Verizon (News - Alert) Wireless is breaking with the business model pack, and in a rather astounding way: The carrier is eliminating the whole sign-a-two-year-contract-in-exchange-for-a-free-phone thing.
The No. 1 U.S. wireless provider said that subsidizing phones for new customers in order to get them in the door is simply a non-starter given the increasing difficulty in maximizing customer profitability in the red-ocean wireless market. The profit that a customer represents has been more and more constricted by competition-driven norms like unlimited text and calling, and generous data plans. Against this backdrop, footing the cost of the handset would seem an appropriate place to start looking for revamping how service is structured.
For those who can’t afford to buy the phone outright, payment plans can be set up—and there will still be online-only discounts and the like to lessen the pain.
If making the customer pay for the phone is the stick, the company also unveiled new plans that represent a bit of a carrot. For one, every smartphone line is now $20 for talk and text with no annual contract. Then, users can choose their choice of data package that can be shared among up to 10 devices:
· Small: $30/month for 1GB of shareable data
· Medium: $45/month for 3GB of shareable data
· Large: $60/month for 6GB of shareable data
· X-Large: $80/month for 12GB of shareable data
The packages are forward-thinking as well: supported devices include tablets and smartwatches, which will require a $10 and $5 monthly connection fee, respectively.
The new Verizon price plans will be available starting on Aug. 13. Existing customers can keep their plans until it’s time to upgrade.
While the move is a bit of a notable one in the world of mobile giants, John Legere, CEO of smaller rival T-Mobile (News - Alert), tweeted about Verizon's announcement with a rather blunt assessment: “And the carriers are at it again… Copying our #uncarrier moves once more and repackaging their half-assed versions as ‘new.’”
Will AT&T (News - Alert) and Sprint follow suit? Given the rising costs of building out upgrades for 4G and the need to invest in innovative services, it would seem likely.