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Verizon Wireless released a statement that it will start offering more simplified - and less expensive - cell phone plans. This is all part of a change by Verizon to stop offering discounted phones and long-term contracts.
What's The Catch?
Wireless carriers have tried to wean customers off subsidized phones for years. With a subsidized cell phone plan, customers would purchase a new iPhone for as little as $199, even though the retail price for Apple's newest phones start at $649.
The catch has been that customers were locked in to two-year contracts. And their providers earned back the cost of the subsidy, and more, over the course of those two years.
Starting August 13th, you will be able to enter into a new Verizon cell phone plan have no down payments, activation fees or two-year contracts.
But, in return for lower prices and simplified cell phone plan options, you will either need to pay for the entire price of a new phone up front, or you can pay off the purchase price of the phone every month for 24 months.
A third option for new customers is to bring their existing phone to Verizon and take advantage of lower cost plans from the nation's most popular wireless carrier.
The benefit for customers is that costs for voice, text, and data plans will be about $20 less per month (on average, and before factoring in the cost of your phone). And Verizon will no longer charge activation fees.
While your new plan may be contract-fee, if you elect to pay for your phone in monthly installments, you will still find yourself locked in with Verizon for 2 years.
How Will the New Plans Work?
Verizon streamlined plans will offer unlimited voice and texting, plus data. You can calculate plan costs by adding per line connection charges and data charges. You will be able to share up to 10 devices per account.
Monthly Connection Cost Per Device:
- $20 per month per smartphone
- $10 per month per tablet or Jetpack
- $5 per month per smartwatch
Monthly Data Options:
- Small: $30/month for 1 GB of shareable data.
- Medium: $45 per month for 3GB of shareable data.
- Large: $60 GB/month for 6GB of shareable data
- X-Large: $80/month for 12GB of shareable data.
If you currently have 2 GB or 10 GB data plan, those plans appear to be eliminated. So you will need to choose either more or less data. Which means that for some customers, simpler also means less flexibility.
Will I End Up Spending More or Less?
What customers want to know is whether they will end up saving money or spending more.
Our research shows that if you are used to upgrading to a new top of the line smart phone every two years, you will end up spending approximately $410 more per line over a 2 year period. That works out to an increase of $17 per month over two years.
Which means the elimination of the dreaded activation fee (usually $40) will not offset the higher cost you will pay for high end phones.
On the other hand, you may be able to save money under these new plans by employing a couple of strategies:
- Buy less expense phones (which means staying away from more expensive phones like the latest Apple iPhone or Samsung Galaxy).
- Do not upgrade your phone every 2 years to get the latest and greatest.
- Only upgrade when you can take advantage of special deals.
However, this is clearly a strategy of saving money by getting by with less.
Will This Effect Existing Customers?
Verizon said that existing customers will be able to keep their current plans. But they did not elaborate on what those restrictions are. If you currently have a phone on a subsidized plan, you will need to wait and see if you will be able to keep the same plan and still purchase your next phone at a discounted price.
If you are already a Verizon Edge customer, these new plans are almost identical to your current offerings, but with a slightly lower monthly fee available for most data tiers. You will want to contact Verizon to take advantage of the cost savings.
We think these changes offered by Verizon will end up costing consumers more money and will hurt device manufacturers. By increasing the cost of smartphone access, Verizon customers will upgrade less often, and be more likely to choose lower end phones.
As others have concluded, buying the latest iPhone from Verizon just got more expensive. This is not good news for Apple, which is only a few months away from issuing the new iPhone 6s and 6s plus.