Even though Verizon Wireless (NYSE:VZ) will follow T-Mobile US (NYSE:TMUS) and AT&T Mobility (NYSE:T) with a new smartphone upgrade program, Verizon Communications CFO Fran Shammo said he doesn't think many customers will use the plan and Verizon won't change its service pricing as a result.
Verizon formally announced the program, Edge, on Thursday, which came after announcements from T-Mobile about its Jump program and AT&T's Next program. Yet Shammo indicated to Reuters that Verizon won't reduce its service pricing for the plan--meaning customers on Verizon's Edge plan will ultimately pay more than customers who choose the carrier's standard two-year contract smartphone pricing.
Shammo also said he does not expect many Verizon customers choose the Edge program--which lets customers upgrade to a new device every six months if 50 percent of the retail cost of the phone has been paid--because most customers would prefer to get a subsidized smartphone upfront and sign a two-year contract.
Shammo's comments help underline the fact that AT&T and Verizon's plans are only for those customers desperate to upgrade their smartphones every year, regardless of the price. "You'd have to be out of your mind" to accept Verizon's new Edge offer, Moffett Research analyst Craig Moffett told Reuters.
A key distinction between Verizon and AT&T's upgrade programs and T-Mobile's Jump plan is that Verizon and AT&T are not taking the cost of a device subsidy out of their rate plans; their rate plans remain the same under the upgrade programs, but customers who want to upgrade sooner are asked to pay the cost of the device as well. Although T-Mobile's Jump program has a $10 monthly fee, T-Mobile, through its Simple Choice plans, has effectively decoupled the cost of its service (which is cheaper than service from AT&T and Verizon) from the cost of devices.
556 Ventures analyst William Ho said T-Mobile introduced its Jump plan as a way to attract and retain additional customers. "T-Mobile brought in [CEO John] Legere and he is changing the playing field," Ho said.
But Verizon and AT&T's upgrade plans are more of a reaction to T-Mobile's Jump offering: "There is that threat of that demographic possibly going to ditch [Verizon and AT&T]," Ho said. "It's about market positioning to say, 'We give choices.'"
Ho concluded that the upgrade plans are not intended for those customers looking to save money. "It's to address consumer behavior in terms of people who want to ditch one device for the next," he said.
Verizon's Edge lets a customer select a device and sign up for a month-to-month service plan. The price of the phone is divided over 24 months and the subscriber pays the first month when he or she purchases the phone. If after six months 50 percent of the retail price of the phone is paid, the customer can upgrade to a new device. The only caveat is that customers must be on a Share Everything data plan.
Under AT&T's Next program, customers buy a smartphone or tablet with no down payment and agree to pay monthly installments for the device over the course of 20 months. However, after 12 payments, if the device is in good working order, customers can trade it in and upgrade to a brand new device with no down payment, or can keep using their device and have no more payments after 20 months. After 12 months, if customers sign up for a new wireless plan when they trade in their device, AT&T will waive the remaining unbilled installment payments. If AT&T customers cancel wireless service, the remaining balance on the device becomes due.
With T-Mobile's Jump program, customers can enroll by upgrading to a new phone, financing it through the T-Mobile EIP (equipment installment plan) and then paying $10 per month per phone. The $10 fee lets customers upgrade their phone twice every year after the initial six-month enrollment period has expired. T-Mobile said the $10 fee not only pays for the enrollment in the Jump program but also is an insurance plan that covers damaged or lost phones. T-Mobile emphasized that the insurance program alone is $8 per month, so enrolling in Jump is just an additional $2 per month.
- see this Reuters article
- see this The Verge article
- see this Consumerist article
- see this AllThingsD article
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