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Verizon Wireless Open to Dropping Contracts

By - Source: CNET | B 18 comments

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.

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  • -4 Hide
    jupiter optimus maximus , April 4, 2013 11:28 AM
    All of them are expensive to me. I just use Net10 as my carrier and pay $100 with 1500 minutes for six months. Don't need to talk with someone for 10min a day.
  • 7 Hide
    kawininjazx , April 4, 2013 11:36 AM
    The cell phone companies are gouging it's customers, and people are getting sick of it. More people will be happy the buy a Nexus 4 for $299 and go to a non contract carrier like T Mobile, even if the service isn't as good. I pay $150 for two smart phones per month with Verizon, it's insane.
  • 2 Hide
    ddpruitt , April 4, 2013 12:20 PM
    Quote:
    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 can already see how this will work with Verizon. Customer walks into store asks for no contract service, gets "We don't offer that" response. So no one gets signed up and Verizon goes with "No one signed up so we're not going to offer it. If they do go no-contract the plans will be the same price as those with a device.

    Either way Verizon will make sure its doomed to fail.
  • Display all 18 comments.
  • 0 Hide
    Johmama , April 4, 2013 12:26 PM
    I'm still confused as to how that financing thing works. Let's say I go to T-Mobile, finance a phone, and go month-to-month with them for two years. That's good and everything, but what exactly happens if I switch to another carrier while I still owe them? Do I just keep getting a bill of $20 in the mail from T-Mobile until it's paid off, or do they make you pay the entire phone off before you can switch? As they say, the devil is in the details.
  • -1 Hide
    slomo4sho , April 4, 2013 12:34 PM
    I suppose they will still lock the financed devices to the Verizon network.
  • 4 Hide
    dalethepcman , April 4, 2013 1:35 PM
    Here is how I read this....

    Basically the big 3's (possibly) unspoken monopoly scheme was being broken by small carriers. Because of this the average consumer is becoming more aware of what these services should cost, so they aren't sure how much longer they can financially rape the average consumer without drawing unwanted attention

    Instead of holding out to squeeze every last ounce, they might have to change over to a more fair model before they are all taken to court. Fortunately they had this fall back plan ready to go for years and just never implemented it.
  • -3 Hide
    TunaSoda , April 4, 2013 1:36 PM
    To me it's insane that people complain that they have to spend like $300 to carry around a multi-core pc in their pocket with like 2 gigs of ram and internet access... give me a break!
    It's not about calls anymore :) 
  • 1 Hide
    the_crippler , April 4, 2013 1:39 PM
    Man, this just seems like a terrible idea to me....sure, you aren't tied to them for two years....but what happens when Verizon or someone says one day, "Okay....data is now $5 a MB."
    "You can't do that," you say.
    "Why," says Verizon with an evil smile, "Do you have a contract that states we agreed otherwise?"
  • 1 Hide
    Azn Cracker , April 4, 2013 2:09 PM
    T-mobile deals are great if you pay a lot for your plan. But if you get the minimum like me then the deal sucks because the phones are a expensive. Something like $69 down payment and then $20 a month for 24 months for a Galaxy S3. Thats pretty much paying retail for the phone.
  • 4 Hide
    jn77 , April 4, 2013 2:18 PM
    And my 15 inch dell laptop with a large more expensive screen, a 9 cell Li On battery, a "Hard Drive", real usb ports, HDMI, Wifi, retails for $499 while a GS3 retails for $649.......... "Rape".

    The phones should be priced at a proper price point.
  • 5 Hide
    dalethepcman , April 4, 2013 3:41 PM
    TunaSodaTo me it's insane that people complain that they have to spend like $300 to carry around a multi-core pc in their pocket with like 2 gigs of ram and internet access... give me a break!It's not about calls anymore


    Carriers love people like you. A cellphone cost's much more than $300 if you follow the course the major carriers had set.

    AT&T - on contract
    Nationwide unlimited, $70x24 (1680), Unlimited TXT messaging $20x24 (480), 5GB /mo data $50x24 (1200), Contract 32gb iphone 5 phone $300.
    Total cost over 2 years $3,360

    T-Mobile - off contract
    Unlimited nationwide and txt $50x24(1200), Unlimited Data $20x24(480), Unlocked 32gb iphone 5 from apple.com $750
    Total cost over 2 years $2,430
  • 3 Hide
    unksol , April 4, 2013 5:54 PM
    Azn CrackerT-mobile deals are great if you pay a lot for your plan. But if you get the minimum like me then the deal sucks because the phones are a expensive. Something like $69 down payment and then $20 a month for 24 months for a Galaxy S3. Thats pretty much paying retail for the phone.


