Verizon Wireless Goes Contract-Free With New Plans

Verizon Wireless Goes Contract-Free With New Plans

posted Sunday Aug 9, 2015 by Scott Ertz

Verizon Wireless Goes Contract-Free With New Plans

The US wireless market has always been a bit of an oddity in the global wireless industry. Much of the world operates on the premise that you are responsible for purchasing your phone, the US wireless companies have long paid the cost of your phone up-front in exchange for you promising to stick with them for 2 years. This allowed you to spread out the cost of the device over the length of the contract, meaning you wouldn't have to pay $700 for a new iPhone (excluding the first generation).

That business model has been changing recently, however. Pushed by T-Mobile US, the North American arm of German operator Deutsche Telekom, American wireless companies have been shifting away from subsidized phone prices. T-Mobile introduced a lease program a few years back, and subsequently the other 3 major carriers implemented similar or identical programs. Now, Verizon Wireless, a wholly-American operator is taking the lead in the transition to a more European style business model.

The company's new plans will retire service contracts and phone subsidies completely in exchange for outright phone purchases or device leases and far simpler plans. In fact, all plans come with unlimited voice and text, and 4 levels of data, labeled small, medium, large and extra-large. These sizes offer 1, 3, 6 and 12GB of sharable data, respectively. Device additions are easy as well, at $20 per smartphone, $10 per tablet and $5 per connected device (smartwatches, etc.). Rob Miller, vice-president of consumer pricing, said,

Choosing a wireless plan is now easier than ever. Customers said they don't want to have to do a lot of math to figure out their best options, and we heard them. A plan with small, medium, large and x-large choices makes sense for the way people actually use their wireless service.

While the idea of abandoning contracts might sound good on its face, it is important to note one thing: A contract is an agreement between 2 parties. In the case of wireless contracts, the thing people always focused on was that they were being "locked in" to a specific carrier. There has always been an exit clause, and the buyout was often less than the price of purchasing the handset outright, making the option potentially less expensive than the new plans. On the other side, however, is the fact that the carrier is also "locked in" with you, meaning they could not change the details of your plan. Without the service agreement, technically the carriers can change the pricing of your plan over time, because there is no contract preventing it.

We have seen no-contract carriers do this in the past. MetroPCS, especially in its early days, changed the prices of plans for all of their customers a number of times (having started at $30 for unlimited data in our market). Virgin Mobile, under Richard Branson's management before becoming part of Sprint, also forced plan changes across the board with no ability for customers to remain on previous plans.

We have never seen the big 4 make this move on their no contract brands, however we have seen them force changes when handsets were upgraded. Under this plan, if Verizon discovers they have made a bad deal, they could change the pricing, similar to how your cable, power or landline phone service works.

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