the $40 a month access fee for contract customers until the contract expires, after which the fee will drop to $20. Customers on More Everything plans can stick with their existing plans for now, as well as add lines. There are no plans to force customers to change service plans at this point.

Expect AT&T to take a similar path towards the elimination of subsidized devices. Because customers will likely finance their $600+ smartphones, it isn’t likely consumers will face dramatically changed pricing as a result of Verizon’s plan changes. But device manufacturers can no longer get away with promoting their phones at a $200 price point. In fact, the sticker shock of the retail price of smartphones may eventually force manufacturers to produce more affordable phones for the marketplace.

Currently there are 6 comments on this Article:

  1. daniel says:

    I bet verizon will use the no contract part as a defense in court within 2 yeasr.

    This is not a good thing.

    No contract gives verizon the power to scew customers. Worse than ever before

    Be like me and avoid verizpn likr tje plaige!

  2. Jeff says:

    Verizon is undoubtedly a crooked company, but I can tell you from first hand experience that people confuse MB with GB all the time. I had to deal with it constantly at the wireless company I worked for.

  3. No more smartphone subsidies nor service contracts is a terrible news for consumers. Increase in rates for low-end plans is even worse.
    Thanks StopTheCap for keeping everyone updated on market trends.

    The BillXperts.com team

    • tacitus says:

      No more smartphone subsidies nor service contracts is a terrible news for consumers.

      No, it’s not. The practice obscured just how much consumers were paying for their flagship phones, many of whom wouldn’t have even considered spending $600+ on a smartphone if the price had been broken out separately.

      The good news is that it’s going to be a lot harder for the manufacturers to justify their high-end flagship prices, especially now that there are so many extremely capable phones on the market for half-that price (i.e. between $250 and $350). It is also getting much harder to justify the cost of high-end models that only offer incremental improvements over last year’s version.

      Hopefully, this measure, combined with increasing competition from the MVNOs, the amount Americans pay for their cell phones per year will finally drop to somewhere close to what consumers are paying in other countries (i.e. typically half).

  4. daniel says:

    i love prepaid but verizons prepaid always sucked.

    no contract isnt bad if done right but veriizon wont do it right.

  5. Scott says:

    The only thing Verizon does right is increase your cellular bill each year guaranteed. They aren’t in the business of making customers happy, they’re in the business of making their stock holders happy.. they shave a percent or profit off the top for the users with the most expensive plans and they’ll make it back 10 fold with the increase on the majority of users signed up for their $30-50/mo plans that will get bumped up another $20/mo or so.

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