    Why would you think you should pay LESS than retail? They are doing you a favor, you should pay MORE than retail to cover the financing... The whole point is they aren't subsidizing your phone any more.
  • 0 Hide
    bennie101 , April 4, 2013 9:25 PM
    Well folks if your on those dreadful plans like I was paying for 1 smart fone and 1 dumb fone for 150 a month to Verizon maybe you should do like I did go to straight talk I got the Samsung proclaim its almost as good as my droad x was and it cost me less then 49 a month to buy the card to refill it and if you like you can have auto refill that even cost less. And yet there boost mobile pay as you go don't get behind and your payment gos down. BTW the proclaim I use uses the Verizon towers.. so Figure this out 12 months times 150 bucks is???1,800 bucks or 12 months times 49 bucks is 588.00 bucks less then 1/3 the cost and yes if you have a problem they have made it right by me well not me my gfriend so pay more live less or pay less live more you do the math I have.
  • 1 Hide
    Uberragen21 , April 4, 2013 10:48 PM
    dalethepcmanCarriers love people like you. A cellphone cost's much more than $300 if you follow the course the major carriers had set.AT&T - on contractNationwide unlimited, $70x24 (1680), Unlimited TXT messaging $20x24 (480), 5GB /mo data $50x24 (1200), Contract 32gb iphone 5 phone $300.Total cost over 2 years $3,360T-Mobile - off contractUnlimited nationwide and txt $50x24(1200), Unlimited Data $20x24(480), Unlocked 32gb iphone 5 from apple.com $750Total cost over 2 years $2,430

    I like how you break it down. It just sucks that I like Verizon's service and coverage, but I have an older unlimited data contract that I will not want to "downgrade" by subsidizing a new phone with them. So my alternative is to buy a new phone at retail (~$700) and continue to pay the high subsidized price I currently pay for my unlimited data plan. Or I could go with the subsidized plan and pay ~$200-$300 for a new phone and still pay the same amount due to the extra $10 a month for the 2GB plan vs. unlimited.

    Damned if you do, damned if you don't in my case. It would be awesome if Verizon implemented something like this before I buy a new phone.
  • 1 Hide
    sykozis , April 5, 2013 3:34 AM
    JohmamaI'm still confused as to how that financing thing works. Let's say I go to T-Mobile, finance a phone, and go month-to-month with them for two years. That's good and everything, but what exactly happens if I switch to another carrier while I still owe them? Do I just keep getting a bill of $20 in the mail from T-Mobile until it's paid off, or do they make you pay the entire phone off before you can switch? As they say, the devil is in the details.

    It works just like a termination fee if you decide to leave before the device is paid off. Whatever you owe on the phone....you owe in a "1 lump sum" payment if you decide to leave.

    Azn CrackerT-mobile deals are great if you pay a lot for your plan. But if you get the minimum like me then the deal sucks because the phones are a expensive. Something like $69 down payment and then $20 a month for 24 months for a Galaxy S3. Thats pretty much paying retail for the phone.

    With T-Mobiles current structure....you ARE paying full retail for the phone BUT, it's better than paying 3-10x retail through a subsidized plan that's designed to rip off customers by overcharging them for "service" (even though the price of the phone is actually figured into the price of the service plan).
  • 1 Hide
    happyballz , April 5, 2013 6:43 AM
    Data is waaay overpriced in US... the whole point of off-contract "non-subsidized" deals is that your monthly bill will be lower... that is not the case with any of the proposed plans from AT&T and Verizon.

    They don't want to lower your monthly bill if you bring your own phone. They think that you not having a 1-2-yr contract is good enough and keep you at the same price-point which is pure BS. Take a look at Euro carriers you greedy trolls. Much cheaper overall contract or not.

    Quote:
    "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."


    Oh please, cry me a freaking river. Carriers get these phones for fractions of retail price. Profit margins of these companies say it all - greedy.
  • 0 Hide
    hyperanthripoid , April 5, 2013 9:47 AM
    dalethepcmanCarriers love people like you. A cellphone cost's much more than $300 if you follow the course the major carriers had set.AT&T - on contractNationwide unlimited, $70x24 (1680), Unlimited TXT messaging $20x24 (480), 5GB /mo data $50x24 (1200), Contract 32gb iphone 5 phone $300.Total cost over 2 years $3,360T-Mobile - off contractUnlimited nationwide and txt $50x24(1200), Unlimited Data $20x24(480), Unlocked 32gb iphone 5 from apple.com $750Total cost over 2 years $2,430


    My AT&T Bill
    10 Gig shared data plan, 7 smart phones $368/month or $52.57/month/phone. Unlimited talk/text. $300 for a subsidized 32gig iphone5 (assuming i actually wanted a iphone) price over 2 years $1,561.71.

    Oh, and I can wi-fi tether (legally) to my laptop, tablets, kindle, other folks ect.
    The down side is the shared data, but I'm fortunate enough that the other 6 phones on my plan rarely go above 1 gig combined. Could add an additional 5 gig for $40/month if needed
  • 0 Hide
    JustPlainJef , April 8, 2013 3:02 AM
    Here's the main difference. Right now, on most of the major carriers, you are required to carry a data package to subsidize the phone. I'm required to carry a $25 data package for my wife's and my phones. Once the 2 years is up, I *can* change my plan to give me less data, but otherwise, I'm still paying the $25 per phone.

    With the new T*Mobile plans, if you finance the phone, once it's paid off, the money comes off your monthly bill.

    New T*Mobile pricing for 1 phone with unlimited minutes / texting / 500 Mb of data: $50.
    4 lines with the same as above: $100. Even financing 4 phones, I'm looking at $180 / month, which is what I pay now (with less minutes and data), but with the new plans, after the phones are paid off, the monthly payments drop.

    For each line, if you want 2Gb of data, it's $10 / month. For $20 / month, it's unlimited data.
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