The Basics: Understanding Verizon Upgrade Policy

Of all the questions and search keywords we come across on this site, there’s one that rises above all the rest: help me understand a Verizon Wireless upgrade.

This question is understandable, really, seeing as how Verizon’s upgrade policy has been rewritten a bit over the past couple months.  But even before the changes, people were asking us for help.

Upgrades are really quite simple, but because of the recent changes, we’re going to split this answer into two sections: customers who signed their last contract in 2010 or earlier, and those who signed their contract in 2011.  New customers will want to pay attention to the second section, as this will pertain to them as well.

Come along with us as we tackle the complexity of a Verizon Wireless upgrade.

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Verizon Wireless Customer #1

Who Last Signed a Contract BEFORE 1/16/2011

This is the old system. If you signed a contract after 1/16/2011, you’ll want to pay more attention to the second section of this article.

The upgrades fall into one of these categories:

On a Plan of Also Known As Standard Upgrade Early Upgrade Extra Discount*
$0 to $34.98/mo Secondary lines on a
family share plan
(add-a-lines),
“save/loyalty” plans, 65+ plans,
older light usage plans.
at 20 months No No
$34.99 to $49.98 Light usage plans,
single lines.
at 20 months No Yes, $30 off 2yr**
$49.99 to $79.98 Single lines, family share
primary lines.
at 20 months Yes, at 12 months*** Yes, $30 off 2yr**
$79.99 or more Single Lines, family share
primary lines.
at 20 months Yes, at 12 months*** Yes, $50 off 2yr**
* Extra discount refers to the “New Every Two” discount, which is added to the upgrade discount already given, must be on a two-year contract term.
** two-year term required, extra discount depends on the price plan, ad evident by the table.
*** Early upgrade eligible on or after the 12 month anniversary of the contract, a $20 early upgrade fee is added to the upgrade price.

As you can see by the table, the upgrade policy used to be quite complex. Over the years, as phones changed, pricing became more competitive, and customer demanded more for signing a contract, the upgrade policy was ammended to add earlier upgrades and reduce the value of discounts (for instance, six years ago the New Every Two program was $100 off for anyone $35/mo or higher). As the system became more complex, the demand for more options increased, and the need to make back subsidy discounting through higher or required plans became common.

If you signed your last contract on 1/15/2011 or earlier, this was the system you agreed to with your contract. People who signed contracts on 1/16/2011 or later have an entirely different system.

And to note, if you thought you had signed a contract to this system, or one of the previous systems that were in place, then you are partially correct. Wheneve you sign a new contract on an upgrade, you’re agreeing to newer terms and conditions. Just because you got a $100 New Every Two in 2005 doesn’t mean that Verizon is contractually obligated to give you $100 in 2011. Once your contract was renewed, or once it went out of contractual effect, neither you nor Verizon were bound by the old rules.

Unfortunately, people assume that the contract you signed six or more years ago is still in effect. If you think about it, did you agree to a six year contract, or a two year one? Every time you signed a new contract, everything changed and everything started over.

Verizon Wireless Customer #2

Who Last Signed a Contract ON or AFTER 1/16/2011

New and existing customer who signed a contract on 1/16/2011 or later are under the following upgrade policy:

On a Plan of Also Known As Standard Upgrade Early Upgrade Extra Discount*
Anything Any plan at 20 months No No
* Remember, you still get a discounted rate on your phone, which could mean standard subsidized discounting AS WELL AS any special offers
extended to you (these are offers above and beyond standard subsidized pricing).

As you can see, the new system is much less complicated. In fact, it’s quite simple: sign a two year contract and upgrade in 20 months, get whatever standard pricing in on the shelf, or take advantage of any special offers given to your specific number.

What About One Year Contracts?

