Verizon Wireless Open to Dropping Contracts
Verizon may jump on the device financing bandwagon too if customers want it.
With T-Mobile breaking away from the traditional contract scene that leaves customers tied to the company for all eternity, copycats are now starting to talk about their own versions of a contract-free agreement.
T-Mobile's "Un-carrier" idea is pretty simple: consumers are only bound to the carrier if they're making monthly payments on a phone. Customers thus can leave T-Mobile any time they want, but they're still obligated to pay for the phone. It's similar to buying a car: make a down payment up front, and then monthly payments to the "bank" (T-Mobile) for two years on top of the wireless coverage.
Last year Verizon Wireless started the trend of one account sharing a pool of data to a number of devices. Now in 2013 the Big Red is playing copycat, with CEO Lowell McAdam saying that it will be rather easy to slip into a similar non-contract mode, but only if consumers start asking for a similar scheme.
"I'm happy when I see something different tried. We can react quickly to consumers' shifting needs," he told reporters during an event to raise awareness for Verizon's "Powerful Answers" initiative. He added that he would keep an eye on consumer response to T-Mobile's new ball-and-chain scheme.
Back in January before T-Mobile launched its new contract-free plan, AT&T CEO Randall Stephenson also mentioned that the company was considering something similar, allowing customers to pay for their own smartphones in exchange for a lower rate. As it stands now, both Verizon and AT&T rely on subsidies to draw in customers, requiring them to sign a two-year wireless contract in exchange for "free" or "discounted" devices. Carriers typically eat the bulk of the device cost up front and in return charge customers high monthly fees for their services, thus making a lower profit.
But T-Mobile's new plan has received mixed responses since its launch last month. Some see the new device financing as another form of a contract, binding the user to the wireless carrier for two years. As previously stated, even if these customers break away and join AT&T or Verizon, they're still obligated to T-Mobile.
The company is likely betting that customers won't switch, as the new plan is still lower than its competitors' offerings. T-Mobile provided an early update for its 1Q13 earnings on Thursday, reporting a net increase of 579,000 customers compared to a net loss of 349,000 customers seen in 4Q12. This is the first positive branded growth in four years, the company said. The customer bleeding, it seems, has finally stopped.
"We have made material progress in stabilizing our branded business in Q1, which provides a solid foundation to build on with the new Un-carrier customer offers we launched last week across America," said T-Mobile USA President and CEO John Legere. "I believe the best is yet to come!"
Yep, Verizon is undoubtedly keeping a close eye on this competitor.