Verizon changes their contract policies
Now that Verizon Wireless has the Iphone, they’re taking some time to change their upgrade and return policies.
Make no mistake; these changes came when they did because of that device. Call it a “cost” of selling the device that so many wanted. The iPhone is expensive, and Apple has some VERY specific price points where they sell their product. But there’s no use arguing over the why, what’s important is how it affects you the consumer.
Join us after the break as we go over what’s changing, what isn’t, and what you can do about it.
What’s not changing:
Before we go any further, I just want to clarify that if you’re currently under contract with Verizon and your New Every 2 date is sometime after the change, you’ll still get that last New Every 2 or Annual upgrade. You will not lose that last upgrade, even if it falls after January 16th. Just remember you have up to 6 months to use it, or you lose the additional credit and just get a standard upgrade instead.
If you currently have a New Every 2 available, that’s where things get a bit harder to figure out. The Policy for years is that you might only have up to six months to use the additional credit before losing it, but it’s never been enforced. This is changing. We haven’t heard a solid answer on how these older upgrades will be treated, so if you have one, please Call Verizon customer service and get back to us with their answer.
In either case, this doesn’t count as a “Material Change” to your existing contract since the 6 month language has existed for years. This means that this won’t let you out of your current contract ETF free. For whatever reason, “Does this mean I can cancel my contract without an ETF” is almost always the first question asked whenever one of these changes occur, so I wanted to get that question out of the way.
New Every 2 Policy:
The New Every 2 policy (I’ll refer to it as NE2 from here on out) was a discount that primary lines got on TOP of the normal upgrade discounts. For example, the Droid X currently sells to customers who upgrade or new customers for $199. If a customer has a NE2 they could get it for up to $100 less ($99) depending on their plan type and when they upgraded last.
To qualify for this extra discount, you needed to be on a voice plan $34.99 or higher, this means secondary (family share) lines never had this extra discount.
Besides for the iphone, another reason why this upgrade is going away is that phones are discounted a lot more than they used to be. How much more? Back when the NE2 policy first launched, the most a phone would be discounted a maximum of $120 dollars. This means if Verizon bought a phone for $300 from Motorola, they would sell it to your for $180 on contract. The NE2 would make that phone down to $80. Kinda cool, right?
But then the iphone happened. I’m not talking the initial launch because Apple was selling it retail. But then they started subsidizing it at that magical price point of $199. This was a huge discount, and one that Verizon needed to match (Or exceed) to remain competitive.
That $300 phone today? That’s the Samsung Intensity II and it’s currently $10 ($280). You can even get it buy one get one free. High end phones like the Droid X cost over $550, and you can get one for $200 ($350 discount), and until recently they were buy one get one free as well.
The numbers vary depending on what device you’re looking at, but the point is that phone prices on contract have dropped considerably, so extra discounts don’t make as much sense as they used to. Phones are already cheaper for new customers than they were a few years ago, even if you had the maximum $100 NE2 (most didn’t)
So what does this mean for you? If you have a NE2 credit on your line, you will keep that credit for up to 6 months past your upgrade date. If you don’t use the credit, it will drop and you’ll have to pay what a new customer will pay.
Once you use that last credit, when you can upgrade again, you’ll get the standard upgrade, which is still several hundred dollars lower than the retail cost of the device. Does it suck losing this discount? Yes, but in our opinion, this is the change we can actually understand.
If you don’t know what an annual upgrade is, it was a special promotion where qualifying lines would be eligible to upgrade 12 months into an 2 year contract. To qualify, your line had to be more than $49.99 before features, data, or non-unlimited texting plans. If you qualified, you could get a new phone at new customer pricing after 12 months with a $20 upgrade fee. This means if a Droid X would sell to a new customer for $199 on a 2yr commitment, an annual upgrade customer could get it for only $220.
Like the New Every 2, if you qualified for this upgrade BEFORE January 16th, you’ll get one more annual upgrade before you have to go on the 20 month upgrade cycle unless you choose to do something different.
What you can do:
If you have an annual upgrade available, we recommend that you don’t use it. Annual upgrades will now make you go 20 months before you can upgrade again, so if you’re someone who likes using that upgrade, using it this last time wouldn’t be a good move.
In fact, this is an excellent time for you to consider doing what we at Phonecan have recommended for so long, breaking the subsidy cycle. Yes, this means either paying a lot more for your devices initially or purchasing used devices from Ebay, Craigslist, or a Friend, but it means you get a device whenever you want on your terms.
The future of cellphones will be unsubsidized, so as consumers we have to get used to the idea of paying a paying for our phones again. It is a lot more up front, but there are ways to help lessen the initial sticker shock, which we’ll cover soon.
Going contract free might be the best option, but for some it might not be a viable one. Phones are expensive, and the idea of dropping more than $200 on a phone is still a foreign one to a lot of people. If you still want to get a discount on the devices, but you don’t want to sign the full 2 year contract, Verizon does offer 1 year contracts.
The phone will still be more expensive than it would on a 2 year contract, but the difference is usually to the tune of an extra $70 and not the hundreds a full retail device would require. As an added bonus, you’re eligible for this discounted pricing every 10 months, meaning you can get a new phone every year.
Not every retailer will give you the option of a one year agreement, at least for the time being, but you can always find them in a corporate store or at verizonwireless.com.
No change occurs in a vacuum, and we’re sure that these changes are just the start of whatever strategy Verizon has planned for their network, policies, and pricing. These changes all seem negative now, but we still don’t see the larger picture here. Is Verizon positioning themselves so that in 2 years they can drop the subsidy model all together? What pricing changes are they planning for LTE?
Whatever those changes may be, we’ll be sure to cover them here. As always, if you have any questions or comments, please feel free to leave them below.
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