Earlier in the week, Verizon announced that it was doing away with service contracts for good. While the current plans will continue to remain in force for customers who do not actively switch over to the new plans, the older plans will henceforth not be available for new customers to sign-up with effect from Thursday, August 13th. While the new plans promise to end the convoluted pricing regime in place right now, bringing more clarity and sanity into the system, the ending of the subsidy era will also make premium handsets like Apple’s iPhones and Samsung’s Galaxy Note series devices more expensive to buy and own, seeing as they will mostly cost upwards of $600 dollars for factory-unlocked, SIM-free versions. Users however will have the option to pay the device charge separately in monthly installments, which will end the moment the device is fully paid for. While this will mean that users won’t have to put up big money upfront, the monthly installment scheme will also allow users the freedom of changing plans at any time without any contractual obligations.
While T-Mobile already de-coupled device pricing from service charges as its signature ‘Uncarrier’ move as far back as 2013, the other three leading carriers, Verizon, AT&T and Sprint, had thus far continued to steadfastly hold onto the long-established billing system. But now that the largest carrier in the country is offering new plans in keeping with the times, switching over to these newer plans might actually save some users a few bucks over the course of a typical two-year tenure for service contracts. So let’s take a look at who might actually benefit from the plans, and if there are any downsides to them, apart from the increased initial down-payment.
For the uninitiated, wireless carriers typically impose high usage charges in order to subsidize the handsets. Customers who do not swap out their devices often, continue to pay those prices even after their contracts are up. Also, customers who like to tread off the beaten path and use off-beat devices from OnePlus, Asus or myriad other international vendors who do not typically have agreements with US carriers, often end up paying double. Firstly to the retailer for buying fully-priced, unlocked devices; and then to the carrier, even though they’re not using a subsidized device! For them, this new development will prove significantly beneficial.
As an example, somebody interested in the OnePlus 2 might just get the unlocked device for $329 or $389 for their chosen variant. Verizon will then charge only $20 per month for access fee for that particular device, along with service charges of either $30 for 1 GB LTE data, or $45 for 3 GB data, $60 for 6 GB or $80 for 12 GB of data. All the plans come with unlimited talk and text, of course. So without device charges, the monthly payment could be as low as $50 plus taxes for the 1 GB plan, including access charge. Somebody who might be interested in the Galaxy S6, say for instance, could opt to pay a $24 monthly installment for 2 years with zero down, rather than pay the full price of $576 upfront. For the 3 GB data plan, that will mean a monthly outgo of $89 plus taxes, including $45 plan charges, $20 access fee and $24 device payment. Under the old plan meanwhile, you’d have paid $90 plus taxes per month for 3GB of data, plus $199 up front for the S6. That would have cost you ($90 x 24) + $199 = $2,359 over two years. Now, for the exact same amount of usage and the exact same device, you’ll need to spend ($65 x 24) + $576 = $2,136. Which of course, works out to a saving of $223 over the same length of time.
Of course, with the new streamlined plan structure in place, you also have the freedom to pay off your device and switch to another carrier at any point in time, as you’re not contractually bound any more. While family plans are going away, the way to mitigate that would be to opt for larger buckets of data and add devices to the plan. Alongside the more mainstream plans, Verizon also lists more data intensive plans for voracious data users. 20 GB at $120, 40 GB at $300, right up to 100 GB at $750 are also on offer. Adding extra devices to each plan will incur access fees at $20 for each paid-off smartphone and $10 for each tablet.