One year contracts haven’t changed. If you sign a one-year contract, your upgrade has been, and still is, at the ten month mark. At ten months, you have the option of signing another one-year contract, which have never allowed for discounts beyond the one-year pricing on equipment (typically $70 more than the two year price). This will remain the same. And as always, customer have the option of signing a two year contract after having been on a one-year contract.

NOTE: The iPhone is one of the few devices not currently offered on a one year contract.  If you were to try to buy it on a one year term, the phone would be the same cost as full retail, at which point you wouldn’t need a contract to begin with.

What Is an Upgrade?

Now that the type of upgrade on Verizon Wireless is covered, let’s talk about what an upgrade is. It might be surprising to many readers, but this is possibly the one thing that confuses people the most.

An upgrade happens when a customer decides to renew their contract with their existing service provider in exchange for new, discounted equipment. The truth is, you can buy a new phone whenever you want to. You could literally buy a new phone to replace your previous one once per day for two whole years (assuming you had limitless money and time). But that’s without a contract change, as well as at the full price of the phone.

An upgrade is different. Instead of paying the highest possible price, you’re paying the lowest possible price (as allowed by the carrier and possibly the retailer). But there’s a cost for saving money: a contract. You sign a contract, the carrier foots part of the bill on the phone, and you walk out with (or wait for) a new device.

What an upgrade refers to is the act of renewing a contract (meaning, you’ve been with your current service provider for some time at this point) for another discounted phone. Many people confuse upgrade with the act of upgrading technology, or moving up to the next product. In reality, no changes are made to your existing phone, and you’re free to move to a more complex technology, as well as a less-complex technology. You’re not required to stick with the same equipment brand, and you’re not required to get something similar. Basically, in the simplest sense, you’re just buying any phone at random. If you choose to buy something similar to what you had for the previous year or two, that’s entirely up to you.

So, an upgrade is a fancy term for buying a new phone and sticking with the same service provider.

Pricing, Discounts, and Cost

These topics are well covered by many of our other articles, and we invite you to use the search field on the right side of the screen to search for more topics (there are too many to link). But we can cover some of these issues, briefly.

Believe it or not, many people assume two things about the wireless business. First, that it works like any other business: you buy a product, then resell it for a profit. Second, that the business inflates the prices of phones to make it seem like you’re getting this amazing deal.

The reality is, the full retail price is usually within $20 of the actual price. While that may sound like a profit (assuming they only sold phones at full retail price), that would be similar to selling a can of soda for a $0.009 (as in, 9/10 of a penny) profit. If you’re not a mathematician, that means you’d have to sell over 111 cans of soda to make only $1 in profit. In other words, it’s not a profit.

Because of this, both assumptions are wrong. Phones may very well cost $100 and retail for $500, but we wouldn’t know that unless we ask the manufacturer - not the company that allows the phone on it’s network - for that kind of information. If Verizon (or any other company) pays $485 for a phone, they’ll probably call full retail $499.99.

The whole reason customers want to sign a contract is so they don’t have to pay the outrageous cost of a phone. As such, the system of discounting has been in place since the inception of this business. But customer beware: the carrier doesn’t value the contract because they want to keep you as a customer, they value it because they want to recoup the cost they’ve invested in your phone. And since they have the early termination fee to cover that, you can assume your contract’s value is minimal.

The discount on the phone - also known as the subsidy - is merely to keep you around long enough to make a profit somewhere in your monthly fees.

As such, the cost of signing a contract is simply your own freedom of choice. You can choose to not sign a contract and go it alone on the cost of the phone, or you can choose to sign the contract, get a discount on your phone, and agree to let the carrier leech off you for a while. To some, this cost is high. To others, it’s minimal.

What Should I Do?

In the end, the choice is yours. Most people choose to have the carrier’s help with their phone. Most people chose to upgrade and stick with the same company for another year or two. You have the choice of upgrading or not. You have the choice of riding out the contract and going somewhere else. You are in the driver’s seat.

You will need to decide if upgrading your phone is right for you.

Hopefully, some of this basic run-down helps you make that decision.