Verizon: Existing customers with 2-year contracts and subsidized smartphones can keep them

Verizon Wireless (NYSE: VZ) is clarifying that despite its recent introduction of new plans that do away with two-year contracts and subsidized smartphones for new customers, existing customers who have two-year contracts can renew them and keep getting subsidized phones.

The carrier felt that there was sufficient confusion after the changes went into effect -- which were widely reported that Verizon was eliminating contracts -- to issue a clarification. The carrier notes that customers who choose the new plans with device payments will still spread the cost of their phone or tablet evenly over 24 months, and they will be able to upgrade anytime once the device is paid in full. Customers own their devices once they are fully paid off.

Verizon customers on two-year contracts can keep and renew their contracts and "take advantage of any subsidized devices we offer as part of that contract." Customers can also keep their two-year contract pricing plan and still purchase a new device via the carrier's monthly device installment option.

Current customers can move to the new Verizon plans whenever they want or stay on their current plan. If they have a current two-year agreement and move over to the new plans, the line access charge will be $40 per smartphone per month and not $20. When customers reach the next upgrade eligibility date, the $40 line access charge will drop to $20 automatically. 

Earlier this month Verizon adopted new plans, which all include unlimited voice and texting and the ability to share data with up to 10 devices:

  • Small: $30 per month for 1 GB of shareable data (the same price as before)
  • Medium: $45 per month for 3 GB of shareable data (down from $50 for 3 GB)
  • Large: $60 per month for 6 GB of shareable data (down from $70 for 6 GB)
  • X-Large: $80 per month for 12 GB of shareable data (Verizon's current $80 promotional price point offers 10 GB of data)

Verizon's shift away from two-year contracts for new customers is part of an ongoing move in the U.S. industry toward plans that do not subsidize smartphones. T-Mobile US (NYSE:TMUS) kicked off the trend in 2013 and AT&T Mobility (NYSE: T) has been an enthusiastic supporter of its Next equipment installment plan. AT&T still offers two-year contracts, but it has indicated they will eventually go away and has directed its third-party retail partners and dealers to sell its phones only through its Next EIP program. AT&T said that in the second quarter, 68 percent of all customers buying postpaid smartphones chose AT&T Next.

Sprint (NYSE: S) CEO Marcelo Claure said earlier this month the carrier is going to move entirely to a device leasing model by the end of the year and do away with two-year contracts.

The shift has led to an increase in equipment revenue and a decrease in service revenues for carriers. The operators have urged financial analysts and investors to instead focus on a relatively new metric to measure their performance known as "average billings per user," which takes into account service revenue and payments from customers making monthly device payments.

The move away from subsidized phones has also given customers more transparency into how expensive their smartphones are, with the full cost for high-end phones ranging into $600 and more. That has created an opening for some Android handset makers to undercut their competitors and see if customers are more receptive to phones that cost $300 to $400 on an unsubsidized basis with similar if less impressive specifications.

For more:
- see this Verizon page
- see this Ars Technica article 
- see this The Verge article 
- see this DSL Reports article 

Related articles:
Sprint to abandon 2-year contracts by year-end, embrace leasing exclusively
Verizon cuts prices on shared data plans and smartphone access charges
AT&T's de la Vega: 2-year contracts will eventually go away
Verizon: Edge customers now must pay off smartphone before upgrading, but get to keep old phone
Report: AT&T to abandon 2-year contracts at national retailers and local dealers

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